UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2023

or

Commission File Number 001-38942

ARCTURUS THERAPEUTICS HOLDINGS INC.

(Exact name of Registrant as specified in its Charter)

(858) 900-2660

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the common equity held by non-affiliates of the Registrant, based on the closing price of the common stock on The Nasdaq Stock Market on June 30, 2023 was $692.4 million.

As of March 4, 2024, the registrant had 26,915,243 shares of voting common stock outstanding.

Table of Contents

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K, or this Annual Report, and the documents incorporated by reference herein may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part I, Item 1.A, “Risk Factors” in this Annual Report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:

These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. In addition, historic results of scientific research, preclinical and clinical trials do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted the same in light of additional research, preclinical and clinical trial results. The forward-looking statements contained in this Annual Report are subject to risks and uncertainties, including those discussed in our other filings with the United States Securities and Exchange Commission (the “SEC”). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although we currently believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

References to Arcturus

In this Annual Report on Form 10-K, unless otherwise stated or the context otherwise indicates, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries from and after the effective time of the Redomiciliation (as defined below in Part I, Item 1. "Business" - "Available Information") and, prior to that time, to our predecessor, Arcturus Therapeutics Ltd.

Trademarks and Tradenames

The Arcturus logo and other trademarks of Arcturus appearing in this Annual Report on Form 10-K are the property of Arcturus. All other trademarks, service marks and trade names in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this report may appear without the ® or ™ symbols.

Market Data and Forecasts

Unless otherwise indicated, information in this Annual Report on Form 10-K concerning economic conditions, our industry, and our markets, including our general expectations and competitive position, market opportunity and market size, is based on a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research.

Our estimates are derived from industry and general publications, studies and surveys conducted by third-parties, as well as data from our own internal research. These publications, studies and surveys generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information, and we have not independently verified industry data from such third-party sources. While we believe our internal research is reliable and that our internal estimates are reasonable, such research has not been verified by any independent source and our internal estimates are based on our good faith beliefs as of the respective dates of such estimates.

PART I

Item 1. Business

Overview

We are a global messenger RNA medicines company focused on the development of infectious disease vaccines and therapeutics for liver and respiratory rare diseases. In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR®, may enable multiple nucleic acid medicines. Our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR®, technology) may provide longer-lasting RNA and sustained protein expression at lower dose levels as compared to conventional mRNA.

We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our efforts. Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines.

In June 2020, we initiated our first clinical study, a Phase 1 study for our mRNA-based therapeutic candidate for ornithine transcarbamylase (“OTC”) deficiency. We launched our COVID-19 vaccine program in March 2020, and in November 2023, our self-amplifying mRNA vaccine against COVID-19, ARCT-154, received marketing approval in Japan. In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc. (“CSL Seqirus”), a part of CSL Limited and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases and global non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022. The collaboration (“CSL Collaboration”) combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR self-amplifying mRNA and LUNAR delivery platform technologies.

Our vaccines franchise, led by a self-amplifying mRNA-based COVID-19 program under license to CSL Seqirus, made significant strides in 2023, highlighted by the marketing authorization approval in Japan of ARCT-154. The approval is the world’s first for a self-amplifying RNA (sa-mRNA) COVID-19 Vaccine. In August 2023, we successfully completed the 12-month safety follow-up of the pivotal Phase 1/2/3 study in Vietnam of ARCT-154 that completed dosing in April 2022 of over 19,000 participants. In February 2023, Meiji Seika Pharma Co., Ltd. (“Meiji”), a Japanese leader in the area of infectious diseases, completed dosing of a Phase 3 clinical trial of ARCT-154 in Japan to evaluate the safety and immunogenicity of a booster dose of ARCT-154, and to assess the non-inferiority of ARCT-154 to a licensed mRNA vaccine, administered as a booster. Meiji conducted the study under its exclusive partnership with CSL Seqirus for the distribution of ARCT-154 in Japan. The study enrolled 828 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech). The results of this study demonstrated that a booster dose of ARCT-154 elicited a numerically higher immune response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®. These Phase 3 study results were used to support the approval of ARCT-154 in Japan for primary immunization and as a booster dose.

Within the framework of the CSL Collaboration, we continue the development of the COVID-19 vaccine to establish a differentiated platform and address routine recommendations for periodic vaccine composition updates in a timely manner. In 2023, we, along with our partner CSL Seqirus, developed a bivalent version of the self-amplifying mRNA vaccine (Bivalent ARCT-2301), including the Wuhan-Hu1 strain and Omicron BA.4/5 subvariant. The clinical study with this vaccine candidate was initiated in September 2023 in Japan. The immunogenicity and safety of Bivalent ARCT-2301 are being compared with those of the bivalent composition of the licensed conventional mRNA COVID-19 vaccine.

The LUNAR-FLU program, also under the CSL Collaboration, has made significant progress as well. In 2023, we generated a comprehensive non-clinical data package to support a Phase 1 clinical trial with a novel seasonal influenza mRNA vaccine candidate and received all necessary approvals to initiate the Phase 1 study in Australia. We initiated dosing in this study in January 2024 with the intention of assessing the dose response of the investigational vaccine and comparing the safety and immunogenicity with the licensed standard of care. Overall, 132 healthy individuals (84 young adults and 48 older adults) are planned to be recruited in this Phase 1 clinical study. In August 2023, we entered into an amendment to the CSL Collaboration Agreement, pursuant to which CSL Seqirus made a $17.5 million milestone payment related to a development milestone for the LUNAR-FLU program.

We continue to advance our rare disease pipeline and collaborations. In our ornithine transcarbamylase (OTC) deficiency program, the Phase 1b single ascending dose study conducted in the United States of ARCT-810 (LUNAR-OTC) in adults with OTC deficiency completed enrollment and dosing of all four cohorts (N=16 subjects). The trial assessed safety, tolerability and pharmacokinetics of a single dose of ARCT-810, as well as various exploratory biomarkers of drug activity. The final database lock occurred in December 2023. A Phase 2 multiple-dose study of ARCT-810 in OTC-deficient adolescents and adults initiated dosing in December 2022 and plans to enroll approximately 24 participants in two dose cohorts. The study is being conducted in the UK and several countries in the European Union. ARCT-810 received Orphan Drug Designation from the FDA and the European Medicines Agency (the “EMA”) for treatment of OTC deficiency. ARCT-810 was also granted Fast Track Designation in May 2023 and Rare Pediatric Disease Designation in June 2023.

Our mRNA therapeutic candidate for cystic fibrosis, ARCT-032 (LUNAR-CF), successfully achieved the recruitment target and administration in a First-in-Human study in New Zealand, a Phase 1 single ascending dosing study with 32 healthy participants (eight subjects in each of four dose cohorts). In August 2023 we received regulatory approval for a protocol amendment to transition to a Phase 1b clinical study of ARCT-032 in up to eight adults with CF, with each participant receiving two administrations of ARCT-032. Dosing began in patients with CF in November 2023 and enrollment is ongoing. The FDA granted Rare Pediatric Disease Designation for ARCT-032 in October 2023. ARCT-032 was granted Orphan Drug Designation by the FDA in November 2023 and Orphan Medicinal Product Designation by the EMA in February 2024.

We also continued to improve our platform technologies and to advance our early-stage research activities and manufacturing process development and operations. We continue to conduct exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR and STARR platforms could potentially be useful for identification and development of additional products for our portfolio. Also, with our sourcing partners, we manufactured cGMP batches (current good manufacturing practices) yielding significant quantities of clinical trial materials for global studies of our candidates, including ARCT-810 (LUNAR-OTC), ARCT-032, (LUNAR-CF), ARCT-154 (LUNAR-COV19) and ARCT-2301 (Bivalent LUNAR-COV19).

Nucleic Acid Medicines and an Introduction to Arcturus’ Platform Technologies

Nucleic Acid Medicines

Nucleic acid medicines have the potential to treat diseases caused by genetic mutations, including diseases that cannot be treated by conventional drugs, such as small molecules and biologics. Some of these medicines function by providing the means for producing a deficient yet vital protein in vivo. Within a cell, DNA carries the blueprint, in the form of genes, from which all proteins necessary for life are encoded. Each gene’s code is transcribed into a nucleic acid molecule called mRNA, which informs the cell’s own machinery how to organize amino acid building blocks to make one or more proteins needed for normal biological function.

Nucleic acid therapeutics represent a significant advancement in targeted medicines and several of these therapeutics are being developed by public and private companies. The general objectives of these therapies include:

Brief Introduction to our LUNAR® and STARR® Technology Platforms

LUNAR®

A key challenge for nucleic acid medicines is the safe and effective delivery of the nucleic acid molecule. We have developed a novel lipid-mediated delivery system called LUNAR. LUNAR is a multi-component drug delivery system that incorporates a mixture of novel biodegradable lipids. Lipids are molecules that contain hydrocarbons and make up the building blocks of the structure and function of living cells. Examples of lipids include fats, oils, waxes, certain hormones, and most of the cell membrane that is not made up of protein. LUNAR is designed to address technical challenges facing the delivery of nucleic acid medicines into cells. We continue to expand our library of proprietary lipids, termed ATX, with over 250 to date. Our preclinical studies have shown that formulations can be customized for the indication and target cell type of interest, and we have also demonstrated that our proprietary formulation process is scalable and reproducible. Our LUNAR platform is described in more detail below.

STARR®

Our STARR technology is our proprietary self-amplifying mRNA (or sa-mRNA) technology platform. When combined with a delivery system, such as our lipid-mediated delivery system LUNAR, the STARR technology has the potential to generate a protective immune response or drive therapeutic protein expression to prevent against or treat a variety of diseases. Self-amplifying RNA-based prophylactic vaccines developed with STARR may trigger rapid and prolonged antigen expression within host cells affording individuals protective immunity against infectious pathogens. We have clinically shown that the combination of LUNAR and STARR technology can result in lower dose requirements with superior immune response and sustained protein expression compared to non-self-amplifying RNA-based vaccines, which may enable production of greater volumes of vaccine doses more quickly.

Development Programs

Our Internal Programs Pipeline
 

Vaccines in Development

According to the National Foundation for Infectious Diseases, over 50,000 people die each year due to vaccine-preventable diseases and related complications in the United States alone. Influenza and pneumonia cases approach this number of deaths each year and more than one million individuals in the United States have died of COVID since the beginning of the COVID-19 pandemic (Centers for Disease Control and Prevention). The Department of Health and Human Services estimated that 330,000 lives were saved in the United States due to COVID-19 vaccination in 2021 alone. Outbreaks of new infectious diseases, and the rise of variants to existing viruses, create demand for new and novel approaches to producing vaccines in a more cost effective and quicker manner.

The COVID-19 pandemic has highlighted the efficacy, safety, and rapidity in which nucleic acid medicines can be used to vaccinate vulnerable populations, and our vaccine program has continued to progress. In 2020, we initiated the development of our first self-amplifying mRNA vaccine candidate to protect against COVID-19. In December 2022 we entered into the CSL Collaboration Agreement, which combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR self-amplifying mRNA vaccine and LUNAR delivery platform technologies. For a more comprehensive discussion of the CSL Collaboration Agreement, please see Item 1 “Business” – “Revenue and Collaboration Arrangements and Other Material Agreements” – “CSL Seqirus.” In a Phase 3 clinical study in Japan that completed dosing in February 2023, ARCT-154, administered as a booster dose, achieved a numerically higher immune response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain, and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®. In November 2023, ARCT-154 was approved for primary immunization and as a booster dose in Japan. This approval marks the world’s first approval for a self-amplifying RNA (sa-mRNA) COVID-19 Vaccine. In collaboration with CSL, and CSL's partner Meiji, we continue to generate clinical data to support using the self-amplifying vaccine platform for seasonal updates of the COVID-19 vaccine.

Our influenza vaccine franchise continued to expand, with the initiation of the Phase 1 clinical trial in January 2024 for the seasonal influenza candidate vaccine under our collaboration with CSL and our continued efforts under our pandemic influenza vaccine program with BARDA.

Development Program

COVID-19

Coronaviruses are a family of viruses that can lead to respiratory illness. Three viruses in this family have emerged in the past twenty years: Severe Acute Respiratory Syndrome (SARS-CoV), Middle East Respiratory Syndrome (MERS-CoV), and Severe Acute Respiratory Syndrome 2 (SARS-CoV-2), the virus responsible for the COVID-19 pandemic. Throughout the pandemic, there have been surges of infections as protective health measures have waxed and waned. Uncontrolled viral spread has led to approximately half a billion cases worldwide and the selection of viral variants that are more contagious, pathogenic, or both. Since late 2021, infections have been dominated by subvariants of the Omicron strain, which continue to displace previous circulating strains by evading immunity and spreading more efficiently, resulting in an increased risk of breakthrough infection among the vaccinated. Despite the expeditious Emergency Use Authorization (“EUA”) and rollout of vaccines in many countries, vaccine efficacy rates vary widely to currently circulating variants. The current recommendations include seasonal vaccination of risk populations against COVID-19, using vaccine compositions, including the new emergent SARS-CoV-2 variants.

As the world pivots from a pandemic to an endemic response to SARS-CoV-2 infections, primary and booster vaccines that induce robust and durable immunity against current and emerging variants of concern (“VOCs”) can help to reduce the infection and disease burden for both the public and the health care systems globally. As such, through the CSL collaboration, we are developing the next generation of mRNA vaccines, which have demonstrated encouraging immunogenicity data, including neutralizing antibody responses against various variants of concern, including Omicron, boosting pre-existing immunity to SARS-CoV-2.

Our initial COVID-19 vaccine candidate, ARCT-021, developed in conjunction with Duke-NUS Medical School, is based on our STARR (self-amplifying mRNA) technology platform and demonstrated antibody and cell-mediated immunogenicity and an excellent safety profile through Phase 2 clinical trials. This vaccine was designed to promote immune responses to the spike protein of the SARS-CoV-2 virus, the critical part of the virus that allows infection to occur.

Our next-generation COVID-19 vaccine candidate, ARCT-154, is also based on our STARR (self-amplifying mRNA) technology platform and our LUNAR platform. Additional changes were implemented for new generation vaccine candidates to further improve the immunogenicity and tolerability profile and increase vaccine efficacy. These changes include codon optimization for replicon and spike protein, additional mutations for stabilization of spike protein in pre-fusion confirmation, and changes in the manufacturing process to improve the impurity profile and reduce the amount of double-stranded RNA.

Marketing Authorization Approval of ARCT-154 in Japan

In November 2023, ARCT-154 received marketing authorization approval from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan. The approval was based on positive clinical data from several ARCT-154 studies, including the pivotal 19,000 subject efficacy, safety and immunogenicity study performed in Vietnam as well as the pivotal Phase 3 booster study in Japan.

Marketing Authorization Application for ARCT-154 in Europe

CSL Seqirus and Arcturus submitted a European Medicines Agency (EMA) marketing authorization application for ARCT-154 for active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals 18 years of age and older. The application was accepted by EMA for review and the review procedure started on August 17, 2023.

Pivotal Phase 1/2/3 Study in Vietnam

During 2021, we entered into a collaboration with Vinbiocare Biotechnology Joint Stock Company (“Vinbiocare”), a member company of the Vingroup Joint Stock Company (Vingroup) group of companies. As part of a collaboration with Vinbiocare, ARCT-154, our investigational next-generation, self-amplifying mRNA-based vaccine for COVID-19, was advanced into a Phase 1/2/3 study in Vietnam, funded and sponsored by Vinbiocare (the “Vinbiocare Study”). The trial is randomized, observer-blinded, placebo, and active-controlled and is intended to assess the safety, immunogenicity, and efficacy of ARCT-154. The Phase 3 arm of the Phase 1/2/3 study was initiated in September 2021. The study enrolled over 19,000 adult subjects in Vietnam, including individuals with medical conditions, putting them at higher risk of severe complications of COVID-19. The Phase 3b placebo-controlled efficacy portion of the study enrolled over 16,000 participants.

In February 2022, Vinbiocare provided safety and immunogenicity data from the placebo-controlled Phase 1/2/3a portions of the study with approximately 1,000 participants. In April 2022, Vinbiocare shared results from the vaccine safety and efficacy analysis of Phase 3b participants. The primary efficacy endpoint in the placebo-controlled Phase 3b portion of the study was met. Analysis of the data demonstrated that two 5-mcg doses of ARCT-154 administered 28 days apart resulted in vaccine efficacy of 56.6% (95% CI; 48.7% - 63.3%) for protection against COVID-19 overall and 93.3% (95% CI; 80.5% - 98.9%) against severe COVID-19. Nine COVID-19-related deaths were reported in the placebo group and one in the ARCT-154 vaccinated group. The single death in the ARCT-154 vaccination arm occurred in an older age group participant who was also at increased risk of severe COVID-19. During the window when COVID-19 cases in the study were routinely collected, the prevalent SARS-CoV-2 strain associated with COVID-19 infections in Vietnam was Delta.

In the Phase 3b study population comprising 8,059 ARCT-154 recipients and 8,041 placebo recipients, and although local solicited AEs were reported more frequently by ARCT-154 recipients than placebo recipients (52.3% versus 15.3%) after Dose 1 or 2, the majority of solicited local AEs were mild or moderate in intensity. Solicited local AEs of severe intensity were infrequent in ARCT-154 recipients (0.6%) and mainly consisted of injection site pain and tenderness. Also, systemic solicited AEs were reported by ARCT-154 recipients more frequently than the placebo recipients (60.5% versus 40.8%), and most solicited systemic AEs were mild or moderate in intensity. Solicited systemic AEs of severe intensity were reported by 2.7% of ARCT-154 recipients. No Grade 4 solicited AE was reported in the study.

Local and systemic AEs were less frequent after the second dose than after the first dose of ARCT-154 and generally resolved within three days. In the entire Phase 3b population and throughout the study, SAEs considered related to the study vaccine were infrequent and reported by 10 ARCT-154 recipients and five placebo recipients from Day 1 to Day 92, and 1 ARCT-154 recipient who had formerly received two placebo doses, from Day 92 to the end of the study.

The administration of the third dose (early booster dose) of the ARCT-154 vaccine approximately two months after the primary vaccination series was not associated with any safety concerns.

No clinically meaningful differences in the safety profile were observed when comparing different subgroups in terms of age/risk groups, sex, or site/region.

No signs of disease enhancement (VAERD) were observed during the study period, judging by the reduction in the severity of the COVID-19 cases observed after one or two doses of the ARCT-154 vaccine. No case of myocarditis or pericarditis was reported.

Two doses of ARCT-154 were immunogenic in the adult study population without previous exposure to SARS-CoV-2 infection in terms of the induction of neutralizing and IgG-binding antibodies specific to the ancestral strain of SARS-CoV-2. Moreover, two doses of ARCT-154 induced cross-neutralization responses to Alpha, Beta, Gamma, and Delta/B.1.617.2 variants of concern when measured by the ACE2 surrogate virus neutralization assay.

Figure: ACE2 surrogate neutralization panel, showing geometric mean concentrations of neutralizing antibody responses (with 95% confidence intervals) obtained for participants across a range of SARS-CoV-2 variants. Data from participants with verified COVID-19 were left out of the analysis.

The administration of the third dose of ARCT-154 (early booster after 2-dose primary series) was associated with a further increase in immune responses to the ancestral SARS-CoV-2 strain and Delta and Omicron BA.1 variants of concern.

In August 2023, we submitted the primary manuscript with efficacy, immunogenicity and safety results of the pivotal Phase 1/2/3 clinical study of ARCT-154 in Vietnam. The preprint of this article is available on https://doi.org/10.21203/rs.3.rs-3329097/v1. The peer review of the manuscript is ongoing by Nature Communications.

Pivotal Phase 3 Non-Inferiority Study of ARCT-154 in Japan

Meiji is sponsoring a randomized, multicenter, Phase 3, observer-blind, active-controlled comparative study to evaluate the safety and immunogenicity of a booster dose of ARCT-154 and to evaluate the non-inferiority of ARCT-154 over COMIRNATY (Monovalent, Original strain). The study targeted a total of 780 adult participants, with half in the ARCT-154 group and half in a comparator group, and completed enrollment with 828 participants in February 2023.

Subjects were eligible if they had received three doses of approved mRNA COVID-19 vaccines with the last dose as COMIRNATY at least three months prior to screening.

The immunogenicity of ARCT-154 was non-inferior to COMIRNATY against the SARS-CoV-2 (Wuhan strain), thus meeting the primary objective of the study. Furthermore, the immunogenicity of ARCT-154 was superior to COMIRNATY against SARS-CoV-2 (Omicron BA.4/5 strain).

