EPIRUS Biopharmaceuticals, Inc. - FORM 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2015.

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

For the transition period from to .

Commission File Number 000-51171

EPIRUS BIOPHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-3514457
(State or other jurisdiction of Incorporation or organization)		(IRS Employer Identification Number)

699 Boylston Street
Eighth Floor
Boston, MA 02116		02116
(Address of Principal Executive Offices)		(Zip Code)

(617) 600-3497

(Registrant’s telephone number, including area code)

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x

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

Number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of May 11, 2015: 23,514,851 shares

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EPIRUS BIOPHARMACEUTICALS, INC.
QUARTERLY REPORT
ON FORM 10-Q

INDEX

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	2

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

Item 3.	Defaults Upon Senior Securities	54

Item 4.	Mine Safety Disclosures	54

Item 5.	Other Information	54

Item 6.	Exhibits	54

Signatures		55

Exhibit Index		56

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

EPIRUS Biopharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

	March 31, 2015			December 31, 2014
	(Unaudited)			(Audited)
Assets
Current assets:
Cash and cash equivalents	$	61,546		$	21,462
Prepaid expenses and other current assets	1,820			1,556
Total current assets	63,366			23,018
Property and equipment, net	665			704
In-process research and development	5,500			5,500
Intangible assets, net	3,548			3,605
Goodwill	16,363			16,363
Restricted cash	1,825			1,825
Other assets	218			374
Total assets	$	91,485		$	51,389
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,658		$	2,483
Accrued expenses	2,722			4,101
Deferred revenue	38			50
Other current liabilities	556			557
Deferred tax benefit	185			185
Total current liabilities	6,159			7,376
Long term debt, net of debt discount	7,298			7,282
Deferred revenue, net of current portion	1,201			946
Deferred tax liability	2,166			2,166
Deferred tax benefit, net of current portion	507			553
Other non-current liabilities	534			665
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.001 par value; Authorized—5,000,000 shares; Issued and Outstanding—0 shares at March 31, 2015 and December 31, 2014	—			—
Common stock, $0.001 par value; Authorized—300,000,000 shares; Issued— 23,528,110 and 12,934,102 shares at March 31, 2015 and December 31, 2014, respectively; Outstanding—23,514,851 and 12,920,843 shares at March 31, 2015 and December 31, 2014, respectively	24			13
Additional paid-in capital	167,688			118,959
Accumulated deficit	(94,092		)	(86,571		)
Total stockholders’ equity	73,620			32,401
Total liabilities, convertible preferred stock and stockholders’ equity	$	91,485		$	51,389

See accompanying notes to condensed consolidated financial statements.

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EPIRUS Biopharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended March 31,
	2015			2014
Revenue	$	25		$	—
Operating expenses:
Research and development	3,079			3,504
General and administrative	4,168			2,718
Total operating expenses	7,247			6,222
Loss from operations	(7,222		)	(6,222		)
Other income (expense):
Interest expense, net	(281		)	(1,219		)
Change in fair value of warrant liability	—			(100		)
Other income (expense), net	(30		)	8
Total other income (expense), net	(311		)	(1,311		)
Loss before income taxes	(7,533		)	(7,533		)
Benefit (loss) from income taxes	12			(86		)
Net loss	$	(7,521	)	$	(7,619	)
Net loss per share—basic and diluted	$	(0.39	)	$	(28.90	)
Weighted-average number of common shares used in net loss per share calculation—basic and diluted	19,284,653			263,611
Comprehensive loss	$	(7,521	)	$	(7,619	)

See accompanying notes to condensed consolidated financial statements

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EPIRUS Biopharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(7,521	)	$	(7,619	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	96			10
Non-cash interest expense	133			1,196
Stock-based compensation and vesting of restricted stock	468			44
Deferred rent and lease incentive activity	(6		)	—
Deferred taxes	(46		)	(46		)
Change in fair value of warrants	—			100
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(360		)	228
Other non-current assets	154			(3		)
Accounts payable	175			74
Accrued expenses and other current liabilities	(1,399		)	1,650
Other non-current liabilities	(125		)	—
Deferred revenue	243			750
Net cash used in operating activities	(8,188		)	(3,616		)
Cash flows from investing activities:
Purchases of property and equipment	—			(15		)
Net cash used in investing activities	—			(15		)
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of costs	48,027			—
Proceeds from the issuance of convertible notes	—			5,000
Proceeds from the exercise of common stock options	245			82
Net cash provided by financing activities	48,272			5,082
Net increase in cash and cash equivalents	40,084			1,451
Cash and cash equivalents—Beginning of period	21,462			1,798
Cash and cash equivalents—End of period	$	61,546		$	3,249
Supplemental disclosure of cash flow information
Cash paid for interest	$	149		$	—
Cash paid for income taxes	$	34		$	—
Supplemental schedule of non-cash investing and financing activities
Amounts in accounts payable for capital expenditures	$	—		$	—
Conversion of convertible debt and accrued interest into preferred stock and warrants	$	—		$	13,184

See accompanying notes to condensed consolidated financial statements

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EPIRUS Biopharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

March 31, 2015

(unaudited)

(In thousands, except share and per share amounts)

1. Organization

On July 15, 2014, EPIRUS Biopharmaceuticals, Inc., a Delaware corporation and private company (“Private Epirus”), completed its merger with EB Sub, Inc., a wholly owned subsidiary of Zalicus Inc., a Delaware corporation (“Zalicus”), pursuant to the terms of that certain Agreement and Plan of Merger and Reorganization (as amended, the “Merger Agreement”), dated as of April 15, 2014, by and among Private Epirus, Zalicus and EB Sub, Inc., formerly known as BRunning, Inc. (the “Merger”). As part of the Merger, Zalicus was renamed EPIRUS Biopharmaceuticals, Inc. (“Public Epirus”) and Private Epirus was renamed EB Sub, Inc. (“EB Sub”). Following completion of the Merger, EB Sub, Inc. (formerly Private Epirus), was the surviving corporation of the Merger and a wholly owned subsidiary of Public Epirus.

The term “Company” as used in these notes to consolidated financial statements refers to Private Epirus and its subsidiaries prior to the completion of the Merger and to Public Epirus and its subsidiaries subsequent to the completion of the Merger.

The Company is commercial-stage biopharmaceutical company focused on improving patient access to important biopharmaceuticals by developing, manufacturing, and commercializing biosimilar therapeutics, or biosimilars, in targeted geographies worldwide. The Company has a principal place of business in Boston, Massachusetts. The Company seeks to build a sustainable, profitable biosimilar company with a pipeline of operationally synergistic monoclonal antibodies in inflammation and immunology.

The Company’s lead product candidate is BOW015, a biosimilar version of Remicade® (infliximab). Remicade is marketed by Johnson & Johnson, Merck Schering and Mitsubishi Tanabe for the treatment of various inflammatory diseases.

In November 2014, the Company launched BOW015 in India, under the brand name InfimabTM, the first infliximab biosimilar in India, with its commercialization partner Sun Pharmaceutical Industries Ltd. (formerly known as Ranbaxy Laboratories Limited, prior to its acquisition by Sun in March 2015) (“Sun”). The Company expects to utilize its existing regulatory data package to gain regulatory approval for BOW015 in additional countries.

The Company’s pipeline of biosimilar product candidates also includes BOW050, a biosimilar version of Humira® (adalimumab), which is marketed by AbbVie and used to treat inflammatory diseases, and BOW070, a biosimilar version of Actemra® (tocilizumab), which is marketed by Genentech/Roche and used to treat inflammatory diseases. BOW050 and BOW070 are in pre-clinical development. The Company is advancing existing development and commercialization partnerships for its product candidates in China and India, as well as in additional countries in Southeast Asia and North Africa. The Company is also pursuing development and commercial partnerships in the United States, Europe, Brazil, and elsewhere.

2. Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three months ended March 31, 2015 are not necessarily indicative

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of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2015. For further information, refer to the consolidated financial statements and footnotes included in the Company’s annual consolidated financial statements for the year ended December 31, 2014, which are included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2015.

3. Summary of Significant Accounting Policies

In the three months ended March 31, 2015, there were no changes to the Company’s significant accounting policies identified in the Company’s most recent annual consolidated financial statements for the fiscal year ended December 31, 2014, which are included in the Company’s annual report on Form 10-K filed with the SEC on March 31, 2015.

Principles of Consolidation

The consolidated financial statements include the accounts of Epirus and its wholly owned subsidiaries: EB Sub, Inc., a Delaware Corporation, Epirus Biopharmaceuticals Ltd., a United Kingdom corporation, Epirus Switzerland GmbH, a Swiss corporation, Epirus Brasil Tecnologia Ltda, a Brazilian corporation, and Zalicus Pharmaceuticals Ltd., a Canadian corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Merger and Exchange Ratio

The Merger has been accounted for as a “reverse merger” under the acquisition method of accounting for business combinations with Private Epirus treated as the accounting acquirer of Zalicus. The historical financial statements of Private Epirus have become the historical financial statements of Public Epirus, or the combined company, and are included in this quarterly report on Form 10-Q. Since the Merger, costs related to Zalicus operations have been immaterial. As a result of the Merger, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of Public Epirus, including the effect of the Merger exchange ratio and the Public Epirus common stock par value of $0.001 per share. See Note 5, “Merger,” for additional discussion of the Merger and the exchange ratio.

Reverse Stock Split

On July 16, 2014, Public Epirus effected a 1-for-10 reverse stock split of its outstanding common stock, par value $0.001 per share (“Public Epirus Common Stock”) (the “Reverse Stock Split”). The accompanying consolidated financial statements and these notes to consolidated financial statements, including the Merger exchange ratio applied to historical Private Epirus common stock and stock options, give retroactive effect to the Reverse Stock Split for all periods presented. The shares of Public Epirus Common Stock retained a par value of $0.001 per share. See Note 5, “Merger,” for additional discussion of the Merger and the exchange ratio.

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Indefinite lived intangible assets are also tested at least annually for impairment. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. During the three months ending March 31, 2015, the Company determined that there was no impairment of its IPR&D.

Recent Accounting Pronouncements

Revenue Recognition

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revenue from contracts with customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and creates a new Topic 606, Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2016, with early adoption not permitted. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company has not yet determined which adoption method it will utilize or the effect that the adoption of this guidance will have on its consolidated financial statements.

Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance, which requires that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related liability, rather than as a deferred charge. The updated guidance is effective retroactively for financial statements covering fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted but the Company does not anticipate electing early adoption. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements.

4. Business Agreements

Sun Pharmaceutical Industries (formerly known as Ranbaxy Laboratories)

For the three months ended March 31, 2015, the Company recorded royalty revenue of $17 related to commercial sales of the Company’s product, Infimab, which the Company launched with its commercialization partner Sun during the fourth quarter of 2014. The Company received the royalty payment in February 2015.

Sun made an upfront payment of $500 upon the execution of the license agreement by and between the Company and Sun, dated as of January 3, 2014 and as amended from time to time (the “License Agreement”) and is obligated to pay the Company up to $1,000 if certain development and regulatory approval milestones are achieved and up to $10,000 if certain sales milestones are achieved. Under certain circumstances of uncured breach by the Company and termination of the License Agreement by Sun, monetary damages of $500 would be due to Sun.

The Company has invoiced Sun for a total of $1,250 in milestone payments, including the upfront payment, and received payments totaling $1,250 through March 31, 2015.

5. Merger

As described in Note 1, “Organization,” on July 15, 2014 (the “Effective Time”), the Company completed the Merger with Zalicus. Pursuant to the Merger Agreement, each share of capital stock of Private Epirus was exchanged for 0.13259 shares of Public Epirus Common Stock (the “Exchange Ratio”). All Private Epirus stock options granted under the Private Epirus stock option plans (whether or not then exercisable) that were outstanding prior to the effective time of the Merger, and all warrants to purchase Private Epirus capital stock that were outstanding prior to the effective time of the Merger were exchanged at the same ratio as described below. Upon the consummation of the Merger, equity holders of Private Epirus were issued an aggregate of 10,288,180 shares of Public Epirus Common Stock, plus 1,152,042 and 21,996 shares of Public Epirus Common Stock which could be issued in the future upon exercise of stock options and warrants, respectively.

After the Effective Time, all outstanding and unexercised Private Epirus stock options assumed by Zalicus were exercised solely for shares of Public Epirus Common Stock and all outstanding and unexercised warrants to purchase Private Epirus capital stock were exercised solely for shares of Public Epirus Common Stock. The number of shares of Public Epirus Common Stock subject to each Private Epirus stock option or warrant assumed by Zalicus was determined by multiplying (a) the number of shares of Private Epirus common stock that were subject to such Private Epirus stock option or warrant, as in effect immediately prior to the Effective Time, by (b) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of Public Epirus Common Stock. The per share exercise price for the Public Epirus Common Stock issuable upon exercise of each Private Epirus stock option or warrant assumed by Zalicus was determined by dividing (a) the per share exercise price of Private Epirus common stock subject to such Private Epirus stock option or warrant, as in effect immediately prior

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to the Effective Time, by (b) the Exchange Ratio and rounding the resulting exercise price up to the nearest whole cent.

All Zalicus equity awards granted prior to the Merger remained legally outstanding.

The Merger was accounted for as a reverse acquisition under the acquisition method of accounting with Private Epirus treated as the accounting acquirer and Zalicus treated as the acquired company for financial reporting purposes. Private Epirus was determined to be the accounting acquirer based upon the terms of the Merger and other factors, such as relative voting rights and the composition of the combined company’s board of directors and senior management. Accordingly, the Zalicus tangible and identifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the date of acquisition, with the excess consideration transferred recorded as goodwill.

See Note 13, “Stock-Based Compensation,” for additional details regarding the accounting treatment for the equity awards of Private Epirus and Zalicus.

The acquisition-date fair value of the consideration transferred is as follows:

Number of shares of Public Epirus Common Stock owned by Zalicus stockholders(1)	2,635,871
Multiplied by the price per share of Public Epirus Common Stock(2)	$	11.80
Fair value of shares of Public Epirus Common Stock owned by Zalicus stockholders	$	31,104
Acquisition-date fair value of assumed Zalicus equity awards attributable to precombination services(3)	$	220
Total consideration transferred	$	31,324

(1) The stock transferred in the table above is comprised of 2,610,871 common shares outstanding at the time of the Merger plus 25,000 restricted stock units (RSUs) that vested immediately upon the closing of the Merger. The fair value of shares of Public Epirus Common Stock owned by Zalicus shareholders of $31,104 includes approximately $1 related to fractional shares resulting from the Reverse Stock Split.

(2) The shares outstanding are multiplied by the closing trading price of Public Epirus Common Stock as of the Merger date.

(3) Consideration transferred includes approximately $220 of Zalicus equity awards assumed and deemed attributable to precombination services to Zalicus. The fair value of the equity awards at July 15, 2014 was determined using a Black-Scholes option-pricing model with the following ranges of assumptions: exercise price of $14.70 per share to $591.00 per share; underlying stock value of $11.80 per share; expected volatility of 66.02%; expected term of 0.1 years to 6.0 years; and risk-free interest rate of 1.91%.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

	July 15, 2014
Cash and cash equivalents	$	13,756
In-process research and development	5,500
Goodwill	14,864
Restricted cash	1,850
Other assets	253
Total assets acquired	36,223
Accounts payable	(1,584		)
Accrued expenses	(381		)
Other current liabilities	(376		)
Other liabilities	(391		)
Deferred tax liabilities	(2,166		)
Total liabilities assumed	(4,899		)
Total net assets acquired	$	31,324

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The purchase price allocation was prepared on a preliminary basis and is subject to change as additional information becomes available concerning the tax basis of the assets acquired and the liabilities assumed. Any adjustments to the purchase price allocation as a result of a change in tax basis or rates will be made as soon as practicable but no later than one year from July 15, 2014, the acquisition date.

