Use these links to rapidly review the document
Table of Contents
MIRNA THERAPEUTICS, INC. (a development stage company)

Confidential Draft Submission Amendment No. 2 submitted to the Securities and Exchange Commission on April 22, 2014.
This draft registration statement has not been filed publicly with the Securities and Exchange Commission and all information
contained herein remains confidential.

Registration No. 333-            


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



AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Mirna Therapeutics, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  26-1824804
(I.R.S. Employer
Identification Number)

2150 Woodward Street, Suite 100
Austin, TX 78744
(512) 901-0900

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)



Paul Lammers, M.D., M.Sc.
President & Chief Executive Officer
Mirna Therapeutics, Inc.
2150 Woodward Street, Suite 100
Austin, TX 78744
(512) 901-0900
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Alan C. Mendelson, Esq.
Mark V. Roeder, Esq.
Latham & Watkins LLP
140 Scott Drive
Menlo Park, CA 94025
Telephone: (650) 328-4600
Facsimile: (650) 463-2600

 

Scott D. Elliott, Esq.
Patrick O'Brien, Esq.
Ropes & Gray LLP
3 Embarcadero Center
San Francisco, CA 94111
Telephone: (415) 315-6300
Facsimile: (415) 315-6350



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

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

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

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

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

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

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

       
 
Title of each class of securities
to be registered

  Proposed maximum
aggregate offering
price(1)

  Amount of
registration fee(1)

 

Common Stock, $0.001 par value per share

  $               $            

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes shares that the underwriters have the option to purchase.



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

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to completion, dated                , 2014

PRELIMINARY PROSPECTUS

                Shares



LOGO

Common Stock



        Mirna Therapeutics, Inc. is offering                shares of common stock. This is our initial public offering and no public market currently exists for our shares. We have applied to list our common stock on The NASDAQ Global Market under the symbol "MIRN." We expect that the initial public offering price will be between $            and $            per share.

        We are an "emerging growth company" as that term is defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for this and future filings.

        Investing in our common stock involves a high degree of risk. Before buying any shares, you should read carefully the discussion of the material risks of investing in our common stock under the heading "Risk Factors" starting on page 10 of this prospectus.

       
 
 
  Per share
  Total
 

Public offering price

  $                   $                
 

Underwriting discounts

  $                   $                
 

Proceeds, before expenses, to Mirna Therapeutics, Inc. 

  $                   $                

 

        We have granted the underwriters the right to purchase up to            additional shares of common stock. The underwriters can exercise this right at any time within 30 days after the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares of common stock to investors on or about            , 2014.



Leerink Partners   Cowen and Company


Baird

 

Wedbush PacGrow Life Sciences

The date of this prospectus is                        , 2014.


Table of Contents


Table of Contents

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    10  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    61  

USE OF PROCEEDS

    63  

DIVIDEND POLICY

    64  

CAPITALIZATION

    65  

DILUTION

    68  

SELECTED FINANCIAL DATA

    70  

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

    72  

BUSINESS

    82  

MANAGEMENT

    119  

EXECUTIVE COMPENSATION

    129  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    141  

PRINCIPAL STOCKHOLDERS

    145  

DESCRIPTION OF CAPITAL STOCK

    147  

SHARES ELIGIBLE FOR FUTURE SALE

    152  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

    155  

UNDERWRITING

    159  

LEGAL MATTERS

    164  

EXPERTS

    164  

WHERE YOU CAN FIND MORE INFORMATION

    164  

INDEX TO FINANCIAL STATEMENTS

    F-1  

        We are responsible for the information contained in this prospectus. Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.

        Until            , 2014 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

i


Table of Contents


Market, Industry and Other Data

        This prospectus also contains estimates, projections and other information concerning our industry, our business and the markets for oncology therapeutics, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data are derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph are derived from the same sources, unless otherwise expressly stated or the context otherwise requires.


Trademarks

        Our logo used in this prospectus is subject to a trademark that is owned by us. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and tradenames.

ii


Table of Contents

 


Prospectus Summary

        This summary highlights information contained in other parts of this prospectus. Because it is only a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the notes related thereto, before deciding to buy shares of our common stock. Unless the context requires otherwise, references in this prospectus to "Mirna," "we," "us" and "our" refer to Mirna Therapeutics, Inc.

Overview

        We are a clinical stage biopharmaceutical company developing a broad pipeline of leading microRNA-based oncology therapeutics. microRNAs are recently discovered, naturally occurring, short ribonucleic acid, or RNA, molecules, or oligonucleotides, that play a critical role in regulating key biological pathways. Misexpression of even a single microRNA can contribute to disease development and tumor suppressor microRNAs are commonly reduced in cancer. Our scientists and others at leading academic institutions have identified numerous tumor suppressor microRNAs that play key roles in preventing normal cells from becoming cancerous. Our therapeutic approach is to bring this tumor suppressor activity back into tumor cells by successfully delivering microRNA mimics, which are copies of naturally occurring microRNAs. This approach is known as microRNA replacement therapy. Based on our preclinical data, we believe our tumor suppressor microRNA mimics kill cancer cells by regaining control over multiple oncogenic pathways and represent a new paradigm in cancer therapy, which may have the potential to create more effective cancer drugs. Our lead product candidate, MRX34, which is currently being evaluated in a Phase 1 clinical trial, is the first microRNA-based replacement therapy to be tested in cancer patients, both in liver-based cancers and in hematological malignancies, and is supported by a comprehensive preclinical dataset.

        We are developing a broad product pipeline of multiple tumor suppressor microRNA mimics. We believe that these mimics have the potential to become promising new oncology therapeutics due to their capacity to regulate many different oncogenes across multiple oncogenic pathways. We have therapeutic use claims related to 15 tumor suppressor microRNAs as well as patents containing composition of matter claims for multiple chemistries and structures that are, or may be used in or contemplated for use with, our therapeutic microRNA mimics. The following chart provides summary information on the most advanced microRNA mimics in our pipeline:

GRAPHIC

 

1


Table of Contents

        In extensive preclinical testing in mouse models of hepatocellular carcinoma, or HCC, our Smarticles® liposome-formulated miR-34 mimic, MRX34, caused significant tumor regression in more than 70% of 139 mice treated at doses ranging from 0.03 mg/kg to 3.0 mg/kg and using dosing frequencies ranging from once to five times per week. We believe that the impressive anti-cancer activity of the miR-34 mimic in nonclinical studies is derived from its capacity to regulate more than 20 oncogenes, whereas many existing cancer therapies target only one or two oncogenes or pathways. The ongoing Phase 1 clinical trial in liver-based cancers is expected to be completed by the end of the first quarter of 2015, and a hematological malignancy cohort is targeted for completion in mid-2015. We publicly disclosed interim data available through the first 47 weeks of our Phase 1 clinical trial with respect to the liver-based cohort at the 2014 Annual Meeting of American Association for Cancer Research held in San Diego, CA, which data are summarized in "Business—MRX34: Our Lead Product Candidate." We expect to conduct a potential end of Phase 1 meeting with respect to both study parts in the first half of 2015 with the Food and Drug Administration, or FDA, to discuss next steps in the clinical development program, and to initiate a Phase 2 clinical program for MRX34 in mid-2015.

        Our early research and discovery work originated in 2002 at Ambion, Inc. and formed the initial basis for our patent portfolio, and later continued at our former parent company, Asuragen, Inc., in Austin, Texas. Leveraging pioneering research and discovery at our predecessor companies, we have developed deep knowhow and expertise in the science underlying microRNAs, their potential applications in complex diseases and various approaches to the systemic delivery of oligonucleotides. We believe our technology is supported by a strong intellectual property position, which we continue to expand and strengthen. Our scientists have also discovered functions of microRNAs in numerous diseases other than cancer, which may provide us an opportunity to expand this novel technology into other therapeutic areas of unmet medical need. We believe these microRNAs represent future partnering or diversification opportunities.