Figure: (A) Geometric mean titers (GMT) of surrogate neutralizing antibodies at Days 1 (baseline) and 29, and geometric mean-fold rises (GMFR) in titers from Day 1 to Day 29; B) GMT Ratio; C) seroresponse rates (SRR) at Day 29; D) SRR Difference - Study ARCT-154-J01. Note: GMT – Geometric Mean Titer; SRR – seroresponse rate. All values are from the Per Protocol Subset 1 (PPS-1) and are shown with 95% confidence intervals in parentheses. Solid circles (●) represent the Wuhan variant, and open circles (○) represent the Omicron BA.4/5 variant. Vertical dashed lines represent the threshold for achieving the non-inferiority comparison of ARCT-154 to Comirnaty.

In addition, the immunogenicity results of ARCT-154 compared to COMIRNATY were not affected by age, sex, time since the last vaccination, antibody titer against SARS-CoV-2 (Wuhan and Omicron BA.4/5 strains) before administration of the study vaccine, and brands of the vaccines administered in the past.

Six months after vaccination, GMTs and SRRs of neutralizing antibodies against SARS-CoV-2 (Wuhan and Omicron BA.4/5 strains) remained higher in ARCT-154 recipients than in COMIRNATY recipients.

Figure: Geometric mean titers (with 95% CI bars) of surrogate neutralizing antibodies against the SARS-CoV-2 Wuhan-Hu-1 (panel A) and Omicron BA.4/5 (panel B) strains up to six months after vaccination with one booster dose of either ARCT-154 or BNT162b2. Geometric mean titer ratios (95% CI) for ARCT-154/ BNT162b2 are shown for Days 29, 91 and 181, and geometric mean-fold rises over baseline (GMFR) with 95% CI are shown for each group at Days 29, 91 and 181.

No safety concerns were raised from the study. No deaths or ARCT-154-related SAEs were reported. The proportions of subjects with the solicited local AEs of injection-site swelling, induration, and erythema were lower after administration of ARCT-154 than after administration of COMIRNATY, and the proportion of subjects with solicited systemic AEs was similar in both study arms. The proportion of subjects with Grade 3 or higher solicited AEs was low in both study arms.

Figure: Rates of solicited local reactions and systemic adverse events in the two study groups with severity.

In summary, the pivotal Phase 3 Non-Inferiority Study of ARCT-154 in Japan met all primary and secondary immunogenicity endpoints, including a secondary pre-defined superiority assessment over Comirnaty (Omicron BA.4/5 strain). Overall, the safety and immunogenicity results of the study support the favorable benefit/risk profile of the ARCT-154 vaccine when administered as a booster dose in adult individuals who previously received other mRNA COVID-19 vaccines.

On July 13, 2023, an article reporting the study results titled “Booster dose of self-amplifying SARS-CoV-2 RNA vaccine vs. mRNA vaccine: a Phase 3 comparison of ARCT-154 with Comirnaty” was posted on medRxiv.org at https://www.medrxiv.org/content/10.1101/2023.07.13.23292597v1.

In December 2023, Lancet Infectious Diseases published results of the study showing that a booster dose of ARCT-154, a novel, self-amplifying messenger RNA (sa-mRNA) vaccine, elicited a numerically higher immune

response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain, and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®. ARCT-154 results were achieved with one-sixth the dose of Comirnaty® (5 μg vs 30 μg).

In January 2024, Arcturus and Meiji submitted the article ‘Persistence of immune responses of a self-amplifying RNA COVID-19 vaccine (ARCT-154) versus BNT162b2’ to Lancet Infectious Disease, with a 6-month follow-up results from this study. These additional data demonstrate the extended persistence of neutralizing antibodies after ARCT-154 compared with conventional mRNA vaccine in the clinical setting, indicating longer-lasting immunity and implying a longer duration of protection by ARCT-154 (Figure above). The manuscript was published on February 1, 2024 (https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(24)00060-4/fulltext).

Phase 1/2 Study in United States, Singapore, and South Africa

In January 2022, we announced immunogenicity data for participants of a Phase 1/2 study being conducted in the United States and Singapore. Results from the arms where participants were dosed with five mcg of ARCT-154 as a booster after at least five months of being vaccinated with two doses of Comirnaty (Pfizer-BioNTech) showed encouraging increases in levels of neutralizing antibody activity against D614G and several variants of concern (VoCs) and variants of interest (VoIs).

On August 7, 2023, we announced that Phase 1/2 clinical trial data demonstrated one-year durability of immune response following ARCT-154 booster vaccine administration as measured using validated microneutralization (MNT) assays. The geometric mean fold rise (GMFR) in neutralizing antibodies remained greater than 10-fold above baseline for one year across a panel of SARS-CoV-2 variants, including ancestral strain with the D614G mutation, Beta (B.1.351), Delta (B.1.617.2), and Omicron (BA.1, BA.2 and BA.4/5), for participants receiving ARCT-154 booster. The results of this study were presented as a poster at the 9th Influenza Conference of the European Scientific Working Group on Influenza (ESWI) in Valencia, Spain.

Figure: Geometric mean fold rise (GMFR) of neutralizing antibodies against SARS-CoV-2 variants (versus pre-booster levels) after ARCT-154 booster vaccination measured by validated pseudovirus microneutralization assays (N=12). Error bars represent the 95% CI. Participants who received any COVID-19 vaccines or had laboratory-confirmed SARS-CoV-2 infection during the follow-up period were excluded from immunogenicity analysis at sampling times after the event.

Phase 3 Study of Bivalent Version of COVID-19 Vaccine Candidate in Japan

On September 29, 2023, Meiji initiated an additional Phase 3 clinical study with a bivalent version of our COVID-19 vaccine candidate (ancestral strain, ARCT-154 and Omicron BA.4/5) to further support immunogenicity and safety data for our self-amplifying mRNA platform, which may facilitate the timely release of future seasonal

updates of our COVID-19 vaccine against evolving variants of concern. The study enrolled 930 healthy adults and individuals with comorbidities, who previously received three to five doses of mRNA COVID-19 vaccines, including the last booster at least three months prior to recruitment. The study will compare the investigational vaccine, ARCT-2301 and COMIRNATY (ancestral strain and BA.4/5), to evaluate safety and immunogenicity between observer-blind groups. Preliminary results of his study are expected by the end of Q1 2024. The results of this study of the bivalent version of our COVID-19 vaccine candidate are not required for approval of ARCT-154 in Japan but will facilitate the timely release of future seasonal updates of the COVID-19 vaccine without the need for additional clinical data.

Figure: Geometric mean titers (GMT) of surrogate neutralizing antibodies at Days 1 (baseline) and 29, and geometric mean-fold rises (GMFR) in titers from Day 1 to Day 29; B) GMT Ratio; C) seroresponse rates (SRR) at Day 29; D) SRR Difference – Study ARCT-2301-J01. Note: GMT – Geometric Mean Titer; SRR – seroresponse rate. All values are from the Per Protocol Subset 1 (PPS-1) and are shown with 95% confidence intervals in parentheses. Solid circles (●) represent the Wuhan variant, open circles (○) represent the Omicron BA.4/5 variant, and open squares (☐) represent the Omicron XBB.1.5 variant. Vertical lines represent the threshold for achieving the non-inferiority and superiority comparisons of ARCT-154 to Comirnaty.

Bivalent ARCT-2301, when administered intramuscularly as a booster dose in subjects who had received three to five doses of authorized mRNA COVID-19 vaccines at least three months before the recruitment, demonstrated immunological superiority over the comparator vaccine (Comirnaty® bivalent: Wuhan strain/Omicron strain BA.4/5), as measured by GMT ratios and seroresponse rates differences for both vaccine strains (prototype Wuhan strain and Omicron BA.4/65 variant). In addition, ARCT-2301 induced a higher immune response against the epidemiologically dominant Omicron XBB.1.5 variant.

COVID-19 Vaccine Platform Stability Data

Current data regarding the product format, stability and cold chain characteristics of our lyophilized self-amplifying mRNA COVID-19 vaccine compares favorably to existing smaller non-self-amplifying COVID-19 vaccine stability requirements. The lyophilized powder of ARCT-154 demonstrated room temperature stability for four days (25°C; 60% RH), refrigerator stability for five months (2-8°C), and long-term stability for 24 months (-25°C to -15°C). The vaccine stability data are supportive for shipping at 2-8°C. Notably, the vaccine remains stable in the event of temperature cycling.

Development Program

LUNAR-qsFLU (Quadrivalent Seasonal Influenza)

Influenza is estimated to cause one billion infections globally every year and hundreds of thousands of deaths, especially in the elderly and individuals with underlying medical conditions. In many regions, influenza is seasonal, with infections peaking during November through April in the Northern Hemisphere and May through September in the Southern Hemisphere. Year-round surveillance by the World Health Organization (“WHO”) in collaboration with various national health agencies informs WHO recommendations on the strains of influenza most likely to spread during the upcoming influenza season. National health agencies (such as the U.S. Food and Drug Administration (“FDA”)) then make the final decision of which strains should be covered by vaccines licensed in their country.

Our LUNAR-qsFLU (qs; quadrivalent seasonal) program, now exclusively licensed to CSL Seqirus, has the objective of producing a safe and effective seasonal influenza vaccine candidate with significant advantages over the traditional egg-based inactivated quadrivalent vaccine. Inaccurate predictions of circulating influenza strains as well as mutations due to adaptation in egg-grown vaccines can substantially reduce efficacy on a year-to-year basis. We believe the ability of mRNA platforms to nimbly adapt to new viral strains should help improve efficacy. In addition, we do not expect mRNA vaccines to face the challenge from mutations common to egg-grown vaccines.

Increasing evidence supports that immunity against neuraminidase (NA), the second most abundant influenza surface protein, along with hemagglutinin (HA) specific immunity protects against influenza disease (Krammer et al, mBIO, 2018). While most currently licensed vaccines contain some neuraminidase, the amount is not standardized, and currently licensed vaccines do not induce robust anti-neuraminidase immune responses. LUNAR-qsFLU, targets both the HA and NA, and may have a protective benefit over current vaccines during seasons even when vaccine strains are not well matched to circulating strains (Sandbulte et al, PNAS, 2011).

LUNAR-qsFLU has been designed to take advantage of our expertise in both LUNAR lipid delivery systems and our STARR self-amplifying mRNA technology. This platform has been shown to deliver effective protection against COVID-19 and has been optimized to elicit robust immunogenicity with acceptable reactogenicity at a lower dose than conventional mRNA vaccines with the aspiration of creating a highly effective influenza vaccine for use in general and high-risk populations. Working with CSL Seqirus, we have generated a comprehensive non-clinical data package to support the initiation of the Phase 1 clinical trial with a novel influenza mRNA vaccine candidate. A Phase 1 dose-finding safety and immunogenicity study was initiated in January 2024 in Australia and is ongoing.

In non-clinical studies, the immunogenicity of ARCT-2138 was compared with those of three licensed influenza vaccines in naïve mice.

Naïve BALB/c mice were vaccinated once with 2 µg of ARCT-2138 or one-fifth of the human dose for comparator vaccines. All vaccines contained antigens from the FDA recommended strains for the 2022/2023 influenza season for cell or egg-based vaccines. Smaller doses than the full adult dose of the comparator vaccines was given due to limitation in the injection volume in the hind legs of mice (50µl per leg, total 100µl). ARCT-2138 was dosed at 2 µg which is a five times lower dose than was tested in humans (10 µg) based on clinical dose escalation studies performed with ARCT-021.

The most significant differences in HAI titers were observed between ARCT-2138 and cell-based and recombinant influenza vaccines. While a significant increase in HAI titers was observed for H1N1 and B Victoria antigens at day 56 for ARCT-2138 compared to the adjuvanted influenza vaccine, no difference was observed between these vaccine groups for H3N2 antigen, and the immune response for B Yamagata antigen was lower after ARCT-2138. Neurominidase antibody responses were assessed at days 42 and 70. As with HAI titers, ARCT-2138 elicited significant higher antibody titers for all four vaccine strains and at all time points analyzed when compared

to titers from mice immunized with cell-based and recombinant influenza vaccines. ARCT-2138 neuraminidase antibody response were slightly, but significantly, higher for all vaccine strains except B Yamagata compared to mice immunized with adjuvanted influenza vaccines.

Altogether, the animal study data indicates that ARCT-2138 elicited higher antibody titers in mice than licensed cell-based and recombinant influenza vaccines and moderately higher titers for most antigens compared to an adjuvanted influenza vaccine.

Figure: HAI and NI Titers after Vaccination with ARCT-2138 and Licensed Comparator Vaccines. Naïve BALB/c mice were vaccinated once with ARCT-2138 (2 µg) or once with one of three licensed vaccines (1/5 human dose) and assessed for HAI and NI titers for each of the antigens from the FDA recommended strains for the 2022/2023 Northern Hemisphere influenza season. Antigens used to determine inhibition titers were from cell-based vaccine strains only. ARCT-2138 showed similar or superior responses to (A) all four HAs and (B) all four NAs present in the licensed comparator. Geometric mean with geometric SD shown. Significance determined by 2-way ANOVA multiple comparisons test comparing ARCT-2138 to licensed vaccines at each time point (****=p<0.0001; ***=p<0.001; **=p<0.01; *=p≤0.05; no asterisks=not significant).

Development Program

LUNAR-pandFLU (Influenza)

Our LUNAR-pandFLU program continues to progress under the award from the Biomedical Advanced Research and Development Authority (“BARDA”) that we obtained in 2022. The program includes all non-clinical, manufacturing, and regulatory support to advance a vaccine to protect against disease caused by H5N1 highly-pathogenic avian influenza. Non-clinical safety and pharmacology studies are ongoing, and a pre-IND meeting was granted. Enrollment for a Phase 1 clinical trial designed to evaluate the safety and immunogenicity of ARCT-2304 (LUNAR-pandFLU candidate vaccine) is expected to begin before the end of 2024. For a more comprehensive discussion of the funding award, please see Item 1 “Business” – “Revenue and Collaboration Arrangements and Other Material Agreements” – “BARDA.”

Rare Disease Program

Medicines in Development

The Orphan Drug Act of 1983 (the “Orphan Drug Act”) defines a rare disease as a disease affecting fewer than 200,000 individuals in the United States. According to the National Institutes of Health (“NIH”), there are approximately 10,000 such diseases that, together, affect nearly 30 million people in the United States. The European Union (the “EU”) defines a rare disease as having a prevalence of fewer than five in 10,000 people. Collectively, these disorders affect between 6% and 7% of the population in the developed world.

There is a pressing need for new medicines for rare diseases as few of the 10,000 known rare diseases have approved treatments. Biopharmaceutical industry researchers are making great progress in the fight against some rare diseases as innovative science has opened new opportunities. More than 770 medicines have been approved by the FDA since the enactment of the Orphan Drug Act and more than 800 medicines are currently in clinical development. Despite recent progress, there is more work to be done to overcome the scientific, operational and financial challenges that arise.

We believe our technology should provide an excellent platform to address genetically inherited rare diseases. Specifically, we are focusing on developing medicines to treat people with rare respiratory and liver diseases who currently have limited or no treatment options.

Rare Disease Program – ARCT-810 (LUNAR-OTC)

The LUNAR-OTC development program addresses ornithine transcarbamylase (OTC) deficiency, a rare, life-threatening, genetic disease caused by mutations in the OTC gene that lead to dysfunctional or deficient OTC.

OTC deficiency is the most common of the urea cycle disorders, a group of inherited metabolic disorders that are associated with reduced ability to eliminate ammonia from the body. There are over 5,000 people with OTC deficiency in the United States and the prevalence is approximately one in 14,000 to one in 77,000 people worldwide. Ammonia is a toxic waste product produced from the breakdown of protein. OTC is a critical enzyme in the urea cycle, which takes place in liver cells and converts ammonia to harmless urea which is eliminated by the kidneys. In patients with OTC deficiency, ammonia accumulates in the blood and is toxic to the brain and liver. Symptoms of high ammonia levels include vomiting, headaches, coma and death. OTC deficiency can cause developmental problems, seizures and death in newborn babies. As an X-linked disorder, OTC deficiency tends to be more severe in males, though female carriers are often affected. Patients with less severe symptoms may present later in life, as adults. Currently no cure exists for OTC deficiency apart from liver transplant; however, this treatment comes with significant risks and complications such as organ rejection, and transplant recipients must take immunosuppressant drugs for the rest of their lives. Current standard of care for OTC deficiency is a low-protein diet, dietary supplements, and ammonia scavengers to try to prevent accumulation of ammonia. Life-threatening episodes of high ammonia levels can still occur, requiring treatment with dialysis or hemofiltration. These treatments do not address the underlying cause of disease and there remains a high unmet need for an effective treatment.

Our LUNAR-OTC development candidate, ARCT-810, uses our LUNAR platform to deliver normal OTC mRNA into liver cells which then produce normal functioning OTC with possible disease-modifying effects. Our LUNAR-OTC approach has the potential to treat the underlying defect that causes the debilitating symptoms of OTC deficiency, rather than mitigating symptoms by sequestering ammonia. We have retained worldwide development and commercialization rights to ARCT-810.

LUNAR-OTC has received orphan drug designation from the FDA and the EMA for treatment of OTC deficiency. ARCT-810 was also successfully granted Fast Track Designation in May 2023 and Rare Pediatric Disease Designation (RPDD) in June 2023. Fast Track Designation is designated to facilitate development and expedite review of new therapeutics intended to treat serious or life-threatening conditions that demonstrate the potential to address important unmet medical needs. Rare Pediatric Disease Designation is designed to recognize rare pediatric diseases in which the serious or life-threatening manifestations primarily affect patients from birth to 18 years of age. Due to such designation, if ARCT-810 achieves approval for a pediatric indication in the original

rare pediatric disease product application in the United States, Arcturus (or the sponsor of ARCT-810) is eligible to receive a voucher for priority review of a subsequent marketing application for a different product.

Preclinical data in OTC-deficient murine models have demonstrated that dosing of LUNAR-OTC results in robust OTC protein expression and activity, thereby improving ureagenesis, reducing plasma ammonia, and increasing survival.

The Phase 1, double-blind, placebo-controlled, single-dose, dose-escalation study of ARCT-810 in healthy volunteers, completed in November 2020, demonstrated favorable safety, tolerability and PK profiles.

A Phase 1b study in stable OTC-deficient adults completed dosing in the United States in August 2023. The trial is designed to assess safety, tolerability and pharmacokinetics of a single dose of ARCT-810, as well as exploratory biomarkers of drug activity. The Phase 1b study is a single ascending dose, placebo-controlled study that enrolled 16 adults with mild OTCD. ARCT-810 was generally safe and well tolerated. A Phase 2 multiple-dose study of ARCT-810 in OTC-deficient adolescents and adults initiated dosing in December 2022 and plans to enroll approximately 24 participants in two dose cohorts. The study is being conducted in the UK and several other countries in the European Union.

Rare Disease Program - LUNAR-CF (Cystic Fibrosis)

The LUNAR-CF program addresses cystic fibrosis (CF) lung disease, a progressive disorder caused by mutations in the cystic fibrosis transmembrane conductance regulator (CFTR) gene. ARCT-032, our lead development candidate for the treatment of cystic fibrosis, uses our LUNAR platform to deliver a codon-optimized CFTR mRNA into airway epithelial cells. This allows airway cells to produce functional human CFTR protein using native translational machinery and protein trafficking pathways which could result in the treatment of the underlying defect that causes CF lung disease, regardless of the specific mutation. The Cystic Fibrosis Foundation (the “CFF”) has partnered with us to support development of this therapy. ARCT-032 represents the first LUNAR-based mRNA therapeutic delivered by the inhaled route, offering direct delivery to the affected airways to restore functional CFTR.

There are close to 40,000 children and adults living with cystic fibrosis in the United States (and an estimated 105,000 people have been diagnosed with CF across 94 countries), and CF can affect people of every racial and ethnic group. Approximately 800 people are newly diagnosed with CF each year in the United States. CF is caused by one of more than 2,000 known mutations in the CFTR gene. These mutations have been grouped into several different classes based on the mechanism by which they cause reduction in the production and/or function of the CFTR protein. When CFTR is absent or defective, the airway surfaces become dehydrated and coated with a layer of thick mucus that clogs the airways, causing difficulty breathing and often resulting in chronic infections, exaggerated inflammation, structural airway damage, and other serious complications in the lungs. CF is a multi-system disease that may also affect the pancreas, intestines, liver, sinuses, reproductive tract and sweat glands. The median predicted survival of CF patients born between 2018-2022 in the United States is approximately 56 years, and the cause of most of the mortality and morbidity is due to the lung disease.