For acquired working capital accounts such as accounts receivable, prepaid expenses and other current assets, accounts payable and certain accrued expenses, the Company determined that no fair value adjustments were required due to the short timeframe until settlement for these assets and liabilities.

The fair value of the in-process research and development (“IPR&D”) was determined using the multi-period excess earnings method, a variation of the income approach, including a discount rate of 13.1% applied to the projected cash flows. The Company believes the assumptions used were consistent and representative of those a market participant would use in estimating the fair value of the IPR&D. The Company will not begin amortizing the IPR&D asset until the research and development is complete and the asset is reclassified to a definite-lived amortizing asset.

Goodwill was calculated as the difference between the acquisition-date fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed. The goodwill is not expected to be deductible for income tax purposes. Goodwill was recorded as an indefinite-lived asset and is not currently being amortized but is tested for impairment on an annual basis or when indications of impairment exist.

Other liabilities of $391 and $376 of other current liabilities related to a sublease liability assumed for Zalicus’ Cambridge, Massachusetts facility. The liability represented the fair value of the difference between the total sublease payments and the total payments for the facility per the lease agreement. The original lease and the sublease agreement terminate in January 2017.

The deferred tax liability of $2,166 related to the temporary difference associated with the $5,500 value of the IPR&D asset, which is not deductible for tax purposes. The deferred tax liability was recorded based on a 39.39% effective tax rate.

The operating results of Zalicus for the period from July 16, 2014 to December 31, 2014, including an operating loss of $25, were included in the Company’s consolidated financial statements as of and for the year ended December 31, 2014. During the three months ended March 31, 2015, operating results for Zalicus were immaterial.

The Company incurred a total of $5,779 in transaction costs in connection with the Merger, excluding Zalicus transaction costs, which were included in general and administrative expense within the consolidated statement of operations for the year ended December 31, 2014.

6. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	March 31, 2015		December 31, 2014
Prepaid manufacturing expenses	$	1,036	$	457
Prepaid other expenses	412		633
Prepaid clinical expenses	—		5
Other current assets	372		461
Total prepaid and other current assets	$	1,820	$	1,556

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7. Property and Equipment, Net

Property and equipment consisted of the following:

	March 31, 2015			December 31, 2014
Leasehold improvements	$	504		$	504
Computer equipment	173			173
Furniture and fixtures	115			116
Total property and equipment	792			793
Less: accumulated deprecation	(127		)	(89		)
Property and equipment, net	$	665		$	704

Depreciation expense related to property and equipment amounted to $38 and $10 for the three months ended March 31, 2015 and 2014, respectively.

8. Goodwill, IPR&D and Intangible Assets, Net

Goodwill

The Company’s goodwill balance as of March 31, 2015 was $16,363. As of March 31, 2015, there were no accumulated impairment losses. Goodwill has been assigned to the Company’s single reporting unit, which is the single operating segment by which the chief operating decision maker manages the Company.

IPR&D

In connection with the Merger in 2014, the Company recognized IPR&D related to Z944. The carrying value of the IPR&D related to Z944 as of December 31, 2014 was $5,500. See Note 5 “Merger” for additional details.

Intangibles

Intangible assets, net of accumulated amortization is as follows:

	March 31, 2015			December 31, 2014
Intangible assets	$	3,687		$	3,687
Total Intangible Assets	3,687			$	3,687
Less: accumulated amortization—intangible assets	(139		)	$	(82	)
Intangible assets, net	$	3,548		$	3,605

Amortization expense, which is included within research and development expense in the consolidated statements of operations and comprehensive loss, was $57 and $0 for the three months ended March 31, 2015 and 2014, respectively.

The estimated aggregate amortization of intangible assets as of March 31, 2015, for each of the five succeeding years and thereafter is as follows:

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	March 31, 2015

April 1, 2015-December 31, 2015	$	168
2016	225
2017	225
2018	225
2019	225
2019 and therafter	2,480
Total	$	3,548

9. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following:

	March 31, 2015		December 31, 2014

Accrued professional fees	$	1,583	$	1,822
Accrued compensation	745		1,244
Accrued manufacturing expense	272		813
Accrued interest expense	90		71
Accrued clinical expense	—		63
Other	32		88
Total accrued expenses	$	2,722	$	4,101

10. Debt

Hercules Notes

As of March 31, 2015, the Company had outstanding borrowings under the Loan and Security Agreement with Hercules Technology Growth Capital, Inc., dated as of September 30, 2014 and as amended from time to time (the “2014 Loan Agreement”) of $7,500. The second term loan, with a principal amount of up to $7,500, may be drawn down at the Company’s option at any time between the earlier of (i) May 30, 2015 or (ii) an Event of Default (as defined in the 2014 Loan Agreement).

As of March 31, 2015, on the Company’s balance sheet, the Company has recorded a long-term debt obligation of $7,298, net of debt discount of $202. Amortization of the debt discount, which was recorded as interest expense in the statement of operations, was approximately $16 for the three months ended March 31, 2015.

Future principal payments, which exclude the 3% end of term charge, in connection with the 2014 Loan Agreement, as of March 31, 2015 are as follows:

	Principal Payments
April 1, - December 31, 2015	$	—
2016	1,851
2017	2,971
2018	2,678
Total	$	7,500

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11. Capital Stock

On February 4, 2015 the Company closed on an underwritten public offering of 9,600,000 shares of its common stock, offered at a price of $5.00 per share. Net proceeds to the Company from this offering were approximately $43,570, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. On February 13, 2015, the Company closed on the sale of an additional 958,208 shares of its common stock at a price of $5.00 per share. Net proceeds to the Company from this overallotment were approximately $4,456, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the net proceeds of $48,026 from the offering to progress its global BOW015 clinical program and to advance the development of its other product candidates, as well as for general corporate and working capital purposes.

As of March 31, 2015, the Company had authorized 300,000,000 shares of common stock, $0.001 par value per share, of which 23,528,110 shares were issued and 23,514,851 shares were outstanding. Additionally, as of March 31, 2015, the Company had authorized 5,000,000 shares of preferred stock, $0.001 par value per share, of which zero were issued and outstanding.

12. Fair Value Measurements

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis in the accompanying balance sheets as of March 31, 2015 and December 31, 2014:

		As of March 31, 2015
		Level 1				Level 2				Level 3				Total
Assets
Cash and cash equivalents		$		61,546		$		—		$		—		$		61,546
		$		61,546		$		—		$		—		$		61,546

	As of December 31, 2014
	Level 1				Level 2				Level 3				Total
Assets
Cash and cash equivalents	$		21,462		$		—						$		21,462
	$		21,462		$		—		$		—		$		21,462

As of March 31, 2015, the Company did not have any liabilities measured at fair value on a recurring basis.

13. Stock-Based Compensation

For the three months ended March 31, 2015 and 2014, the Company recognized stock-based compensation expense of approximately $526, and $44, respectively, in connection with its stock-based payment awards. The Company also recorded a reduction in stock-based compensation expense for the three months ended March 31, 2015 of $100 resulting from the modification of an award for a former officer of the company.

Stock Options

A summary of stock option activity during the three months ended March 31, 2015 is as follows:

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					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual		Aggregate
	Number		Exercise		Term		Intrinsic
	of Options		Price		(in years)		Value

Outstanding at December 31, 2014	1,652,882		$	10.03
Granted	906,764		10.47
Exercised	(35,800	)	6.85
Cancelled	(111,948	)	6.91
Outstanding at March 31, 2015	2,411,898		$	10.39	9.0		$	4,357

Vested and expected to vest at:
March 31, 2015	2,326,854		$	10.46	9.0		$	4,240

Exercisable at:
March 31, 2015	285,319		$	24.75	7.3		$	1,421

Weighted average grant-date fair value of options granted during the period					$	5.98
Cash received upon exercise of options					$	245

The aggregate intrinsic value in the table above represents the value (the difference between the Company’s common stock fair value on March 31, 2015 and the exercise price of the options, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2015. As of March 31, 2015, there was $9,361 of total unrecognized stock-based compensation expense related to stock options granted under the plans. The expense is expected to be recognized over a weighted-average period of 3.27 years.

During the three months ended March 31, 2015 and 2014, respectively, the range of assumptions used in the Black-Scholes pricing model for new grants were as follows:

	Three Months Ended March 31,
	2015	2014

Risk-free interest rate	1.35%-1.82%	1.95	%
Expected volatility	61.40% - 62.53%	64.07	%
Expected term (in years)	6.00	6.00
Expected dividend yield	0.0%	0.0	%

Restricted Stock Units

A summary of the activity of nonvested restricted stock units (“RSUs”) for the three months ended March 31, 2015 is as follows:

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				Weighted-
				Average
	Number	Weighted-		Remaining
	of	Average		Contractual	Aggregate
	Restricted	Grant Date		Term	Intrinsic
	Stock Units	Fair Value		(in years)	Value

Nonvested at December 31, 2014	—
Granted	126,621	$	10.53	2.3	$	—
Vested	—	—		—	—
Cancelled	—	—		—	—
Nonvested at March 31, 2015	126,621	$	10.53	2.3	$	—

As of March 31, 2015, there was $744 of total unrecognized stock-based compensation expense related to nonvested RSUs. The expense is expected to be recognized over a weighted-average period of 3.7 years.

During February 2015, the Company issued 117,131 RSUs to certain employees, which vest with respect to one quarter (1/4) of the RSUs on the first anniversary of the grant date and an additional one quarter (1/4) on each anniversary thereafter until the fourth anniversary of the grant date. In addition, the Company issued 9,490 RSUs to certain employees as merit grants in lieu of annual raises. These RSUs vest in full on the first year anniversary of the grant date.

Restricted Stock Awards

In April 2014, the Company granted 53,056 shares of restricted common stock to a vendor for consulting services. The restricted stock award is subject to certain performance-based vesting conditions under which 25% of the award vested on April 15, 2014, 50% vested on September 24, 2014 and the remaining 25% would vest following the successful achievement of certain performance milestones and the passage of time.

As of March 31, 2015, the Company had outstanding 13,259 shares of nonvested restricted common stock at a weighted average grant date fair value of $5.08. During the three months ended March 31, 2015, the Company recorded $41 in stock compensation expense related to the nonvested restricted common stock award.

14. Income Taxes

For the three months ended March 31, 2015, the Company recorded income tax benefit of $12, which is due primarily to a tax benefit of $46 from the amortization of the Company’s deferred tax benefit related to the transfer of IPR&D to the Company’s subsidiary, Epirus Switzerland GmbH, a Swiss corporation, offset by tax expense for cash flows generated in foreign territories of $27 and minimum state taxes due in the United States of $7. For the three months ended March 31, 2014, the Company recorded an income tax expense of $86 related to withholding taxes in India and Brazil.

The Company has evaluated the positive and negative evidence on the realizability of its deferred tax assets in each jurisdiction and management has determined that it is more likely than not that the Company will not utilize the benefits of its deferred tax assets in each jurisdiction. Accordingly, the deferred tax assets have been fully reserved as of March 31, 2015 and December 31, 2014.

15. Commitments

As of March 31, 2015, future minimum lease payments under all of the Company’s operating leases are as follows:

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	March 31, 2015
April 1, 2015 - December 31, 2015	1,340
2016	1,719
2017	567
2018	472
2019	480
2020 and thereafter	817
Total	$	5,395
Less: Future sublease payments to be received	(1,671		)
Net future lease payments	$	3,724

16. Net Loss Per Share

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method, have been excluded from the computation of diluted weighted-average shares outstanding for the three months ended Mach 31, 2015 and 2014, as they would be dilutive.

	Three Months Ended March 31,
	2015	2014
Options to purchase common stock	2,411,898	379,162
Settlement of loan agreement	248,093	—
Nonvested restricted stock units	126,621	—
Warrants to purchase common stock	93,040	831,038
Nonvested restricted stock awards	13,259	—
Convertible preferred stock	—	5,361,028
Convertible notes	—	666,001

17. Legal Proceedings

From time to time, the Company is involved in legal proceedings and claims of various types and accounts for these legal proceedings in accordance with ASC Topic 450, “Contingencies.” The Company records a liability in its consolidated financial statements for these matters when a loss is considered probable and the amount of loss can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

Zalicus Shareholder Litigation

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unlawful and unenforceable, an order enjoining defendants from proceeding with the Merger, an order enjoining defendants from consummating the Merger unless and until additional procedures are implemented and all material information in connection with the proposed Merger is disclosed, rescission of the Merger or any terms thereof to the extent implemented (or an award of rescissory damages), compensatory damages and interest, and an award of all costs of the Massachusetts Action, including reasonable attorneys’ fees and experts’ fees.

Between May 1, and May 16, 2014, three putative class action lawsuits were filed by purported stockholders of Zalicus in the Court of Chancery of the State of Delaware (the “Delaware Court”) against Zalicus, Zalicus’ directors, Private Epirus and/or EB Sub, Inc., Stein v. Zalicus Inc., et al., No. 9602; Do v. Zalicus, Inc., et al., No. 9636; and Mendlowitz, et al. v. Zalicus Inc., et al., No. 9664 (the “Consolidated Action”). On May 23, 2014, plaintiff Harvey Stein filed a verified amended complaint, and on May 27, 2014, plaintiff Tuan Do filed a verified amended complaint. The Consolidated Action alleged that the Zalicus board of directors breached their fiduciary duties, and Private Epirus and/or EB Sub, Inc. aided and abetted the purported breaches, in connection with the proposed Merger. The Consolidated Action sought relief including, among other things, to preliminarily and permanently enjoin the proposed Merger, to enjoin consummation of the proposed Merger and rescind the Merger if consummated (or to award rescissory damages), an award of compensatory damages, and an award of all costs of the Consolidated Action, including reasonable attorneys’ fees and experts’ fees.

On June 6, 2014, plaintiffs’ counsel in the Consolidated Action filed a motion seeking to schedule a preliminary injunction hearing in advance of the stockholder vote on the proposed Merger, and seeking expedited discovery in advance of that hearing. Zalicus, Private Epirus, and the individual defendants opposed the motion. After a hearing, on June 13, 2014, the Delaware Court denied plaintiffs’ motion.

On October 27, 2014, plaintiffs’ counsel in the Massachusetts Action served the Company with a motion for voluntary dismissal and an award of attorney’s fees. The motion alleged, as set forth in the consolidated amended complaint filed in the Massachusetts Action on May 21, 2014, that the Form S-4 Registration Statement filed with the SEC on May 8, 2014 contained numerous material misstatements and/or omissions that prevented the Company’s shareholders from being able to evaluate the reasonableness of the Merger. The motion further alleged that in the Amended Registration Statement filed on June 4, 2014, the Company supplemented the disclosures and addressed the allegedly material misstatements and omissions contained in the initial Registration Statement, and that the Company did so in response to the claims made in the Massachusetts Action.

On November 6, 2014, with the Massachusetts Court’s entry of a judgment of dismissal, the Massachusetts Action was closed.

On November 10, 2014, the parties in the Consolidated Action submitted a stipulation and proposed order to dismiss the Consolidated Action and to set a schedule for plaintiffs’ counsel’s anticipated application for an award of attorney’s fees and expenses. On November 12, 2014, the Delaware Court entered an order dismissing the Consolidated Action without prejudice. The Delaware Court retained jurisdiction solely for the purpose of determining plaintiffs’ anticipated application for an award of attorneys’ fees and reimbursement of expenses.

After the Consolidated Action was dismissed, the parties commenced and engaged in discussions to resolve the amount of plaintiffs’ counsel’s application for fees and expenses.