        We are led by a management team with extensive experience in the biopharmaceutical industry. Our principal investors are funds managed by Sofinnova Ventures, New Enterprise Associates and Pfizer Venture Investments. As of December 31, 2013, we had $23.2 million in cash and cash equivalents.

microRNAs: A Unique Class in the RNA Therapeutics Space

        The landscape of various RNA-based therapeutic technologies has rapidly expanded over the past few years, mostly due to advances in the delivery of these molecules to their intended targets. These new delivery technologies have enabled the use of microRNA mimics, which we believe provide stronger therapeutic activity than other RNA-based approaches. Since tumor suppressor microRNAs are natural molecules expressed in normal tissues and cells, we also believe that undesired, or so-called "off-target," side effects due to sequence mismatches are less likely to be associated with our microRNA mimic approach.

        While other companies in the field of microRNA have focused primarily on inhibiting overexpressed microRNAs by antagonists known as anti-miRs, we have focused on introducing microRNAs that are underexpressed in disease through the use of microRNA mimics. This is in part due to what we believe is stronger therapeutic activity of microRNA mimics compared to anti-miRs. Within the group of companies in the microRNA space, we are the first company to clinically employ microRNA mimics.

        microRNAs are misexpressed in a broad range of diseases including cancer, obesity, cardiovascular diseases, neurodegenerative diseases and viral infections. We believe that microRNA-based therapies have the potential to become a new class of drugs with broad therapeutic application due to their ability to modulate multiple disease pathways, target specificity which minimizes off-target effects, and their potential to work synergistically with other currently marketed drugs.

 

2


Table of Contents

Our Strategy

        Key elements of our strategy are:

    Maintain our position as a leader in the field of microRNA-based therapeutics.  We aim to be the first to establish clinical proof-of-concept for a microRNA-based replacement therapy for cancer. Our most advanced product candidate, MRX34, is currently in a Phase 1 clinical trial. Because our preclinical studies suggest that the liposome formulation of MRX34 is particularly effective at delivering microRNA mimics to the liver, we initially limited enrollment in the Phase 1 clinical trial to patients who have primary liver cancer or solid tumors with liver involvement. Since then, our own internal research as well as third party data appear to support delivery to bone marrow and malignant lymphocytes, respectively, which led us to expand our Phase 1 clinical trial to include a cohort of patients with hematological malignancies. We believe our Phase 1 clinical trial, including the hematological malignancy cohort, will not only reveal an appropriate dose and dose regimen for our Phase 2 clinical trials, but will also identify one or more cancer indications that demonstrate biological response to MRX34. Our goal is to establish clinical proof-of-concept for a microRNA-based replacement therapy for cancer in the shortest time possible. We will also continue to conduct research in the microRNA field to better understand the biology and mechanism of action for our future product candidates.

    Establish and maximize applications for MRX34.  We believe the commercial success of MRX34 will be in part due to its potential to address multiple cancer types with high unmet medical need. We are evaluating the capacity of MRX34, as a standalone therapy, to inhibit tumor growth and metastasis in animal models of a range of cancers. We do much of this work in house, but we also leverage the resources of contract research organizations and academic collaborators. We are also evaluating MRX34 in combination with standard of care drugs for a variety of cancers.

    Expand our clinical development program to additional microRNAs.  Our owned and in-licensed intellectual property portfolio includes issued U.S. patents with claims to various therapeutic uses related to 15 tumor suppressor microRNAs, including miR-34. Developing one or more product candidates in addition to MRX34, either alone or in combination, will allow us to file additional Investigational New Drug, or IND, applications with the FDA or equivalent applications with foreign regulatory agencies, and will also allow us to expand our clinical development program and create new development, commercialization and out-licensing opportunities.

    Leverage partnership and out-licensing opportunities.  The recent successful human application of different RNA therapeutic approaches in early clinical trials has led to increased interest in the field of RNA therapy from large pharmaceutical and biotechnology companies. To date, we have focused on establishing proof-of-concept for MRX34; however, in the future we anticipate that we will explore certain partnership and out-licensing opportunities for this product candidate as well as additional product candidates in our pipeline. We believe our leading position in the clinical development of microRNA-based therapeutics in cancer, coupled with a broad and promising pipeline, positions us well to actively seek such opportunities. Additionally, we have identified microRNAs we believe could have potential therapeutic uses for diseases other than cancer, including in cardiovascular, neurodegenerative and inflammatory diseases and a variety of other conditions.

    Identify biomarkers to support therapeutic product candidates.  We believe that biomarkers may be used to monitor microRNA activity and potentially aid in the selection of optimal patient segments in clinical trials. We are using clinical samples supplemented with cell and animal model studies to identify predictive biomarkers that may assist in selecting patients most likely to benefit from treatment with MRX34 or other tumor suppressor microRNAs.

 

3


Table of Contents

    Expand our intellectual property position.  We intend to continue building on our technology platform, comprised of intellectual property, proprietary methods and knowhow in the field of microRNA. These assets form the foundation for our ability to not only strengthen our product pipeline but also to successfully defend and expand our position as a leader in the field of microRNA.

MRX34: Our Lead Product Candidate

        We are developing MRX34 as an intravenous injectable microRNA replacement therapy for cancer. The active drug substance within MRX34 is a double-stranded RNA mimic of the tumor suppressor microRNA, miR-34, that inhibits cell cycle progression and induces cancer cell death. We performed cell culture studies that revealed that introducing a mimic of miR-34 into cancer cell lines derived from patients with liver, lung, colon, pancreatic and breast cancers results in significant reductions in cell proliferation. In various preclinical studies, miR-34 also inhibited formation of cancer stem cells, which are believed to contribute to the development, metastasis and therapeutic resistance of tumors.

        MRX34 features an innovative liposomal formulation called Smarticles, which is used to deliver our miR-34 mimic to cancer cells. We selected Smarticles based on a number of identified efficacy and safety parameters during a comprehensive evaluation of more than 10 preclinical or clinical stage lipid-and polymer-based nanoparticle delivery technologies.

        We initiated clinical development of MRX34 in April 2013 with a multi-center Phase 1 clinical trial that is continuing to enroll patients with unresectable primary liver cancer or solid cancers with liver involvement. We have also expanded the Phase 1 clinical trial with a separate cohort of patients with hematological malignancies, which may include non-Hodgkin's lymphoma, acute myelogenous leukemia, acute and chronic lymphocytic leukemia, chronic myelogenous leukemia in accelerated or blast phase, multiple myeloma and myelodysplastic syndrome. Primary objectives of the Phase 1 clinical trial, including the hematological malignancy cohort, are to establish the maximum tolerated dose and an appropriate dose for Phase 2 clinical trials. Secondary objectives are to assess the safety, tolerability and pharmacokinetic profile of MRX34 after intravenous dosing as well as to assess any biological and clinical activity. Through the first 47 weeks of our Phase 1 clinical trial, the maximum tolerated dose has not been reached and the most common adverse events associated with MRX34 have been fever, chills, fatigue, thrombocytopenia, diarrhea, back pain and nausea, which have been manageable with standard interventions used by oncologists.

        Based upon our nonclinical research, we believe controlling multiple cancer pathways may reduce the risk of one of the more prevalent problems of modern cancer therapies, the development of drug resistance. We have observed in cell culture studies that our miR-34 mimic works synergistically with sorafenib (Nexavar®) in HCC cells and with erlotinib (Tarceva®) in non-small cell lung cancer, or NSCLC, cells. Therefore, we continue to conduct in vitro and in vivo testing of combinations of MRX34 with these and other standard of care cancer drugs, which we believe would further broaden the development and commercial opportunities for MRX34.

Risks Associated with Our Business

    We have incurred significant losses since inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. We will also need substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate our product development, other operations or commercialization efforts.

 

4


Table of Contents

    The approach we are taking to discover and develop novel therapeutics using microRNA is unproven and may never lead to marketable products.

    We are heavily dependent on the success of our lead product candidate, MRX34, which is in Phase 1 clinical development. If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

    Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Even if a product candidate does obtain regulatory approval, that product candidate may never achieve market acceptance or commercial success.