Current non-curative therapies for CF lung disease are directed towards disease severity and to prevent the progression of the disease. These treatments include aerosolized mucolytics, antibiotics, and airway clearance techniques that are time-consuming and represent a significant treatment burden for people with CF. Many CF patients ultimately suffer from a critical decline in lung function and require lung transplants.

The FDA has approved several CFTR modulator therapies (Kalydeco®, Orkambi®, Symdeko®, and Trikafta®) that assist certain classes of abnormal CFTR protein to reach the cell membrane and/or increase functional ion channel activity. The CFTR modulators, while effective in many patients, are mutation-specific and therefore are not effective in all persons with CF. Other treatments are required to target Class I mutations (no CFTR produced; approximately 10% of CF cases worldwide), and people who are intolerant or have poor response to CFTR modulator therapies. We are initially focusing ARCT-032 on these groups of patients, as they currently have the highest unmet need for CF therapies.

We made significant progress on the LUNAR-CF program in 2023. Following on our activities of 2022, which included reproducible demonstration of restoration of CFTR function in human bronchial epithelial cell cultures from CF donors and the completion of the first-in-human enabling GLP toxicology studies, in 2023 we

initiated and successfully achieved the recruitment target in a Phase 1 single ascending dose study of ARCT-032 (LUNAR-CF), our mRNA therapeutic candidate for CF, in 32 healthy participants (eight subjects in each of four dose cohorts). In August 2023 we received regulatory approval of a protocol amendment to transition to a Phase 1b clinical study of ARCT-032 in up to eight adults with CF, with each participant receiving two administrations of ARCT-032. We initiated Phase 1b enrollment in October 2023.

ARCT-032 was granted Orphan Drug Designation by the FDA in November 2023 and Orphan Medicinal Product Designation by the EMA in February 2024. The FDA granted Rare Pediatric Disease Designation for ARCT-032 in October 2023. The Rare Pediatric Disease Designation is designed to recognize rare pediatric diseases in which the serious or life-threatening manifestations primarily affect patients from birth to 18 years of age. With this designation, if ARCT-032 achieves approval for a pediatric indication in the original rare pediatric disease product application in the United States, Arcturus (or the sponsor of ARCT-032) is eligible to receive a voucher for priority review of a subsequent marketing application for a different product.

An extensive portfolio of nonclinical studies supported the advancement of ARCT-032 to the clinic. Our comprehensive data set showcasing the potential for ARCT-032 as a disease-modifying treatment has been presented at the major CF conferences in North America and Europe. For example, we recently presented data at the North American Cystic Fibrosis Conference in November 2023 that demonstrated that a single dose of ARCT-032, administered in the airways of CF ferrets by microsprayer, effectively doubled the mucociliary transport rate in vivo.

In vitro proof of concept of ARCT-032 was obtained using HBE cells cultured in an air-liquid interface system, a model system that has been shown to be highly correlated with clinical trial results with CFTR modulator drugs. HBE cells cultured in this manner undergo extensive differentiation, resulting in an in vitro model that is representative of the in vivo airway epithelium. The cells exhibit a pseudostratified morphology and are comprised of a heterogeneous cell population, including ionocytes, ciliated, basal, and secretory cells. Work performed at University of Alabama at Birmingham (UAB) demonstrated that ARCT-032 (LUNAR-CFTR) treatment resulted in significantly higher chloride activity when compared to negative control (LUNAR-TdTomato). More importantly, after treatment with ARCT-032, cultures derived from patients with CF with the F508del mutation (F508del+/+) demonstrated that the chloride current had been restored, i.e., the chloride efflux was similar to HBE cells from people without CF (WT) that were used as a positive control (figure below). Additionally, western blot analysis of protein in the HBE cells showed higher levels of mature CFTR protein (C-band) in ARCT-032 treated cells when compared to non-CF donor control cells.

Functional Measurement of Chloride Activity and Western Blot Protein Expression Analysis in Human CF F508del+/+ Cells Transduced With ARCT-032

Isc = short-circuit current; WT = wild type (healthy subjects).

Left: A significant increase in chloride activity was observed in cultured cells from CF donors (F508del) treated

with LUNAR-CFTR (ARCT-032) compared to those treated with LUNAR-TdTomato (negative control). ARCT-032 restored the levels of chloride efflux to the wild-type range observed for healthy human donors.

** p<0.001 (unpaired t-test)

Right: Western blot demonstrates robust mature (C-band) CFTR protein expression specific to ARCT-032 treated CF cells (F508del+/+) comparable to WT cells, and not present in the LUNAR buffer or TdTomato controls.

The use of F508del HBEs allowed us to compare the activity of ARCT-032 with Vertex Pharmaceutical’s Trikafta (elexacaftor/tezacaftor/ivacaftor), a highly effective CFTR modulator combination approved for patients with F508del and other CFTR mutations.

Figure 1: Chloride conductance was measured in presence or absence of a chloride gradient in ALI-cultured F508 HBE cells (solid bars) or WT HBEs (textured bars) 24 hours following a single treatment with ARCT-032 (blue circles), LUNAR-TdT (red circles) or Trikafta (green circles). The measurements were performed in three separate studies at different times.

ALI-cultured HBE cell monolayers derived from either three different CF patients carrying the F508del mutation or from an equal number of healthy donors carrying the WT CFTR. The cells were transfected with a single, 20 µg dose of ARCT-032 or LUNAR-TdT, a formulation carrying TdTomato encoding mRNA that was used as a negative control. When the HBE monolayer was tested for transepithelial chloride currents in presence of a chloride gradient, a single 20 µg treatment with ARCT-032 resulted in significantly increased chloride conductance compared to the LUNAR-TdT control at 24 hours post-treatment (Figure 1). Importantly, ARCT-032-restored chloride efflux in F508del HBEs matched the chloride efflux observed in wild type HBEs from non-CF donors. In absence of a chloride gradient, ARCT-032 driven chloride currents were lower than those with a chloride gradient but matched the activity of Trikafta tested alongside (Figure 1). Our results from the UAB studies without chloride gradients are comparable to those previously obtained at CF Foundation Therapeutics under similar experimental conditions.

Next, ARCT-032 activity was evaluated in CF HBEs carrying the nonsense mutations (G542X/R1162X) which are associated with a severe CF phenotype due to the complete absence of CFTR expression (CFTR null). CF patients harboring these and other nonsense mutations are not eligible to be treated with the approved CF modulators such as Trikafta and are a primary target population of patients for ARCT-032 treatment. We demonstrated that a single 20 µg treatment with ARCT-032 resulted in a significantly higher CFTR-mediated chloride conductance compared to the LUNAR-TdT used as a negative control (Figure 2). These observations highlight the potential applicability of ARCT-032 treatment in CF patients non-responsive to currently approved CF modulators.

Figure 2: Chloride conductance measured in G542X/R1162X nonsense mutation carrying HBEs or WT HBEs at 24 hours following a single treatment with ARCT-032 (blue circles) or LUNAR-TdT (red circles) or buffer (black circles).

Additional preliminary results have indicated that a single 20 µg treatment with ARCT-032 could impart substantial CFTR activity in F508del HBEs for at least three days while the activity is still detectable at five days from the treatment (Figure 3A). This highlights the efficacy of transfection and the stability of translated CFTR protein. Furthermore, we have demonstrated that treatment of F508 HBEs with multiple smaller doses (3 µg and 5 µg) of ARCT-032 can achieve CFTR activity comparable to a larger single dose (20 µg) (Figure 3B). Together, these results have demonstrated the ability of ARCT-032 to generate a functional and stable CFTR protein in a dose and treatment amenable manner.

Figure 3: A) Time-course study in F508del HBEs carried out in presence of a chloride gradient following a single treatment with ARCT-032 indicated substantial CFTR activity for three days and detectable activity for at least five days. B) Under no chloride gradient conditions, treatment of F508del HBEs with multiple smaller doses (3µg or 5µg) of ARCT-032 achieved CFTR function comparable to a single larger dose (20µg).

As mentioned, earlier work has shown successful transduction of airway epithelial cells with LUNAR-mRNA in multiple species of healthy animals. We recently achieved similar success in a CF animal model. In collaboration with the University of Iowa and supported by the Cystic Fibrosis Foundation, a double transgenic ferret model of CF was used to assess transduction of bronchial epithelial cells in diseased ferrets. Ferrets with the G551D mutation maintained on VX-770 (ivacaftor) developed a CF phenotype including thick mucus in the lungs upon withdrawal from VX-770 treatment. LUNAR-Cre was administered to the airways by microsprayer, and the Cre recombinase mRNA-transduced cells switched off TdTomato expression (shown in red) and expressed EGFP (cells in green). This demonstrated the ability of LUNAR-Cre to penetrate the mucus layer and transduce the target pulmonary epithelial cells in CF-diseased ferrets.

Penetration of LUNAR-mRNA Through Mucus

Figure 4: Photomicrographs of the pulmonary epithelium of G551D CFTR/Rosa transgenic ferrets following microsprayer administration of LUNAR Cre. The ferrets express TdTomato protein (red) by default; introduction of Cre recombinase mRNA (via LUNAR-Cre) results in Cre protein expression and excision of TdTomato enabling expression of EGFP (green). The panel on the left shows transduction with LUNAR-Cre of pulmonary epithelial cells lining the trachea, as evidenced by the conversion of TdTomato expression in red to EGFP expression in green. The panel on the right illustrates the ability of LUNAR-Cre LNPs to penetrate the mucus (outlined by a blue box) in a smaller bronchiole and transduce the underlying epithelial cells. The red-fluorescing cells are not transduced by LUNAR-Cre. Sections were counterstained with DAPI (blue).

Further experiments with G551D CFTR-transgenic ferrets demonstrated in vivo proof of concept of ARCT-032 (LUNAR-CFTR) in this model system. The G551D ferrets are initially maintained on VX-770 treatment and develop typical findings of CF lung disease upon withdrawal of the drug. This enables the evaluation of therapeutic interventions. Following withdrawal of VX-770, the ferrets were treated with either ARCT-032 or LUNAR-TdTomato (negative control) administered by a microsprayer. Mucociliary clearance was assessed by PET/CT scan while maintained on VX-770, a few weeks after VX-770 withdrawal, and 24 hours following dosing. As shown in figure below, after a single administration of ARCT-03 the mucociliary clearance in CF ferrets 2 (green line) was about twice that of the ‘VX-770 Off’ baseline (black line), and comparable to or greater than that for ‘VX-770 On’ (turquoise line).

LUNARhCFTR = ARCT-032; LUNARdT = LUNAR-TdTomato; MCC = mucociliary clearance; VX-770 = ivacaftor.

Note: x-axis represents time in minutes.

Figure 5: After VX-770 washout, G551D CFTR ferrets were treated as shown and PET/CT scanned. MCC was assessed post first dose.

Discovery Program

Discovery Program – Phenylketonuria (PKU)

Phenylketonurea (PKU) is an inherited metabolic disease characterized by the buildup of the amino acid phenylalanine (Phe) in the body due to the lack or deficient activity of the enzyme responsible for its metabolism, phenylalanine hydroxylase (PAH). In PKU patients, high levels of phenylalanine affect normal nervous system function and can lead to brain disfunction and intellectual disability. Globally, approximately 1:10,000 newborns carry mutations in the PAH gene responsible for the PKU disease. Dietary restriction (low protein diet) has been the main therapeutic treatment to control Phe levels and, although successful, outcomes are not always optimal, and patients often have difficulty adhering to restrictions. There are only two approved treatments for PKU: Palynziq®, which requires injections that may lead to an immune response against Palynziq® as it is an enzyme derived from bacteria, and the synthetic PAH co-factor, BH4, Kuvan®, which only helps a subpopulation of PKU patients.

The LUNAR PKU program attempts to address the unmet needs of PKU patients by delivering mRNA encoding the PAH protein formulated in LUNAR lipid nanoparticles to the PAH-deficient liver, restoring PAH function and reducing blood Phe to healthy levels. In a PKU mouse model, we have shown that we can deliver a functional human PAH mRNA to the liver and reduce Phe to safe levels (Phe < 0.3 mM). Presently, the program is aiming to increase the duration of the efficacy after a single dose treatment to reduce the frequency of dosing and improve the effectiveness of the therapy. Proof of concept studies in PKU mice show that engineering of PAH mRNA and protein lead to a significant increase in the duration of the efficacy, longer than six (6) days, as compared to the original, first-generation PAH mRNA (~24-48 hours). Additional in vivo efficacy and tolerability studies are underway to finalize a candidate drug product composed of the optimized PAH mRNA and LUNAR formulations.

LUNAR PAH mRNA reduces phenylalanine plasma levels in a PKU mouse model after a single dose.

Discovery Programs – Vaccine Programs (Lyme Disease and Gonorrhea)

Based on the clinical and regulatory validation of LUNAR and STARR technologies provided by the approval of ARCT-154, our next-generation vaccine for COVID-19, we have initiated new vaccine discovery programs for Lyme disease and gonorrhea. The new discovery programs rely on the evidence of superior immunogenicity, durability, and breadth of immune response compared to conventional mRNA vaccines, as observed in the COVID-19 program.

Lyme disease is a bacterial infection and is the most common vector-borne disease in the United States. Infection can spread to joints, the heart and the nervous system. Gonorrhea is a sexually transmitted disease (STD) that can infect the mucous membranes of the reproductive tract. It is the second most commonly reported bacterial sexually transmitted infection in the United States. We selected these diseases based on high unmet medical needs, good understanding of the path forward in vaccine target selection, and demonstration of proof of concept, as well as platform advantages that may be translated in a favorable vaccine product.

Enabling Technologies

Enabling Technologies – LUNAR-Genome Editing

Genome editing therapies are based on the ability to modify a specific DNA sequence in the human genome. All genome editing molecular tools can be programmed to target a DNA sequence of interest. Although the diversity of programmable gene editing tools is increasing, all of them are based on a DNA binding component (either a protein or, as in the case of CRISPR-clustered regularly interspaced short palindromic repeats, an RNA sequence) plus a DNA modifier component (a protein that can either make double strand breaks on the DNA (nuclease), single strand breaks (nickase), or make chemical modification in the DNA (base editors)). One of the main roadblocks to applying genome editing as a therapy to treat human disease is the delivery of the genome editing tool components into the cells, either ex-vivo or in vivo, applying them directly into the human body and targeting the right organ.

The LUNAR-Genome editing program aims to leverage the ability of our LUNAR-mRNA technology to deliver any type of genome editing tools into target cells. Some of the genome editing tools are based on protein components working in pairs (TALEN-Transcriptional Activator-Like Effector Nuclease, ZFN-Zinc Finger Nuclease) or as a single protein (meganuclease), while other tools could have a combination of RNA and protein component (CRISPR). We have delivered mRNAs coding for TALEN proteins encapsulated in our LUNAR formulations acting on different targets, and also CRISPR Cas9 mRNA to edit the targeted DNA sequence.

To test the efficacy of the different genome editing strategies as a proof of concept, we utilized target genes that encode proteins that are well known, that are involved in diseases and can be detected in the plasma, which facilitated the readout of the experiments. For evaluation of the LUNAR TALEN mRNA strategy, we designed TALEN pairs targeting either the mouse Pcsk9 gene or the human LPA gene which are involved in lipid metabolism and are associated with cardiovascular disease.

PCSK9

The Pcsk9 gene is expressed only in the liver, and the PCSK9 protein is secreted into the blood circulation. PCSK9 binds and downregulates the low-density lipoprotein (LDL) receptors (LDLR) present in the hepatocytes cell membrane, therefore reduction of PCSK9 protein levels increases LDLR (defined below) levels and its availability to take and reduce LDL-Cholesterol from the blood (Figure below. Top). A single intravenous dose of LUNAR-TALEN PCSK9 mRNA encapsulated LUNAR LNPs into wildtype mice led to insertions and deletions in the PCSK9 genomic DNA sequence which resulted in the inactivation of the PCSK9 gene and, consequently, a reduction of PCSK9 protein levels in the mouse plasma of the treated mice (Figure below. Bottom Left). Examination of the targeted PCSK9 DNA sequence extracted from different organs did not show any DNA modifications except for the liver, which is explained by the liver specificity of this LUNAR formulation (Figure below. Bottom Right).

Figure: Top: PCSK9 involvement in LDL-Cholesterol metabolism. PCSK inhibits LDL-Receptor activity and increases LDL-Cholesterol in circulation. Elimination of PCSK9 protein after editing the Pcsk9 target gene Bottom Left: LUNAR-PCSK9 TALEN mRNA dosing of mice at time Day 0 reduces levels of PCSK9 in circulation. Bottom Right: Genome editing evaluation by sequencing shows INDEL (insertion/deletions) only in DNA extracted from the liver but not from other tissues.

Lp(a)

Lipoprotein(a), Lp(a), is a causal risk factor for cardiovascular disease. Numerous epidemiological studies have shown an association between higher circulating Lp(a) concentrations and an increased risk of atherosclerotic and aortic calcification cardiovascular disease. Lipid-lowering drugs do not effectively reduce Lp(a) levels that are mainly regulated by the genomic structure of the apo(a) gene named LPA. LPA is expressed only in the liver and natural homozygous loss of this gene in humans has not been associated with adverse phenotypes, which makes LPA a candidate for genome editing therapies. We designed and tested our LUNAR-TALEN-LPA technology in primary human hepatocytes and in a transgenic mouse model containing the human LPA gene. Like the PCSK9 model, either one or two intravenous doses of LUNAR-TALEN-LPA mRNA encapsulated LUNAR LNPs led to a significant reduction of Lp(a) levels in serum that correlated with the reduction of LPA mRNA expression and the presence of gene editing in the LPA target sequence.

LUNAR-TALEN-LPA mRNA reduces human Lp(a) plasma levels and hepatic mRNA levels in a human Lp(a) transgenic mouse model after either one or two doses.

Enabling Technologies - CRISPR/Cas9

Our efforts in CRISPR/Cas9 genome engineering are focused on generating proof-of-concept for our platform technology. To test the ability to deliver CRISPR/Cas9 complexes to the liver, we used a single guide RNA known to target the mouse TTR gene and an mRNA encoding the Cas9 nuclease, both encapsulated in a proprietary LUNAR LNP (LUNAR-Cas9-TTR). The transthyretin (TTR) protein is expressed only in the liver and is secreted into the blood. In humans, mutations in the TTR gene can cause transthyretin amyloidosis (ATTR), which is a progressive and fatal disorder resulting from the deposition of insoluble amyloid fibrils in different tissues of the body, predominantly the nervous system and the heart, resulting in organ failure. Reduction of TTR production by CRISPR/Cas9-mediated gene editing has been shown to halt disease progression (Fig. 2 Top). LUNAR-Cas9-TTR formulations were injected intravenously into wild-type mice. After a single dose, there was a significant reduction in the amount of TTR protein detected in the mouse serum at the doses tested (Fig.2, Bottom left). This reduction of TTR protein correlated with the deletions detected in the targeted TTR genomic DNA extracted from the liver of the LUNAR-Cas9-TTR treated mice (Fig.2, Bottom right). Further, when our constructs were compared to a competitor’s results, using a similar Cas9 mRNA and TTR-targeting sgRNA, a significantly greater amount of gene editing was observed using the Arcturus mRNA and lipid nanoparticles. Demonstration of efficacy of the LUNAR mRNA platform with different genome editing technologies and targets will enable future discovery efforts toward the identification of new potential therapies.

Figure: Top: TTR protein containing mutations aggregates and deposits forming amyloid fibers in different organs causing cardiomyopathies or neuropathies. Left: TTR levels in the serum were reduced in mice treated with LUNAR-Cas9-TTR. Right: Quantitation of genome editing by DNA sequencing analysis showed a significant amount of INDELs (insertion/deletions) in the livers of mice treated with LUNAR-Cas9-TTR.

Enabling Technologies – Cancer vaccines

Our LUNAR Cancer vaccine discovery efforts are aimed at developing an immunotherapy against a tumor via activated T-cells. We contemplate that the vaccine would encode an antigen(s) that would be specifically presented by (or associated with) a tumor, such that the vaccination would elicit T cell responses that recognize and attack the tumor. We have applied our learnings from our more-advanced LUNAR-COVID-19 vaccine program to establish both STARR (self-amplifying) and conventional mRNA platforms for immuno-oncology therapy.