After negotiations, the parties agreed that the Company would make a combined, global fee and expense payment to counsel in both the Consolidated Action and the Massachusetts Action in the amount of $400, of which $50 would be paid by the Company’s insurer, in full satisfaction of plaintiffs’ counsel’s claim for attorneys’ fees and expenses in the Consolidated Action and the Massachusetts Action, which the parties memorialized in a stipulation dated January 13, 2015. As a result of the order, the Company recorded $350 in general and administrative expense in its Consolidated Statement of Operations for the year ended December 31, 2014. The parties requested that the Delaware Court close the Consolidated Action as a result of the stipulation. The Delaware Court directed that notice of the resolution of plaintiffs’ counsel’s request for attorneys’ fees and expenses be provided to shareholders. The parties have since issued notice to shareholders (including via the Company’s filing on its Current Report on March 13, 2015). After expiration of the requisite notice waiting period, the parties submitted to the Delaware Court a proposed order verifying that notice has been provided and providing for the final dismissal and closure of the case. On April 15, 2015, the Delaware Court accepted the order and closed and dismissed the Consolidated Action.

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The Company paid the agreed-to $400 fee and expense amount on April 22, 2015, which is within ten days of the final dismissal and closure of the Consolidated Action.

Reliance Life Sciences Dispute

In December 2014, Reliance Life Sciences Pvt Ltd, or RLS, the Company’s BOW015 contract manufacturer for India, exercised its three-year termination for-convenience right with respect to the parties’ Manufacturing and Supply Agreement, dated as of May 14, 2014 and as amended from time to time (the “RLS Agreement”), which would have caused the RLS Agreement to terminate in December 2017. In addition, in March 2015, RLS initiated an arbitration proceeding under the RLS Agreement alleging that the RLS Agreement grants RLS exclusive global supply rights for BOW015, that the terms of the Company’s collaboration agreements with Fujifilm Diosynth Biotechnologies U.S.A., Inc. and Livzon MabPharm Inc. violate the RLS Agreement, and sought to terminate the RLS Agreement. The proceeding initiated by RLS sought a declaratory judgment, but did not seek any monetary damages.

18. Subsequent Event

Reliance Life Sciences Settlement

On April 22, 2015, the Company entered into a Settlement Agreement with RLS (the “Settlement Agreement”). Pursuant to the Settlement Agreement, RLS has agreed to manufacture 20 final batches of BOW015, with the initial 15 binding forecast batches to be manufactured on or before June 30, 2016 and the final five non-binding forecast batches to be manufactured on or before December 31, 2016, with the forecast for such final batches to be finalized by December 31, 2015. RLS has also agreed to use reasonable commercial efforts to transfer the existing Indian marketing authorization for BOW015 granted by the Drug Controller General of India (“DCGI”) to the Company or its designee, with all costs of the transfer to be borne by the Company and subject to the DCGI’s approval of such transfer. The Company has agreed to pay to RLS a fee of $2,250, payable in four installments over the course of the final batch manufacture, with the final installment to be paid no later than ten days after June 30, 2016. Pursuant to the Settlement Agreement, on May 4, 2015, RLS withdrew the arbitration proceeding it initiated, and the parties have agreed to release each other from all causes of actions or claims, present and future, arising under the RLS Agreement. Following the satisfaction by both parties of all of the terms of the Settlement Agreement, the RLS Agreement and related agreements between the parties shall be terminated and neither party shall have any further rights or obligations thereunder. The Company made the first payment of $750 on April 27, 2015.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and their notes appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this quarterly report.

In the following discussion, the terms “Epirus,” “we,” “our,” “us” or the “Company” refer to EPIRUS Biopharmaceuticals, Inc., a Delaware corporation and private company, prior to the July 15, 2014 merger described below, and EPIRUS Biopharmaceuticals, Inc., formerly known as Zalicus Inc., a Delaware corporation and public company, subsequent to the July 15, 2014 merger described below.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements throughout this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may appear throughout this report. Words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will result,” “seek,” “could,” “may,” “might,” or the negative of these terms and similar expressions or words, identify forward-looking statements. Forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties. Important factors that could cause actual results to differ materially from those reflected in our forward-looking statements include, among others:

· our inability to obtain regulatory approval for, or successfully commercialize, our leading product candidate, BOW015 or our other product candidates, BOW050 and BOW070;

· our inability to secure and maintain relationships with collaborators and single-source contract manufacturers;

· our history of operating losses and inability to ever become profitable;

· our limited history of complying with public company reporting requirements;

· our limited sales and marketing infrastructure;

· uncertainty and volatility in the price of our common stock;

· our inability to meet the continued listing requirements of the NASDAQ Capital Market;

· our inability to develop, implement and maintain appropriate internal controls in the future;

· uncertainty as to our employees’, independent contractors’ and other collaborators’ compliance with regulatory standards and requirements and insider trading rules;

· uncertainty as to the relationship between the benefits of our product candidates and the risks of their side-effect profiles;

· our inability to effectively compete with the reference biologic products for our biosimilar product candidates and from other pharmaceuticals approved for the same indication as the reference biologic products;

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· dependence on the efforts of third-parties to conduct and oversee our clinical trials for our product candidates, to manufacture nonclinical and clinical supplies of our product candidates, to store critical components of our product candidates, and to commercialize our product candidates;

· the extent of government regulations;

· uncertainty of clinical trial results;

· a loss of any of our key management personnel;

· our inability to develop or commercialize our product candidates due to intellectual property rights held by third parties and our inability to protect the confidentiality of our trade secrets;

· the cost and effects of potential litigation; and

· our limited financial resources and inability to access capital to fund proposed operations.

All written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We caution investors not to rely too heavily on the forward-looking statements we make or that are made on our behalf. We undertake no obligation, and specifically decline any obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in any annual, quarterly or current reports that we may file with the Securities and Exchange Commission (the “SEC”).

We encourage you to read the discussion and analysis of our financial condition and our unaudited interim financial statements contained in this report. We also encourage you to read Item 1A of Part II of this quarterly report on Form 10-Q entitled “Risk Factors” and Item 1A of Part I of our annual report on Form 10-K for the fiscal year ended December 31, 2014, which contains a discussion of the risks and uncertainties associated with our business. In addition to the risks described above and in Item 1A of Part II of this quarterly report on Form 10-Q, other unknown or unpredictable factors also could affect our results. There can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Therefore, no assurance can be given that the outcomes stated in such forward-looking statements and estimates will be achieved.

Overview

On July 15, 2014, EPIRUS Biopharmaceuticals, Inc., a Delaware corporation and private company (“Private Epirus”), completed its merger with EB Sub, Inc., a wholly-owned subsidiary of Zalicus Inc., a Delaware corporation (“Zalicus”) (the “Merger”). As part of the Merger, Zalicus was renamed EPIRUS Biopharmaceuticals, Inc. (“Public Epirus”) and Private Epirus was renamed EB Sub, Inc. (“EB Sub”). The boards of directors of Private Epirus and Zalicus approved the Merger on April 15, 2014, and the stockholders of Private Epirus and Zalicus approved the Merger and related matters on July 15, 2014. Following completion of the Merger, Private Epirus, now known as EB Sub, Inc., was the surviving corporation of the Merger and a wholly-owned subsidiary of Public Epirus. The Merger has was accounted for as a “reverse merger” under the acquisition method of accounting for business combinations with Private Epirus treated as the accounting acquirer of Zalicus. The historical financial statements of Private Epirus have become the historical financial statements of Public Epirus, or the combined company, and are included in this quarterly report on Form 10-Q. Since the Merger, costs related to Zalicus operations have been immaterial. As a result of the Merger, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of Public Epirus, including the effect of the Merger exchange ratio and the Public Epirus common stock par value of $0.001 per share. See “Merger “ within Note 5 of the notes to our condensed consolidated financial statements for the three months ended March 31, 2015 included in this quarterly report on Form 10-Q for additional discussion of the Merger and the exchange ratio. Pursuant to the terms of the merger agreement and after giving effect to a reverse stock split, at the effective time of the Merger, each outstanding share of Private Epirus

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capital stock was converted into the right to receive approximately 0.13259 shares of Zalicus’ common stock (the “Exchange Ratio”).

We are a commercial-stage biopharmaceutical company focused on improving patient access to important biopharmaceuticals by developing, manufacturing, and commercializing biosimilar therapeutics, or biosimilars, in targeted geographies worldwide. We seek to build a sustainable, profitable biosimilar company with a pipeline of operationally synergistic monoclonal antibodies in inflammation and immunology.

Our lead product candidate is BOW015, a biosimilar version of Remicade® (infliximab). Remicade, marketed by Johnson & Johnson, Merck Schering and Mitsubishi Tanabe for the treatment of various inflammatory diseases, generated approximately $8.8 billion in global sales in 2014, according to EvaluatePharma®.

We have reported bioequivalence and efficacy data from a Phase 1 clinical trial in the United Kingdom and a Phase 3 clinical trial in India, both of which demonstrated the equivalence of BOW015 to Remicade. We also announced positive 58 week follow up data from the Phase 3 trial. In this open label phase, we demonstrated that patients can be safely initiated and effectively maintained on BOW015 for 58 weeks, and that patients can be safely switched from Remicade to BOW015 and effectively maintained out to 58 weeks. We intend to initiate a global clinical program for BOW015 in late 2015 or early 2016. We have been designing this clinical program in consultation with European regulatory bodies in order to obtain the data necessary to support eventual approval of BOW015 in North America and Europe.

In November 2014, we launched BOW015 in India, under the brand name InfimabTM, the first infliximab biosimilar in India, with our commercialization partner Sun Pharmaceutical Industries Ltd. (formerly known as Ranbaxy Laboratories Limited, prior to its acquisition by Sun in March 2015) (“Sun”). We expect to utilize our existing regulatory data package to gain regulatory approval for BOW015 in additional countries.

Our pipeline of biosimilar product candidates also includes BOW050, a biosimilar version of Humira® (adalimumab), which is marketed by AbbVie and used to treat inflammatory diseases, and BOW070, a biosimilar version of Actemra® (tocilizumab), which is marketed by Genentech/Roche and used to treat inflammatory diseases. BOW050 and BOW070 are in pre-clinical development. Collectively, Remicade, Humira, and Actemra generated approximately $23 billion in global sales in 2014, according to EvaluatePharma. We are advancing existing development and commercialization partnerships for our product candidates in China and India, as well as in additional countries in Southeast Asia and North Africa. We are also pursuing development and commercial partnerships in the United States, Europe, Brazil, and elsewhere.

Presentation for Reverse Stock Split

On July 16, 2014, Public Epirus effected a 1-for-10 reverse stock split of its outstanding common stock, par value $0.001 per share (“Public Epirus Common Stock”) (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each ten shares of Public Epirus Common Stock issued and outstanding immediately prior to the Reverse Stock Split were automatically combined into and became one share of common stock. No fractional shares were issued as a result of the Reverse Stock Split and any stockholder who otherwise would have been entitled to receive fractional shares was entitled to receive cash in an amount, without interest, determined by multiplying such fraction of a share by $11.80, the closing price of a share of Public Epirus Common Stock on the Nasdaq Stock Market on July 15, 2014, after giving effect to the Reverse Stock Split. Also, as a result of the Reverse Stock Split, the per share exercise price of, and the number of shares of common stock underlying, our stock options, warrants and other derivative securities outstanding immediately prior to the Reverse Stock Split were automatically proportionally adjusted based on the 1-for-10 split ratio in accordance with the terms of such options, warrants or other derivative securities, as the case may be. Share and per-share amounts of Public Epirus Common Stock, options and warrants included herein have been adjusted to give effect to the Reverse Stock Split. The Reverse Stock Split did not alter the par value of Public Epirus Common Stock, $0.001 per share, or modify any voting rights or other terms of the common stock. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements, including the Exchange Ratio applied to historical Private Epirus common stock and stock options, give retroactive effect to the Reverse Stock Split for all periods presented.

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As of March 31, 2015, we had an accumulated deficit of $94.1 million. We had a net loss of $7.5 million and $7.6 million for the three months ended March 31, 2015 and 2014, respectively.

Critical Accounting Policies and Estimates

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

There were no changes to our critical accounting policies between December 31, 2014 and March 31, 2015. It is important that the discussion of our operating results that follows be read in conjunction with the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2014 which are included in our annual report on Form 10-K filed with the SEC on March 31, 2015.

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which amends the guidance for accounting for revenue from contracts with customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and creates a new Topic 606, Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2016, with early adoption not permitted. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. We have not yet determined which adoption method we will utilize or the effect that the adoption of this guidance will have on our consolidated financial statements.

Debt Issuance Costs

In April 2015, the Financial Accounting Standards Board (“FASB”) issued guidance, which requires that debt issuance costs be presented in the balance sheet as a deduction from the carrying amount of the related liability, rather than as a deferred charge. The updated guidance is effective retroactively for financial statements covering fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted but we do not anticipate electing early adoption. We are currently evaluating the impact of the adoption of this guidance on our consolidated financial statements.

Results of Operations

The following discussion summarizes the key factors our management team believes are necessary for an understanding of our financial statements.

Comparison of the Three Months Ended March 31, 2015 and 2014:

The following table sets forth our results of operations for each of the periods set forth below (in thousands):

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	Three Months Ended March 31,						Change
	2015			2014			$			%
Revenue	$	25		$	—		$	25		100	%
Operating expenses:
Research and development	3,079			3,504			(425		)	-12	%
General and administrative	4,168			2,718			1,450			53	%
Total operating expenses	7,247			6,222			1,025			16	%
Loss from operations	(7,222		)	(6,222		)	(1,000		)	16	%
Other income (expense):
Interest expense, net	(281		)	(1,219		)	938			-77	%
Change in fair value of warrant liability	—			(100		)	100			-100	%
Other income (expense), net	(30		)	8			(38		)	(4.82	)
Total other income (expense), net	(311		)	(1,311		)	1,000			-76	%
Loss before income taxes	(7,533		)	(7,533		)	(0		)	0	%
Benefit (loss) from income taxes	12			(86		)	98			-114	%
Net loss	$	(7,521	)	$	(7,619	)	$	98		-1	%

Research and development expenses—For the three months ended March 31, 2015, research and development expense was $3.1 million compared to $3.5 million for the three months ended March 31, 2014, a decrease of $0.4 million, or 12%. This decrease was primarily the result of decreased development costs of $1.5 million and $0.3 million related to BOW015 and BOW030 (our bevacizumab program), respectively. Offsetting these decreases were increased development costs of $0.4 million and $0.2 million related to BOW050 and BOW070, respectively, increased headcount related costs of $0.5 million, increased non-cash stock-based compensation of $0.2 million and overhead costs of $0.1 million. We expect research and development expense to increase in future periods as compared due to increased costs related to our global clinical program for BOW015 and development of our pipeline products.

The following table sets forth our results of research and development expenses by program for each of the periods set forth below (in thousands):

	Three Months Ended March 31,				Change
Project	2015		2014		$			%
BOW015	$	1,145	$	2,672	$	(1,527	)	-57	%
BOW050	$	435	$	32	$	403		1259	%
BOW030	$	—	$	294	$	(294	)	-100	%
BOW070	$	195	$	—	$	195		100	%
Overhead/Other	$	1,304	$	506	$	798		158	%
Total	$	3,079	$	3,504	$	(425	)	-12	%

General and administrative expenses— For the three months ended March 31, 2015, general and administrative expense was $4.2 million compared to $2.7 million for the three months ended March 31, 2014, an increase of $1.5 million, or 53%. This increase was primarily the result of increased headcount related costs of $0.7 million, increased professional fees of $0.2 million related to public reporting activities, increased non-cash stock compensation of $0.3 million and increased overhead expenses of $0.3 million. We expect general and administrative expense in future periods to remain approximately the same as compared to the current period.

Interest expense— For the three months ended March 31, 2015, interest expense was $0.3 million compared to $1.2 million for the three months ended March 31, 2014, a decrease of $0.9 million, or 77%. Interest expense for the three month period ending March 31, 2015 primarily reflects interest expense and the amortization of debt discounts related to the term loan funded in October 2014. For the three months ended March 31, 2014, interest expense primarily reflects amortization of debt discounts related to convertible notes issued during 2013, and in the first quarter of 2014. All of our convertible notes converted to equity in March and April of 2014.