    We rely on third parties to conduct some of our nonclinical and all of our clinical trials as well as on single source third-party contract manufacturing organizations to manufacture and supply MRX34 and other product candidates for us. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may face delays in the development and commercialization of our product candidates.

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

    We will need to increase the size of our organization, and we may experience difficulties in managing growth.

Our Corporate Information

        We were incorporated in late 2007 under the laws of Delaware and were maintained as a wholly-owned subsidiary of our former parent company, Asuragen, Inc., until the end of 2009 when we became an independent entity. Our principal executive offices are located at 2150 Woodward St., Austin, TX 78744 and our telephone number is (512) 901-0900. Our website address is www.mirnarx.com. The information contained on, or that can be accessed through, our website is not part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

        We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of the last day of the fiscal year following the fifth anniversary of the completion of this offering, the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, the date on which we are deemed to be a large accelerated filer (this means the market value of our common stock that is held by non-affiliates exceeds $700 million at the end of the second quarter of that fiscal year), or the date on which we have issued more than $1.0 billion in nonconvertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company,

    we will avail ourselves of the exemption from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

    we will provide less extensive disclosure about our executive compensation arrangements; and

    we will not require shareholder non-binding advisory votes on executive compensation or golden parachute arrangements.

        However, we are choosing to "opt out" of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards. The decision to opt out of the extended transition periods under the JOBS Act is irrevocable.

 

5


Table of Contents

 


The Offering

Issuer

  Mirna Therapeutics, Inc.

Common stock we are offering

 

                  shares

Common stock to be outstanding
after the offering

 

                  shares

Option to purchase additional shares

 

                  shares

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $          million, or approximately $          million if the underwriters exercise their option to purchase additional shares in full, at an assumed initial public offering price of $          per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We currently estimate that we will use approximately $40-$50 million of the net proceeds from this offering, together with our existing cash and cash equivalents, to fund clinical development expenses for our lead program, MRX34, including the completion of our Phase 1 clinical trial for both unresectable primary liver cancer or metastatic solid tumors with liver involvement and the cohort for hematological malignancies, and the initiation of our related Phase 2 clinical trials for these indications, and the remainder for preclinical studies, working capital and other general corporate purposes, which may include selection and development of our preclinical product candidates, pursuit of our other research and discovery efforts and the acquisition or in-license of other products, product candidates or technologies. See "Use of Proceeds" on page 63 for a more complete description of the intended use of proceeds from this offering.

Risk factors

 

See "Risk Factors" beginning on page 10 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

Symbol on The NASDAQ Global Market

 

"MIRN"

        The number of shares of common stock to be outstanding after this offering is based on 84,031,765 shares of common stock outstanding at December 31, 2013, and excludes the following:

    5,323,318 shares of common stock issuable upon the exercise of outstanding stock options at December 31, 2013 having a weighted-average exercise price of $0.16 per share;

    2,987,423 shares of common stock reserved for issuance pursuant to future awards under our 2008 Long Term Incentive Plan, as amended, at December 31, 2013, which will become available for issuance under our 2014 Equity Incentive Award Plan after consummation of this offering;

                         shares of common stock reserved for issuance pursuant to future awards under our 2014 Equity Incentive Award Plan, as well as any automatic increases in the number of

 

6


Table of Contents

      shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering; and

                         shares of common stock issuable to the holders of Series C convertible preferred stock under the terms of our certificate of incorporation as a result of the accruing paid-in-kind dividend in connection with the conversion of all shares of Series C convertible preferred stock into shares of common stock immediately prior to the consummation of this offering.

        Unless otherwise indicated, the number of shares of our common stock described above gives effect to:

    the conversion of all 84,000,766 shares of our convertible preferred stock into an aggregate of 84,000,766 shares of common stock immediately prior to the consummation of this offering;

    the adoption of our amended and restated certificate of incorporation and amended and restated bylaws immediately prior to the consummation of this offering; and

    except as otherwise indicated, the assumption there will be no exercise of the underwriters' over-allotment option.

        We refer to our Series A, Series B, Series B-1 and Series C convertible preferred stock collectively as "convertible preferred stock" for financial reporting purposes and in the financial tables included in this prospectus, as more fully explained in Note 7 to our financial statements. In other parts of this prospectus, we refer to our Series A, Series B, Series B-1 and Series C convertible preferred stock collectively as "preferred stock."

 

7


Table of Contents

 


Summary Financial Data

        The following tables set forth a summary of our historical financial data at, and for the period ended on, the dates indicated. The statement of operations data for the years ended December 31, 2011, 2012 and 2013 are derived from our audited financial statements included elsewhere in this prospectus. You should read this data together with our audited financial statements and related notes appearing elsewhere in this prospectus and the information under the captions "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results.

 
  Year Ended December 31,  
 
  2011   2012   2013  
 
  (in thousands, except share and per
share data)

 

Statement of Operations Data:

                   

Operating expenses:

                   

Research and development

  $ 980   $ 2,742   $ 4,391  

General and administrative

    1,504     1,562     2,384  
               

Total operating expenses

    2,484     4,304     6,775  

Other income (expense):

   
 
   
 
   
 
 

Change in fair value of option liability

            339  

Gain on extinguishment of note payable

        1,001      

Interest expense

    (399 )   (355 )    
               

Net loss

  $ (2,883 ) $ (3,658 ) $ (6,436 )
               
               

Less: Accretion and dividends on convertible preferred stock        

    (1,276 )   (6,142 )   (2,324 )
               

Net loss attributable to common stockholders

  $ (4,159 ) $ (9,800 ) $ (8,760 )
               
               

Net loss per share attributable to common stockholders, basic and diluted        

  $ (183.91 ) $ (373.52 ) $ (293.92 )
               
               

Common shares used to compute basic and diluted net loss per share attributable to common stockholders        

    22,614     26,237     29,804  
               
               

Pro forma net loss per common share (unaudited)—basic and diluted        

              $ (0.13 )
                   
                   

Common shares used to compute pro forma net loss per share (unaudited)—basic and diluted        

                51,440,488  
                   
                   

        The table below presents our balance sheet data at December 31, 2013:

    on an actual basis;

    on a pro forma basis to give effect to:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 84,000,766 shares of common stock immediately prior to the consummation of this offering; and

    the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering; and

    on a pro forma as adjusted basis to give further effect to the sale of             shares of common stock in this offering at an assumed initial public offering price of $        per share (the midpoint

 

8


Table of Contents

      of the range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 
  At December 31, 2013  
 
  Actual   Pro Forma   Pro Forma
As Adjusted(1)
 
 
  (in thousands)
 

Balance Sheet Data:

                   

Cash and cash equivalents

  $ 23,182   $ 23,182        

Total assets

    23,684     23,684        

Total liabilities

    2,915     2,915        

Convertible preferred stock

    50,683            

Common stock

        84        

Additional paid-in capital

    890     51,489        

Accumulated deficit

    (30,804 )   (30,804 )      

Total stockholders' (deficit) equity

    (29,914 )   20,769        

(1)
Each $1.00 increase (decrease) in the assumed initial public offering price of $          per share, the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $           million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $           million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same.

 

9


Table of Contents


Risk Factors

        Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus and any related free writing prospectus, including our financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.


Risks Related to Our Limited Operating History, Financial Position and Capital Requirements

We have incurred significant losses since inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and if we are unable to achieve and sustain profitability, the market value of our common stock will likely decline.

        We are a clinical stage biopharmaceutical company with a limited operating history. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We have not generated any product revenues and we do not expect to generate any product revenues for the foreseeable future. We have incurred losses in each year since our founding in 2007 and we expect to continue to incur significant operating losses for the foreseeable future. The amount of future losses is uncertain. All of our product candidates are in development, and none has been approved for sale. We have devoted substantially all of our efforts to research and development, including our preclinical and nonclinical development activities, and expect that it will be many years, if ever, before we have a product candidate ready for commercialization. To date, we have derived all of our funding from our collaboration with our former parent company, Asuragen, Inc., or Asuragen, private placements of preferred stock and government grants for research and development. Our net losses for the years ended December 31, 2011, 2012 and 2013 were $2.9 million, $3.7 million and $6.4 million, respectively. Since inception, we have incurred net losses leading to an accumulated deficit of approximately $30.8 million as of December 31, 2013.