In a preclinical study, our proof of concept (POC) vaccine encoding AH1 antigen of gp70 protein which is highly expressed on the surface of mouse colorectal carcinoma cell line CT26 has demonstrated clear effectiveness in a syngeneic mouse model of a colorectal CT26 cell line. With intramuscular administration of the STARR vaccine (two doses of 10 ug), treated with a checkpoint inhibitor (CPI), anti-PD1/PDL1 antibody, led to a substantial reduction of tumor growth in comparison to the CPI treatment by itself (Panel A). Moreover, the same level of efficacy was achieved with a single administration of a 0.2 ug dose of the STARR vaccine.

With various LUNAR formulations, conventional mRNA vaccine expressing the AH1 antigen also demonstrated a robust T cell response (Panel B) and reduction of tumor growth with anti-PD1/PDL1 treatment in the syngeneic mouse model. We believe that these POC results from the two platforms hints for the possible applicability to various types of cancer with flexibility in dosing regimens.

Our current effort focuses on the selection of neoantigens, and other common tumor-specific antigens encoded in the cancer vaccines. Common tumor antigens can be shared among patients, and therefore target broader patient populations, whereas a neoantigen vaccine would be a personalized vaccine specific for an individual patient. Additional advancements of the LUNAR Cancer Vaccine program include the improvement of antigen cassette designs, STARR RNA elements, and immune modulator molecules, all of which can significantly enhance T cell responses.

Figure: Antitumor activity and T cell response by Arcturus cancer vaccines. A. STARR vaccine expressing a tumor antigen led to a significant reduction of the tumor growth rate of a colorectal cancer cell line, CT26. B. T responses elicited by conventional mRNA cancer vaccine by various LUNAR formulations.

Enabling Technologies – Immuno-oncology

Cell-based therapies for hematologic malignancies using chimeric antigen receptor (CAR) T cells have made significant advances in the past decade. The success of CAR-T cells in immuno-oncology has led to a growing number of therapies utilizing other immune cell types engineered to express a variety of immunomodulatory molecules. Yet, despite their promise, extensive challenges still exist with this therapeutic approach. Some of the issues include toxicity, potential for insertional mutagenesis of the CAR construct, T cell malignancies, and an ex vivo manufacturing process that is complex, time consuming and costly. We believe that our LUNAR-I/O approach has the potential to ameliorate some of these issues. For example:

The goal of the LUNAR-I/O program is to leverage the inherent advantages of both RNA and LUNAR technology to maximize clinical effectiveness of CAR-expressing cells. To this end, initial experiments have demonstrated that our proprietary LUNAR lipid nanoparticles can transfect > 90% of both primary human CD8+ and CD4+ T lymphocytes in vitro. Our current efforts are focused on targeting T lymphocytes in vivo with either CAR-mRNA or CAR-STARR (self-amplifying RNA) constructs in combination with other immunostimulatory molecules.

Platform Technology Overview

Our LUNAR lipid-mediated delivery technology includes a diverse, growing library of over 300 proprietary lipids that we are rationally designing to be versatile, while maximizing efficacy and improving tolerability of a diverse selection of nucleic acids, refining the LNPs to target specific cell types, and determining the most favorable routes of administration. A key feature of our LUNAR lipids is their biodegradability, decreasing the undesired effects caused by lipid accumulation that are associated with tolerability issues present in other lipid-mediated RNA medicine delivery platforms. Our team continues to advance our LUNAR lipid formulated nucleic acid platform in a scalable and highly reproducible manner, reducing the costs of goods for the therapies in our pipeline.

In addition to our LUNAR lipid-mediated delivery technology, we believe we have created innovative, proprietary advancements in producing mRNA medicines, including improvements that increase purity, scalability, efficiency in production times, and adaptability to different mRNA modification strategies. We strive to use these proprietary innovations to benefit each mRNA medicine in our pipeline.

We continue to invest in our LUNAR lipid-mediated delivery of mRNA (encoding CRISPR-Cas9, TALEN, zinc finger proteins, and meganucleases), siRNA, DNA, microRNA, and antisense oligonucleotide technology platforms to improve their efficacy and safety profile, further expanding their applications. This investment has led to key innovations ensuring that our LUNAR formulated drug product candidates have optimal characteristics for therapeutic use, which we believe sets us apart from other nucleic acid therapeutics and lipid-mediated delivery platforms. As such, we consider ourselves a leader in the research and development of systemically administered mRNA therapeutics.

Key Attributes of Our LUNAR Lipid-Mediated Delivery Technology

We have designed our LUNAR lipid-mediated delivery platform to address major challenges with nucleic acid medicine delivery, including transfection efficiency, adverse immune reactions and liver damage.

LUNAR formulations are a multi-component, lipid-mediated drug delivery system that utilizes our proprietary lipids, called ATX lipids. Each of our ATX lipids contain an ionizable head group and a biodegradable lipid backbone. The head group is a key chemical component of the ATX lipid, making it pH-sensitive and providing it distinct advantages as a component of our LUNAR lipid formulation. At acidic pH, ATX lipids are positively charged, facilitating interaction with the negatively charged nucleic acid, thereby enabling LUNAR particle formation. At physiological pH (e.g., pH 7.4),the ATX lipids within the LUNAR formulations are neutrally charged, reducing the toxicity often seen with permanently positively-charged lipid-mediated delivery technology. Upon uptake into a cell by endocytosis (a process that forms a cellular structure called an endosome around the LUNAR formulated nucleic acid therapeutic), the head group again becomes positively charged, disrupting the endosome and the LUNAR particle, resulting in release of the nucleic acid therapeutic into the cell where is it translated to produce a therapeutic protein.

The disruption of the LUNAR particle also releases the components of the formulation into the cell, where the ATX lipid is degraded by enzymes in the cell allowing for the lipids to be cleared from the cell. We designed the ATX lipid to be rapidly biodegradable by engineering chemical structural components, called esters, into the ATX backbone that are sensitive to cellular enzymes, called esterases. This degradation prevents ATX lipids from accumulating inside the cell and causing toxicity.

Biodegradable, highly optimized for each cell type

LUNAR-platform development

The development of our LUNAR platform is focused on continuous innovation and advancement in the following areas:

Through the above efforts, our versatile LUNAR platform continues to drive internal and partner programs.

ATX Lipid Design and In Vivo Screening Process

As mentioned above, we have generated a growing library of more than 300 proprietary ATX lipids. ATX lipids are rationally designed to fit their respective applications and vary depending on the target cell type and route of administration. We perform extensive formulation screening for each nucleic acid therapeutic candidate to determine the optimal ATX lipid and LUNAR composition for the particular nucleic acid therapeutic candidate, the desired route of administration, and target cell type.

The design of ATX lipids is an iterative process based on in vivo protein expression and tolerability results from previous ATX lipid candidates. New ATX lipids are chemically synthesized and used to package both siRNAs for inhibiting target protein expression and mRNAs expressing a secreted protein. The ATX lipid formulated RNAs must meet specific chemical and biophysical acceptance criteria before being tested for biological activity. RNA formulations meeting all acceptance criteria are first screened for protein expression in mice. Active candidates are then tested for tolerability and preliminary tissue clearance rates following administration. Active candidates are further verified by evaluating protein expression in non-human primates. Active ATX lipid candidates demonstrating high levels of protein expression and equivalent or improved tissue clearance rates are then assigned to a specific disease target for development of therapeutic applications. The following results are from an in vivo mRNA expression study which identified three new highly active LUNAR lipids with regard to protein expression in non-human primates compared to the positive control.

In the top two figures, mice were injected intravenously with 4 different LUNAR lipid formulations containing mRNA expressing human erythropoietin (EPO). The LUNAR lipids that were screened were LUNAR96, LUNAR97, LUNAR98 and LUNAR2 at 0.1 mg/kg 0.3 mg/kg RNA doses. LUNAR lipid 2 formulation is a positive control to which expression from the other formulations is compared. Mice were bled 24 hours after injection and assayed for EPO, a secreted protein. The figure below the mouse human EPO expression figure shows the clearance of the LUNAR lipids from the liver 48 hours after administration of 0.1mg/kg and 0.3 mg/kg RNA doses. LUNAR 96, 97 and 98 yielded much higher expression levels of EPO than LUNAR 2, the positive control for both doses tested. The mouse liver clearance figure shows that the residual amount of LUNAR96 and LUNAR98 were below the limit of detection and the residual amount of LUNAR97 was at least 10-fold less than the remaining amount of LUNAR2 at the 0.1 mg/kg RNA dose and at least two-fold less than the residual amount of LUNAR2 at the higher RNA dose. LUNAR96 and LUNAR98 formulations were tested for EPO expression in non-human primates at a single dose and assayed for secreted EPO in the blood 24 hours after IV administration. Both LUNAR96 and LUNAR98 yielded significantly higher expression levels than the positive control, LUNAR2 further confirming the superior performance of the new LUNAR formulations. Hence, this lipid screen identified 3 LUNAR lipids that yielded greater RNA expression in mice and 2 LUNAR lipids in NHPs, and were rapidly cleared from the liver within 48 hours after administration.

Lung Targeting

Aerosol capabilities have been developed for the Cystic Fibrosis program using our proprietary lipid nanoparticle delivery platform, LUNAR. Characterization and optimization of the aerosolized LUNAR formulations in targeting airway epithelium have been achieved in rodent (mice, rat) and nonrodent models (ferret, NHP) as depicted in the image using a reporter mRNA encapsulated in LUNAR. We expect that the validation attained for the inhaled LUNAR platform in the Cystic Fibrosis program will serve as a translatable approach to support other respiratory approaches where targeting airway epithelium is needed.

LUNAR delivery to airways epithelium demonstrated in vivo across species (rodents, ferrets, NHPs)

Liver Targeting

As proof of concept for augmenting LUNAR liver-targeting capabilities, we are developing LUNAR formulations containing a propriety hepatocyte targeting agent. Traditional lipid nanoparticle-mediated delivery to hepatocytes occurs via uptake by the low-density lipoprotein receptor (LDLR). We evaluated this targeting agent in an LDLR-deficient mouse model and found that only the LUNAR formulations with this targeting agent were able to deliver mRNA to the hepatocytes compared to LUNAR formulations that did not contain the targeting agent. Based on these promising data, we are expanding these platform development efforts.

LUNAR Safety (i.v. administration)

LUNAR-CF - ARCT-032 Nonclinical Safety Profile

Arcturus has instituted a robust ATX lipid screening paradigm to ensure that we identify formulations with suitable properties for the intended drug’s target product profile, whether is it a protein replacement therapy, a gene editing treatment, or a vaccine. Drug product safety is a key feature in that profile. A recent example of the outcome of these efforts is the nonclinical safety profile we obtained with ARCT-032 that has enabled the first-in-human trials.

Our Proprietary mRNA and Protein Design Technology

The mRNA programs in our pipeline benefit from our in-house expertise in protein and mRNA design, which helps us address many of the known challenges that face the viability of mRNA therapeutics today. We have identified several design elements of mRNA compounds that provide improved translation (the process of making protein based on the instructions/codes in the mRNA) of our mRNA therapeutics, including untranslated regions derived from species that have not previously been combined with human mRNA sequences. This platform technology is applicable to many different human mRNA sequences that we are currently investigating in our discovery efforts. We are able to engineer human protein sequences to increase the half-life of the proteins produced by our mRNA therapies and can more efficiently direct specific types of proteins to certain cellular structures of interest. These innovations are broadly applicable to several programs that are part of our mRNA discovery efforts.

In addition to these platform technologies, we have developed a proprietary tool to aid our team in the efficient design and development of new mRNA drug candidates. Our mRNA Design Suite is a cloud-based software suite with a collection of proprietary bioinformatic algorithms aimed at achieving highly improved potency of a drug substance through optimization of mRNA sequences. The algorithms were developed in house through the integration of experimentally validated optimization processes. Through multi-layered in silico quality control pipelines, mRNA Design Suite promptly generates high-quality and error-free sequences accompanied by various statistics. Additionally, mRNA Design Suite seamlessly interacts with our plasmid/mRNA production database to accelerate the process from mRNA design to gene synthesis, cloning, and mRNA production.

Our STARR® mRNA Technology

In addition to our LUNAR lipids technology, our platform technologies include our distinct and proprietary self-amplifying RNA (saRNA) platform, termed STARR. The STARR platform includes proprietary algorithms that inform the design and optimization of saRNA to enhance expression of the applicable antigen while minimizing structures that might inhibit expression. The replicase, an RNA-dependent RNA polymerase, is encoded upstream of the antigen of interest and functions to amplify transcripts and increase the duration of antigen expression compared to non-self-amplifying (conventional) mRNA. The enhanced expression leads to higher immunogenicity at lower doses than conventional mRNA vaccines in preclinical studies (Figure below).

The above results show the luciferase expression from an optimized saRNA, STARR Technology (Green), a non-optimized saRNA (Blue) and the conventional RNA (Purple). The STARR Technology yields at least a 30-fold greater expression level than conventional RNA. The STARR Technology also produces a longer duration of expression compared to the conventional RNA and also the non-optimized self-amplifying RNA.

We believe the combination of LUNAR and STARR technology can provide lower dose requirements by generating a superior immune response and sustained protein expression as compared to non-self-amplifying RNA-based vaccines. We believe this LUNAR/STARR technology will enable us to simplify and increase the speed of vaccine production.

Supply and Manufacturing

Our supply and manufacturing strategies are focused on addressing the following considerations:

We have built a global manufacturing footprint with our partners, including Aldevron, Catalent, Recipharm, Polymun and ARCALIS. With such collaborations, we have established an Integrated Global Supply Chain Network with our primary and secondary sourcing contract development & manufacturing organizations (CDMOs) based in the United States, EU and Asia for producing critical raw materials, drug substance, and packaged finished product.

To date, we have manufactured and supplied gram quantities of drug substance, and scaled-up and validated our finished drug products (COVID Vaccine) through our CDMOs for clinical studies, and commercial readiness. We continue to dedicate, resources to advance our sophisticated manufacturing know-how, including formulation of lipid nanoparticles, which improves manufacturing efficiency and capacity. As the market for COVID vaccines shifts from multi-dose vial formats to lower and single-dose vial formats, we continue, with our collaborator CSL Seqirus, to evaluate and advance manufacturing process and capabilities and technology transfers, and prepare for commercialization of COVID vaccines.

Global Manufacturing Footprint

For the near future, we expect to continue to rely on third-party CDMOs for the supply of drug substance and finished drug product for our current product candidates, including to support the launch of our first commercial product.

Our CDMOs are compliant with CGMPs, and other rules and regulations prescribed by foreign regulatory authorities. We believe we have established sufficient manufacturing capacity through our CDMOs to meet our current internal research, development, and potential commercial needs, as well as our obligations under existing agreements with our partners. Additionally, we continue to evaluate relationships with additional suppliers to increase overall capacity and diversify our supply chain.

Revenue and Collaboration Arrangements and Other Material Agreements

In addition to our internal programs, we have a number of strategic alliances where we collaborate with other parties on discovery, development, manufacturing or other efforts based on our LUNAR lipid-mediated delivery system and our proprietary mRNA and protein design technologies. Among other collaboration arrangements,

CSL Seqirus

In November 2022, we entered into the CSL Collaboration Agreement with CSL Seqirus for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines. The CSL Collaboration Agreement became effective on December 8, 2022, following clearance under the Hart-Scott-Rodino Antitrust Improvements Act.

Under the CSL Collaboration Agreement, CSL Seqirus receives global exclusive rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases. Specifically, the collaboration agreement grants CSL Seqirus a license to our STARR mRNA technology and LUNAR lipid-mediated delivery, as well as mRNA drug substance and drug product manufacturing expertise. CSL has also been

granted global non-exclusive rights in the field of pandemic preparedness (i.e., pathogens identified as priority diseases by the WHO), with the right to convert to an exclusive license.

The CSL Collaboration Agreement sets forth how the parties will collaborate to research and develop vaccine candidates. In the COVID-19 field, we undertake activities for certain regulatory filings for our leading self-amplifying mRNA vaccine candidate in COVID-19, ARCT-154, in the United States and Europe and for research and development activities of a next-generation COVID vaccine candidate. CSL Seqirus leads and is responsible for all other research and development in COVID-19, influenza and the other fields.

We received an up-front payment of $200.0 million, with the potential to receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We also are entitled to potentially receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields. In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza, pandemic preparedness and three additional respiratory infectious diseases. Entitlement to all such payments is subject to the strict conditions, requirements, royalty reduction provisions and other limitations set forth in the CSL Collaboration Agreement.

Either party may terminate the CSL Collaboration Agreement on a field-by-field basis for material breach by the other party, following notice and opportunity to cure. CSL Seqirus may also terminate the collaboration agreement in its entirety or on a field-by-field basis for any reason or no reason whatsoever, with certain limitations. The CSL Collaboration Agreement may also be terminated by CSL Seqirus for safety reasons, clinical data nonviability, commercial nonviability and other specified reasons.

The CSL Collaboration Agreement allows us to fulfill our obligations under the award from the Biomedical Advanced Research and Development Authority (BARDA) relating to rapid pandemic influenza response, announced by Arcturus in August 2022.

Cystic Fibrosis Foundation Agreement

On May 16, 2017, pursuant to a Development Program Letter Agreement (as amended, the “CFF Agreement”) with the CFF, CFF agreed to award us funding for a development program to identify lead CFTR mRNA sequences and LUNAR formulations, demonstrate tolerability of LUNAR CFTR mRNA, and demonstrate translatability of aerosolized LUNAR. The award includes a grant of rights to CFF know-how to assist us to research, develop, commercialize, make or otherwise exploit a product. If the award results in a successful commercialized product, we will pay CFF (i) royalties on sales of the product up to a maximum of a single-digit multiple of the total award amount actually paid to us by CFF, and (ii) thereafter, a single-digit percentage of annual net sales. Further, in the event of a license, sale or other transfer of the product or our development program technology (including a change of control transaction), we will pay CFF a percentage of such license, sale or transfer payments actually received by us or our shareholders (subject to a royalty cap). On August 1, 2019, we entered into an amendment to the CFF Agreement. Pursuant to the amendment, (i) CFF will increase the amount it will award to advance LUNAR-CF, (ii) we will provide a certain amount of matching funds for remaining budgeted costs, and (iii) the related disbursement schedule from CFF to us was modified such that (a) a disbursement was made upon execution of the amendment, (b) an agreed upon amount will be disbursed to us within thirty days of the first day of each of January, April, July and October 2020, and (c) the last payment will be disbursed upon us invoicing CFF to meet good manufacturing practices and submitting an IND application. In January 2022, the parties signed an additional amendment for CFF to fund the development of a CF ferret model for application in the development of ARCT-032, our LUNAR-CF candidate.

On September 25, 2023, we entered into an additional amendment (the “Fourth Amendment”) to the CFF Agreement, pursuant to which we and CFF agreed to: (a) increase the Amount of Award (as defined in the CFF Agreement and applicable amendment) from CFF to advance LUNAR-CF by up to $9 million (for a total to date of up to approximately $25 million), and required Arcturus to provide $15 million in matching funds for remaining budgeted costs; (b) modify the existing rates and caps on royalties due to CFF under the CFF Agreement, including the addition of an option for Arcturus to reduce the royalty rate through a one-time payment; (c) modify the calculation of payments from Arcturus to CFF in the event of certain dispositions or licensing of cystic fibrosis or other pulmonary assets or of a change of control of Arcturus; and (d) make corresponding changes to exhibits, definitions and other provisions of the CFF Agreement.

Ultragenyx

On October 26, 2015, we entered into a Research Collaboration and License Agreement with Ultragenyx, which was later amended in 2017, 2018 and during the second quarter of 2019 (as amended, the “Ultragenyx Agreement”). Ultragenyx initially selected two development targets, including Glycogen Storage Disease Type III, and the parties initially agreed to a list of eight additional reserved rare disease targets which Ultragenyx has an exclusive option to select for collaborative development. Under the Ultragenyx Agreement, we granted Ultragenyx exclusivity (i) with respect to development targets, to the development and commercialization of products containing nucleic acid technology, and (ii) with respect to reserved targets, the development and commercialization of any product containing nucleic acid products or utilizing LUNAR lipid-mediated delivery technology.