Change in fair value of warrant liability— For the three months ended March 31, 2015, change in fair value of warrant liability was $0. For the three months ended March 31, 2014, change in fair value of warrant liability was $0.1 million resulting from the change in fair value of our preferred stock. We do not anticipate that we

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will recognize further amounts with respect to fair value adjustments of warrants as a result of the conversion of all outstanding warrants to purchase our preferred stock into warrants to purchase our common stock in connection with the completion of the Merger.

Other income, net— For the three months ended March 31, 2015 and 2014, other income, net was less than $0.1 million.

Benefit from income taxes— For the three months ended March 31, 2015, benefit from income taxes reflected amortization of the deferred tax benefit offset in part by tax expense for cash flows generated in foreign territories and minimum state taxes due in the United States. For the three months ended March 31, 2014, income tax expense resulted primarily from tax expense for cash flows generated in foreign territories.

Liquidity and Capital Resources

From January 25, 2011 to March 31, 2015, we have incurred an accumulated deficit of $94.1 million, primarily as a result of expenses incurred through a combination of research and development activities, primarily related to our lead product candidate, BOW015, and expenses supporting those activities. We have financed our operations since inception primarily through the public sale of common stock, private sale of preferred stock, cash received in connection with the Merger and the issuance of debt. In February 2015, we closed on an underwritten public offering of 10.6 million shares of our common stock, offered at a price of $5.00 per share. Net proceeds to us from this offering were approximately $48.0 million after deducting underwriting discounts and commissions and offering expenses paid by us.

Our total cash and cash equivalents balance, including restricted cash for deposits on leased facilities of $1.8 million, as of March 31, 2015, was $63.4 million.

We believe that our existing cash and cash equivalents along with $7.5 million in proceeds from the second tranche of our debt financing will be sufficient to fund our current operating plan and capital expenditure requirements into the third quarter of 2016. We have based this estimate on assumptions that may prove to be wrong, and we could use up our available capital resources sooner than we currently expect. Based on our planned use of our net cash and cash equivalents and our existing cash resources, we believe that our available funds will be sufficient to enable us to commence a global clinical program for BOW015 and continue our pre-clinical development of BOW050 and BOW070. We expect that these funds will not be sufficient to enable us to seek additional marketing approvals or commercialize any of our pipeline products beyond BOW015.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

· the timing and costs of our planned global clinical program for BOW015;

· the progress, timing and costs of manufacturing BOW015, BOW050 and BOW070 for current and planned clinical trials;

· the initiation, progress, timing, costs and results of pre-clinical studies and clinical trials for our other product candidates and potential product candidates;

· the outcome, timing and costs of seeking regulatory approvals;

· the costs of commercialization activities for BOW015 and other product candidates if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

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· subject to receipt of marketing approval, revenue received from commercial sales of our product candidates by us or our partners;

· the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish;

· the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone and royalty payments and patent prosecution fees;

· the costs of hiring additional employees;

· the costs of maintaining and protecting our intellectual property rights and defending against intellectual property related claims; and

· the extent to which we in-license or acquire other products and technologies.

We expect that we will need to obtain substantial additional funding in order to commercialize BOW015, BOW050, BOW070 and other product candidates. To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on acceptable terms, we could be forced to significantly delay, scale back or discontinue the development or commercialization of BOW015, BOW050, BOW070 or other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to BOW015, BOW050, BOW070 or other product candidates that we otherwise would seek to develop or commercialize ourselves.

Cash Flows

The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):

	Three Months Ended March 31,
	2015			2014

Net cash used in operating activities	$	(8,188	)	$	(3,616	)
Net cash used in investing activities	—			(15		)
Net cash provided by financing activities	48,272			5,082
Net increase in cash and cash equivalents	$	40,084		$	1,451

Operating Activities. Our operating activities used $8.2 million and $3.6 million for the three months ended March 31, 2015 and 2014, respectively. The increase in net cash used in operating activities is primarily due to timing of payments for operating assets and liabilities of $4.0 million and a decrease in non-cash activities of $0.7 million offset in part by a decrease in net loss of $0.1 million.

Investing Activities. We did not have any investing activities in the three months ended March 31, 2015. Investing activities for the three months ended March 31, 2014 consist entirely of office equipment purchases.

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Financing Activities. Our financing activities provided cash of $48.3 million and $5.1 million for the three months ended March 31, 2015 and 2014, respectively. Net cash provided by financing activities for the three months ended March 31, 2015 is primarily related to $48.0 million of net proceeds from the issuance of common stock in February 2015 and $0.3 million of proceeds from the exercise of stock options. Net cash provided by financing activities for the three months ended March 31, 2014 was primarily related to $5.0 million of proceeds from the issuance of convertible notes and $0.1 million of proceeds from the exercise of stock options.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or any relationships with unconsolidated entities of financial partnerships, such as entities frequently referred to as structured finance or special purpose entities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not hold or issue derivatives, derivative commodity instruments or other financial instruments for speculative trading purposes. Additionally, we do not believe our cash equivalents have any significant risk of default or illiquidity.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this report. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on their evaluation, including the existence of the material weakness in our internal control over financial reporting referenced below, our management, including our Chief Executive Office and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2015.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In connection with the review of Private Epirus’ interim financial statements for the three and six month periods ended June 30, 2014 (the “Private Epirus Financial Statements”), our independent registered public accounting firm identified a number of accounting and disclosure errors, including in relation to the weighted average number of outstanding shares and certain income and cash flow items, which resulted in material post-closing adjustments to the Private Epirus Financial Statements. These errors, when aggregated, represent a material weakness in our financial statement close process. These errors were caused in part by the transaction demands placed upon our finance department and a lack of sufficient finance department resources with the requisite accounting competencies.

Remediation of Material Weakness in Internal Control over Financial Reporting

We are in the process of designing and implementing improved internal controls to remediate the material weaknesses that existed as of March 31, 2015, as set forth above.

We are in the process of hiring additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. In addition, we have engaged an outside financial consultant firm

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to assist in our effort to improve the design, operation and documentation of our internal control over financial reporting, including with respect to our financial statement close process.

Certain of the changes described above were in process as of March 31, 2015, and for the financial statement close process for the periods then ended, but had not yet been fully implemented. We believe these changes to our control environment are responsive to the identified material weakness and expect them to be in place and functioning by the second quarter of 2015.

Changes in Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated any change in our internal control over financial reporting that occurred during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, except as described in this Item 4, there was no change in our internal control over financial reporting during the three months ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Zalicus Shareholder Litigation

Between April 28, 2014 and May 2, 2014, three putative class action lawsuits were filed by purported stockholders of Zalicus in the Business Litigation Session of the Massachusetts Superior Court, Suffolk County (the “Massachusetts Court”), against Zalicus, EB Sub, Inc. the members of Zalicus’ board of directors and Private Epirus. Plaintiff has since voluntarily dismissed one of these actions, Civil A. No. 14-1380. The remaining two actions, Civ. A. No. 14-1381 and Civ. A. No. 14-1455, were consolidated into a single action, In re Zalicus Shareholder Litigation, Lead Civ. A. No. 14-1381 (the “Massachusetts Action”). The Massachusetts Action alleged that the Zalicus board of directors breached its fiduciary duties, and that Private Epirus and EB Sub, Inc. aided and abetted the purported breaches, in connection with the proposed Merger. The Massachusetts Action sought relief including, among other things, a declaration that the Merger Agreement was entered into in breach of fiduciary duties and is unlawful and unenforceable, an order enjoining defendants from proceeding with the Merger, an order enjoining defendants from consummating the Merger unless and until additional procedures are implemented and all material information in connection with the proposed Merger is disclosed, rescission of the Merger or any terms thereof to the extent implemented (or an award of rescissory damages), compensatory damages and interest, and an award of all costs of the Massachusetts Action, including reasonable attorneys’ fees and experts’ fees.

Between May 1, and May 16, 2014, three putative class action lawsuits were filed by purported stockholders of Zalicus in the Court of Chancery of the State of Delaware (the “Delaware Court”) against Zalicus, Zalicus’ directors, Private Epirus and/or EB Sub, Inc., Stein v. Zalicus Inc., et al. , No. 9602; Do v. Zalicus, Inc., et al. , No. 9636; and Mendlowitz, et al. v. Zalicus Inc., et al. , No. 9664 (the “Consolidated Action”). On May 23, 2014, plaintiff Harvey Stein filed a verified amended complaint, and on May 27, 2014, plaintiff Tuan Do filed a verified amended complaint. The Consolidated Action alleged that the Zalicus board of directors breached their fiduciary duties, and Private Epirus and/or EB Sub, Inc. aided and abetted the purported breaches, in connection with the proposed Merger. The Consolidated Action sought relief including, among other things, to preliminarily and permanently enjoin the proposed Merger, to enjoin consummation of the proposed Merger and rescind the Merger if consummated (or to award rescissory damages), an award of compensatory damages, and an award of all costs of the Consolidated Action, including reasonable attorneys’ fees and experts’ fees.

On October 27, 2014, plaintiffs’ counsel in the Massachusetts Action served us with a motion for voluntary dismissal and an award of attorney’s fees. The motion alleged, as set forth in the consolidated amended complaint filed in the Massachusetts Action on May 21, 2014, that the Form S-4 Registration Statement filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2014 contained numerous material misstatements and/or omissions that prevented our shareholders from being able to evaluate the reasonableness of the Merger. The motion further alleged that in the Amended Registration Statement filed on June 4, 2014, we supplemented the disclosures and addressed the allegedly material misstatements and omissions contained in the initial Registration Statement, and that we did so in response to the claims made in the Massachusetts Action.

On November 6, 2014, with the Massachusetts Court’s entry of a judgment of dismissal, the Massachusetts Action was closed.

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Consolidated Action without prejudice. The Delaware Court retained jurisdiction solely for the purpose of determining plaintiffs’ anticipated application for an award of attorneys’ fees and reimbursement of expenses.

After the Consolidated Action was dismissed, the parties commenced and engaged in discussions to resolve the amount of plaintiffs’ counsel’s application for fees and expenses.

After negotiations, the parties agreed that we would make a combined, global fee and expense payment to counsel in both the Consolidated Action and the Massachusetts Action in the amount of $0.4 million, of which $50,000 would be paid by our insurer, in full satisfaction of plaintiffs’ counsel’s claim for attorneys’ fees and expenses in the Consolidated Action and the Massachusetts Action, which the parties memorialized in a stipulation dated January 13, 2015. The parties requested that the Delaware Court close the Consolidated Action as a result of the stipulation. The Delaware Court directed that notice of the resolution of plaintiffs’ counsel’s request for attorneys’ fees and expenses be provided to shareholders. The parties have since issued notice to shareholders (including via our filing on our Current Report on March 13, 2015). After expiration of the requisite notice waiting period, the parties submitted to the Delaware Court a proposed order verifying that notice has been provided and providing for the final dismissal and closure of the case. On April 15, 2015, the Delaware Court accepted the order and closed and dismissed the Consolidated Action. We paid the agreed-to $.4 million fee and expense amount on April 22, 2015, which is within ten days of the final dismissal and closure of the Consolidated Action.

Reliance Life Sciences Dispute

In December 2014, Reliance Life Sciences Pvt Ltd, or RLS, our BOW015 contract manufacturing partner for India, exercised its three-year termination for-convenience right with respect to the parties’ Manufacturing and Supply Agreement, dated as of May 14, 2014 and as amended from time to time (the “RLS Agreement”), which would have caused the RLS Agreement to terminate in December 2017. In addition, in March 2015, RLS initiated an arbitration proceeding under the RLS Agreement alleging that the RLS Agreement grants RLS exclusive global supply rights for BOW015 that the terms of our collaboration agreements with Fujifilm Diosynth Biotechnologies U.S.A., Inc. and Livzon MabPharm Inc. violate the RLS Agreement, and sought to terminate the RLS Agreement. The proceeding initiated by RLS sought a declaratory judgment, but did not seek any monetary damages.

On April 22, 2015, we entered into a Settlement Agreement with RLS (the “Settlement Agreement”). Pursuant to the Settlement Agreement, RLS has agreed to manufacture 20 final batches of BOW015, with the initial 15 binding forecast batches to be manufactured on or before June 30, 2016 and the final five non-binding forecast batches to be manufactured on or before December 31, 2016, with the forecast for such final batches to be finalized by December 31, 2015. RLS has also agreed to use reasonable commercial efforts to transfer the existing Indian marketing authorization for BOW015 granted by the Drug Controller General of India (“DCGI”) to us or our designee, with all costs of the transfer to be borne by us and subject to the DCGI’s approval of such transfer. We have agreed to pay to RLS a fee of approximately $2.3 million payable in four installments over the course of the final batch manufacture, with the final installment to be paid no later than ten days after June 30, 2016. Pursuant to the Settlement Agreement, on May 4, 2015, RLS withdrew the arbitration proceeding it initiated, and the parties have agreed to release each other from all causes of actions or claims, present and future, arising under the RLS Agreement. Following the satisfaction by both parties of all of the terms of the Settlement Agreement, the RLS Agreement and related agreements between the parties shall be terminated and neither party shall have any further rights or obligations thereunder.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this quarterly report and our annual report on Form 10-K for the fiscal year ended December 31, 2014, including the consolidated financial statements and the related notes appearing herein and therein, with respect to any investment in shares of our common stock. If any of the following risks actually occurs, our business, financial condition, results of operations and future prospects would likely be materially and adversely affected. In that event, the market price of our common stock could decline and you could lose all or part of your investment.

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Risks Related to Financial Results, Need for Additional Financing and Debt Arrangements

We have a history of operating losses. We expect to incur significant operating losses and may never be profitable. Our common stock is a highly speculative investment.

Private Epirus incurred operating losses since its inception, and was never cash-positive. As of March 31, 2015, we had an accumulated deficit of $94.1 million. We have spent, and expect to continue to spend, significant resources to fund research and development of our product candidates and to enhance our drug development technologies. We expect to incur substantial operating losses over the next several years due to our ongoing research, development, pre-clinical testing, and clinical trial activities. As a result, our accumulated deficit will continue to increase.

Except for BOW015, our product candidates are in the early stages of development and may never result in any revenue. We will not be able to generate product revenue unless we or our partners successfully commercialize BOW015 or our early stage product candidates. We may seek to obtain revenue from collaboration or licensing agreements with third parties. Our current collaboration and license agreements may not provide us with material, sustainable ongoing future revenue, and we may not be able to enter into additional collaboration agreements. Even if we eventually generate product revenues, we may never be profitable, and if we ever achieve profitability, we may not be able to sustain it.

We will require substantial additional funds to obtain regulatory approval for and commercialize our biosimilar product candidates and any future pipeline product candidates and, if additional capital is not available, we may need to limit, scale back or cease our operations.

Since our inception, we have devoted substantial resources to the nonclinical and clinical development of our most advanced biosimilar product candidate, BOW015, a proposed biosimilar of Remicade® (infliximab). We will incur substantial costs for our global clinical program for BOW015, which is expected to commence in late 2015 or early 2016. We believe that we will continue to expend substantial resources for the foreseeable future for the clinical development of our current pipeline of biosimilar product candidates, including for development of any other indications and product candidates we may choose to pursue. These expenditures will include costs associated with research and development, conducting nonclinical studies and clinical trials, and manufacturing and supply as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of BOW015 in all of the markets in which we plan to commercialize the product and our pipeline of other product candidates.