        We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future as we continue our Phase 1 clinical trial of our lead product candidate, MRX34, pursue development of MRX34 for additional indications, conduct research and development of other product candidates and pursue marketing approval for MRX34 in the future. If we obtain marketing approval of MRX34, we also expect to incur significant sales, marketing, distribution and manufacturing expenses. Even after obtaining such marketing approval, our products may never gain sufficient market acceptance and adequate market share. If we fail to succeed in any of these activities or our product candidates fail to demonstrate safety and efficacy in clinical trials, do not gain regulatory approval or do not achieve significant market acceptance following regulatory approval and commercialization, we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders' equity and working capital. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. Because of the numerous risks and uncertainties associated with developing biopharmaceutical products, we are unable to predict the extent of any future losses or whether we will become profitable.

Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

        We are a clinical stage biopharmaceutical company that was founded in 2007 and did not exist as a standalone company until 2009. Our operations to date have been limited to organizing and staffing

10


Table of Contents

our company, business planning, raising capital, acquiring and developing our technology, identifying and evaluating potential product candidates and delivery technologies, undertaking nonclinical studies, filing an Investigational New Drug, or IND, application with the U.S. Food and Drug Administration, or FDA, and conducting the Phase 1 clinical trial of our most advanced product candidate, MRX34. Except for MRX34, all of our product candidates are still in preclinical development. We have not yet demonstrated our ability to initiate clinical trials for product candidates other than MRX34, or successfully complete any clinical trials, including large-scale, pivotal clinical trials, obtain marketing approvals, manufacture a commercial scale medicine, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes several years to develop one new product candidate from the time it is discovered to when it is available for treating patients. Consequently, any predictions about our future success or viability, or any evaluation of our business or prospects, may not be as accurate as they could be if we had a longer operating history. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. We will need to transition from a company with a research focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

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

        Developing biopharmaceutical products, including conducting preclinical and nonclinical studies and clinical trials, is an expensive and highly uncertain process that takes years to complete. Our expenses will increase substantially as we continue our Phase 1 clinical trial of our lead product candidate, MRX34, pursue development of MRX34 for additional indications, and conduct research and development of our other product candidates. Additional clinical trials, including one or more late-stage pivotal trials, will be required to obtain potential marketing approval for MRX34, and the costs of any future trials may be more expensive and time consuming than our current trial. If we obtain marketing approval of MRX34, we also expect to incur significant sales, marketing, distribution and outsourced manufacturing expenses.

        As of December 31, 2013, we had working capital of $22.3 million and cash and cash equivalents of $23.2 million. Based on our current operating plan, we believe that our available cash and the proceeds from this offering are sufficient to fund our anticipated levels of operation for at least the next 12 months. Our future capital requirements for the period for which we expect our existing resources to support our operations may vary significantly from what we expect. For example, our expenses could increase beyond expectations if we are required by the FDA or comparable foreign regulatory agencies to perform studies and trials in addition to those that we currently anticipate. Our funds following this offering will not be sufficient to obtain marketing approval for MRX34. As a result, we will be required to obtain additional financing in the future, which we may obtain through public or private equity offerings, debt financings, a credit facility, government grants and contracts and/or strategic collaborations. If we are required to secure additional capital, such additional fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize future product candidates. Additional financing may not be available to us when we need it or it may not be available to us on favorable terms, if at all. If we are unable to obtain adequate financing or form favorable collaborations, when needed, we may have to delay, reduce the scope of or eliminate one or more of our clinical trials, research and development programs or our commercialization efforts, including with respect to MRX34.

        Additionally, our future financing requirements will depend on many factors, some of which are beyond our control, including:

11


Table of Contents

        Future capital requirements will also depend on the extent to which we acquire or invest in additional complementary businesses, products and technologies. We currently have no understandings, commitments or agreements relating to any of these types of transactions.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through public or private equity offerings, debt financings, credit facilities, government grants and contracts and/or strategic collaborations.

        To raise capital, we may from time to time issue additional shares of common stock at a discount from the then-current trading price of our common stock. As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock. Whether or not we issue additional shares of common stock at a discount, any issuance of common stock will, and any issuance of other equity securities, securities convertible into equity securities or options, warrants or other rights to purchase common stock may, result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline. New investors could also gain rights, preferences and privileges senior to those of holders of our common stock, which could cause the price of our common stock to decline. Debt securities may also contain covenants that restrict our operational flexibility, impose liens or other restrictions on our assets, restrict our ability to incur additional debt, impose limitations on our ability to acquire, sell or license intellectual property or impose other operating restrictions that could adversely affect our business and could also cause the price of our common stock to decline.

        Other than our collaboration with our former parent company, Asuragen, and private placements of preferred stock, the only external source of funds to date has been state and federal government grants for research and development. The grants have been, and any future government grants and contracts we may receive may be, subject to the risks and contingencies set forth below under the risk factor entitled "Reliance on government funding for our programs may add uncertainty to our research and commercialization efforts with respect to those programs that are tied to such funding and may impose requirements that limit our ability to take certain actions, increase the costs of commercialization and production of product candidates developed under those programs and subject

12


Table of Contents

us to potential financial penalties, which could materially and adversely affect our business, financial condition and results of operations." Although we apply for government and private contracts and grants, we cannot assure you that we will be successful in obtaining additional grants or contracts in the future for MRX34 or any other product candidates or programs.


Risks Related to Product Development and Commercialization

The approach we are taking to discover and develop novel therapeutics using microRNA is unproven and may never lead to marketable products.

        The scientific discoveries that form the basis for our efforts to discover and develop new drugs are relatively recent. To date, neither we nor any other company has received regulatory approval to market therapeutics utilizing microRNA. The scientific evidence to support the feasibility of developing drugs based on these discoveries is both preliminary and limited. Successful development of microRNA-based products by us will require solving a number of issues, including providing suitable methods of stabilizing the microRNA material and delivering it into target cells in the human body. In addition, any compounds that we develop may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory and nonclinical studies, and they may interact with human biological systems in unforeseen, ineffective or even harmful ways. If we do not successfully develop and commercialize product candidates based upon our technological approach, we may not become profitable and the value of our common stock may decline.

        Further, the FDA has relatively limited experience with microRNA-based therapeutics. No regulatory authority has granted approval to any person or entity, including us, to market and commercialize microRNA therapeutics, which may increase the complexity, uncertainty and length of the regulatory approval process for our product candidates. If our microRNA technologies prove to be ineffective, unsafe or commercially unviable, our entire pipeline would have little, if any, value, which would have a material adverse effect on our business, financial condition, results of operations and prospects.

        Further, our exclusive focus on microRNA technology for developing products as opposed to multiple, more proven technologies for drug development increases the risk associated with our business. If we are not successful in developing a product candidate using microRNA technology, we may not be able to identify and successfully implement an alternative product development strategy.

We are heavily dependent on the success of our lead product candidate, MRX34, which is in Phase 1 clinical development.

        We currently have no products approved for sale and have invested a significant portion of our efforts and financial resources in the development of MRX34. The clinical development of MRX34 began in April 2013 with a multi-center Phase 1 clinical trial that is currently enrolling patients with unresectable primary liver cancer or solid cancers with liver involvement. We have also expanded the Phase 1 clinical trial with a separate cohort of patients with hematological malignancies, which may include patients with non-Hodgkin's lymphoma, acute myelogenous leukemia, acute and chronic lymphocytic leukemia, chronic myelogenous leukemia in accelerated or blast phase, multiple myeloma and myelodysplastic syndrome. The primary objectives of the Phase 1 clinical trial, including the hematological malignancy cohort, are to establish the maximum tolerated dose and an appropriate dose for Phase 2 clinical trials. The secondary objectives of the Phase 1 clinical trial are to assess the safety, tolerability and pharmacokinetic profile of MRX34 after intravenous dosing as well as to assess any biological and clinical activity.