On June 18, 2019, we expanded our collaboration with Ultragenyx and entered into a third amendment (the “Third Amendment”) to the Ultragenyx Agreement. Pursuant to the Third Amendment, the total number of targets was increased from 10 to 12, and we granted Ultragenyx exclusivity to development targets for four years at no additional cost. In connection with the Third Amendment, Ultragenyx purchased shares of our common stock and made a one-time upfront payment. Ultragenyx also received a two-year option to purchase additional shares of our common stock which they exercised in May of 2020.

On December 1, 2021, Ultragenyx announced that the first patient had been dosed in its Phase 1/2 study of UX053, an investigational messenger RNA therapy in development under the collaboration for the treatment of Glycogen Storage Disease Type III, and thus the first milestone under the collaboration agreement had been met. Ultragenyx completed dosing in the single ascending dose, or SAD, stage of the Phase 1/2 study of UX053 with no safety issues observed. In May 2023, Ultragenyx announced that it terminated the Phase 1/2 study for UX053 due to reasons unrelated to safety concerns. On June 18, 2023, the exclusivity period for reserved targets expired. Prior to this expiration, Ultragenyx exercised its option with respect to some of its reserved targets thereby converting them to development targets under the agreement.

BARDA

In August 2022, we entered into a cost reimbursement contract with the Biomedical Advanced Research and Development Authority (“BARDA”) of the U.S. Department of Health and Human Services to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform.

The contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years. The contract provides for reimbursement by BARDA of Arcturus’ permitted costs incorporated into the contract, up to $63.2 million. The contract does not include the purchase of any pandemic influenza vaccine that eventually may be developed. The contract is terminable by BARDA at any time under specified circumstances, including for convenience.

This contract is part of BARDA’s ongoing efforts to bolster pandemic preparedness and response capabilities by investing in innovative medical counter-measures that can help prevent the medical consequences that result from outbreaks caused by pandemic influenza and emerging infectious diseases.

CureVac

On January 1, 2018, we entered into a Development and Option Agreement with CureVac, which was amended on May 3, 2018, restated on September 28, 2018 and amended on July 24, 2019 (as amended and restated, the “Development and Option Agreement”). Under the terms of the Development and Option Agreement, CureVac and Arcturus agreed to conduct joint preclinical development programs and we granted CureVac a license to develop and commercialize certain products incorporating certain of our technology (the “Arcturus LMD Technology”) and CureVac technology. CureVac did not exercise its option to extend the term prior to its expiration, and the Development and Option Agreement expired as of July 24, 2023.

ARCALIS Joint Venture

On August 14, 2023, we announced that ARCALIS Inc. (ARCALIS), our manufacturing joint venture in Japan to support the production of mRNA vaccines and therapeutics, had been awarded up to $115 million in two separate grants from the Japanese government. We anticipate that these grants will be used to fund the construction

of a factory and the purchase of capital equipment to support current Good Manufacturing Practice (cGMP) production of mRNA drug substance and mRNA drug product operations.

On October 4, 2023, we announced that ARCALIS was selected by the Japanese Ministry of Economy, Trade and Industry to receive additional financial support to construct a DNA template manufacturing facility along with new state-of-the-art equipment. DNA plasmid generated at this facility would be used as key starting material in the manufacture of mRNA drug substance at ARCALIS’ neighboring mRNA drug substance facility, which was completed in July 2023. To date, approximately $165 million has been awarded to ARCALIS by the Japanese government, subject to certain terms and conditions, to build mRNA Drug Substance, mRNA Drug Product manufacturing capabilities and to construct a DNA template manufacturing facility.

Intellectual Property

Our business success depends in part on our ability to obtain and maintain intellectual property protection for our proprietary technologies, inventions and know-how, and on our ability to operate without infringing on the proprietary rights of others. We strive to protect our intellectual property through a combination of patents, trademarks, trade secrets, licensing agreements, invention assignment agreements and confidentiality agreements with employees, advisors, consultants and contractors.

We rely on continuing technological innovation to strengthen our proprietary position in the field of nucleic acid medicines. Therefore, we plan to continue to file patent applications in jurisdictions around the world as we discover and develop novel nucleic acid technology platforms and novel nucleic acid therapeutic candidates. We cannot guarantee that future applications will be issued.

Our Patent Portfolio

As of February 26, 2024, we own over 438 patents and pending patent applications including 46 granted U.S. patents, 41 pending U.S. patent applications, six pending international applications under Patent Cooperation Treaty (“PCT”), 157 granted foreign patents and 188 pending foreign patent applications. The claims of these patents and pending applications include compositions of matter, methods of use, manufacturing process and drug product formulations. These claims cover the use of our core platform technologies including the use of LUNAR and lipid components to deliver nucleic acids, the use of UNA oligomers for therapeutics and reagents, the use of LNA oligomers for therapeutics, specific nucleic acid modalities for treating disease, as well as our proprietary technology regarding the design, manufacture, and purification of nucleic acids for use in therapy. Claims also cover the composition of matter, formulation, and use of our therapeutic candidates to prevent and/or treat target diseases including OTC deficiency, CF and COVID-19. If issued, our patents are expected to expire between 2028 and 2044, without taking into account any possible patent term extensions.

Our patent portfolio includes the following patents and pending patent applications for LUNAR, UNA and the use of LNA in certain RNA medicines:

Patent Terms

The term of individual patents depends on the countries in which they are obtained. The patent term is 20 years from the earliest effective date of filing a non-provisional patent application in most of the countries in which we file.

Under the Drug Price Competition and Patent Term Restoration Act (also known as the Hatch-Waxman Act), U.S. patent holders can apply for a patent term extension to compensate for the patent term lost during the FDA regulatory review process. Patent extension is only available for patents covering FDA-approved drugs. The extension can be up to five years beyond the original expiration date of the patent and cannot extend a patent term for longer than 14 years from the date of product approval. Only one patent extension is granted per approved drug. Similar provisions may be available in foreign jurisdictions including Europe. We intend to apply for patent term extensions where possible.

Trade Secrets

We have developed valuable trade secrets to protect our product candidates and proprietary processes, including trade secrets related to the design and optimization of nucleic acids, the design and optimization of lipid compositions for delivery of nucleic acids, manufacturing and formulation processes, and analytical techniques.

Certain Risks to Intellectual Property

Our commercial success also depends in part on our non-infringement of the patents or proprietary rights of third parties. For a more comprehensive discussion of the risks related to our intellectual property, please see Item 1A “Risk Factors” – “Risks Related to Our Intellectual Property.”

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

Our success depends in part on our ability to:

We seek to protect our proprietary technology and processes, in part, by confidentiality and invention assignment agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants, scientific advisors or other contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Product Approval and Government Regulation

Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of products such as those we are developing. Any product candidate that

we develop must be authorized or approved by the FDA before it may be legally marketed in the United States and by the appropriate foreign regulatory agency before it may be legally marketed in foreign countries.

U.S. Drug Development Process

In the United States, the development, manufacturing, and marketing of human drugs and vaccines are subject to extensive regulation. The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (“FDCA”) and implementing regulations, and biological products, including vaccines, under provisions of the FDCA and the Public Health Service Act (“PHSA”). Drugs and vaccines are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial civil or criminal sanctions. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, debarment, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us. The process required by the FDA before a drug or biological product may be marketed in the United States generally involves the following:

The lengthy process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations require the expenditure of substantial resources and approvals are inherently uncertain.

Before testing any compounds with potential therapeutic value in humans, the drug candidate enters the preclinical study stage. Preclinical tests, also referred to as nonclinical studies, include discovery and target identification, in vitro testing to assess biological activity, mechanism of action, and potential toxicity, as well as animal studies to assess the potential safety, pharmacokinetics, and pharmacological activity of the drug candidate. The conduct of the animal studies must comply with federal regulations and requirements including GLP. The sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. The IND automatically becomes effective thirty days after receipt by the FDA, unless the FDA imposes a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before

the clinical trial can begin. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trial.

Clinical trials involve the administration of the drug candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s direct control. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety. Each protocol must be submitted to the FDA as part of the IND. Clinical trials must be conducted in accordance with the FDA’s regulations comprising the good clinical practices requirements. Further, each clinical trial must be reviewed and approved by an independent institutional review board (“IRB”) at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal representative and provides oversight for the clinical trial until completed.

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

Post-approval clinical trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication.

Annual progress reports detailing the results of the clinical trials must be submitted to the FDA and written IND safety reports must be promptly submitted to the FDA and the investigators for serious and unexpected adverse events or any finding from tests in laboratory animals that suggests a significant risk for human subjects. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Concurrently with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final drug. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.

U.S. review and approval processes

The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market the product. The submission of an NDA or BLA is subject to the payment of substantial user fees; a waiver of such fees may be obtained under certain limited circumstances.

In addition, under the Pediatric Research Equity Act (“PREA”), an NDA or BLA or supplement to an NDA or BLA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.

The FDA reviews all NDAs or BLAs submitted to determine if they are substantially complete before it accepts them for filing. If the FDA determines that an NDA or BLA is incomplete or is found to be non-navigable, the filing may be refused and must be re-submitted for consideration. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA or BLA. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA has 10 months from acceptance of filing in which to complete its initial review of a standard NDA or BLA and respond to the applicant, and six months from acceptance of filing for a priority NDA or BLA. The FDA does not always meet its PDUFA goal dates. The review process and the PDUFA goal date may be extended by three months or longer if the FDA requests or the NDA or BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission before the PDUFA goal date.

After the NDA or BLA submission is accepted for filing, the FDA reviews the NDA or BLA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, strength, quality and purity. The FDA may refer applications for novel drug or biological products or drug or biological products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. During the drug approval process, the FDA also will determine whether a risk evaluation and mitigation strategy (“REMS”) is necessary to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS; the FDA will not approve the NDA or BLA without a REMS, if required.

Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. The FDA requires vaccine manufacturers to submit data supporting the demonstration of consistency between manufacturing batches, or lots. The FDA works together with vaccine manufacturers to develop a lot release protocol, the tests conducted on each lot of vaccine post-approval. Additionally, before approving an NDA or BLA, the FDA will typically inspect the sponsor and one or more clinical sites to assure that the clinical trials were conducted in compliance with IND study requirements. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable it will outline the deficiencies in the submission and often will request additional testing or information.

The NDA or BLA review and approval process is lengthy and difficult and the FDA may refuse to approve an NDA or BLA if the applicable regulatory criteria are not satisfied or may require additional clinical data or other data and information. Even if such data and information are submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data. The FDA will issue a complete response letter if the agency decides not to approve the NDA or BLA. The complete response letter usually describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take to place the application in a

condition for approval. If a complete response letter is issued, the applicant may either submit new information, addressing all of the deficiencies identified in the letter, or withdraw the application.

If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, which are designed to further assess a product’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized.

Post-approval requirements

Any drug or biological products for which we or our strategic alliance partners receive FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Failure to comply with FDA requirements can have negative consequences, including adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

Following approval, the FDA continues to monitor vaccine quality through real-time monitoring of lots by requiring manufacturers to submit certain information for each vaccine lot. Vaccine manufacturers may only distribute a lot following release by the FDA. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA or BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process require notice to or prior approval from the FDA before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval.

Regulation in Europe and Other Regions

In addition to regulations in the United States, we and our strategic alliance partners are subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our products.

Whether or not we or our collaborators obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.

To obtain regulatory approval of an investigational drug or biological product under EU regulatory systems, we or our strategic alliance partners must submit a marketing authorization application. The application in the EU is similar to that required in the United States, with the exception of, among other things, region/country-specific document requirements.

For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCPs and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. The

regulatory approval of marketing authorization application of an investigational drug or biological product is similar to that required in the United States, with the exception of, among other things, country-specific document requirements.

Competition

Our Business in General

We believe that our scientific knowledge and expertise in nucleic acid-based therapies provide us with competitive advantages over the various companies and other entities that are attempting to develop similar treatments. However, we face competition at the technology platform and therapeutic indication levels from both large and small biopharmaceutical companies, academic institutions, governmental agencies and public and private research institutions. Many of our competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our recent collaboration with CSL, a global leader in vaccines, will allow us to compete better commercially on the world stage within the COVID and influenza markets.

Our success will be based in part upon our ability to identify, develop and manage a portfolio of product candidates that are safer and more effective than competing products in the treatment of our targeted patients. The commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, are more convenient or are less expensive than any products we may develop in our respective areas.

We are aware of several other companies that are working to develop nucleic acid medicines, including gene therapy, gene editing, mRNA (including saRNA), siRNA, and antisense therapeutics. Many of these companies, such as Genevant Sciences and Acuitas Therapeutics, are also developing nucleic acid delivery platforms which compete with LUNAR technology.

Below we have included what we believe to be the competitive landscape for certain of the medicines that we currently have in development.

Vaccine Franchise

LUNAR-COV19 Vaccines (ARCT-154)

Our vaccine franchise is based on our self-amplifying and self-replicating STARR technology platform and our lipid nanoparticle delivery platform called LUNAR. This franchise has advanced into late-stage clinical development including ARCT-154 in two Phase 3 clinical studies. We have partnered our COVID-19 vaccine franchise with CSL Seqirus. We consider the following companies with approved or late-stage clinical development vaccines as some of our competitors or future competitors to our partnered COVID-19 vaccine franchise: Pfizer/BioNTech, Moderna, Janssen, AstraZeneca, Novavax, and HDT Bio. Dozens of other companies are continuing to develop COVID-19 vaccines. However, the majority of these companies use conventional mRNA (not self-amplifying) and egg-based vaccine technology as the basis for their COVID-19 vaccines.

LUNAR-FLU Vaccine

We have partnered our influenza vaccine franchise with CSL Seqirus. We consider the following companies as some of the competitors or future competitors to our partnered LUNAR-Flu vaccine franchise: Pfizer, BioNTech, Moderna, and Sanofi. The flu industry is rapidly shifting to utilizing mRNA-based platforms in addition to traditional (egg-based) technologies.

Liver Franchise ARCT-810 (LUNAR-OTC)

Our liver franchise has advanced into mid-stage clinical development with ARCT-810 in Phase 2 clinical development. Potential competitors include, but are not limited to, Ultragenyx which is advancing a gene therapy

program for OTC in clinical development, and Moderna which has a therapeutic candidate in pre-clinical development.

Lung Franchise: ARCT-032 (LUNAR-CF)

The lead candidate of our lung franchise is ARCT-032, which is an mRNA therapeutic candidate for cystic fibrosis based on our proprietary drug substance mRNA technology platform and our LUNAR lipid nanoparticle delivery platform.

We are aware of product candidates of the following companies that we consider as competitors or future competitors to ARCT-032: Moderna/Vertex, Eloxx Pharmaceuticals, Recode, 4DMT, Spirovant, SalioGen and Splisense.

Human Capital

As of December 31, 2023, we had approximately 180 employees, all of which were full-time. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Available Information

The Company was founded in 2013 as Arcturus Therapeutics, Inc., and we have maintained our principal executive offices in San Diego, California since that time. In November 2017, Alcobra Ltd., an Israeli limited company, merged with our company, changed its name to Arcturus Therapeutics Ltd. (“Arcturus Israel”), and commenced trading on Nasdaq under the symbol “ARCT.” On June 17, 2019, we redomiciled to the United States (the “Redomiciliation”) and changed our name to Arcturus Therapeutics Holdings Inc.

Our Internet address is www.arcturusrx.com. Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto, are available free of charge on our Internet website. These reports are posted on our website as soon as reasonably practicable after they are electronically filed with the SEC. The public may read and copy any materials that we file with the SEC electronically through the SEC website (www.sec.gov). The information contained on the SEC’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be part thereof.

Item 1A. Risk Factors

In conducting our business, we face many risks that may interfere with our business objectives. Some of these risks could materially and adversely affect our business, financial condition and results of operations. In particular, we are subject to various risks resulting from inherent unknowns and uncertainties in the drug development process, as well as changing economic, political, industry, regulatory, business and financial conditions. The risks and uncertainties described below are not the only ones we face.

You should carefully consider the following factors and other information in this Annual Report before you decide to invest in our common stock. If any of the negative events referred to below occur, our business, financial condition and results of operations could suffer. In any such case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risk Factor Summary

The following is a summary of certain important factors that may make an investment in our company speculative or risky. You should carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes.

RISKS RELATED TO OUR FINANCIAL CONDITION AND NEED FOR ADDITIONAL CAPITAL

We have a limited operating history, have incurred significant losses since our inception (with the exception of fiscal year 2022) and anticipate that we will continue to incur significant losses for the foreseeable future.

We are a global clinical-stage messenger RNA medicines company with a limited operating history. Since inception, our operations have been primarily limited to acquiring and licensing intellectual property rights, developing our product platform, undertaking basic research and conducting studies for our initial product development programs. We have not yet obtained regulatory approval for any product candidates. Consequently, any predictions about our future success or viability, or any evaluation of our business and prospects, is difficult and may not be accurate. In 2023 we recognized a significant portion of our revenue from non-recurring milestone payments and license revenue under our collaboration agreement with CSL Seqirus. Our future payments from CSL Seqirus are dependent on our ability to execute by meeting key product development and other milestones within the contract. We have not recognized any revenue from product sales since our inception.

As of December 31, 2023, we had an accumulated deficit of $367.9 million.

We have devoted most of our financial resources to research and development, including our preclinical and clinical development activities. To date, we have funded our operations primarily through upfront payments, research funding and milestone payments from strategic alliances and collaborations, and through the sale of equity and convertible securities. We expect to continue to incur substantial and increased expenses, losses and negative cash flows as we expand our development activities and advance our programs. If our product candidates are not successfully developed or commercialized, including because of a lack of capital, or if we do not generate enough revenue following marketing approval, we will not achieve profitability and our business may fail. Even if we or our strategic alliance partners successfully obtain regulatory approval to market a product candidate, our revenues will also depend upon the size of any markets in which our product candidates have received market approval and our ability to achieve sufficient market acceptance and adequate market share for our products.

We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

We have never generated any revenue from product sales, have generated only limited collaboration and grant revenue since inception, and may never be profitable in the long term.

Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic alliance partners, to successfully complete the development of, obtain the necessary regulatory approvals for and commercialize our product candidates. Our ability to generate revenues from product sales depends heavily on our success in:

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict reliably the timing or amount of increased expenses and when we will be able to achieve and maintain profitability, if ever. In addition, our expenses could increase beyond expectations if we are required by the FDA, or other foreign regulatory agencies to perform studies and trials in addition to those that we currently anticipate.

Even if one or more of the product candidates that we independently develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved product. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

We expect that we will need to raise additional capital in the future, which may not be available on acceptable terms, or at all.

Developing pharmaceutical products, including conducting studies and clinical trials, is extremely expensive. We expect our research and development expenses to substantially increase in connection with our ongoing activities, particularly as we advance our product candidates towards and through clinical trials. We may need to raise additional capital to support our operations and such funding may not be available to us on acceptable terms, or at all. As of December 31, 2023, we had unrestricted cash and cash equivalents of $292.0 million, which we expect should be sufficient to fund currently planned operations for the near future. But if our plans change or we face unexpected circumstances, our capital resources may be depleted more rapidly than we currently anticipate. For example, our clinical trials may encounter technical, regulatory or other difficulties. Any of these events would increase our development costs more than we expect. In order to support our long-term plans, we will need to raise additional capital or otherwise obtain funding through additional strategic alliances if we choose to initiate preclinical or clinical trials for product candidates that are not currently subject to a collaboration. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, future product candidates.

A portion of our current cash balance is expected to be utilized during 2024 to fund our continued preclinical and clinical development activities for our pipeline, including manufacturing activities to support such development activities.

Any additional fundraising efforts may divert our management from our day-to-day activities, which may delay and hinder our ability to develop and commercialize future product candidates. We may be unable to raise sufficient amounts of additional capital when needed and on acceptable terms, which could require us to:

We are dependent upon relationships with our collaboration partners, and the failure of these relationships could negatively affect our business and results of operations.

We are subject to a number of risks associated with our dependence on our relationships with our collaboration partners, including:

Due to these factors and other possible disagreements with our collaboration partners, we may be delayed or prevented from further developing, manufacturing or commercializing our drug products or our product candidates or we may become involved in litigation or arbitration, which would be time consuming and expensive.