We believe that our existing cash and cash equivalents (including proceeds anticipated from our second tranche of debt financing of $7.5 million) will be sufficient to fund our operations into the third quarter of 2016. As of March 31, 2015, our total cash and cash equivalents, including restricted cash, and marketable securities were $63.4 million. We may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. We may also seek to raise additional funds before that time if our research and development expenses exceed current expectations, our collaboration funding is less than current assumptions or expectations, or we encounter obstacles to our development and commercialization of our product candidates that were not anticipated. This could occur for many reasons, including:

· our product candidates require more extensive clinical or pre-clinical testing, our research and development programs for our product candidates do not proceed as expected, our clinical trials take longer to complete than we currently expect or our clinical trials are not successful;

· we advance more of our product candidates than expected into costly later stage clinical trials;

· we advance more of our pre-clinical product candidates than expected into early stage clinical trials;

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· our revenue generating collaboration agreements are terminated;

· the time and costs involved in obtaining regulatory approvals are higher than anticipated in one or more jurisdictions where we are seeking to manufacture and/or market our products;

· some or all of our product candidates fail in clinical or pre-clinical studies or prove to be less commercially promising than we expect or we are forced to seek additional product candidates;

· we are required, or consider it advisable, to acquire or license rights from one or more third parties;

· we determine to enter into a business combination or acquire or license rights to additional product candidates or new technologies;

· the cost of regulatory, manufacturing and commercialization activities, if any, relating to our product candidates, are higher, or take longer to establish than anticipated; and

· we are subject to litigation in relation to our activities with respect to our product candidates, including potential patent litigation with innovator companies or others who may hold patents.

While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of any financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or others. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements on acceptable terms, if at all. The arrangements also may include issuances of equity, which may also be dilutive to, or otherwise adversely affect, holders of our common stock. There can be no assurance that we will be able to access equity or credit markets in order to finance our operations or expand development programs for any of our product candidates, or that there will not be a deterioration in financial markets and confidence in economies. We may also have to scale back or further restructure our operations. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our research or development programs.

Our term loans include certain covenants and other events of default. Should we not comply with these covenants or incur an event of default, we may be required to repay our obligation in cash, which could have an adverse effect on our liquidity.

Our term loans from Hercules Technology Growth Capital, Inc. include certain customary covenants, including limitations on other indebtedness, liens, acquisitions, investments and dividends.

If we fail to stay in compliance with our covenants or suffer some other event of default under the term loans, we may be required to repay the outstanding principal. Should this occur, our liquidity would be adversely impacted.

The requirements of being a public company have required and will continue to require significant resources, increase our costs and occupy our management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

Our merger with Zalicus was determined to constitute a reverse acquisition and Private Epirus, a privately held company, was determined to be the acquirer for accounting purposes. Although Zalicus was an operating company, its operations were deemphasized following the consummation of the merger with the post-merger entity, which focuses on Private Epirus’ biosimilar business. Because the financial statements and information relating to Private Epirus now constitute our financial statements and information, we are in a position similar to a newly public company.

As a company with public reporting responsibilities, we have incurred and will continue to incur significant legal, accounting, and other expenses that Private Epirus did not incur as a private company. Complying with rules,

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regulations and requirements applicable to public companies has required substantial effort and has increased and may continue to increase our costs and expenses. We have been required to:

· institute a more formalized function of internal control over financial reporting;

· prepare, file and distribute periodic and current reports under the Securities Exchange Act of 1934 (the “Exchange Act”) and comply with other Exchange Act requirements applicable to public companies;

· formalize old and establish new internal policies, such as those relating to insider trading and disclosure controls and procedures;

· involve and retain to a greater degree outside counsel and accountants in the above activities; and

· establish and maintain an investor relations function, including the provision of certain information on our website.

Compliance with these rules and regulations has increased, and will continue to increase, our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these new rules and regulations have made it more expensive for us to obtain director and officer liability insurance and we have been required to incur substantial costs to maintain the same or similar coverage.

In connection with our merger, the Securities and Exchange Commission (the “SEC”) granted us a waiver of the requirements of Section 404 of the Sarbanes-Oxley Act for a period of one year, and therefore we are not required to make a formal assessment of the effectiveness of our internal controls over financial reporting for that purpose until the filing of our annual report on Form 10-K for the fiscal year ended December 31, 2015. In anticipation of this formal assessment, we have been required to comply with Section 404 since January 1, 2015. We may subsequently identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, such as the material weakness discussed in the other risk factors described in this section. Additionally, as we begin to comply with Section 404, we expect to incur significant expense and devote substantial management effort toward ensuring compliance with these requirements. If we are not able to comply with these requirements in a timely manner, or if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

Our international operations subject us to potentially adverse tax consequences.

We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our operations.

Risks Relating to the Development, Manufacturing and Commercialization of Our Products

We are largely dependent on the success of BOW015. All of our other product candidates are still in pre-clinical development. If we are unable to obtain regulatory approval in additional jurisdictions for, or successfully commercialize, BOW015, our business will be materially harmed.

Our business prospects and potential product revenues are largely dependent upon our ability to obtain regulatory approval of, and successfully commercialize, BOW015. We have reported positive bioequivalence and efficacy data in the clinical development program for BOW015, including a Phase 1 clinical trial in the United

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Kingdom and a Phase 3 clinical trial in India in each case showing equivalence with Remicade as the reference product. In March 2014, our manufacturing partner, Reliance Life Sciences Pvt Ltd, or RLS, obtained marketing approval on our behalf in India for BOW015 for rheumatoid arthritis on the basis of our Phase 3 trial, and in September 2014, RLS received final manufacturing and market approval on our behalf from the Drug Controller General of India (“DCGI”). We currently have an agreement to commercialize BOW015 in India with our partner Sun Pharmaceutical Industries Ltd. (formerly known as Ranbaxy Laboratories Limited, prior to its acquisition by Sun in March 2015) (“Sun”), and in November 2014, we launched BOW015 in India with Sun. As discussed in the other risk factors described in this section, we have recently settled a dispute with RLS that may adversely affect our ability to rely on the approvals that have been obtained by RLS for our benefit and that we currently rely upon for selling BOW015 in India. In the event that the DCGI does not approve the transfer of the marketing approval to us or our designee, pursuant to the terms of our Settlement Agreement with RLS (as described below) and it becomes necessary to obtain new manufacturing and marketing approvals from the DCGI, no assurance can be given as to whether we or our partners will be able to obtain the required approvals or that any such approvals will be obtained in a timely manner. Additionally, in conjunction with other potential partners with whom we may form alliances, we intend to file for regulatory approval in additional markets where our current data are expected to be sufficient for approval. We expect to commence a global clinical program for BOW015 in late 2015 or early 2016, after which we intend to pursue regulatory approval for BOW015. As discussed in the other risk factors described in this section, obtaining regulatory approval is costly and uncertain. Even if we obtain regulatory approval for BOW015 in a jurisdiction, we may not be successful in commercializing it in the jurisdiction. If Sun encounters delays or difficulties in commercializing BOW015 pursuant to our agreement, it may adversely affect our ability to successfully commercialize BOW015 in India. If we fail to successfully commercialize BOW015, or encounter significant delays in doing so, we may be required to curtail or terminate some or all of our research or development programs and our business prospects, financial condition and results of operations would be materially harmed. To date, we have not yet commercialized BOW015 in any of our target markets other than India.

Our other product candidates, BOW050 and BOW070, are both in pre-clinical development. Before we can commercialize these product candidates we need to:

· conduct substantial research and development;

· undertake nonclinical and clinical testing, for the purpose of demonstrating bioequivalence with the applicable reference products, and engage in sampling activity and other costly and time consuming measures;

· scale-up manufacturing processes; and

· pursue and obtain marketing and manufacturing approvals and, in some jurisdictions, pricing and reimbursement approvals.

This process involves a high degree of risk and takes many years, and success is never guaranteed. Our product development efforts with respect to these product candidates may fail for many reasons, including:

· failure of the product candidate in nonclinical studies, including those required to demonstrate bioequivalence with the reference product;

· inability to obtain on a timely basis supplies of the applicable reference products to which our product candidates must be compared;

· delays or difficulty enrolling patients in clinical trials, particularly for disease indications with small patient populations;

· patients exhibiting adverse reactions to the product candidate or indications of other safety concerns;

· insufficient clinical trial data to support the bioequivalence of one or more of our product candidates with the applicable reference product;

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· inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-efficient manner, if at all;

· potential patent litigation with innovator companies or others who may hold patents;

· failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate, the facilities or the processes used to manufacture the product candidate; or

· changes in the regulatory environment, including pricing and reimbursement that make development of our biosimilar product candidates or development of such product candidates for a new indication no longer desirable.

If our product development efforts fail for any of these or other reasons, or we decide to abandon development of a product candidate at any time, we would never realize revenue from those programs and our business could be materially harmed.

If an improved version of a reference product, such as Remicade, is developed, or if the market for a reference product significantly declines, sales or potential sales of our biosimilar product candidates may suffer.

We are developing and commercializing follow-on versions of approved, reference biological products. Such follow-on products are known as biosimilars. Innovator companies may develop improved versions of a reference product as part of a life cycle extension strategy, and may obtain regulatory approval of the improved version under a new or supplemental application filed with the applicable regulatory authority. Should the innovator company succeed in obtaining an approval of an improved biologic product, it may capture a significant share of the collective reference product market in the applicable jurisdiction and significantly reduce the market for the reference product and thereby the potential size of the market for our product candidates. In addition, the improved product may be protected by additional patent rights and thereby subject our follow-on biosimilar to claims of infringement.

Additionally, competition in the biotechnology industry is intense. Reference biologic products face competition on numerous fronts as technological advances are made that may offer patients a more convenient form of administration or increased efficacy, or as new products are introduced. As new products are approved that compete with the reference products to our biosimilar product candidates, such as Remicade, or our pipeline products, such as Humira and others, sales of the reference biologic products may be significantly and adversely impacted and may render the reference products obsolete. If the market for the reference product is impacted, we in turn may lose significant market share or market potential for our biosimilar products and product candidates, and the value for our product pipeline could be negatively impacted. As a result of the above factors, our business, prospects and financial condition could suffer.

Our biosimilar product candidates, if approved, will face significant competition from the reference products and from other biosimilars approved for the same indication as the reference biologic products. Our failure to effectively compete may prevent us from achieving significant market penetration and expansion.

Our business involves highly competitive pharmaceutical and biotechnology markets. Successful competitors in the pharmaceutical market have the ability to effectively discover, obtain patents, develop, test and obtain regulatory approvals for products, as well as the ability to effectively commercialize, market and promote approved products, including communicating the effectiveness, safety and value of products to actual and prospective customers and medical staff. Numerous companies, universities, and other research institutions are engaged in developing, patenting, manufacturing and marketing of products competitive with those that we are developing. Many of these potential competitors, such as Celltrion and Hospira, Inc. (acquired by Pfizer, Inc.), are large, experienced companies that enjoy significant competitive advantages, such as substantially greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition and more experience and expertise in undertaking nonclinical testing and clinical trials of product candidates, and obtaining

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regulatory approvals of products. If we do not effectively compete with these potential competitors, the value of our product pipeline could be negatively impacted and our business, prospects and financial condition could suffer.

Use of our product candidates could be associated with side effects or adverse events.

As with most pharmaceutical and biological drug products, use of our product candidates could be associated with side effects or adverse events, which can vary in severity (from minor reactions to death) and frequency (infrequent or prevalent). Side effects or adverse events associated with the use of our product candidates or those of our collaborators may be observed at any time, including in clinical trials or when a product is commercialized, and any such side effects or adverse events may negatively affect our ability to obtain regulatory approval or market our product candidates. Side effects such as toxicity or other safety issues associated with the use of our product candidates could require us or our collaborators to perform additional studies or halt development or sale of these product candidates or expose us to product liability lawsuits that would harm our business. We may be required by regulatory agencies to conduct additional animal or human studies regarding the safety and efficacy of our pharmaceutical product candidates that we have not planned or anticipated. There can be no assurance that we will resolve any issues related to any product related adverse events to the satisfaction of any regulatory agency in a jurisdiction where we are seeking to commercialize our products in a timely manner or ever, which could harm our business, prospects and financial condition.

In addition, if we are successful in commercializing the most advanced biosimilar in our pipeline, BOW015, or any other of our pipeline product candidates, then laws and regulations may require that we report certain information about adverse medical events according to timelines that may vary from jurisdiction to jurisdiction. The timing of our obligation to report may be triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, regulatory agencies could take action including, without limitation, criminal prosecution, the imposition of civil monetary penalties, seizure of our products, or delay in approval of future products. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our pipeline product candidates, conduct our clinical trials and commercialize BOW015, or any future pipeline product candidates we develop.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We believe that our future success is highly dependent upon the contributions of our senior management, particularly our chief executive officer, chief financial officer, chief technical officer, vice president of program management, and vice president of manufacturing and quality, as well as our senior scientists and other members of our senior management team. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of BOW015, or any future products we develop.

Although we have not historically experienced significant difficulties attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the biotechnology and pharmaceuticals field is intense due to the limited number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we expand our process and clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, or at all, which may cause our business and operating results to suffer.

We expect to enter into alliances with other companies that can provide capabilities and funds for the development and commercialization of our product candidates, as well as local market access in jurisdictions where we intend to pursue our In Market, For Market commercialization strategy. If we are unsuccessful in

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forming or maintaining these alliances on favorable terms, or if such alliances do not prove to be as successful as we anticipate, our business could be adversely affected.

Our In Market, For Market strategy for development and commercialization of our biosimilar product candidates in key emerging markets is based on the assumption that we will enter into collaborative relationships with local entities to facilitate our access to and penetration into such markets. We also have limited or no capabilities for independent manufacturing, sales, marketing and distribution. For example, we have entered into a collaboration agreement with Livzon MabPharm Inc. (“Livzon”) for the development and commercialization of BOW015 and other pipeline biosimilar products to be agreed with Livzon in China, using our In Market, For Market strategy. We retain global rights to commercialize BOW015 and the other pipeline biosimilar products outside of China, subject to our other agreements with third parties. In the future, we expect to form alliances with other companies that are based in our target markets and that have expertise in development, manufacture and commercialization of biologics and biosimilar products in our target markets to enable us to expand the commercialization opportunities for our product candidates. In such alliances, we would expect our partners to provide substantial capabilities in clinical development, manufacturing, regulatory affairs, sales and marketing. We may not be successful in entering into any such alliances. Even if we do succeed in securing such alliances, we may not be able to maintain them if, for example, development or approval of a product candidate is delayed or sales of an approved product are disappointing. If we are unable to secure or maintain such alliances we may not have the capabilities necessary to continue or complete development of our product candidates and bring them to market, which may have an adverse effect on our business.

In addition to product development and commercialization capabilities, we may depend on our alliances with other companies to provide substantial additional funding for development and potential commercialization of our product candidates. We may not be able to obtain funding on favorable terms from these alliances, and if we are not successful in doing so, we may not have sufficient funds to develop a particular product candidate internally, or to bring product candidates to market. Failure to bring our product candidates to market would prevent us from generating sales revenue, and this would substantially harm our business. Furthermore, any delay in entering into these alliances could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market. As a result, our business may be adversely affected.

Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to market those products and decrease our ability to generate revenue.

Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit, and similar healthcare management organizations, or reimbursed by government authorities, private health insurers and other third-party payors. If coverage and reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize our product candidates. Because there are not many approved biosimilars available, many countries and payors may not yet have established policies for the coverage and payment for those types of drugs, even if the reference biologic is covered. Moreover, even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs and biologics will be covered and reimbursed. The Medicare program covers certain individuals aged 65 or older, disabled or suffering from end-stage renal disease. The Medicaid program, which varies from state-to-state, covers certain individuals and families who have limited financial means. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs and biologics. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our product candidates.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in

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Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medical products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

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

Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, was passed, which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Our employees, independent contractors, principal investigators, contract research organizations, or CROs, consultants and collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading.