13


Table of Contents

        Our prospects are substantially dependent on our ability to develop and commercialize MRX34. Our ability to timely develop and effectively commercialize MRX34 will depend on several factors, including the following:

        If we do not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays or an inability to commercialize MRX34, which would materially and adversely affect our business, financial condition and results of operations.

        We have not previously submitted a new drug application, or NDA, to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if we successfully obtain regulatory approvals to market one or more of our product candidates, our revenues will be dependent upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved. Successful development of MRX34 or other product candidates for additional indications will be subject to these same risks.

If we are not successful in discovering, developing and commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

        Although a substantial amount of our efforts will focus on the Phase 1 clinical trial and potential approval of our lead product candidate, MRX34, a key element of our strategy is to discover, develop and potentially commercialize a portfolio of product candidates to treat cancer and other indications.

14


Table of Contents

We are seeking to do so through our internal research programs and are exploring, and intend to explore in the future, strategic partnerships for the development of new products. Other than MRX34, all of our other potential product candidates remain in the discovery and preclinical study stages. Research programs to identify product candidates require substantial technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following:

        If we are unsuccessful in identifying and developing additional product candidates, our potential for growth may be impaired.

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

        Because we have limited financial and human resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or more profitable market opportunities. Our spending on current and future research and development programs and future product candidates for specific indications may not yield any commercially viable products. We may also enter into strategic alliance agreements to develop and commercialize certain of our programs and potential product candidates in indications with potentially large commercial markets. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic alliance, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.

The regulatory approval process is lengthy, expensive and uncertain, and we may be unable to obtain regulatory approval for our drug products under applicable regulatory requirements. The denial or delay of any such approval would delay commercialization of our drug products and adversely impact our ability to generate revenue, our business and our results of operations.

        The development, research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of drug products are subject to extensive and evolving regulation by federal, state and local governmental authorities in the United States, principally the FDA, and by foreign regulatory authorities, which regulations differ from country to country. Neither we nor any future

15


Table of Contents

collaborator is permitted to market MRX34 or any other product candidate in the United States until we receive regulatory approval of an NDA from the FDA.

        Obtaining regulatory approval of an NDA can be a lengthy, expensive and uncertain process. Prior to obtaining approval to commercialize a drug candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or other foreign regulatory agencies, that such drug candidates are safe and effective for their intended uses. The number of nonclinical studies and clinical trials that will be required for FDA approval varies depending on the drug candidate, the disease or condition that the drug candidate is designed to address, and the regulations applicable to any particular drug candidate. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for our drug candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. Administering drug candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials and result in the FDA or other regulatory authorities denying approval of a drug candidate for any or all indications. The FDA may also require us to conduct additional studies or trials for our product candidates either prior to or post-approval, such as additional drug-drug interaction studies or safety or efficacy studies or trials, or it may object to elements of our clinical development program such as the number of subjects in our current clinical trials from the United States.

        We expect the unresectable primary liver cancer and solid tumors with liver involvement portion of our Phase 1 clinical trial for our lead product candidate, MRX34, to be completed by the end of the first quarter of 2015 and the hematological malignancy cohort to be completed in mid-2015, and our business currently depends substantially on the successful development, regulatory approval and commercialization of MRX34. We currently have no drug products approved for sale, and we may never obtain regulatory approval to commercialize MRX34.

        The FDA or any foreign regulatory bodies can delay, limit or deny approval of MRX34 or require us to conduct additional nonclinical or clinical testing or abandon a program for many reasons, including:

16


Table of Contents

        Of the large number of drugs in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are commercialized. The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market MRX34, which would significantly harm our business, financial condition, results of operations and prospects.

        Even if we eventually complete clinical testing and receive approval of an NDA or foreign marketing application for MRX34, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials, including Phase 4 clinical trials, and/or the implementation of a Risk Evaluation and Mitigation Strategy, or REMS, which may be required to ensure safe use of the drug after approval. The FDA or the applicable foreign regulatory agency also may approve MRX34 for a more limited indication or a narrower patient population than we originally requested, and the FDA or applicable foreign regulatory agency may not approve the labeling that we believe is necessary or desirable for the successful commercialization of MRX34. Any delay in obtaining, or inability to obtain, applicable regulatory approval would delay or prevent commercialization of MRX34 and would materially adversely impact our business and prospects.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

        Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Furthermore, we rely on contract research organizations, or CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements with our CROs governing their committed activities, and the ability to audit their performance, we have limited influence over their actual performance. Failure or delay can occur at any time during the clinical trial process. Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of clinical trials by other parties may not be indicative of the results in trials we may conduct. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in clinical trials, even after promising results in earlier nonclinical or clinical studies. These setbacks have been caused by, among other things, nonclinical findings made while clinical studies were underway and safety or efficacy observations made in clinical studies, including previously unreported adverse events. The results of preclinical, nonclinical and early clinical studies of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical and initial clinical trials. Notwithstanding any potential promising results in earlier studies, we cannot be certain that we will not face similar setbacks. Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval for our product candidates.

        Although we have an ongoing Phase 1 clinical trial for MRX34 and expect to complete the unresectable primary liver cancer and solid tumors with liver involvement portion of the trial by the end of the first quarter of 2015 and the hematological malignancy cohort in mid-2015, we may experience delays in our ongoing trial and we cannot be certain that the trial or any other future clinical trials for MRX34 or other product candidates will begin on time, need to be redesigned, enroll

17


Table of Contents

an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed or aborted for a variety of reasons, including delay or failure related to:

        Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians' and patients' perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating.

        We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

        Further, conducting clinical trials in foreign countries, as we plan to do for MRX34, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

        If we experience delays in the completion, or termination, of any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed or not realized at all. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or

18


Table of Contents

completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

If we are required to suspend or discontinue clinical trials due to side effects or other safety risks, or if we are required to conduct studies on the long-term effects associated with the use of MRX34 or other product candidates, our ability to commercialize our product candidates could be adversely affected.

        Our clinical trials, including our Phase 1 clinical trial for MRX34, or other trials our strategic partners or CROs may conduct, may be suspended or terminated at any time for a number of safety-related reasons. For example, we may voluntarily suspend or terminate our clinical trials if at any time we believe that our product candidates present an unacceptable safety risk to the clinical trial patients. In addition, IRBs or regulatory agencies may order the temporary discontinuation or termination of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements, including if they present an unacceptable safety risk to patients. Administering any product candidate to humans may produce undesirable side effects. The existence of undesirable side effects resulting from our product candidates could cause us or regulatory authorities, such as the FDA, to interrupt, delay or halt clinical trials of our product candidates and could result in the FDA or other regulatory agencies denying further development or approval of our product candidates for any or all indications.

        We have not conducted complete studies on the long-term effects associated with the use of MRX34 or any other product candidate. Studies of these long-term effects may be required for regulatory approval and such requirement would delay our introduction of MRX34 or other product candidates into the market. These studies could also be required at any time after regulatory approval of a product candidate. Absence of long-term data may also limit the approved uses of a product, if any, to short-term use. MRX34 or any other product candidate may prove to be unsafe for human use, which would materially harm our business.

        Certain oligonucleotide therapeutics and liposomal drug delivery products have shown injection site reactions, infusion reactions and pro-inflammatory effects and may also lead to impairment of organ function, including kidney or liver function. There is a risk that our current and future product candidates may induce similar adverse events, or require pre- or co-administration of other drugs to minimize such effects, which pre- or co-administration might adversely affect the benefits of our product or add additional side effects to the treatment regimens. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all indications. Drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may significantly harm our business, financial condition, results of operations and prospects significantly.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

        As with many pharmaceutical products and product candidates under development, MRX34 or our other potential product candidates may produce undesirable side effects or adverse reactions or events. In the event we or others identify undesirable side effects caused by one of our product candidates, any of the following adverse events could occur:

19


Table of Contents

        If MRX34 or our other potential product candidates receives marketing approval, and we or others later identify undeisrable side effects caused by such products, a number of potentially significant negative consequences could result, including:

        Any of the foregoing events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and result in the loss of significant revenues to us, which would materially and adversely affect our results of operations and business.