If any collaboration partner were to terminate our collaborative relationship unilaterally, we would need to undertake development, commercialization or distribution or sale activities for our drug products and product candidates solely at our own expense, and/or seek one or more other partners for some or all of these activities worldwide. If we pursued these activities on our own, it would significantly increase our capital and infrastructure

requirements, might limit the indications we are able to pursue for our drug products and our product candidates, and could prevent us from effectively developing and commercializing our drug products and our product candidates. If we sought to find one or more other pharmaceutical company partners for some or all of these activities, we may not be successful in such efforts, or they may result in collaborations that have us expending greater funds and efforts than our relationships with our current collaboration partners.

We are exposed to interest rate risk, including under our loan agreements.

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results from our debt obligations, including the credit agreement entered into on April 21, 2023 by our wholly-owned subsidiary, Arcturus Therapeutics, Inc., and Wells Fargo Bank, National Association (the “Credit Agreement”), providing for a revolving credit line evidenced by a revolving line of credit note (the “Note”). Borrowings under the Credit Agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York. All Loans shall bear interest during an Event of Default (as defined in the Credit Agreement) at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default (as defined in the Credit Agreement). As of December 31, 2023, we had no outstanding balance under the Credit Agreement.

Our indebtedness could materially and adversely affect our business, financial condition and results of operations.

Agreements with our lenders, including with Wells Fargo Bank, National Association, create several limitations on us, including but not limited to:

Our ability to comply with these covenants in future periods will depend on our financial and operating performance, which in turn will be subject to economic conditions and to financial, market and competitive factors, many of which are beyond our control. Any of these factors or others described in the Credit Agreement could materially and adversely affect our business, financial condition and results of operations.

Our debt contains customary default clauses, a breach of which may result in acceleration of the repayment of some or all of this debt.

The Credit Agreement contains customary default clauses. In the event we were to default on our obligations under our debt and were unable to cure or obtain a waiver of such default, the repayment of our debt may be accelerated. If such acceleration were to occur, we would be required to promptly secure alternative sources of equity or debt financing to be able to repay the debt. Alternative financing may not be available on terms satisfactory to us, or at all. New debt financing may require the cooperation and agreement of our existing lenders. If acceptable alternative financing were unavailable, we would have to consider alternatives to fund the repayment of the debt, which could materially and adversely affect our business, financial condition and results of operations.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

Under the Tax Cuts and Jobs Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, U.S. federal net operating losses (“NOLs”) incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal NOLs is limited. It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act. To the extent that we continue to generate taxable losses for United States federal income tax purposes, unused NOLs will carry forward to offset future taxable income (subject to any

applicable limitations), if any. Under Sections 382 and 383 of the Internal Revenue Code, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be significantly limited. We believe we may have triggered an “ownership change” limitation; however, we have not completed a study in accordance with Sections 382 and 383 of the Code to determine whether this ownership change has occurred or what the possible effects of an ownership change would be on our ability to use NOLs. We may also experience ownership changes in the future as a result of subsequent shifts in our share ownership. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. Similar provisions of U.S. state tax law may also apply to limit our use of accumulated state tax attributes, including our state NOLs. 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. As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could negatively impact our future cash flows.

RISKS RELATED TO THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCT CANDIDATES

We are highly dependent upon our relationship with CSL Seqirus to further research, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases.

In November 2022, we entered into the CSL Collaboration Agreement with CSL Seqirus, for the research, manufacture and global commercialization of self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases. If such relationship is unsuccessful, or if CSL Seqirus terminates its collaboration agreement with us, it would negatively impact our ability to conduct our business and generate net product revenue. Failure by CSL Seqirus to perform its duties under its collaboration agreement with us may negatively affect us. The potential financial returns to us under our collaboration agreements with CSL Seqirus depends in large part on the achievement of milestones and generation of product sales, and if CSL Seqirus fails to perform or satisfy its obligations under the collaboration agreement, the development and commercialization of the licensed programs could be delayed, hindered or may not occur and our business and prospects could be materially and adversely affected. The fulfillment of our obligations under the CSL Collaboration Agreement may require significant deployment of our resources, which could disrupt or delay our ability to pursue other programs, including our platform development and development of other product candidates.

Even if our COVID-19 vaccine candidate is commercialized, it might not have a profitable commercial market.

If the prevalence of COVID-19 and public concern about the virus continues to decline, the potential market opportunity will shrink for our COVID-19 vaccine under our collaboration with CSL Seqirus. As further COVID-19 vaccines are approved, production of existing COVID-19 vaccines improves and the COVID-19 impact transitions from pandemic to endemic stage, there may be downward pressure on prices. Therefore, even if we and CSL Seqirus can get through the extremely costly, long and risky process of developing and obtaining regulatory approval to market a vaccine, it may not be commercially successful. This failure could be due to reduced demand for COVID-19 vaccines, lower prices, distribution problems, competitors’ products or many other reasons. Our manufacturing process for our current COVID-19 vaccine candidates include a step for lyophilization to enhance the stability of the vaccine product. The additional step of lyophilization adds time and costs to the overall production output, which could adversely impact the production volumes and profitability of our COVID-19 vaccines if approval to market a vaccine is achieved. Any changes to our manufacturing processes or our product format could take a long time, be expensive and be unsuccessful. It is also still unclear if the vaccines will enable adequate long-term protection, as (i) many vaccinated individuals have become ill due to “breakthrough infections” and have transmitted the virus to many others, (ii) there are millions of individuals who refuse to be vaccinated or who cannot be vaccinated due to pre-existing conditions, (iii) it is unclear how long the vaccine protection will last, and (iv) genetic mutations or variants of the virus already have had, and are expected to continue to have, an adverse impact on the efficacy of available vaccines. If we cannot, with and through our partner, develop and commercialize a vaccine that adequately addresses some of these shortcomings of vaccines currently on the market, we cannot expect to have commercial success.

Our partnered next generation COVID-19 vaccine candidate, ARCT-154, only has marketing approval in Japan and may never achieve marketing approval in any other countries. Regulators may refuse to approve our current or an updated COVID-19 vaccine candidate containing an updated variant strain in Japan and elsewhere.

Although we have marketing approval for ARCT-154 in Japan, we do not have approval for ARCT-154 in any other countries and may never achieve marketing approval in any other countries. Further, ARCT-154 is not commercially viable in Japan or any other country because it does not contain an updated variant strain, and we do not have approval of a COVID-19 vaccine with an updated variant strain and may never achieve a marketing approval containing an updated variant strain. Our continued development efforts for our COVID-19 vaccine could face increased research and development costs, including for clinical trials, non-clinical studies and CMC, when updating COVID-19 vaccines containing new variants of concern based on WHO and FDA recommendations. Regulatory authorities, including the FDA, may deem the variant strain data we expect to collect from studies outside of the United States to be insufficient. If key regulatory authorities, such as the FDA, determine that our data is inadequate or unacceptable, or make the path to regulatory approval more difficult, we may not be able to achieve regulatory approval and any additional study may prove too costly for us to conduct without a strategic partner. If we do not receive approvals to market our partnered COVID-19 vaccine, our efforts and the efforts of our partner, CSL Seqirus, on future generations of COVID-19 vaccines based on our platform could be substantially harmed.

Even with the approval in Japan of our partnered next generation COVID-19 vaccine candidate, ARCT-154, we might not achieve any sales in Japan.

We are relying on our partner, CSL Seqirus, and CSL Seqirus’ partner, Meiji Seika Pharma (Meiji), to conduct further development and commercialization of our COVID-19 vaccine candidate. Even if our COVID-19 vaccine containing an updated variant strain achieves approval in Japan, purchasers in Japan might not purchase any doses of our vaccine, due to competition, pricing, product profile or other factors. Japanese regulatory agencies and purchasers might require involvement of Japanese companies in the domestic production of our COVID-19 vaccine. If any such Japanese companies do not participate or fail in such activities, then our and our partners’ ability to commercialize our COVID-19 vaccine will be materially harmed.

Data from our past and ongoing clinical trials of our COVID-19 vaccine candidates may not provide sufficient evidence to any regulatory authorities, including the FDA, that they are sufficiently safe and effective to achieve any marketing approval.

Clinical trial results are inherently uncertain, and a significant portion of our potential success and business prospects currently depend on our partnered COVID-19 vaccine program. If we cannot demonstrate sufficient safety and efficacy and complete these clinical trials on a timely basis, we likely will have missed a substantial market opportunity for COVID-19 vaccines, after dedicating significant efforts and financial resources to this program, and our commercial relationships may be materially adversely affected.

Regulatory authorities may change views and recommendations, which could lead to more challenging regulatory paths to approvals and to more expensive clinical and commercial efforts.

Regulatory authorities are still settling in on their advice and recommendations for approving COVID-19 vaccine candidates. For example, at a meeting of the Vaccines and Related Biological Products Advisory Committee (VRBPAC) of the FDA in January 2023, the committee members voted to harmonize the vaccine strain composition of primary series and booster doses used in the U.S. to a single composition, the result of which was to favor bivalent vaccines (e.g., original plus Omicron BA.4/BA.5). However, five months later, FDA advised manufacturers seeking to update their COVID-19 vaccines with a monovalent XBB.1.5 composition for the 2023-2024 season based on the VRBPAC meeting on 15 June 2023. Such a changing regulatory recommendation can make our development activities significantly more challenging and expensive, and have an adverse impact on a pathway to approval for our future COVID-19 vaccine candidates. Further, additional data demonstrating broad immunogenicity against emerging variant strains may be requested by FDA and other regulatory agencies to support registration, and there can be no assurance that our vaccine candidates will achieve such immunogenicity.

There is significant competition in the development of a vaccine against COVID-19, some competitors’ vaccines are already widely accepted in the market, and many of our competitors have substantially greater financial, scientific and other resources than we have.

A large number of biopharmaceutical companies, academic institutions and other organizations currently have programs to develop COVID-19 vaccine candidates and many are further along in development of their vaccine

candidates. Pfizer, Moderna and Novavax have received full approvals or emergency use authorization from the FDA and many other health regulatory authorities throughout the world, and other biopharmaceutical companies have received approvals or authorizations from many health regulatory authorities other than the FDA, for their COVID-19 vaccines and have already commercialized them on a large scale and have vaccinated billions of people around the world.

Even with the partnering of our COVID-19 program, we are already at a significant competitive disadvantage to those companies with vaccines on the market, as well as many other competitors pursuing vaccine candidates. Many other competitors have significantly greater product candidate development, manufacturing and marketing resources than we do. Larger pharmaceutical and biotechnology companies have extensive experience in clinical testing and obtaining regulatory approval for their products, and may have the resources to heavily invest to accelerate discovery and development of their vaccine candidates. Our business could be further materially and adversely affected by our competitors’ commercialization of their vaccines before development of our vaccine candidate is completed or approval is achieved. If they develop and commercialize one or more COVID-19 vaccines that are safer, more effective against multiple variants, have fewer or less severe side effects, have broader market acceptance, are more convenient or are less expensive than any vaccine candidate that we develop, then our COVID-19 vaccine candidate may not achieve any commercial success even if it is approved. Furthermore, if any competitors are successful in producing a more efficacious vaccine or other treatment for COVID-19, or if any competitors are able to manufacture and distribute any such vaccines or treatments with greater efficiency, there may be a diversion of potential governmental and other funding away from us and toward such other parties.

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

The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing, regulatory and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, drug products that are more effective, safer or less costly than any product candidate that we may develop. Our existing competitors and new market entrants may respond more quickly to or integrate new or emerging technologies such as artificial intelligence and machine learning, undertake more extensive marketing campaigns, have greater access to clinical information to support ongoing product position in the market, have greater financial, marketing and other resources or be more successful in attracting potential customers, employees and strategic partners. There can be no assurance that any products now in development, or that we may seek to develop in the future, will achieve technological feasibility, obtain regulatory approval or gain market acceptance. If we are unable to develop and launch new products, our ability to maintain or expand our market position in the markets in which we participate may be negatively impacted. Our competitors may achieve patent protection, regulatory approval, or product commercialization that would limit our ability to compete with them. These and other competitive pressures could have a material adverse effect our business.

If we are unable to generate successful results from preclinical and clinical studies of our product candidates, or experience significant delays in doing so, our business may be materially harmed.

Other than the approval of ARCT-154 in Japan, we have no products approved for commercial marketing and all of our product candidates are in preclinical or clinical development. Before obtaining regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct extensive preclinical studies and clinical trials to demonstrate the safety and efficacy of our product candidates.

The success of our product candidates will depend on several factors, including the following:

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully complete the development or commercialization of our product candidates, which would materially harm our business.

Our platform focuses on nucleic acid technology, and mRNA drug products in particular, which are relatively new and any adverse results from nucleic acid or mRNA technologies in the industry could significantly impact our ability to develop and commercialize marketable products.

We have concentrated our therapeutic product research and development efforts on nucleic acid technology, and mRNA in particular, and our future success depends on the successful development and acceptance of this technology for drug products. The development and commercialization of drug products based on nucleic acid technologies, including mRNA, are relatively new. The scientific evidence to support the feasibility of developing product candidates based on these discoveries is both preliminary and limited. If nucleic acid or mRNA approaches to drug products encounter setbacks based on the safety, efficacy, distribution, costs or other factors, it will significantly hurt our prospects and the value of our common stock.

Our focus on nucleic acid technology for developing drugs as opposed to more proven technologies for drug development increases the risks associated with our business. If we are not successful in developing any product candidates using nucleic acid technology, we may be required to change the scope and direction of our product development activities. In that case, we may not be able to identify and successfully implement an alternative product development strategy.

Changes to our drug product format could significantly impact our timeline to commercialize our products.

Each of our products, including our COVID-19 vaccine candidates, has a certain drug product format and utilizes certain manufacturing processes. We evaluate and implement such attributes based on our considerations of regulatory and commercial potential, along with scientific feasibility. There can be no assurance that the format and processes of any of our products is sufficient to achieve regulatory approval for commercialization per planned timelines. For example, the stability of our products and the vial presentations could impact the commercial attractiveness of a product, and different markets may favor different characteristics. Any changes to drug product formats will likely add additional cost and may delay approvals.

We may not be successful in our efforts to identify or discover potential product candidates.

The success of our business depends primarily upon our ability to identify, develop and commercialize messenger RNA medicines. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including:

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

Before obtaining marketing approval from regulatory authorities for the sale of product candidates, we or our strategic alliance partners must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Clinical trials are expensive, difficult to design and implement, can take many years to complete and are uncertain as to the outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products. Furthermore, even if prior animal studies have demonstrated the potential safety and efficacy of our product candidates, there can be no guarantee that such results will be reproducible in preclinical studies and clinical trials involving human subjects.

Events which may result in a delay or unsuccessful completion of clinical development include:

If we or our strategic alliance partners are required to conduct additional clinical trials or other testing of any product candidates beyond those that are currently contemplated, are unable to successfully complete clinical trials of any such product candidates or other testing, or if the results of these trials or tests are not positive, are only modestly positive or if there are safety concerns, we or our strategic alliance partners may:

Our product development costs will also increase if we experience delays in testing or marketing approvals. We face risks that clinical trials may not begin as planned, may need to be restructured or may not be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our product candidates. Any inability to

timely and successfully complete preclinical and clinical development, whether independently or with our strategic alliance partners, could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties.

We may find it difficult to identify and enroll patients in our clinical studies, and the limited number of patients who have the diseases for which certain of our product candidates are being studied could delay or prevent clinical studies of certain of our product candidates.

Identifying and qualifying patients to participate in clinical studies of our product candidates is critical to our success. The timing of our clinical studies depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical studies if we encounter difficulties in enrollment.

In addition, certain conditions for which we plan to evaluate our current product candidates are rare genetic diseases, and have limited patient pools from which to draw for clinical studies. For example, we estimate that approximately 8,000 patients in the developed world suffer from late-onset OTC deficiency, for which LUNAR-OTC is being studied. In addition to the rarity of these diseases, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require patients to have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study. The process of finding and diagnosing patients may prove costly, especially since the rare diseases we are studying are commonly underdiagnosed. We also may not be able to identify, recruit, and enroll a sufficient number of appropriate patients to complete our clinical studies because of demographic criteria for prospective patients, the perceived risks and benefits of the product candidate under study, the proximity and availability of clinical study sites for prospective patients, and the patient referral practices of physicians. The availability and efficacy of competing therapies and clinical studies can also adversely impact enrollment.

If we are unable to promptly enroll an adequate number of patients in our studies for the foregoing or other reasons, the timeline for conducting studies and obtaining regulatory approval of potential products will be delayed, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenue from any of these product candidates could be delayed or prevented. Furthermore, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates. Delays in achieving approval to conduct and in completing our clinical studies will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition, and prospects significantly.

If any of our product candidates cause undesirable side effects or have other properties impacting safety, their regulatory approval could be prevented, delayed or limited.

Undesirable side effects caused by our product candidates could cause us 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 or other regulatory authorities. It is likely that there will be side effects associated with use of our product candidates. If results of our trials reveal a high and unacceptable severity and prevalence of side effects, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of, or deny approval of, our product candidates for any or all targeted indications. Such side effects could also affect patient recruitment, the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may materially and adversely affect our reputation and financial condition.

Further, clinical trials by their nature test product candidates in only samples of the potential patient populations. With a limited number of patients and limited duration of exposure in such trials, rare and severe side effects of our product candidates may not be uncovered until a significantly larger number of patients are exposed to the product candidate.

If any of our product candidates receives marketing approval, and causes serious, unexpected, or undesired side effects, a number of potentially significant negative consequences could result after we begin commercialization, including:

Any of these events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our future products and impair our ability to generate revenues from the commercialization of these products either by us or by our strategic alliance partners.

Even if we complete the necessary preclinical studies and clinical trials, we obtain regulatory approval to commercialize a product candidate and we cannot, therefore, predict the timing of any revenue from a future product.

The extent and timing of any product revenue is highly unpredictable because regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval for many reasons including:

Additional delays may result if an FDA advisory committee recommends restrictions on approval or recommends non-approval. In addition, we or our strategic alliance partners may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process.

Even if we obtain regulatory approval for a product candidate, we will still face extensive regulatory requirements and our products may face future development and regulatory difficulties.

Even if we obtain regulatory approval in the United States, the FDA may still impose significant restrictions on the indicated uses or marketing of our product candidates, or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. The FDA may also require a risk evaluation and mitigation strategy as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution

methods, patient registries and other risk minimization tools. Additionally, the manufacturing processes, packaging, distribution, adverse event reporting, labeling, advertising, promotion, and recordkeeping for the product will be subject to extensive and ongoing FDA regulatory requirements, in addition to other potentially applicable federal and state laws. These requirements include monitoring and reporting of adverse events and other post-marketing information and reports, registration, as well as continued compliance with current good manufacturing practice, or cGMP, regulations. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. If we or a regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.

If we or our strategic partners fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our future products, if approved, and generate revenues.

We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.

As a result of our limited financial and human resources, we will have to make strategic decisions as to which targets and product candidates to pursue and may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed applicable insurance coverage we may have as well as our financial resources. We also could incur significant costs associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or

future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Manufacturing issues may arise that could increase product and regulatory approval costs or delay or hinder commercialization.

As we scale-up manufacturing of product candidates and conduct required stability testing, product, packaging, equipment and process-related issues may require refinement or resolution in order to proceed with any clinical trials and obtain regulatory approval for commercial marketing. We may identify significant impurities, which could result in increased scrutiny by the regulatory agencies, delays in clinical programs and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for product candidates or any approved products. We do not have any commercial products, and therefore, the robustness of our manufacturing supply chain to support commercial distribution has not been tested. Furthermore, we are required by our contract manufacturers to make financial commitments in advance of the receipt of clinical data or feedback from regulatory authorities, which could result in significant financial obligations.

The commercial success of our product candidates will depend upon the acceptance of our product candidates by the medical community, including physicians, patients and healthcare payors.

The degree of market acceptance of any product candidates will depend on a number of factors, including:

Unless other formulations are developed in the future, we expect our compounds to be formulated in an injectable or inhalable form. Injectable medications may be disfavored by patients or their physicians in the event drugs which are easy to administer, such as oral medications, are available. If any of our products is approved, but does not achieve an adequate level of acceptance by physicians, patients and healthcare payors, we may not generate sufficient revenues from such product and we may not become or remain profitable. Such increased competition may decrease any future potential revenue for future product candidates due to increasing pressure for lower pricing and higher discounts in the commercialization of our product.

If we are unable to establish cost-effective sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenues from product sales.