We are exposed to the risk that our employees, independent contractors, principal investigators, CROs, consultants and collaborators may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or unauthorized activities that violate: (1) regulations of regulatory authorities in jurisdictions where we are performing activities in relation to our product candidates, including those laws requiring the reporting of true, complete and accurate information to such authorities; (2) manufacturing regulations and standards; (3) fraud and abuse and anti-corruption laws and regulations; or (4) laws that require the reporting of true and accurate financial information and data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, bias, misconduct, kickbacks, self-dealing and other abusive practices, and these laws may differ substantially from country to country. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also include the improper use of information obtained in the course

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of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. While we have in place a Code of Business Conduct and Ethics, it is not always possible to identify and deter misconduct by employees and other third parties. Moreover, the precautions we take to detect and prevent this activity may not be effective in controlling misconduct or prevent governmental investigations or proceedings or lawsuits stemming from a failure to be in compliance with such 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 have a significant impact on our business including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in subsidized healthcare programs in a given country, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

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, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations. 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 both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

· the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

· federal, civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

· the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;

· HIPAA, as amended by the Health Information Technology and Clinical Health Act, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;

· the federal physician sunshine requirements under the Affordable Care Act, which require manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health and Human Services information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; and

· state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain

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circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the Affordable Care Act provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Failure to comply with the Foreign Corrupt Practices Act, or FCPA, and other similar anti-corruption laws could subject us to significant penalties and damage our reputation.

We are subject to the FCPA, which generally prohibits U.S. companies and intermediaries acting on their behalf from offering or making corrupt payments to “foreign officials” for the purpose of obtaining or retaining business or securing an improper business advantage. The FCPA also requires companies whose securities are publicly listed in the United States to maintain accurate books and records and to maintain adequate internal accounting controls. We are also subject to other similar anti-corruption laws that apply to our activities in the countries where we operate. Certain of the jurisdictions in which we conduct or expect to conduct business have heightened risks for public corruption, extortion, bribery, pay-offs, theft and other fraudulent practices. In addition, our international business is heavily regulated and therefore involves significant interactions with “foreign officials.” In many countries, health care professionals who serve as investigators in our clinical studies, or prescribe or purchase our commercialized products, are employed by a government or an entity owned or controlled by a government. Dealings with these investigators, prescribers and purchasers are subject to regulation under the FCPA. We rely on local and strategic business partners to produce and commercialize our products in certain markets outside of the United States, and we rely on distributors and other intermediaries to sell and distribute our products internationally. We maintain policies, procedures and internal controls designed to promote compliance with the FCPA and other anti-corruption laws. However, if we, or our business partners or intermediaries, fail to comply with the requirements of the FCPA, or similar laws of other countries, governmental authorities in the United States or elsewhere, as applicable, could seek to impose civil penalties, criminal fines, and other collateral consequences, which could damage our reputation and have a material adverse effect on our business, financial condition, and results of operations.

Risks Related to Regulatory Approvals

The regulatory approval process is costly and lengthy and, for biosimilar products, still evolving. We may not be able to successfully obtain all required regulatory approvals.

The pre-clinical development, clinical trials, manufacturing, marketing, testing, approval, and labeling of pharmaceutical and biological products, including biosimilars, are all subject to extensive regulation by numerous regulatory authorities throughout the world. We or our collaborators must obtain regulatory approval for product candidates before marketing or selling any of them. The approval process is typically lengthy and expensive, and approval is never certain. Moreover, only one biosimilar has been approved in the United States to date, and no biosimilars have been approved in many other countries. It is not possible to predict with any specificity how long the approval processes of the applicable regulatory authorities for any of our products will take or whether any such approvals ultimately will be granted on a timely basis or at all. Moreover, we expect to seek regulatory approvals in

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jurisdictions in which we have limited experience navigating the regulatory frameworks, or where the regulatory frameworks for the approval of biosimilars are not well-developed and are constantly evolving. In particular, the regulatory standards applicable to establish biosimilarity vary by jurisdiction. The last ten years has seen the establishment in many jurisdictions of a formal regulatory regime for review and approval of biosimilar products, but these regimes are at differing stages of development, with often limited harmonization between major jurisdictions. We plan to continue to analyze and incorporate into our biosimilar development plans any new laws, regulations, or policies promulgated or established by relevant authorities. The costs of development and approval, along with the probability of success for our biosimilar product candidates, will be dependent upon application of any laws and regulations issued by the relevant regulatory authorities.

Regulatory agencies generally have substantial discretion in the biologic and biosimilar approval processes, and positive results in pre-clinical testing or early phases of clinical studies offer no assurance of success in later phases of the approval process. Generally, pre-clinical and clinical testing of products can take many years and require the expenditure of substantial resources, and the data obtained from these tests and trials can be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Any delay in obtaining, or failure to obtain, approvals could prevent or adversely affect the marketing of our products or our collaborator’s products and our ability to generate product revenue. The risks associated with the approval process include delays or rejections in the regulatory approval process based on the failure of clinical or other data to meet expectations, or the failure of the product or candidate to meet a regulatory agency’s requirements for safety, efficacy and quality.

Clinical trials can be delayed for a variety of reasons, including delays related to:

· ongoing discussions with the regulatory authorities regarding the scope or design of clinical trials;

· delays or the inability to obtain required approvals from ethics committees or other governing entities at clinical sites selected for participation in our clinical trials;

· delays in enrolling patients and volunteers into clinical trials;

· lower than anticipated retention rates of patients and volunteers in clinical trials;

· the need to repeat clinical trials as a result of inconclusive or negative results or poorly executed testing;

· lack of sufficient funds for further clinical development;

· insufficient supply or deficient quality of product candidate materials or other materials necessary to conduct clinical trials;

· unfavorable regulatory inspection of a manufacturing, testing, labeling or packaging facility for drug substance or drug product;

· unfavorable regulatory inspection and review of a clinical or nonclinical trial site or records of any clinical or nonclinical investigation;

· serious and unexpected drug-related side effects or serious adverse safety events experienced by participants in clinical trials or by patients following commercialization; or

· the placement of a clinical hold on a product candidate in an ongoing clinical trial.

We may not be able to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of patients, or demonstrate equivalence of our product candidates with the applicable reference products, begin or successfully complete clinical trials in a timely fashion, if at all. Any failure to perform may delay or terminate the trials. Our current clinical trials may be insufficient to demonstrate that our potential products are

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equivalent to the applicable reference products, or sufficiently active, safe, or effective and as a result we may decide to abandon further development of such product candidates. Additional clinical trials may be required if clinical trial results are negative or inconclusive, or insufficient to obtain regulatory approval in one or more countries under applicable laws regulating biosimilar products, which will require us to incur additional costs and significant delays. If we do not receive the necessary regulatory approvals, we will not be able to generate product revenues and will not become profitable. We may encounter significant delays in the regulatory process that could result in excessive costs that may prevent us from continuing to develop our product candidates. In addition, the failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties, product recalls, withdrawal of product approval, mandatory restrictions or other actions that could impair our ability to conduct our business.

The development, manufacture and commercialization of biosimilar products in the United States poses unique risks, and our failure to successfully introduce biosimilar products in the United States could have a negative impact on our business and future operating results.

We intend to pursue market authorization for our biosimilar product candidates in numerous jurisdictions, including the United States. In the United States, an abbreviated pathway for approval of biosimilar products was established by the Biologics Price Competition and Innovation Act of 2009, or BPCIA, enacted on March 23, 2010, as part of the Patient Protection and Affordable Care Act. Subsequent to the enactment of the BPCIA, the U.S. Food and Drug Administration, or FDA, has released six guidance documents regarding implementation of the BPCIA regulatory pathway.

These guidance documents focus on scientific considerations, quality considerations and clinical pharmacology data related to demonstrating biosimilarity; meetings between the FDA and biosimilar product sponsors; requests for reference product exclusivity; and common questions and answers regarding implementation of the BPCIA. However, none of the guidance documents address the standards for interchangeability.

The FDA is still in the process of implementing the BPCIA, however, on March 6, 2015, the FDA approved Zarxio®, Sandoz’s biosimilar version of Amgen’s Neupogen® (filgrastim) for all of the reference product’s approved indications.

Moreover, market acceptance of biosimilar products in the U.S. is unclear. Numerous states are considering or have already enacted laws that regulate or restrict the substitution by state pharmacies of biosimilars for biological products already licensed by the FDA pursuant to biologic license applications, or “reference products.” Market success of biosimilar products will depend on demonstrating to patients, physicians, payors, and relevant authorities that such products are safe and efficacious compared to other existing products.

We plan to continue to analyze and incorporate into our biosimilar development plans any final regulations issued by the FDA, pharmacy substitution policies enacted by state governments, and other applicable requirements established by relevant authorities. The costs of development and approval, along with the probability of success for our biosimilar product candidates, will be dependent upon application of any laws and regulations issued by the relevant regulatory authorities.

Biosimilar products may also be subject to extensive patent clearances and patent infringement litigation, which will likely delay and could prevent the commercial launch of a product. Moreover, the BPCIA prohibits the FDA from accepting an application for a biosimilar candidate to a reference product within four years of the reference product’s licensure by the FDA. In addition, the BPCIA provides innovative biologics with twelve years of exclusivity from the date of their licensure, during which time the FDA cannot approve any application for a biosimilar candidate to the reference product. However, in his proposed budget for fiscal year 2015, President Obama proposed to cut this twelve-year period of exclusivity down to seven years. He also proposed to prohibit additional periods of exclusivity due to minor changes in product formulations, a practice often referred to as “evergreening.” It is possible that Congress may take these or other measures to reduce or eliminate periods of exclusivity.

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The BPCIA is complex and only beginning to be interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning is subject to significant uncertainty. Future implementation decisions by the FDA could result in delays in the development or commercialization of our product candidates or increased costs to assure regulatory compliance, and could adversely affect our operating results by restricting or significantly delaying our ability to market new biosimilar products in the United States.

Even if we receive regulatory approvals for our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. If we fail to comply with continuing regulatory requirements, we could lose regulatory approvals, and our business would be adversely affected.

Even if we obtain regulatory approvals for our product candidates, we will be subject to extensive and continued regulatory review regarding manufacturing, labeling, packaging, distribution, adverse event reporting, storage, import, export, advertising, promotion and recordkeeping, among other activities. These requirements include submissions of safety and other post-marketing information and reports, manufacturing facility registration and inspection, as well as continued compliance with current Good Manufacturing Practices, or cGMPs and Good Clinical Practice, or GCPs for any clinical trials that we conduct post-approval. Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing and surveillance to monitor the safety and efficacy of the product candidate. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

· restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;

· fines, warning letters or holds on clinical trials;

· refusal by regulatory authorities to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals;

· product seizure or detention, recalls, or refusal to permit the import or export of products; and

· injunctions or the imposition of civil or criminal penalties.

The laws, regulations, and policies of the regulatory authorities may change and additional laws, regulations, and policies may be enacted or established that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

If we are not able to demonstrate biosimilarity of our biosimilar product candidates to the satisfaction of regulatory authorities, we will not obtain regulatory approval for commercial sale of our biosimilar product candidates and our future results of operations would be adversely affected.

Our future results of operations depend, to a significant degree, on our ability to obtain regulatory approval for and to commercialize our proposed biosimilar products. To obtain regulatory approval for the commercial sale of these product candidates, we will be required to demonstrate to the satisfaction of regulatory authorities, among other things, that our proposed biosimilar products are highly similar to biological reference products already licensed by the regulatory authority pursuant to marketing applications, notwithstanding minor differences in clinically inactive components, and that they have no clinically meaningful differences as compared to the marketed biological products in terms of the safety, purity and potency of the products. Each individual jurisdiction may apply

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different criteria to assess biosimilarity, based on a preponderance of the data that can be interpreted subjectively in some cases. In the EEA, the similar nature of a biosimilar and a reference product is demonstrated by comprehensive comparability studies covering quality, biological activity, safety and efficacy.

It is uncertain if regulatory authorities will grant the full originator label to biosimilar product candidates when they are approved. For example, an infliximab biosimilar molecule was approved in Europe for the full originator label but did not receive the full originator label when approved in Canada. A similar outcome could occur with respect to one or more of our product candidates.

In the event that regulatory authorities require us to conduct additional clinical trials or other lengthy processes, the commercialization of our proposed biosimilar products could be delayed or prevented. Delays in the commercialization of or the inability to obtain regulatory approval for these products could adversely affect our operating results by restricting or significantly delaying our introduction of new biosimilars.

The structure of complex proteins used in protein-based therapeutics is inherently variable and highly dependent on the processes and conditions used to manufacture them. If we are unable to develop manufacturing processes that achieve a requisite degree of biosimilarity to the originator drug, and within a range of variability considered acceptable by regulatory authorities, we may not be able to obtain regulatory approval for our products.

Protein-based therapeutics are inherently heterogeneous and their structures are highly dependent on the production process and conditions. Products from one production facility can differ within an acceptable range from those produced in another facility. Similarly, physicochemical differences can also exist among different lots produced within a single facility. The physicochemical complexity and size of biologic therapeutics create significant technical and scientific challenges in the context of their replication as biosimilar products.

The inherent variability in protein structure from one production lot to another is a fundamental consideration with respect to establishing biosimilarity to an originator product to support regulatory approval requirements. For example, the glycosylation of the protein, meaning the manner in which sugar molecules are attached to the protein backbone of a therapeutic protein when it is produced in a living cell, is critical to half-life (how long the drug stays in the body), efficacy and even safety of the therapeutic and is therefore a key consideration for biosimilarity. Defining and understanding the variability of an originator molecule in order to match its glycosylation profile requires significant skill in cell biology, protein purification and analytical protein chemistry. Furthermore, manufacturing proteins with reliable and consistent glycosylation profiles at scale is challenging and highly dependent on the skill of the cell biologist and process scientist.

There are extraordinary technical challenges in developing complex protein-based therapeutics that not only must achieve an acceptable degree of similarity to the originator molecule in terms of characteristics such as the unique glycosylation pattern (attachment of sugars to the protein) critical to therapeutic efficacy, but also the ability to develop manufacturing processes that can replicate the necessary structural characteristics within an acceptable range of variability sufficient to satisfy regulatory authorities.

Given the challenges caused by the inherent variability in protein production, we may not be successful in developing our products if regulators conclude that we have not achieved a sufficient level of biosimilarity to the originator product, or that the processes we use to manufacture our products are unable to produce our products within an acceptable range of variability.

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Risks Relating to our Reliance on Third Parties

We rely on third parties to conduct and oversee our clinical trials for our biosimilar product candidates, and expect to continue to do so as we progress the development of our pipeline product candidates. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or otherwise conduct the trials as required or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all, and our business could be substantially harmed.

We rely upon third-party CROs to monitor and manage the clinical sites and investigators for our ongoing clinical programs, and to audit and verify the data produced by these parties. We also rely upon medical institutions, clinical investigators and contract laboratories to conduct our trials in accordance with our clinical protocols and in accordance with applicable legal and regulatory requirements. These third parties play a significant role in the conduct of these trials and the subsequent collection and analysis of data from the clinical trials. These third parties are not our employees, and except for remedies available to us under our agreements with such third parties, there is no guarantee that any such third party will devote adequate time and resources to our clinical trial. If any CROs engaged by us or any other third parties upon which we rely for administration and conduct of our clinical trials do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, or if they otherwise perform in a substandard manner, our clinical trials may be extended, delayed, suspended or terminated, and we may not be able to complete development of, obtain regulatory approval for, or successfully commercialize our product candidates. We plan to rely heavily on these third parties for the execution of our planned global clinical program for BOW015 and for other clinical trials for products we are developing or may develop in the future, and will control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on our CROs does not relieve us of our regulatory responsibilities.