Our clinical drug development program may not uncover all possible adverse events that patients who take MRX34 or other product candidates may experience. The number of subjects exposed to MRX34 or other product candidates and the average exposure time in the clinical development program may be inadequate to detect rare adverse events, or chance findings, that may only be detected once the product is administered to more patients and for greater periods of time.

        Clinical trials by their nature utilize a sample of the potential patient population. However, with a limited number of subjects and limited duration of exposure, we cannot be fully assured that rare and severe side effects of MRX34 or other product candidates will be uncovered. Such rare and severe side effects may only be uncovered with a significantly larger number of patients exposed to the drug. If such safety problems occur or are identified after MRX34 or another product candidate reaches the market, the FDA may require that we amend the labeling of the product or recall the product, or may even withdraw approval for the product.

20


Table of Contents

We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use or misuse of our product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims. If we are unable to obtain adequate insurance or are required to pay for liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage, a material liability claim could adversely affect our financial condition.

        The use or misuse of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. Certain oligonucleotide therapeutics and liposomal drug delivery products have shown injection site reactions, infusion reactions, and pro-inflammatory effects, and may also lead to organ dysfunction, including impairment of kidney or liver function. There is a risk that our future product candidates may induce similar adverse events. Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and have both known and unknown significant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

        Although we have product liability insurance that we feel is appropriate for our stage of development, which covers our clinical trials in the United States, for up to $1 million per occurrence, up to an aggregate limit of $5 million, our insurance may be insufficient to reimburse us for any expenses or losses we may suffer, and we will be required to increase our product liability insurance coverage for our advanced clinical trials that we plan to initiate. We have obtained an additional product liability insurance policy for our planned clinical trials in the Republic of Korea. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products. We do not know whether we will be able to continue to obtain product liability coverage and obtain expanded coverage if we require it, in sufficient amounts to protect us against losses due to liability, on acceptable terms, or at all. We may not have sufficient resources to pay for any liabilities resulting from a claim excluded from, or beyond the limits of, our insurance coverage. Where we have provided indemnities in favor of third parties under our agreements with them, there is also a risk that these third parties could incur liability and bring a claim under such indemnities. An individual may bring a product liability claim against us alleging that one of our product candidates or products causes, or is claimed to have caused, an injury or is found to be unsuitable for consumer use. 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. Any product liability claim brought against us, with or without merit, could result in:

21


Table of Contents

        Product liability claims may subject us to the foregoing and other risks, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Currently, our product candidates are expensive to produce and are expensive relative to presently-marketed therapeutics targeting similar indications.

        To date, our proposed product candidates have only been manufactured at a scale that is adequate to supply our research activities and early-stage clinical trials. As with many companies conducting Phase 1 clinical trials or preclinical studies on product candidates, the current cost of each treatment is expensive relative to presently-marketed therapeutics targeting similar indications. We cannot assure you that we will be able to scale the manufacturing of our products during future clinical trials or commercialization in order to achieve a treatment price that would allow for commercial acceptance. In the event our product candidates cannot be manufactured in sufficient commercial quantities at a competitive price, our future prospects could be significantly impacted and our financial prospects would be materially harmed.

Even if a product candidate does obtain regulatory approval, that product candidate may never achieve market acceptance or commercial success.

        Even if we obtain FDA or other regulatory approvals, and are able to launch MRX34 or any other product candidate commercially, the product candidate may not achieve market acceptance among physicians, patients, patient advocacy groups and third-party payors and, ultimately, may not be commercially successful. Market acceptance of any product candidate for which we receive approval depends on a number of factors, including:

22


Table of Contents

        Any failure by MRX34 or any other product candidate that obtains regulatory approval to achieve market acceptance or commercial success would adversely affect our financial results.


Risks Related to Our Reliance on Third Parties

We rely on third parties to conduct some of our nonclinical and all of our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our product candidates.

        Although we conduct certain nonclinical studies, we currently do not have the ability to independently conduct nonclinical studies that comply with the regulatory requirements known as good laboratory practice, or GLP, requirements. We also do not currently have the ability to independently conduct any clinical trials. The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as current good clinical practice, or GCP, requirements for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct GLP-compliant nonclinical studies and GCP-compliant clinical trials on our product candidates properly and on time. While we will have agreements governing their activities, we control only certain aspects of their activities and have limited influence over their actual performance. The third parties with whom we contract for execution of our GLP nonclinical studies and our GCP clinical trials play a significant role in the conduct of these studies and trials and the subsequent collection and analysis of data. These third parties are not our employees and, except for restrictions imposed by our contracts with such third parties, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our GLP-compliant preclinical and nonclinical studies and GCP-compliant clinical trials, we remain responsible for ensuring that each of our GLP preclinical and nonclinical studies and GCP clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

        Many of the third parties with whom we contract may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If the third parties conducting our GLP preclinical or nonclinical studies or our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical trial protocols or to GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and our nonclinical studies or clinical trials may need to be extended, delayed, terminated or repeated. As a result we may not be able to obtain regulatory

23


Table of Contents

approval in a timely fashion, or at all, for the applicable product candidate, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate revenues could be delayed.

We rely on single source third-party contract manufacturing organizations to manufacture and supply MRX34 and other product candidates for us. If our supplier or manufacturer fails to perform adequately or fulfill our needs, or if these agreements are terminated by the third parties, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers. We may also face delays in the development and commercialization of our product candidates.

        We do not currently independently conduct manufacturing activities for our product candidates, including MRX34. We rely upon single source third-party contract manufacturing organizations to manufacture and supply our product candidates. We currently have a relationship with only one supplier, NITTO DENKO Avecia, or Avecia, located in Massachusetts, for clinical supply of the drug substance for our miR-34 mimic, and one supplier, Polymun Scientific Immunbiologische Forschung GmbH, or Polymun, located in Austria, as the exclusive manufacturer of our MRX34 drug product. Further, we rely on Avecia to manage the supply chain for the raw materials used in the process.

        Any manufacturers of the drug substance and drug product for our product candidates must comply with current good manufacturing practice, or cGMP, requirements enforced by the FDA through its facilities inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our component materials may be unable to comply with these cGMP requirements and with other FDA, state and foreign regulatory requirements. We do not directly control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or foreign regulatory agencies, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. The FDA or similar foreign regulatory agencies at any time may also implement new standards, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of products. We have little control over a manufacturer's compliance with these regulations and standards. However, a failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturer's failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully commercialize our products, and we may be held liable for any injuries sustained as a result. In addition, if the FDA or a comparable foreign regulatory agency does not approve our contract manufacturer's facilities for the manufacture of our product candidates or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would negatively impact our ability to develop, obtain regulatory approval for, or market our product candidates, if approved. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization of our product candidates or entail higher costs or impair our reputation.

        The manufacture of pharmaceutical products in compliance with cGMP regulations requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of the product candidate and quality assurance testing, or shortages of qualified personnel. If our manufacturers were to encounter any of these difficulties or otherwise fail to comply with their

24


Table of Contents

obligations to us or under applicable regulations, our ability to provide study materials in our nonclinical studies and clinical trials would be jeopardized. Any delay or interruption in the supply of nonclinical study or clinical trial materials could delay the completion of our nonclinical studies and clinical trials, increase the costs associated with maintaining our nonclinical study and clinical trial programs and, depending upon the period of delay, require us to conduct nonclinical studies, commence new trials at significant additional expense or terminate the studies and trials completely.