In order to market any products that may be approved, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with outside parties to perform these services. With respect to certain of our current programs as well as future programs, we may rely completely on a strategic alliance partner for sales and marketing. In addition, we intend to enter into strategic alliances with other parties to commercialize other product candidates, if approved, including in markets outside of the United States or for other large markets that are beyond our resources. Although we intend to establish a sales organization if we are able to obtain approval to market any product candidates for niche markets in the United States, we will also consider the option to enter into strategic alliances for future product candidates in the United States if commercialization requirements exceed our available resources. This will reduce the potential profit generated from the sales of these products.

Our current and any future strategic alliance partners may not dedicate sufficient resources to the commercialization of our product candidates, if approved, or may otherwise fail in their commercialization due to factors beyond our control. If we are unable to establish effective alliances to enable the sale of our product

candidates, if approved, to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future strategic alliance partners do not successfully commercialize the product candidates that may be approved, our ability to generate revenues from product sales will be adversely affected.

If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

If we obtain approval to commercialize any approved products outside of the United States, we expect that we will be subject to additional risks related to entering into international business relationships, including:

If coverage and adequate reimbursement is not available for any of our future products, it would be difficult for us to sell that product profitably.

Market acceptance and sales of any product candidates that we develop will depend on coverage and reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third-party payors, such as private health insurers, government payors and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. We cannot be sure that coverage and adequate reimbursement will be available for any future product candidates. In the United States, the Centers for Medicare & Medicaid Services (“CMS”), an agency within the U.S. Department of Health and Human Services, decides whether and to what extent a new drug will be covered and reimbursed under Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for novel product candidates. Inadequate reimbursement amounts could substantially reduce the demand for, or the price of, our future products. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. If reimbursement is not available, or is available only at limited levels, we may not be able to successfully commercialize product candidates that we develop and that may be approved. Thus, even if we succeed in bringing a product to market, it may not be considered medically necessary or cost-effective, and the amount reimbursed for any products may be insufficient to allow us to sell our products on a competitive basis.

In addition, we cannot be certain if and when we will obtain formulary approval to allow us to sell any products into our target markets. Obtaining formulary approval from hospitals and from pharmacy benefits payors can be an expensive and time-consuming process. Failure to obtain timely formulary approval will limit our commercial success.

There have been a number of legislative and regulatory proposals to change the healthcare system in the United States and in some foreign jurisdictions that could affect our ability to sell products profitably. These legislative and/or regulatory changes may negatively impact the reimbursement for drug products, following approval. The availability of numerous generic treatments may also substantially reduce the likelihood of reimbursement for our future products. We expect to experience pricing pressures in connection with the sale of any products that we develop, 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, and prescription drugs in particular, has and is expected to continue to increase in the future. For instance, government and private payors who reimburse patients or healthcare providers are increasingly seeking greater upfront discounts, additional rebates and other concessions to reduce prices for pharmaceutical products. If we fail to successfully secure and maintain sufficient reimbursement coverage for our future products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our future products and our business will be harmed.

In addition, in some non-U.S. jurisdictions, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. If any country that has price controls or reimbursement limitations for pharmaceutical products does not allow favorable reimbursement and pricing arrangements for any of our products, our sales and profits from that product could be severely limited. Historically, products launched in the EU do not follow price structures of the U.S. and generally tend to be priced significantly lower.

RISKS RELATED TO OUR RELIANCE ON OUTSIDE PARTIES

If our strategic alliances are unsuccessful or are terminated, we may be unable to commercialize certain product candidates and generate revenues.

We depend on alliance partners for financial and scientific resources for the clinical development, manufacture and commercialization of certain of our product candidates. Under these alliances we are likely to have limited influence and control over their approaches to development and commercialization. If strategic alliance partners do not perform in the manner that we expect or fail to fulfill their responsibilities in a timely manner, or at all, the clinical development, regulatory approval and commercialization efforts related to product candidates we have licensed to such strategic alliance partners could be delayed or terminated. These alliances will likely provide us with limited control over the course of development of a product candidate, especially once a candidate has reached the stage of clinical development. Our ability to ultimately recognize revenue from our strategic relationships will depend upon the ability and willingness of our alliance partners to successfully meet their respective responsibilities under our agreements with them.

Our ability to recognize revenues from strategic alliances may be impaired by several factors, including:

If any of our alliance partners do not elect to pursue the development and commercialization of our development candidates or if they terminate the strategic alliance, then, depending on the event:

Any of these events would have a material adverse effect on our results of operations and financial condition.

If the outside contractors we rely on to conduct some aspects of our compound formulation, research and studies do not perform satisfactorily and meet deadlines, development of our product candidates could be delayed or precluded.

We do not independently conduct all aspects of our drug discovery activities, compound formulation research or preclinical and clinical studies of product candidates. We currently rely and expect to continue to rely on outside contractors to conduct some aspects of our preclinical and clinical studies and formulation development, but we remain responsible for ensuring that each of our IND-enabling studies and clinical trials are conducted in accordance with the study plan and protocols for the trial.

If these outside parties terminate their engagements with us or do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatory requirements or our stated

study plans and protocols, we will not be able to complete, or may be delayed in completing, the necessary preclinical studies to enable us or our strategic alliance partners to select viable product candidates for IND submissions and will not be able to, or may be delayed in our efforts to, successfully develop and commercialize such product candidates.

If the contract manufacturers we rely on to produce the supply of our preclinical and clinical product candidates, including materials for the manufacture of our product candidates do not timely deliver adequate quantities of quality materials, development and commercialization of our product candidates would be hindered.

We rely on outside contractors to produce the supply of our preclinical and clinical product candidates, and we intend to rely on outside contractors to produce future clinical supplies of product candidates and commercial supplies of any approved product candidates. Reliance on outside suppliers and manufacturers entails risks, some of which we would not be subject to if we manufactured the product candidates ourselves, including:

Any of these events could lead to clinical study delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products, if approved. Some of these events could be the basis for detrimental FDA action, including injunction, product recall or seizure, or total or partial suspension of production.

Any disruption in the supply chain of raw materials for, or in the manufacturing capacity and timing for the manufacture of drug substance or drug product for, our product candidates may cause a delay in developing and commercializing these product candidates and limit the revenues that we could generate.

We have established manufacturing relationships with a limited number of suppliers to supply raw materials used to create our product candidates and with a limited number of contract manufacturers to manufacture drug substance and drug product. The availability of continued supply and manufacturing capacity from our current vendors, and the availability of additional suppliers and manufacturers, is limited. We have and may continue to experience some supplier shortages and delivery delays. If our vendors fail to supply materials or to manufacture substances or products in the required quantities on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement vendors in a timely manner at a substantially equivalent cost, our clinical trials may be delayed, and our commercialization prospects could be materially diminished.

Prior to marketing approval for any of our product candidates, a manufacturer and its processes are required to be qualified by the FDA. If supply from the approved manufacturer is interrupted, there could be a significant disruption in our sales of any product. An alternative vendor would need to be qualified through an NDA supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

In addition, if our alliance partners elect to control manufacturing for certain programs, we may lose control over the manufacturing activities for the product candidate, which would reduce our level of manufacturing process development and would make the success of such programs dependent on our partners’ ability to manufacture timely and properly.

If the contract research organizations and clinical trial sites we rely on to conduct, supervise and monitor our clinical trials perform in an unsatisfactory manner, it may harm our business.

We and our strategic alliance partners rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials. We and our strategic alliance partners have limited control or influence over their actual performance, but remain responsible for ensuring that clinical trials are conducted in accordance with the applicable protocol, legal, regulatory and scientific standards.

If we or our CROs fail to comply with applicable good clinical practices, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or applicable non-U.S. regulatory agency may require us to perform additional clinical trials before approving any marketing applications. In addition, our future clinical trials will require a sufficiently large number of test subjects to adequately evaluate the safety and effectiveness of a potential drug product. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process and increase our costs.

Our CROs are not our employees, and we are not able to control whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities, which could possibly harm our competitive position. If our future CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates. As a result, the commercial prospects for such products and any product candidates that we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

We rely on other outside parties to store and distribute drug products for clinical trials. Any performance failure or delays by our distributors could delay clinical development, marketing approval or commercialization of our product candidates, resulting in additional losses and depriving us of potential product revenue.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

If we are unable to obtain or protect intellectual property rights related to our products and product candidates, we may not be able to compete effectively in our markets.

Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our product candidates, methods used to develop and manufacture our product candidates and methods for treating patients using our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. As of February 26, 2024, we own over 438 patents and pending patent applications, including 46 granted U.S. patents. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be highly uncertain. The patent applications that we own or in-license may fail to result in patents with claims that cover our products or methods in the United States or in other countries.

Our patents could be prevented from issuing or be invalidated after issuance for many reasons, including:

If the patent applications we hold or have in-licensed with respect to our programs or product candidates fail to issue or are invalidated or if their breadth or strength of protection is threatened, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize, future products.

If we do not prevail in any challenge to our intellectual property rights, we could be required to cease using the related technology or to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license at all, or on commercially reasonable terms. Our defense of a patent or patent application in such a proceeding may not be successful and, even if successful, may result in substantial costs and distract our management and other employees. Even if our patents are issued and are not challenged or invalidated, our patents and patent applications may not adequately protect our intellectual property or products, or prevent others from designing around our claims. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords is limited. Once the patent life has expired for a product, we may be open to competition from generic medications. Further, if we encounter delays in regulatory approvals, the period during which we could market a product candidate under patent protection could be reduced.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect certain proprietary know-how, including processes for which patents are difficult to enforce, elements of our drug discovery and development processes and elements of our proprietary manufacturing processes. Although each of our employees agrees to assign their inventions to us through an employee inventions agreement, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology are required to enter into confidentiality agreements, such agreements may not be effective in preventing our trade secrets and other confidential proprietary information from being disclosed or accessed by competitors. In addition, competitors and others may independently discover our trade secrets and proprietary information or independently develop substantially equivalent information and techniques, and regulatory agencies may require additional disclosures of proprietary know-how.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business.

Claims that we infringe the intellectual property rights of others, especially in the crowded and competitive field of mRNA and delivery technology patents, may prevent or delay our development and commercialization efforts.

As the biotechnology and pharmaceutical industries expand and more patents are issued and as our activities expand and mature, the risk increases that our product candidates and activities may be subject to claims of infringement of the patent rights of others. This risk is significantly heightened because of the many patents and other intellectual property rights related to messenger RNA and its delivery.

Prior to and since the outbreak of the COVID-19 pandemic, many companies have devoted substantial effort to developing vaccines and therapeutics that use mRNA technology and have developed their own intellectual property rights, applied for patents, and licensed rights to patents held by other companies or research institutions. Some of these patents may have broad claims that cover our current or expected activities.

We are aware of patent challenging and enforcement activities in connection with technologies used in mRNA-based COVID-19 vaccines. The outcomes of such activities and the advancement of our programs could give rise to third party claims of infringement against us and our partners.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our and our partners’ ability to further develop and commercialize products based on our platform. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee and financial resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay significant royalties, or try to redesign our infringing products, which may be impossible or require substantial time and monetary expenditure, further delaying and commercialization and substantially reducing potential market revenue. In order to continue development, manufacture or sale of a product, we may need to obtain a license from the owner of intellectual property, which may not be available on commercially reasonable terms or at all.

If we fail to obtain licenses to necessary intellectual property or do not comply with our obligations in license agreements, we could lose important rights.

We may need to obtain licenses from owners of intellectual property to advance our research or allow commercialization of our product candidates, and we have done so from time to time. If we fail to obtain any of these licenses at a reasonable cost and on reasonable terms, we would be unable to further develop and commercialize one or more of our product candidates, which could harm our business significantly.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensees, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensees. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or of our licensees is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Our defense in a lawsuit may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensees, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during the course of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

If we are subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties, we could incur substantial expenses.

We employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. We may not be successful in defending these claims, and if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees.

Certain of our patents are, and our future owned and in-licensed patents may be, discovered through government funded programs and thus may subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies, and the exercise of such “march-in” rights by the U.S. government could harm our business, financial conditions, results of operations and prospects.

Certain of our patents have been, and our future owned and in-licensed patents may be, discovered through government funded programs. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future products pursuant to the Bayh-Dole Act of 1980 (the “Bayh-Dole Act”), and implementing regulations, which are amended from time to time. On December 7, 2023, the Biden administration announced an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us or our licensors to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, which are also referred to as “march-in rights.” The U.S. government also has the right to take title to these inventions if we, or the applicable licensor, fail to disclose the invention to the government and fail to file an application to register the intellectual property within specified time limits. If the U.S. government decides to

exercise these rights, it is not required to engage us as its contractor in connection with doing so. To the extent any of our current or future intellectual property is generated through the use of U.S. government funding, the provisions of the Bayh-Dole Act may similarly apply. Any exercise by the government of any of the foregoing rights could harm our business, financial condition, results of operations and prospects.

RISKS RELATED TO OUR BUSINESS OPERATIONS AND INDUSTRY

We may need to expand our organization and may experience difficulties in managing this growth, which could disrupt our operations.

As of December 31, 2023, we had approximately 180 employees. In the future we may expand our employee base to increase our managerial, scientific, operational, commercial, financial and other resources and we may hire more consultants and contractors. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure or give rise to operational mistakes, loss of business opportunities, loss of employees or reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. Moreover, if our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

We have recently experienced high turnover and if we cannot continue to attract, retain and motivate key executives and qualified scientists and other personnel, we will not be able to effectively operate our business.

We are highly dependent on principal members of our executive team, and any reduction or loss of their services may adversely impact the achievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employment at any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees for our business, including scientific and technical personnel, will also be critical to our success. We have experienced a high number of resignations over the past few years, which could continue. There was already a shortage of skilled executives as well as scientific and technical personnel in our industry prior to COVID-19, which was exacerbated by the pandemic and is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high, as we have recently seen. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in preclinical studies and clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit any executive or key employee or the loss of the services of any executive or key employee might impede the progress of our research, development and commercialization objectives.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of employee fraud or other misconduct. Employee misconduct could have significant negative impacts on our business. Misconduct by employees could include intentional or nonintentional failures to comply with the regulations of the FDA and other regulators, to provide accurate information to the FDA and other regulators, to comply with healthcare fraud and abuse laws and regulations in the United States and abroad, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation. Although we have adopted a code of conduct and procedures, we may not always be effective in identifying and deterring employee misconduct, controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of civil, criminal and administrative penalties, damages, fines, possible exclusion from Medicare, Medicaid and other government healthcare programs, additional reporting requirements and/or oversight, particularly if we become subject to a corporate integrity agreement or similar agreement to

resolve allegations of non-compliance, disgorgement, imprisonment, and contractual damages. Even if we are ultimately successful in defending any such action, we could be required to divert financial and managerial resources in doing so and adverse publicity could result, all of which could harm our business.

If we do not fully comply with applicable healthcare fraud and abuse laws, false claims laws and health information privacy and security laws, we could face criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly, or indirectly through our customers, further subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act (the “FCA”). These laws may impact, among other things, our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we conduct our business. The healthcare laws and regulations that may affect our ability to operate include:

In addition, the EU has established its own data security and privacy legal framework, including but not limited to Directive 95/46/EC (the “Data Protection Directive”). The European General Data Protection Regulation (“GDPR”) took effect on May 25, 2018, which contains new provisions specifically directed at the processing of health information, higher sanctions and extra-territoriality measures intended to bring non-E companies under the regulation. We anticipate that over time we may expand our business operations to include additional operations in the EU, including potentially conducting preclinical and clinical trials. With such expansion, we would be subject to increased governmental regulation in the EU countries in which we might operate, including regulation due to the GDPR.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations or laws that apply to us, we may be subject to substantial penalties, including, without limitation, civil, criminal and administrative penalties, damages, fines, possible exclusion from Medicare, Medicaid and other government healthcare programs, additional reporting requirements and/or oversight, particularly if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Recent and future healthcare legislation may further impact our business operations.

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policymakers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the ACA was enacted, which made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. The ACA included a number of provisions that may reduce the profitability of drug products, including revising the rebate methodology for covered outpatient drugs under the Medicaid Drug Rebate Program, extending

Medicaid rebates to individuals enrolled in Medicaid managed care plans, and requiring drug manufacturers to pay an annual fee based on their market share of prior year total sales of branded programs to certain federal health care programs.

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our product candidates or products. For example, unanticipated adverse effects could result from the use of our future products or product candidates which may result in a potential product liability claim. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

We have a limited amount of product liability insurance relating to the use of our therapeutics in clinical trials. However, such insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to obtain or maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Cyber security risks and the failure to maintain the confidentiality, integrity, and availability of our computer hardware, software, and Internet applications and related tools and functions could result in damage to our reputation and/or subject us to costs, fines or lawsuits.

Our business requires manipulating, analyzing and storing large amounts of data. In addition, we rely on a global enterprise software system to operate and manage our business. We also maintain personally identifiable information about our employees and participants in our clinical trials. Our business therefore depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure. To the extent that our hardware or software malfunctions or access to our data by internal research personnel is interrupted, our business could suffer. The integrity and protection of our employee and company data is critical to our business and our employees and participants in our clinical trials have a high expectation that we will adequately protect their personal information. The regulatory environment governing information, security and privacy laws is increasingly demanding and continues to evolve. Maintaining compliance with applicable security and privacy regulations may increase our operating costs. Although our computer and communications hardware is protected through physical and software safeguards, it is still vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, software viruses, and similar events. These events could lead to the unauthorized access, disclosure and use of non-public information. The techniques used by cyber criminals are sophisticated, change frequently, may originate from less regulated and more remote areas of the world, may not be recognized until launched and can originate from a wide variety of sources, including insider threats and outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies, or generated using artificial intelligence. As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. If our computer systems are compromised, we could be subject to fines, damages, litigation and enforcement actions,

and we could lose trade secrets, the occurrence of which could harm our business. In addition, any sustained disruption in internet access provided by other companies could harm our business.

Business interruptions could delay us in the process of developing our future products.

Our headquarters is located in San Diego, California. We are vulnerable to natural disasters such as earthquakes, mudslides, floods and wildfires, as well as other events that could disrupt our operations. We do not carry insurance for earthquakes or other natural disasters, and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our business operations.

U.S. Government agencies have special contracting authority that gives them the ability to terminate and/or modify their contracts with us.

On August 31, 2022, we entered into a cost reimbursement contract with BARDA to support the development of a low-dose pandemic influenza candidate based on Arcturus’ proprietary self-amplifying messenger RNA-based vaccine platform.

The contract with BARDA, as with most U.S. Government contracts, is subject to audit, and contains termination provisions allowing the government to terminate all or part of the contract at its sole discretion, which will subject us to additional risks. These risks include the ability of the U.S. Government unilaterally to:

Termination-for-convenience provisions generally enable us to recover only our costs incurred or committed, settlement expenses, and profit on the work completed prior to termination. A contractor’s rights under a termination for convenience are limited to an adjustment of profit and, with the contracting officer’s concurrence, a reduction in the estimated cost. Under the general termination for convenience procedures, a partial termination is treated as a full termination when (i) the terminated portion is clearly severable from the balance of the contract or (ii) when contract performance is virtually complete or performance of the continued portion of the contract is only on subsidiary items or is otherwise not substantial. Termination-for-default provisions do not permit these recoveries and could make us liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source.

Our business is subject to audit by the U.S. Government, and a negative audit could adversely affect our business.

Several U.S. Government agencies, such as the Defense Contract Audit Agency (the “DCAA”), routinely audit and investigate government contractors. These agencies review, among other things, a contractor’s performance under its contracts, incurred costs, cost structure and compliance with applicable laws, regulations and standards.

The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information

systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.
 

We have identified material weaknesses in our internal control over financial reporting, and determined that our disclosure controls were not effective. If our remediations of these material weaknesses are not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, we may not be able to accurately and timely report our financial results, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports, and the price of our common stock may decline.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles (“GAAP”). We are required to furnish annually a report by management of its assessment of the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year. In addition, our independent registered public accounting firm is required to provide a related attestation report on our internal control over financial reporting.