We and any CROs that we engage are required to comply with GCP requirements which are regulations and guidelines enforced by regulatory authorities around the world for products in clinical development. Regulatory authorities enforce these GCP regulations through periodic inspections of clinical trial sponsors, principal investigators and clinical trial sites. If we or any of our CROs fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and our submission of marketing applications may be delayed or the regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot provide any assurance that, upon inspection, a regulatory authority will determine that any of our clinical trials comply or complied with applicable GCP regulations. In addition, our clinical trials must be conducted with product produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

Clinical trials require a substantial number of patients that can allow statistically significant results. Delays in site initiation or unexpectedly low patient recruitment rates may delay the results of the clinical trial. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed. Further, if our relationship with any CRO that we engage to perform services on our behalf is terminated, we may be unable to enter into arrangements with an alternative CRO on commercially reasonable terms, or at all. Switching or adding CROs can involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, prospects, financial condition or results of operations.

We rely on third parties, and in some cases a single third party, to manufacture nonclinical and clinical supplies of our product candidates, to store critical components of our product candidates for us, and also to commercialize our product candidates. Our business could be harmed if those third parties fail to provide us with sufficient quantities of product candidates at acceptable quality levels and on commercially reasonable terms, or fail to commercialize our products in accordance with the terms of our agreements with them.

We do not have the infrastructure or capability internally to manufacture supplies of our biosimilar product candidates for use in the conduct of our nonclinical and clinical studies or on a commercial scale. We rely on third-party manufacturers, including our India-based contract manufacturer RLS, to manufacture and supply us with BOW015 in India. As discussed in the other risk factors described in this section, we may need to seek additional third-party manufacturers following RLS’ completion of its manufacture obligations pursuant to the Settlement Agreement (as described below). Additionally, we rely on an agreement with Sun to commercialize BOW015 in

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India and certain North African and Asian countries. We also have an agreement with Fujifilm Diosynth Biotechnologies U.S.A., Inc., or Fujifilm, for BOW015 process development with a view toward establishing Fujifilm as a source of future clinical and commercial supply of BOW015. Developing successful scale up techniques for manufacture of our biosimilar product candidates for commercial quantities will be time consuming and may not yield the quantities of product that we anticipate, which may have a material impact on our ability to successfully commercialize our product candidates. Moreover, the market for contract manufacturing services for protein therapeutics is highly cyclical, with periods of relatively abundant capacity alternating with periods in which there is little available capacity. If any need we have for contract manufacturing services increases during a period of industry-wide production capacity constraints, we may not be able to produce our product candidates on a timely basis or on commercially viable terms. Although we generally do not begin a clinical study unless we believe we have a sufficient supply of a product candidate to complete such study, any significant delay or discontinuity in the supply of a product candidate for an ongoing clinical study due to the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing, and potential regulatory approval of our product candidates, which could harm our business and results of operations.

Any failure or refusal to supply the components for our product candidates that we may develop could delay, prevent or impair our clinical development or commercialization efforts. Although we endeavor, and will continue to do so in the future, to establish alternative sources of supply for BOW015 and our future product candidates in order to protect against any disruption in product supply, we cannot assure you that we will be able to find a suitable alternative manufacturer who is permitted to supply product under applicable regulatory laws, or to enter into appropriate agreements with such third parties on commercially reasonable terms, or at all. If our contract manufacturers were to breach or terminate their manufacturing arrangements with us, the development or commercialization of the affected products or product candidates could be delayed, which could have an adverse effect on our business. Any change in our manufacturers could be costly because the commercial terms of any new arrangement could be less favorable and the expenses relating to the transfer of necessary technology and processes could be significant.

If any of our product candidates are approved for any given jurisdiction, in order to produce the quantities necessary to meet anticipated market demand, any contract manufacturer that we engage may need to increase manufacturing capacity. If we are unable to produce our product candidates in sufficient quantities to meet the requirements for the launch of these products or to meet future demand, our revenue and gross margins could be adversely affected. Although we believe that we will not have any material supply issues, we cannot be certain that we will be able to obtain long-term supply arrangements for our product candidates or materials used to produce them on acceptable terms, if at all. If we are unable to arrange for third-party manufacturing, or to do so on commercially reasonable terms, we may not be able to complete development of our products or market them.

We also rely on third parties to store the BOW015 master and working cell bank, and those of our pipeline product candidates. We have one master cell bank and one working cell bank and believe we would have adequate backup should any cell bank be lost in a catastrophic event. However, it is possible that we could lose multiple cell banks and have our manufacturing severely impacted by the need to replace the cell banks, which could materially and adversely affect our business, financial condition and results of operations.

Further, we are currently party to an agreement with Sun, pursuant to which we granted to Sun exclusive rights under our intellectual property and regulatory materials relating to BOW015 in order to develop and commercialize BOW015 in India and certain other countries in Asia and North Africa. Pursuant to this agreement, Sun has agreed to distribute and sell BOW015 in India under the marketing authorization granted for BOW015. If we encounter delays or difficulties in executing our agreement with Sun to commercialize BOW015 in India, we may be required to seek alternative commercialization partners and/or develop a plan to commercialize BOW015 through direct sales into the Indian market, either of which may adversely affect our ability to successfully commercialize BOW015 in India. We have no direct sales experience in India or elsewhere. Therefore, if we decide to commercialize BOW015 through direct sales we cannot assure you that we would be successful.

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Disputes under key agreements with third parties could adversely affect, delay or prevent development or commercialization of our product candidates.

Any agreements we have or may enter into with third parties, such as collaboration, license, formulation supplier, manufacturing, testing, clinical research organization or clinical trial agreements, may give rise to disputes regarding the rights and obligations of the parties to such agreements. Disagreements may occur relating to the parties’ rights and obligations under these agreements, such as the scope of development or commercialization rights, ownership or use of intellectual property, the approach to obtaining regulatory approvals or commercialization strategy. Any disputes or commercial conflicts could lead to the termination of these agreements, delay progress of our product development programs, compromise our ability to renew agreements or obtain future agreements, lead to the loss of suppliers of our products, harm our intellectual property rights or result in costly litigation.

In December 2014, RLS exercised its three-year termination for-convenience right with respect to our manufacturing and supply agreement with RLS, which we refer to as the RLS Agreement, which would have caused the RLS Agreement to terminate in December 2017. In addition, in March 2015, RLS initiated an arbitration proceeding under the RLS Agreement alleging that the RLS Agreement grants RLS exclusive global supply rights for BOW015, that the terms of our collaboration agreements with Fujifilm and Livzon (described above) violate the RLS Agreement, and sought to terminate the RLS Agreement. On April 22, 2015, we entered into a Settlement Agreement with RLS (the “Settlement Agreement”). Pursuant to the Settlement Agreement, RLS has agreed to manufacture 20 final batches of BOW015, with the initial 15 binding forecast batches to be manufactured on or before June 30, 2016 and the final five non-binding forecast batches to be manufactured on or before December 31, 2016, with the forecast for such final batches to be finalized by December 31, 2015. RLS has also agreed to use reasonable commercial efforts to transfer the existing Indian marketing authorization for BOW015 granted by the DCGI to us or our designee, with all costs of the transfer to be borne by us and subject to the DCGI’s approval of such transfer. We have agreed to pay to RLS a fee of $2,250,000, payable in four installments over the course of the final batch manufacture, with the final installment to be paid no later than ten days after June 30, 2016. Pursuant to the Settlement Agreement, on May 4, 2015, RLS withdrew the arbitration proceeding it initiated, and the parties have agreed to release each other from all causes of actions or claims, present and future, arising under the RLS Agreement. Following the satisfaction by both parties of all of the terms of the Settlement Agreement, the RLS Agreement and related agreements between the parties shall be terminated and neither party shall have any further rights or obligations thereunder. While we believe that, based on forecasts from our Indian commercial partner, Sun, the current inventory, and future inventory as agreed to under the Settlement Agreement, of BOW015 is sufficient to fulfill anticipated demand there throughout the end of 2016, it is possible that demand will increase in excess of our current inventory and that we will not be able to meet these demands if the agreed-upon batches to be manufactured by RLS pursuant to the Settlement Agreement are not sufficient to meet our needs. We intend to continue to build up additional BOW015 inventory via the agreed upon production runs by RLS, as necessary to establish sufficient product for the Indian territory, but we cannot be certain that this additional supply will be adequate. It is possible that RLS could stop providing us with BOW015 entirely, despite the terms of the Settlement Agreement and regardless of whether this causes RLS to breach the RLS Agreement or the Settlement Agreement. We and Sun intend to transfer BOW015 manufacturing for Indian territory to an alternate contract manufacturer, but there can be no assurances that we will be successful in making such a transfer on a timely basis, or at all. This, in turn, could materially and adversely affect our ability to manufacture or supply BOW015 for use in commercial sales in India and other markets currently contemplated to be served by Sun.

Where we apply our In Market, For Market strategy for commercialization of our product candidates in emerging markets, where approved, we expect to transfer our cell lines and certain proprietary manufacturing technology to our third-party partners in order to permit locally-based manufacture of our biosimilar products by our partners. If our alliances with these partners terminate, our business could be harmed if such former partners continue to use our technology in such countries following termination, in breach of our agreements with them.

Under our collaboration with Livzon, and under future In Market, For Market collaborations, we expect to transfer the manufacture and certain development and commercialization responsibilities for BOW015 and certain of our pipeline product candidates to Livzon and other future collaborators, along with certain of our SCALE manufacturing technology, and to provide technical assistance in such territories to assist our partners in establishing

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manufacturing capacity or modifying their existing manufacturing capacity for the production of our biosimilar product candidates. If our alliances with Livzon and any future partners are not successful, or our agreements with such partners are terminated, our agreements will include terms that require the partners to immediately cease any use of our technology, and to return to us any tangible embodiments of such technology, including our cell lines. However, our former partners may fail to comply with these terms, and may continue to use our technology to manufacture and sell biosimilar products in such countries, in breach of our agreements with them. In such case, we may be forced to enforce our contractual and intellectual property rights in the applicable countries, which would be time-consuming and costly, and would divert substantial management time and resources from other aspects of our business. Further, although we endeavor to include dispute resolution provisions in our agreements that are fully enforceable irrespective of the jurisdiction, including by the use of arbitration, countries outside the United States where we have In Market, For Market collaborations may not provide the same level of protection for our contractual and intellectual property rights, and there is no guarantee that we would be successful in preventing a party to whom we have transferred our technology from continuing to use our cell lines and technology to manufacture biosimilar products, in which case our business in those countries could be adversely affected.

In certain countries where we expect to commercialize our product candidates, under applicable laws, it is necessary for us to rely on locally established third parties to act as the holder of marketing approvals or authorizations for our product candidates in such countries. Our business could be harmed if those third parties fail to comply with the terms of such marketing authorizations or approvals, or fail to act in accordance with our instructions in relation to the marketing and sale of our product candidates covered by such authorizations or approvals.

In some circumstances, it may be necessary as a matter of applicable local law, for the marketing and manufacturing approvals for our biosimilar products to be held by a third party that is not one of our affiliates. For example, our marketing approval in India for BOW015 is currently held in the name of our manufacturing partner, RLS, which also holds the manufacturing approval for BOW015. Pursuant to the Settlement Agreement described herein, RLS has agreed to use reasonable commercial efforts to transfer such authorization to us or our designee, subject to approval by the DCGI. The marketing approval held by RLS for manufacture and sale of infliximab in India is based on and is specific to the data arising from our clinical trials conducted with respect to BOW015, which data is owned solely by us, and RLS therefore has no right to commercialize BOW015 in India or in any other country independently of us on the basis of such marketing authorization. We have a manufacturing and supply agreement in place with RLS that includes provisions that permit us to have oversight over RLS’s activities in order to protect against breach by RLS of the terms of such marketing approval, and we will seek to include equivalent contractual protections in future agreements with third parties that hold regulatory approvals on our behalf. However, there is no guarantee that RLS or any other such third party will comply with the terms of the marketing authorization for the applicable biosimilars or with applicable laws. Where permissible under applicable laws, we also seek to provide for transfer of rights in any regulatory approval to an alternative holder on termination of our agreements with such third parties, and we also endeavor, and will continue to do so in the future, to establish alternative sources of supply for BOW015 and our future product candidates in order to protect against any disruption in product supply. However, we cannot assure you that we will be able to find an alternative holder for any such regulatory approvals in a timely fashion, or to enter into appropriate agreements with such third parties on commercially reasonable terms, or at all. Any non-compliance with applicable laws or the terms of regulatory approvals by such third parties could result in the permission to market and sell the applicable product candidate being revoked in one or more countries, which would materially jeopardize our right to commercialize BOW015 in India and such other countries.

We expect to partner with third parties in connection with the development of certain of our product candidates. Even if we enter into such collaborations, and we believe that the development of our technology and product candidates is promising, our partners may choose not to proceed with such development.

Our agreements with potential partners may include the right for our partner to terminate the agreement on short notice upon the occurrence of certain circumstances. Accordingly, even if we enter into agreements with third-party partners in all of the territories where we intend to pursue commercialization of our product candidates, and we believe that the development of such product candidates are worth pursuing, our partners may choose not to continue with such development. If any of our partnerships are terminated, we may be required to devote additional

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resources to the development of our product candidates or seek a new partner on short notice, and the terms of any additional partnerships or other arrangements that we establish may not be favorable to us, if an alternative partner is even available.

We are also at risk that our partnerships or other arrangements may not be successful. Factors that may affect the success of our partnerships include the following:

· our partners may incur financial and cash-flow difficulties that force them to limit or reduce their participation in our joint projects;

· our partners may be pursuing alternative technologies or developing alternative products that are competitive to our technology and products, either on their own or in partnership with others;

· our partners may terminate their partnerships with us, which could make it difficult for us to attract new partners or adversely affect perception of us in the business and financial communities; and

· our partners may pursue higher priority programs or change the focus of their development programs, which could affect their commitment to us.

For example, in September 2014, we entered into a license and collaboration agreement with Livzon for development and commercialization of BOW015 and up to four other biosimilar pipeline products in China and related territories. This collaboration with Livzon is based on our In Market, For Market strategy, under which we would work with Livzon to establish local manufacturing capacity for the relevant product candidates. If our collaboration with Livzon is not successful or if we or Livzon terminate this agreement, we may not be able to progress our plans to develop and commercialize our product candidates in China and the related territories. Although we believe that there are appropriate alternative partners in each territory, there is no guarantee that we could identify and negotiate satisfactory terms with any such alternative partner, or that we could do so in a timeframe that would not compromise our ability to commercialize our product candidates.

If we cannot maintain successful partnerships, our business, financial condition and operating results may be adversely affected.

International expansion of our business exposes us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

Our business strategy incorporates significant international expansion, with initial focus on emerging markets such as India, China and Latin America, as well as developed markets outside of the United States, such as Europe. We plan to engage in manufacturing, maintain sales representatives and conduct clinical trials outside of the United States. Doing business internationally involves a number of risks, including but not limited to:

· multiple, conflicting, and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements, and other governmental approvals, permits, and licenses;

· failure by us to obtain and maintain regulatory approvals for the use of our products in various countries;

· additional potentially relevant third-party patent rights;

· complexities and difficulties in obtaining protection and enforcing our intellectual property;

· difficulties in staffing and managing foreign operations;

· limits in our ability to penetrate international markets;

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· financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations;

· natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade, and other business restrictions;

· certain expenses including, among others, expenses for travel, translation, and insurance; and

· regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the FCPA, its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm any future international expansion and operations and, consequently, could adversely affect our business prospects.

Industry Related Risks

If efforts by manufacturers of reference products to delay or limit the use of biosimilars are successful, our sales of biosimilar products may suffer.

Many manufacturers of reference products have increasingly used legislative, regulatory and other means in attempts to delay regulatory approval of and competition from biosimilars. These efforts have included sponsoring legislation to prevent pharmacists from substituting biosimilars for prescribed reference products or to make such substitutions more difficult by establishing notification, recordkeeping, and/or other requirements, as well as seeking to prevent manufacturers of biosimilars from referencing the brands of the innovator products in biosimilar product labels and marketing materials. If these or other efforts to delay or block competition are successful, we may be unable to sell our biosimilar product candidates, which could have a material adverse effect on our sales and profitability.