        We currently believe that our third party suppliers have the necessary expertise to produce our MRX34 drug substance and drug product in sufficient quantity and of acceptable quality to support our development program through at least Phase 3 clinical trials and possibly through commercialization of MRX34. However, our current agreements with our suppliers do not provide for the entire supply of the drug necessary for additional clinical trials or for full-scale commercialization. In the event that we and our suppliers cannot agree to the terms and conditions for them to provide some or all of our clinical and commercial drug supply needs, or if our suppliers terminate their agreements with us in response to a breach by us or any other reason permitted under our agreements, we would not be able to manufacture the drug on a commercial scale until a qualified alternative supplier is identified, which could also delay the development of, and impair our ability to commercialize, our product candidates. Any supplier would be required to obtain regulatory approval of their manufacturing facilities, processes and quality systems before engaging in the commercial manufacture of a pharmaceutical product. Due to the complexity of the processes used to manufacture pharmaceutical products and product candidates, any potential third-party manufacturer may be unable to continue to pass or initially pass federal, state or international regulatory inspections in a cost-effective manner.

        Although we believe that appropriate alternative sources of supply exist for each of our current product candidates, the number of third-party suppliers with the necessary manufacturing and regulatory expertise and facilities is limited, and it could be expensive and take a significant amount of time to arrange for alternative suppliers, which could have a material adverse effect on our business. New suppliers of any drug would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing such ingredients. Obtaining the necessary FDA approvals or other qualifications under applicable regulatory requirements and ensuring non-infringement of third-party intellectual property rights could result in a significant interruption of supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.

        The failure of third-party manufacturers or suppliers to perform adequately or the termination of our arrangements with any of them may negatively and adversely affect our business.

        Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

25


Table of Contents

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

We may not be able to develop or identify a technology that can effectively deliver our miR-34 mimic or any other of our microRNA-based product candidates to the intended diseased cells or tissues, and any failure in such delivery technology could adversely affect and delay the development of MRX34 and our other product candidates.

        In connection with our Phase 1 clinical trial of MRX34, we have used a Smarticles® liposomal formulation to facilitate delivery to tumors. Smarticles has demonstrated successful tumor delivery of our miR-34 mimic in multiple mouse models of liver cancer, but we cannot be certain that the Smarticles technology will be capable of delivering adequate levels of our miR-34 mimic to liver tumors in patients to produce a therapeutic response. While we believe Smarticles could be used to deliver mimics in additional indications, future clinical testing could reveal that the efficacy of Smarticles is limited to delivery to liver cancer cells. While we are continuing to evaluate the use of Smarticles in other indications, and additional delivery technologies that might enable us to target other cells with our product candidates, we cannot be certain whether we will be successful in developing such alternative delivery mechanisms. Our failure to effectively deliver any of our product candidates to the intended diseased cells or tissues could adversely affect and delay the development of our product candidates.

We currently have no sales and marketing staff or distribution organization. If we are unable to develop a sales and marketing and distribution capability on our own or through third parties, we will not be successful in commercializing our future products.

        We currently have no sales, marketing or distribution capabilities or experience. To achieve commercial success for any approved product candidate, we must either develop a sales, marketing and distribution organization or outsource these functions to third parties. If we rely on third parties for marketing and distributing our approved products, any revenue we receive will depend upon the efforts of third parties, which may not be successful and are only partially within our control and our product revenue may be lower than if we directly marketed or sold our products. If we are unable to enter into arrangements with third parties to sell, market and distribute product candidates for which we have received regulatory approval on acceptable terms or at all, we will need to market these products ourselves. This is likely to be expensive and logistically difficult, as it would require us to build our own sales, marketing and distribution capacity. We have no experience in this area, and if such efforts were necessary, we may not be able to successfully commercialize our future products. If we are not successful in commercializing our future products, either on our own or through third parties, any future product revenue will be materially and adversely affected.

We may attempt to form collaborations in the future with respect to our product candidates, but we may not be able to do so, which may cause us to alter our development and commercialization plans.

        We may attempt to form strategic alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties with respect to our programs that we believe will complement or augment our existing business. For example, we may attempt to find a strategic partner for the

26


Table of Contents

development and/or commercialization of MRX34. We may face significant competition in seeking appropriate strategic partners, and the negotiation process to secure appropriate terms is time-consuming and complex. We may not be successful in our efforts to establish such a strategic partnership for any product candidates and programs on terms that are acceptable to us, or at all. This may be because our product candidates and programs may be deemed to be at too early of a stage of development for collaborative effort, our research and development pipeline may be viewed as insufficient, the competitive or intellectual property landscape may be viewed as too intense or risky, and/or third parties may not view our product candidates and programs as having sufficient potential for commercialization, including the likelihood of an adequate safety and efficacy profile.

        Any delays in identifying suitable collaborators and entering into agreements to develop and/or commercialize our product candidates could delay the development or commercialization of our product candidates, which may reduce their competitiveness even if they reach the market. Absent a collaboration partner, we would need to undertake development and/or commercialization activities at our own expense. If we elect to fund and undertake development and/or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we are unable to do so, we may not be able to develop our product candidates or bring them to market and our business may be materially and adversely affected.

We may be unable to realize the potential benefits of any collaboration.

        Even if we are successful in entering into a collaboration with respect to the development and/or commercialization of one or more product candidates, there is no guarantee that the collaboration will be successful. Collaborations may pose a number of risks, including:

27


Table of Contents

        As a result, a collaboration may not result in the successful development or commercialization of our product candidates.

Reliance on government funding for our programs may add uncertainty to our research and commercialization efforts with respect to those programs that are tied to such funding and may impose requirements that limit our ability to take certain actions, increase the costs of commercialization and production of product candidates developed under those programs and subject us to potential financial penalties, which could materially and adversely affect our business, financial condition and results of operations.

        During the course of our development of our product candidates, we have been funded in significant part through federal and state grants, including but not limited to the substantial funding we have received from the Texas Emerging Technology Fund and the Cancer Prevention & Research Institute of Texas, or CPRIT. In addition to the funding we have received to date, we have applied and intend to continue to apply for federal and state grants to receive additional funding in the future. Contracts and grants funded by the U.S. government, state governments and their related agencies, including our contracts with the State of Texas pertaining to funds we have already received, include provisions that reflect the government's substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to:

28


Table of Contents

        In addition to those powers set forth above, the government funding we may receive could also impose requirements to make payments based upon sales of our products in the future. For example, under the terms of our award from CPRIT, we are required to pay CPRIT a portion of our revenues from sales of certain products by us, or received from our licensees or sublicensees, at a percentage in the low single digits until the aggregate amount of such payments equals a specified multiple of the grant amount, and thereafter at a rate of less than one percent, subject to our right, under certain circumstances, to make a one-off payment in a specified amount to CPRIT to buy out such payment obligations. See "Business—Strategic Partnerships and Collaborations" for a description of the CPRIT agreement, which includes a description of our obligations to make royalty payments.

        We may not have the right to prohibit the U.S. government from using certain technologies developed by us, and we may not be able to prohibit third-party companies, including our competitors, from using those technologies in providing products and services to the U.S. government. The U.S. government generally takes the position that it has the right to royalty-free use of technologies that are developed under U.S. government contracts. These and other provisions of government grants may also apply to intellectual property we license now or in the future.

        In addition, government contracts and grants normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions. These requirements include, for example:

        If we fail to maintain compliance with any such requirements that may apply to us now or in the future, we may be subject to potential liability and to termination of our contracts.

Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we do business.

        Our third-party manufacturers' activities and our own activities involve the controlled storage, use and disposal of hazardous materials, including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous compounds. We and our manufacturers are subject to federal, state, local and foreign laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these hazardous materials. We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials. Although we believe that our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials. In the event of an accident, state or federal or other applicable authorities may curtail our use of these materials and/or interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages and fines. If such unexpected costs are substantial, this could significantly harm our financial condition and results of operations.

29


Table of Contents


Risks Related to Administrative, Organizational and Commercial Operations and Growth

We will need to increase the size of our organization, and we may experience difficulties in managing growth.

        As of December 31, 2013, we had 18 employees. We may need to expand our managerial, operational, financial and other resources in order to manage our operations and clinical trials, continue our development activities and commercialize MRX34 or other product candidates. Our management and personnel, systems and facilities currently in place are likely not adequate to support this future growth. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure and give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. Our need to effectively execute our business strategy requires that we:

        If we are unable to expand our managerial, operational, financial and other resources to the extent required to manage our development and commercialization activities, our business will be materially adversely affected.