As part of our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2023, management identified a material weakness related to information technology general controls (“ITGCs”) for information systems and applications that are relevant to the preparation of the consolidated financial statements. Specifically, it was determined we did not design and maintain: (i) sufficient user access controls to ensure appropriate segregation of duties and adequately restrict user and privileged access to financial applications, programs and data to the appropriate personnel; (ii) program change management controls to ensure that information technology (“IT”) program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; and (iii) computer operations controls to ensure that critical batch and interfaced jobs are monitored, privileges are appropriately granted, and data backups are authorized and monitored. Business process controls (automated and manual) that are dependent on the ineffective ITGCs, or that rely on data produced from systems impacted by the ineffective ITGCs, are also deemed ineffective. Management also identified a material weakness related to revenue recognition. Certain control activities within the area of revenue did not operate effectively, specifically controls over the review of costs incurred in satisfaction of our performance obligations under collaboration arrangements. As such, we concluded that our disclosure controls and procedures were not effective as of December 31, 2023.

If we are unable to successfully remediate our existing material weaknesses or any future material weakness or other deficiencies in our internal control over financial reporting: the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets and the perceptions of our creditworthiness; we may be unable to maintain compliance with applicable securities laws, Nasdaq listing requirements, and the covenants under our debt instruments regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; and investors may lose confidence in our financial reporting. If any such event or circumstance were to occur, our stock price could decline and our business, financial condition and results of operations could be materially adversely affected.

Notwithstanding the identified material weaknesses, management does not believe that the deficiencies had an adverse effect on our reported operating results or financial condition, and management has determined that the financial statements and other information included in this report and other periodic filings present fairly in all material respects our financial condition and results of operations at and for the periods presented. The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein. For further discussion of the material weaknesses identified and our remedial efforts, see Item 9A. Controls and Procedures.

RISKS RELATED TO OUR COMMON STOCK

We do not intend to pay dividends on our common stock so any returns to investors will be limited to the value of our shares.

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.

The market price of our common stock has been, and is expected to continue to be, highly volatile and investors may not be able to resell shares at or above the price at which they purchased the shares.

The trading price of our common stock is likely to continue to be volatile. Our share price could be subject to wide fluctuations in response to a variety of factors, including but not limited to the following factors:

In addition, companies trading in the stock market in general, and Nasdaq in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

The requirements of being a publicly traded company may strain our resources and divert management’s attention.

As a publicly traded company, we have incurred, and will continue to incur, significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), as well as rules subsequently implemented by the SEC and Nasdaq have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.

Failure to comply with these requirements could subject us to enforcement actions by the SEC, divert management’s attention, damage our reputation, and adversely affect our business, results of operations, or financial condition. In particular, if our independent registered public accounting firm is not able to render the required unqualified attestation, it could result in a loss of investor confidence in the accuracy, reliability, and completeness of our financial reports.

If we are subject to securities class action litigation, we would incur substantial costs and diversion of management’s attention.

We may be at risk of securities class action litigation. This risk is especially relevant for us due to our dependence on positive clinical trial outcomes and regulatory approvals of each of our product candidates. In the

past, medicines, biotechnology and pharmaceutical companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials results and product approvals. If we face such litigation, it could result in substantial costs, divert management’s attention and resources, and have a very material adverse effect on our business, operating results and prospects.

Sales of a substantial number of shares of our common stock in the public market by our existing shareholders could cause our share price to fall.

If our existing shareholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline significantly. In particular, the former shareholders, warrant holders and noteholders of Arcturus Therapeutics, Inc. received an aggregate of 6,631,712 of our common stock pursuant to the merger with Alcobra Ltd. in an unregistered transaction, which shares may be sold pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”). Those shareholders are eligible to sell those shares in the public market without restriction, except for shareholders who are deemed our “affiliates” under Rule 144 under the Securities Act. In addition, common stock that is either subject to outstanding options or reserved for future issuance under our employee benefit plans, may become eligible for sale in the public market to the extent permitted by vesting schedules and Rule 144 under the Securities Act. If common stock is sold, or if it is perceived that it will be sold, in the public market, that could cause the trading price to decline.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities (including but not limited to securities issued in connection with the Sales Agreement, as defined below), our shareholders may experience substantial dilution.

Pursuant to our 2019 Omnibus Equity Incentive Plan, as amended, our management is authorized to grant options and other equity-based awards to our employees, directors and consultants. We may issue and sell additional shares of common stock, convertible securities or other equity securities in one or more capital-raising or other transactions at prices and in a manner we determine from time to time, any of which may result in material dilution to investors and/or our existing shareholders. New investors could also be issued securities with rights superior to those of our existing shareholders.

On December 23, 2022, we entered into a Controlled Equity Offering℠ Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) and Wells Fargo Securities, LLC (“Wells Fargo”), relating to shares of our common stock. In accordance with the terms of the Sales Agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $200,000,000 from time to time through Cantor or Wells Fargo, each acting as our sales agent. As of the date hereof, we have not offered or sold any shares of common stock pursuant to the Sales Agreement.

We may be unable to comply with the applicable continued listing requirements of Nasdaq.

Our common stock is currently listed on Nasdaq. In order to maintain this listing, we must satisfy minimum financial and other continued listing requirements and standards, including a minimum closing bid price requirement for our common stock of $1.00 per share. There can be no assurance that we will be able to comply with the applicable listing standards. For example, if we were to fail to meet the minimum bid price requirement for 30 consecutive business days, we could become subject to delisting. Although Nasdaq may provide us with a compliance period in which to regain compliance with the minimum bid price requirement, we may not be able to regain compliance within the period provided by Nasdaq. In order to regain compliance with such requirement, the closing bid price of our common stock would need to meet or exceed $1.00 per share for at least 10 consecutive business days during the compliance period. If we were not able to regain compliance within the allotted compliance period for this requirement or any other applicable listing standard, including any extensions that may be granted by Nasdaq, our common stock would be subject to delisting. In the event that our common stock is delisted from Nasdaq, liquidity will be reduced, and the trading price of our common stock can be expected to decline immediately. If our common stock is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for our common stock and there would likely also be

a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Risk management and strategy

We recognize the critical importance of developing, implementing, and maintaining robust cybersecurity measures to safeguard our information systems and protect the confidentiality, integrity, and availability of our data.

Managing Material Risks & Integrated Overall Risk Management

We have implemented tools, processes and strategies to promote a company-wide culture of cybersecurity risk management. This ensures that cybersecurity considerations are an integral part of our decision-making processes at every level. Our IT Department works closely with our leadership and key operating personnel to evaluate and address cybersecurity risks in alignment with our business objectives and operational needs.

Engage Third-parties on Risk Management

Due to the complexity and evolving nature of cybersecurity threats, we engage with a range of external experts, including but not limited to cybersecurity assessors, consultants, and auditors to evaluate and test our risk management systems. These partnerships enable us to leverage specialized knowledge and insights, to help ensure our cybersecurity strategies and processes remain at the forefront of industry best practices. Our collaborations with these third-parties includes regular audits, threat assessments, 24-hour monitoring, and consultation on security enhancements.

Oversee Third-party Risk

Because we are aware of the risks associated with third-party service providers, we conduct thorough security assessments of all third-party providers before engagement to ensure compliance with industry cybersecurity standards and frameworks. This includes assessments performed by our Executive Director of IT, who oversees the Company's cybersecurity function.

Risks from Cybersecurity Threats

We have not encountered cybersecurity challenges that have materially impaired our operations or financial standing.

Governance

We have implemented standard operating procedures to define the channels by which cybersecurity threats are communicated to the Company's Board of Directors (the “Board”). This ensures that The Board has oversight and effective governance in managing risks associated with cybersecurity threats.

Board of Directors Oversight

The Audit Committee of the Board (the “Audit Committee”) is central to the Board’s oversight of cybersecurity risks and bears the primary responsibility for this domain. The Audit Committee is composed of board members with diverse expertise including, risk management, and finance, equipping them to oversee cybersecurity risks effectively. The Audit Committee receives briefings on cybersecurity risks from the Executive Director of IT or the Chief Legal Officer as described below in “Management’s Role Managing Risk.”

Management’s Role Managing Risk

The Executive Director of IT and the Chief Legal Officer (“CLO”) play a pivotal role in informing the Audit Committee on cybersecurity risks. They provide briefings to the Audit Committee on a regular basis, with a minimum frequency of once per year. These briefings encompass a broad range of topics, including:

Risk Management Personnel

Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the Executive Director of IT and the Associate Director of IT Infrastructure and Security. Our IT Leadership team oversees our governance programs, tests our compliance with standards, remediates known risks, stays informed of significant developments in the cybersecurity domain, and leads our employee training program.

Monitor Cybersecurity Incidents

The Executive Director of IT is continually informed about the latest developments in cybersecurity, including potential threats and innovative risk management techniques. This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. In cooperation with the Executive Director of IT, the Associate Director of IT Infrastructure and Security implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of advanced security measures and regular system audits to identify potential vulnerabilities. In the event of a cybersecurity incident, the Executive Director of IT is equipped with a well-defined incident response plan. This plan includes immediate actions to mitigate the impact and long-term strategies for remediation and prevention of future incidents.

Reporting to Board of Directors

The Executive Director of IT, in his capacity, regularly informs the Chief Financial Officer (CFO) and Chief Legal Officer (CLO) of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing us. Furthermore, significant cybersecurity matters, and strategic risk management decisions are escalated to the Board, ensuring that they have comprehensive oversight and can provide guidance on critical cybersecurity issues.

See Item 1A “Risk Factors” – “Risks Related to Business Operations and Industry.”

Item 2. Properties

We have two properties located in San Diego, California. Our principal place of business is located at 10628 Science Center Drive, Suite 250, and consists of approximately 24,700 square feet of office space and laboratory space leased through March 2025. We have the right to extend this lease for an additional five-year term.

On September 29, 2021, we entered into a lease agreement for office, research and development, engineering and laboratory space located at 10285 Science Center Drive, San Diego, California. The additional space of approximately 43,234 square feet is leased for a term of 10 years and 8 months. The leased premises will serve as an addition to Arcturus’ existing properties.

We believe that our properties are suitable for the conduct of our business.

Item 3. Legal Proceedings

From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business, and the results of litigation and claims are inherently unpredictable and uncertain. We are not currently a party to any material legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for our Common Stock

Our common stock is listed on the Nasdaq under the symbol “ARCT”.

Holders of Common Stock

As of March 4, 2024, there were 10 registered holders of record of our common stock. As of such date, there were 26,915,243 shares of our common stock issued and outstanding. Our common stock is listed on the Nasdaq under the symbol “ARCT”. We believe that there are a substantially greater number of beneficial owners of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of the Board and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors the Board may deem relevant.

Stock Performance Graph

The following graph compares the Company’s cumulative stockholder return since December 31, 2018 with the Nasdaq Composite Index, and the Nasdaq Biotechnology Index. The graph is based on the assumption that $100 had been invested in Company common stock.

Securities Authorized for Issuance under Equity Compensation Plans

Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. Reserved

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with the consolidated financial statements and related notes included elsewhere herein.

This report includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

Overview

We are a global messenger RNA medicines company focused on the development of infectious disease vaccines and therapeutics for liver and respiratory rare diseases. In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR®, has the potential to enable multiple nucleic acid medicines, and our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR®, technology) has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels as compared to conventional mRNA.

We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs. We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our discovery efforts. Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines.

In June 2020, we initiated our first clinical study, a Phase 1 study for our mRNA-based therapeutic candidate for ornithine transcarbamylase (“OTC”) deficiency. We launched our COVID-19 vaccine program in March 2020, and in November 2023, our self-amplifying mRNA vaccine against COVID-19, ARCT-154, received marketing approval in Japan. In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc. (“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases and global non-exclusive rights to pandemic pathogens. The CSL Collaboration Agreement became effective on December 8, 2022. The collaboration (“CSL Collaboration”) combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR self-amplifying mRNA and LUNAR delivery platform technologies.

Our vaccines franchise, led by our self-amplifying mRNA-based COVID-19 program, made significant strides in 2023, highlighted by the marketing authorization approval in Japan of ARCT-154. The approval is the world’s first for a self-amplifying RNA (sa-mRNA) COVID-19 Vaccine. In August 2023, we successfully completed the 12-month safety follow-up of the pivotal Phase 1/2/3 study in Vietnam of ARCT-154 that completed dosing in April 2022 of over 19,000 participants. In February 2023, Meiji Seika Pharma Co., Ltd. (“Meiji”), a Japanese leader in the area of infectious disease, completed dosing of a Phase 3 clinical trial of ARCT-154 in Japan to evaluate the safety and immunogenicity of a booster dose of ARCT-154, and to assess the non-inferiority of ARCT-154 to a licensed mRNA vaccine, administered as a booster. Meiji conducted the study under its exclusive partnership with CSL Seqirus for distribution of ARCT-154 in Japan. The study enrolled 828 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech). The results of this study demonstrated that a booster dose of ARCT-154 elicited a numerically higher immune response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®. These Phase 3 study results were used to support the approval of ARCT-154 in Japan for primary immunization and as a booster dose.

Our activities since inception have consisted principally of performing research and development activities, clinical research activities, general and administrative activities and raising capital to fund those efforts. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we

achieve sustainable revenues and profit from operations. As of December 31, 2023, we had an accumulated deficit of $367.9 million.

Liquidity and Capital Resources

From the Company’s inception through the year ended December 31, 2023, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements and government contracts, the sale of capital stock and long-term debt. During fiscal year 2023, we received milestone payments totaling $147.9 million from CSL Seqirus. Additionally, we received milestone payments of $23.8 million from CSL Seqirus subsequent to December 31, 2023. We expect to receive future payments from CSL Seqirus primarily by meeting future milestones related to the CSL Collaboration Agreement. At December 31, 2023, the Company’s balance of cash and cash equivalents, including restricted cash, was $348.9 million.

CSL Seqirus, Inc. Collaboration and License Agreement

We entered into the CSL Collaboration Agreement with CSL Seqirus, a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize mRNA vaccines.

CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens. We received an up-front payment of $200.0 million during the fourth quarter of 2022. We will be eligible to receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We will also be entitled to receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields.

In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza and the other three specified infectious disease pathogens, as well as royalties on revenues from vaccines that may be developed for pandemic preparedness.

The CSL Collaboration Agreement sets forth how CSL Seqirus and we shall collaborate to research and develop vaccine candidates. In the COVID-19 field, we will lead activities for certain regulatory filings for ARCT-154 in the US and Europe and for research and development activities of a next-generation COVID vaccine candidate. CSL Seqirus will lead and be responsible for all other research and development in COVID-19, influenza and the other fields.

Wells Fargo Credit Agreement

On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc. entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo agreed to make a $50.0 million revolving credit line available to the Company (the “Wells Fargo Loan”) with each Wells Fargo Loan evidenced by a revolving line of credit note (each, a “Note”).

Borrowings under the agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Wells Fargo Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York. If an Event of Default (as defined in the credit agreement) occurs, then all Wells Fargo Loans shall bear interest at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default.

The term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal. There is no penalty for terminating the agreement. There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Note. As collateral, the Company has agreed to pledge $55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

Grant from the Biomedical Advanced Research and Development Authority

On August 31, 2022, we entered into a cost reimbursement contract (the “BARDA Contract”) with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) within the U.S. Department of Health and Human Services

(“HHS”) to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform. The BARDA Contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years. It provides for reimbursement by BARDA of our permitted costs up to $63.2 million.

Vinbiocare Agreement

During 2021, we entered into a technology license and technical support agreement and the framework drug substance supply agreement with Vinbiocare, a member of Vingroup Joint Stock Company (collectively, the “Vinbiocare License & Supply Agreements”), whereby we would provide technical expertise and support services to Vinbiocare to assist in the build out of an mRNA drug product manufacturing facility in Vietnam. We received an upfront payment in aggregate of $40.0 million as part of the Vinbiocare License and Supply Agreements. In October 2022, in association with the termination of the Vinbiocare License and Supply Agreements, we signed the Vinbiocare Support Agreement with Vinbiocare which continues Vinbiocare’s clinical obligations and reserved a portion of the original $40.0 million upfront payment received from the License and Supply Agreements to be paid over the future periods.

The Vinbiocare Support Agreement requires us to pay to Vinbiocare certain limited payments, including upon the occurrence of specified events through the first quarter of 2025. Vinbiocare is also eligible to receive a single digit percentage of amounts received by Arcturus on net sales, if any, of ARCT-154 (or next-generation COVID vaccine) up to a capped amount.

General Financial Resources

A portion of our current cash balance is expected to be utilized during fiscal year 2024 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA agreement and (iv) continued exploratory activities related to our platform and other general administrative activities.

Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders.

We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development. Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement and identifying and developing successful mRNA drug and vaccine candidates. If we are not able to achieve planned milestones or incur costs in excess of our forecasts, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.

Funding Requirements

We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans. We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses and continued funding from partners at anticipated levels. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing when and as needed. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.

Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to the following:

• the development of our LUNAR-COV19 and LUNAR-FLU vaccine candidates;

• the achievement of milestones under our strategic alliance agreements;

• maintaining and/or expanding our manufacturing network and capabilities;

• the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish, including those with CSL Seqirus and CSL Seqirus’ arrangement with Meiji, and any related payments thereunder;

• the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates;

• the number and characteristics of product candidates that we pursue;

• the outcome, timing and cost of regulatory approvals;

• delays that may be caused by changing regulatory requirements;

• the cost and timing of hiring new employees to support our continued growth;

• the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;

• the costs and timing of procuring clinical and commercial supplies of our product candidates;

• the costs and timing of establishing sales, marketing and distribution capabilities;

• the costs associated with legal proceedings;

• the costs associated with potential litigation related to collaboration agreements; and

• the extent to which we acquire or invest in businesses, products or technologies.

The following table shows a summary of our cash flows for the years ended December 31, 2023 and 2022:

Operating Activities

Net cash used in operating activities in 2023 was $18.1 million and consisted of net loss of $29.7 million offset by adjustments of $4.2 million and a net change in assets and liabilities of $7.4 million. Non-cash items primarily included stock-based compensation of $34.6 million and depreciation and amortization of $3.0 million offset by a gain on debt extinguishment of $34.0 million. The net change in assets and liabilities was primarily due to an increase in deferred revenue of $38.6 million, a decrease in right-of-use assets of $4.0 million and a decrease in prepaid and other current assets of $1.2 million. This was partially offset by an increase in accounts receivable of $29.3 million, a decrease in accounts payable and accrued liabilities of $2.9 million and a decrease lease liabilities of $4.3 million.

Net cash provided by operating activities in 2022 was $32.0 million and consisted of net income of $9.3 million and non-cash adjustments of $35.2 million, plus a net change in assets and liabilities of $12.6 million. Non-cash items primarily included stock-based compensation of $30.6 million and depreciation and amortization of $1.5 million. The net change in assets and liabilities was primarily due to a decrease in deferred revenue of $14.7 million, a decrease in lease liabilities of $4.5 million, and increase in prepaid and other current assets of $3.6 million and a decrease in accounts payable of $3.1 million, partially offset by an increase in accrued liabilities of $9.4 million, a decrease in right-of-use assets of $3.3 million and a decrease in accounts receivable of $0.6 million.

Investing Activities

Net cash used in investing activities of $2.9 million in 2023 and $7.7 million in 2022 reflected the acquisition of property and equipment.

Financing Activities

Net cash used in financing activities in 2023 was $24.1 million, primarily from principal payments on long-term debt of $27.4 million, partially offset by proceeds from the exercise of stock options of $2.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.6 million.

Net cash used in financing activities in 2022 was $2.9 million, primarily from principal payments on long-term debt of $5.0 million, partially offset by proceeds from the exercise of stock options of $1.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.4 million.

Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements included in this Annual Report. Our historical results of operations and the year-to-year comparisons of our results of operations that follow are not necessarily indicative of future results.

Revenues

We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees and royalties on future sales. The following table summarizes our total revenues for the periods indicated:

Revenue decreased by $39.2 million during the year ended December 31, 2023 as compared to the year ended December 31, 2022. The decrease during 2023 primarily relates to decreases in revenue of the following: (i) $25.2 million related to the termination of the agreement with Vinbiocare during 2022, (ii) $12.5 million related to the recognition of revenue for agreement with the Israeli Ministry of Health during 2022, (iii) $8.5 million related to the termination of the agreement with Janssen during 2022 and (iv) $1.9 million related to the completion of the amortization of the upfront payment from the UGX agreement during the second quarter of 2023. The decrease was primarily offset by increases in the revenue of $8.8 million related to the increase in reimbursable research and development expenses for the grant agreement with BARDA and $0.1 million related to other material transfer agreements during the year ended 2023.

Operating Expenses

Our operating expenses consist of research and development and general and administrative expenses.

The following table presents our total research and development expenses by category:

Research and Development Expenses, net