Foreign governments tend to impose strict price controls, which may adversely affect our revenue, if any.

In some foreign countries, the pricing of prescription pharmaceuticals is subject to governmental control. This is likely also to apply to pricing of biosimilar products. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

We may have significant product liability exposure which may harm our business and our reputation.

Although our product candidates are biosimilar products, and are designed to be equivalent against reference products that have an established safety record in the indications in which they are marketed and used, we face a risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk as we commercialize our products. For example, we may incur liability if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Regardless of the merits or eventual outcome, liability claims may result in:

· decreased demand for BOW015, or any future product candidates;

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· injury to our reputation and significant negative media attention;

· withdrawal of clinical trial participants or cancellation of clinical trials;

· costs to defend the related litigation;

· a diversion of management’s time and our resources;

· substantial monetary awards to trial participants or patients;

· regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;

· loss of revenue; and

· the inability to commercialize any products we develop.

Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could impact the commercialization of BOW015, and any other product candidates. We currently carry product liability insurance covering our clinical trials in the amount of $5 million in the aggregate. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses in all the jurisdictions in which we seek to market and sell our products. As we obtain approvals for marketing BOW015 and any other product candidates in more jurisdictions, we intend to expand our insurance coverage to include the sale of such products; however, we may be unable to obtain this liability insurance on commercially reasonable terms.

We use and generate materials that may expose us to expensive and time-consuming legal claims.

Our development programs involve the use of hazardous materials, chemicals, and biological materials. We are subject to foreign, federal, state and local laws and regulations governing the use, manufacture, storage, and disposal of materials and waste products. We believe that our safety procedures for handling these materials comply with the standards prescribed by laws and regulations. However, we may incur significant costs to comply with current or future environmental laws and regulations. In addition, we cannot completely eliminate the risk of contamination or injury from hazardous materials. In the event of an accident, an injured party may seek to hold us liable for any damages that result. Any liability could exceed the limits or fall outside the coverage of our insurance, and we may not be able to maintain insurance on acceptable terms, if at all.

Risks Related to Intellectual Property

We may not be able to develop or commercialize our product candidates due to intellectual property rights held by third parties.

Although we aim to launch our biosimilar product candidates in markets where we are not aware of any valid patent protection covering the reference biologic product, or in some cases where the fundamental patent protection for the reference product has expired, if a third party holds a patent to a formulation technology related to our planned formulation of a product candidate, we may not be able to develop or commercialize such product candidates without first obtaining a license to such patent, or waiting for such patent to expire. In addition, in the

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United States, under certain limited circumstances, patents known as “submarine” patents may issue without the corresponding application being previously published. If such a submarine patent were to issue and cover aspects of any one or more of our product candidates, it is possible that such patents could affect our ability to commercialize the affected product candidate(s). Our business will be harmed if we are unable to use the optimal formulation of our product candidates, which may occur because the formulations or methods of use are covered by one or more third-party patents, and a license to such patents is unavailable or is only available on terms that are unacceptable. In the case of our biosimilar product candidates, this may prevent us from establishing the equivalence to the reference biologic product required to gain regulatory approval for sale of such biosimilar product within a time frame that would make the commercialization of the affected biosimilar product candidate commercially viable.

We may not have identified all the relevant patents covering our product candidates, or the scope or term of identified patents may differ from our assessment, which may affect our ability to commercialize our product candidates.

Although we have conducted searches in commercially available patent databases directed to patents that would cover reference products in our pipeline, we may not have identified all of the relevant patents. Patent filings can be complicated and involve many progeny cases in different jurisdictions around the world. Patents and patent applications are published weekly and if the databases that we use are not up to date when the search is conducted then we may not identify relevant patents that may cover our product patents. If we fail to identify relevant patent filings in the jurisdictions in which we plan to commercialize, or if we incorrectly interpret the claims or scope of coverage afforded by any patent identified in our searches in any jurisdiction, such that our product candidates in fact infringe such patents, then our ability to commercialize our products in the applicable countries could be prevented or delayed. Further, the patents covering the reference products may be subject to adjustments or extensions under applicable law that may prolong the life of such patents. While we strive to avoid litigation by launching our product candidates in markets where the reference product is no longer subject to patent protection, if we incorrectly assess the applicable term of the patent, or if such term is extended in any jurisdiction via an appeal or otherwise, our ability to commercialize in that such jurisdiction could be adversely affected.

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

We do not currently have any patent filings with any patent offices in the world. We rely solely on trade secret protection and confidentiality agreements to protect proprietary know-how that may not be patentable, processes for which patents may be difficult to obtain or enforce and any other elements of our product development processes that involve proprietary know-how, information or technology that is not covered by patents. This includes our rights in our proprietary SCALE technology, which is critical to the success of our In Market, For Market strategy for commercialization of our product candidates in emerging markets.

As part of our efforts to protect our trade secrets and other confidential information, we require our employees, consultants, collaborators and advisors to execute confidentiality agreements upon the commencement of their relationships with us, and we include equivalent provisions in all of our material collaboration and license agreements. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not be disclosed to third parties. These agreements, however, may not provide us with adequate protection against improper use or disclosure of confidential information, and these agreements may be breached. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. A breach of confidentiality could significantly affect our competitive position. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, collaborators or advisors have previous employment or consulting relationships. To the extent that our employees, consultants or contractors use any intellectual property owned by others in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions. Also, third parties, including our competitors, may independently develop substantially equivalent proprietary information and technologies or otherwise lawfully gain access to our trade secrets and other confidential information. In such a case, we would have no right to prevent such third parties from using such proprietary information or technologies to compete with us, which could harm our competitive position.

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In addition, where we enter into In Market, For Market collaborations to develop and commercialize our product candidates in emerging markets, these collaborations are expected to involve the establishment in such countries of independent manufacturing capacity for the applicable product candidates. Establishing such manufacturing capacity is expected to involve certain technology transfer by us to our strategic partners, and the provision by us of technical assistance in connection with such transfer. If our agreements with our collaborators are terminated, although these agreements provide that our former partners have no further rights in the transferred technology, such third parties could use the technology and know-how they received from us to continue to develop and commercialize the applicable products, in breach of our agreements with them, and which would materially impact our revenues from commercialization of our product candidates. In such case, it may be necessary for us to become involved in litigation or arbitration to retain and defend our rights in such technology, and to prevent such commercialization. Any such proceedings, which would be likely to be conducted in a country outside the United States would be costly and time consuming, and would divert significant management time and resources, with no guarantee of a successful outcome.

We may not be able to protect against third-party copying of our product candidates.

As noted above, we currently rely upon trade secrets to protect our product candidates. Our product candidates utilize the same formulations and ingredients as others used in the marketplace and, as such, may not be eligible for any patent protection. In addition, there may be third-party patents and patent applications directed to formulations, processes of manufacture or other processes that could cover our product candidates.

Litigation or third-party claims of intellectual property infringement could require substantial time and money to resolve. Unfavorable outcomes in these proceedings could limit our activities.

We may need to resort to litigation to enforce or defend our intellectual property rights, including any misappropriation of our trade secrets or know how. We cannot guarantee that our product candidates will be free of claims by third parties alleging that we have infringed their intellectual property rights. Third parties may assert that we are employing their proprietary technologies without authorization and they may resort to litigation to attempt to enforce their rights. Third parties may have or obtain patents in the future and claim that the use of our technology or any of our product candidates infringes their patents. We may not be able to develop or commercialize product candidates because of patent protection others have. Our business will be harmed if we cannot obtain a necessary or desirable license, can obtain such a license only on terms we consider to be unattractive or unacceptable, or if we are unable to redesign our product candidates or processes to avoid actual or potential patent or other intellectual property infringement.

Our efforts to obtain, protect and defend our intellectual property rights, whether we are successful or not, may require us to incur substantial costs, including the diversion of management and technical personnel. An unfavorable ruling in intellectual property litigation could subject us to significant liabilities to third parties, require us to cease developing, manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties, or result in awards of substantial damages against us. In addition, intellectual property litigation, whether we are successful or not, can be very expensive and may require us to incur substantial costs, including the diversion of management and technical personnel. During the course of any litigation, there may be public announcements of the results of hearings, motions, and other interim proceedings or developments in the litigation. If securities analysts or investors regard these announcements as negative, the market price of our common stock may decline. General proclamations or statements by key public figures may also have a negative impact on the perceived value of our intellectual property.

There can be no assurance that we would prevail in any intellectual property infringement action, will be able to obtain a license to any third-party intellectual property on commercially reasonable terms, successfully develop non-infringing alternatives on a timely basis, or license non-infringing alternatives, if any exist, on commercially reasonable terms. Any significant intellectual property impediment to our ability to develop and commercialize our products could seriously harm our business and prospects.

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Risks Related to an Investment in Our Common Stock

Our management and independent auditors have identified material weaknesses in our internal controls, and we may be unable to develop, implement and maintain appropriate controls in future periods, which may lead to errors or omissions in our financial statements.

In connection with the preparation of certain of our 2014 interim financial statements, our management team and independent registered public accounting firm identified certain weaknesses in our internal controls that were considered to be a material weakness. Specifically, our independent auditors identified errors in the draft financial statements of Private Epirus for the three and six-month periods ending June 30, 2014 that, in the aggregate, represented a material weakness in our financial statement close process. This material weakness has not been fully remediated. Prior to the complete remediation of this material weakness, there remains risk that the transitional controls on which we currently rely will fail to be sufficiently effective, which could result in a material misstatement of our financial position or results of operations and require a restatement of our financial statements.

We are currently designing and implementing new procedures and controls intended to address the material weakness described above over the financial statement close process. While this design and implementation phase is underway, we are relying significantly on outside accounting professionals until permanent employees can be hired to fill these roles and on manual procedures to assist us with meeting the objectives otherwise fulfilled by an effective control environment. The implementation of new procedures and controls could be costly and distract management from other activities.

We note that a system of procedures and controls, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all systems of procedures and controls, no evaluation can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple error or mistake. Additionally, procedures and controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override. The design of any system of procedures and controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, our systems of procedures and controls, as we further develop and enhance them, may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective system of procedures and controls, misstatements due to error or fraud may occur and not be detected and could be material and require a restatement of our financial statements.

If we are unable to establish appropriate internal controls, we may not have adequate, accurate or timely financial information, and we may be unable to meet our reporting obligations or comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002, which could result in the imposition of sanctions, including the inability of registered broker dealers to make a market in our common shares, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our securities. Further and continued determinations that there are significant deficiencies or material weaknesses in the effectiveness of our internal controls could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures to comply with applicable requirements.

Our failure to meet the continued listing requirements of The NASDAQ Capital Market could result in a delisting of our common stock.

In connection with the Merger, we effected a reverse split of our common stock to enable us to comply with The NASDAQ Capital Market’s minimum bid price listing requirement. Notwithstanding the reverse stock split and compliance with The NASDAQ Capital Market’s minimum bid price listing requirement, we may not be able to maintain a price per share of our common stock in excess of $1.00 per share or the additional criteria for continued listing of our common stock set forth by The NASDAQ Capital Market. The occurrence of any future non-compliance with The NASDAQ Capital Market’s minimum bid price or other listing requirements may have a material adverse effect on our stock price, our business and our prospects.

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Our stock price is expected to continue to be volatile and you may not be able to resell your shares.

We cannot assure you that an active trading market for shares of our common stock will continue to develop or be sustained. If an active market for our common stock does not continue to develop, or is not sustained, it may be difficult to sell shares without depressing the market price for the shares or to sell your shares at all.

The market price for our common stock has been volatile, and market prices for securities of companies comparable to us have been highly volatile. In addition, the stock market as a whole and biotechnology and other life science stocks in particular have experienced significant recent price volatility. Like our common stock, these stocks have experienced significant price and volume fluctuations for reasons unrelated to the operating performance of the individual companies. Factors giving rise to this volatility may include:

· regulatory developments in both the United States and abroad;

· developments concerning proprietary rights, including patents and litigation matters;

· disclosure of new collaborations or other strategic transactions;

· public concern about the safety or efficacy of our product candidates or technology, their components, or related technology or new technologies generally;

· public announcements by our competitors or others regarding new products or new product candidates;

· general market conditions and comments by securities analysts and investors; and

· developments relating to our key partners.

In the past, securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, operating results and financial condition.

Fluctuations in our operating losses could adversely affect the price of our common stock.

Our operating losses may fluctuate significantly on a quarterly basis. Some of the factors that may cause our operating losses to fluctuate on a period-to-period basis include the status of our clinical and pre-clinical development programs, level of expenses incurred in connection with our clinical and pre-clinical development programs, restructuring costs, implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, non-recurring revenue or expenses under any such agreement, and compliance with regulatory requirements. Period-to-period comparisons of our historical and future financial results may not be meaningful, and investors should not rely on them as an indication of future performance. Our fluctuating losses may fail to meet the expectations of securities analysts or investors. Our failure to meet these expectations may cause the price of our common stock to decline.

Anti-takeover provisions in our charter documents and provisions of Delaware law may make an acquisition more difficult and could result in the entrenchment of management.

We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our charter documents may make a change in control or efforts to remove management more difficult. Also, under Delaware law, our board of directors may adopt additional anti-takeover measures. The existence of the following provisions of Delaware law and our sixth amended and restated charter, as amended, or our amended and restated bylaws could limit the price that investors might be willing to pay in the future for shares of our common stock.

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Our charter authorizes our board of directors to issue up to 5,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If the board of directors exercises this power to issue preferred stock, it could be more difficult for a third party to acquire a majority of our outstanding voting stock and vote the stock they acquire to remove management or directors.

Our charter also provides staggered terms for the members of our board of directors. Under Section 141 of the General Corporation Law of the State of Delaware, or the DGCL, and our charter, our directors may be removed by stockholders only for cause and only by vote of the holders of 75% of voting shares then outstanding. These provisions may prevent stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to acquire control without the consent of our board of directors. These provisions could also delay the removal of management by the board of directors with or without cause. In addition our amended and restated bylaws limit the ability our stockholders to call annual meetings of stockholders.

Our equity incentive plans generally permit our board of directors to provide for acceleration of vesting of options granted under these plans in the event of certain transactions that result in a change of control. If our board of directors uses its authority to accelerate vesting of options, this action could make an acquisition more costly, and it could prevent an acquisition from going forward.

Under Section 203 of the DGCL, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction in advance. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. The potential inability to obtain a control premium could reduce the price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

A list of exhibits is set forth in the Exhibit Index immediately following the signature page of this report, and is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EPIRUS BIOPHARMACEUTICALS, INC.


Date: May 13, 2015	By:	/s/ Amit Munshi
		Amit Munshi
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 13, 2015	By:	/s/ Thomas Shea
		Thomas Shea
		Senior Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

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EPIRUS BIOPHARMACEUTICALS, INC.

EXHIBIT INDEX

		Incorporated by Reference to:
Exhibit No.	Description	Form or Schedule	Exhibit No.	Filing Date with SEC	SEC File Number
+10.1	EPIRUS Biopharmaceuticals, Inc. Severance Plan	8-K	10.1	01/26/2015	000-51171
10.2	Settlement Agreement dated as of April 22, 2015 by and between the registrant and Reliance Life Sciences Pvt Ltd				*
31.1	Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002				*
31.2	Certification of the Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002				*
32.1	Certifications of the Chief Executive Officer and Chief Financial Officer as required by 18 U.S.C. 1350				*
101	The following financial information from this quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2015 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014; (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014; and (iv) Notes to Condensed Consolidated Financial Statements				*

* Filed herewith.

+ Indicates management contract or compensatory plan.

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