We face substantial competition and our competitors may discover, develop or commercialize products faster or more successfully than us.

        The development and commercialization of new drug products is highly competitive. We face competition from major pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies, universities and other research institutions worldwide with respect to MRX34 and other product candidates that we may seek to develop or commercialize in the future. Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective or less costly than MRX34 or any other product candidates that we are currently developing or that we may develop, which could render our product candidates obsolete and noncompetitive.

        There are a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of the most prevalent form of liver cancer, hepatocellular carcinoma, or HCC. Companies working in this area include Alnylam Pharmaceuticals, Inc., Dicerna Pharmaceuticals, Inc., Isis Pharmaceuticals, Inc., Quark Pharmaceuticals, Inc., Regulus Therapeutics, Inc., Rosetta Genomics Ltd., Silence Therapeutics plc and Tekmira Pharmaceuticals Corporation, or Tekmira, as well as a number of the multinational pharmaceutical companies. In addition, there are a variety of available therapies marketed for the treatment of liver cancer with which we would expect would compete. Many of the available therapies are well-established and widely accepted by physicians, patients and third-party payors. For example, Nexavar®, marketed by Amgen Inc. and Bayer AG, is currently in use for the treatment of HCC. In addition, Tekmira has announced that it expects to initiate a multicenter, single-arm, open-label dose

30


Table of Contents

escalation Phase 1/2 study for TKM-PLK1 in HCC in the first half of 2014. There are also a number of pharmaceuticals and biologics that are marketed or in clinical development for the treatment of solid tumors. The most common treatments for solid tumors are various chemotherapeutic agents, radiation therapy and certain targeted therapies, including monoclonal antibodies such as Avastin®, Erbitux®, Herceptin® and Vectibix®. Small molecules, such as Nexavar, Sutent® and Tarceva®, are also indicated for the treatment of solid tumors. In addition, we believe that Kadmon Corporation, LLC is evaluating salirasib (KD032) in clinical trials for the treatment of KRAS-specific non-small cell lung cancer, pancreatic cancer and other solid tumors.

        There are also a number of pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of various hematological malignancies. Companies working in this area include Celgene Corporation, Gilead Sciences, Inc., Infinity Pharmaceuticals, Inc., Millennium Pharmaceuticals, Inc., Pharmacylics Inc. and ProNAi Therapeutics, Inc., as well as a number of the multinational pharmaceutical companies. In addition, there are a variety of available therapies marketed for the treatment of various hematological malignancies with which we would expect to compete. Many of the available therapies are well-established and widely accepted by physicians, patients and third-party payors. For example, Rituxan®, marketed by F. Hoffmann-La Roche Ltd. and Genentech Inc., is currently in use for the treatment of chronic lymphocytic leukemia and non-Hodgkin's lymphoma, or NHL. In addition, ProNAi Therapeutics, Inc. has an ongoing Phase 2 clinical trial in patients with NHL on their lead therapeutic product, PNT2258. There are also a number of pharmaceuticals and biologics that are marketed or in clinical development for the treatment of various hematologic malignancies. The most common treatments for various hematological malignancies are chemotherapeutic agents, radiation therapy and certain targeted therapies, including monoclonal antibodies such as Gazyva®, Arzerra® and Campath®. Small molecules, such as Imbruvica®, Vizada®, Treanda®, Velcade® and Revlimid® are also indicated for the treatment of various hematological malignancies.

        In addition to the competition we face from alternative therapies for the diseases we intend to target with our product candidates, we are also aware of several companies that are also working specifically to develop microRNA therapeutics, including InteRNA Technologies B.V., Microlin Bio, Inc., miRagen Therapeutics, Inc., MiReven Pty Ltd, Regulus Therapeutics, Inc. and Santaris Pharma A/S. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Insurers and other third-party payors may also encourage the use of generic products. For example, if MRX34 is approved, it may be priced at a significant premium over other competitive products. This may make it difficult for MRX34 or any other future products to compete with these products.

        If our competitors obtain marketing approval from the FDA or comparable foreign regulatory authorities for their product candidates more rapidly than us, it could result in our competitors establishing a strong market position before we are able to enter the market.

        Many of our competitors have materially greater name recognition and financial, manufacturing, marketing, research and drug development resources than we do. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Large pharmaceutical companies in particular have extensive expertise in preclinical, nonclinical and clinical testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors. Failure of MRX34 or other product candidates to effectively compete against established treatment options or in the future with new products currently in development would harm our business, financial condition, results of operations and prospects.

31


Table of Contents

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

        From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases, and out-licensing or in-licensing of products, product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:

        Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks, could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are highly dependent on the services of our President and Chief Executive Officer, Paul Lammers, M.D., M.Sc., and our ability to attract and retain qualified personnel.

        We may not be able to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. Our industry has experienced a high rate of turnover of management and scientific personnel in recent years. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategy.

        We are highly dependent on the principal members of our management and scientific staff. The loss of service of any of our management and key scientific staff could harm our business, particularly our President and Chief Executive Officer, Dr. Lammers. Due to our limited resources, we may not be able to effectively attract and recruit additional qualified personnel. If we are not able to retain our management, particularly our President and Chief Executive Officer, Dr. Lammers, and to attract, on acceptable terms, additional qualified personnel necessary for the continued development of our business, we may not be able to sustain our operations or grow. Although we have executed

32


Table of Contents

employment agreements with each member of our current executive management team, including Dr. Lammers, we may not be able to retain their services as expected.

        In addition, we have scientific and clinical advisors who assist us in formulating our product development and clinical strategies. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development of products that may compete with ours.

Our internal computer systems, or those of Asuragen, our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

        Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, including the confidential medical information of clinical trial participants, we could incur liability and the further development of our product candidates could be delayed.

Our employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

        We are exposed to the risk that employees, independent contractors, principal investigators, CROs, consultants and vendors may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA; (ii) manufacturing standards; (iii) federal and state healthcare fraud and abuse laws and regulations; or (iv) laws that require the true, complete and accurate information or data. Specifically, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure 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 civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, 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.

33


Table of Contents

Requirements associated with being a public company will increase our costs significantly, as well as divert significant company resources and management attention.

        Prior to this offering, we have not been subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or the other rules and regulations of the Securities and Exchange Commission, or SEC, or any securities exchange relating to public companies. We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will be required in order to adequately prepare for being a public company could be material, particularly after we cease to be an "emerging growth company." Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis.

        However, for as long as we remain an "emerging growth company" as defined in the Jumpstart our Business Startups Act, or the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." Because the JOBS Act has only recently been enacted, it is not yet clear whether investors will accept the more limited disclosure requirements that we may be entitled to follow while we are an "emerging growth company." If they do not, we may end up electing to comply with disclosure requirements as if we were not an "emerging growth company," in which case we would incur the greater expenses associated with such disclosure requirements.

        We will remain an "emerging growth company" for up to five years after the completion of this offering, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have total annual gross revenues of $1 billion or more during any fiscal year before that time, we would cease to be an "emerging growth company" as of the end of that fiscal year, or if we issue more than $1 billion in non-convertible debt in a three-year period, we would cease to be an "emerging growth company" immediately.

        In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors' and officers' liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance, we may be subject to sanctions by regulatory authorities.

        Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and, beginning with our annual report for fiscal year 2015, provide a management report on the internal control over financial reporting. If we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We will be evaluating our

34


Table of Contents

internal controls systems to allow management to report on, and eventually allow our independent auditors to attest to, our internal controls. We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and eventual auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. The aforementioned auditor attestation requirements will not apply to us until we are not an "emerging growth company."

        To date, we have never conducted a review of our internal controls for the purpose of providing the reports required by these rules. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC or The NASDAQ Stock Market LLC, or NASDAQ. Any such action could adversely affect our financial results or investors' confidence in us and could cause our stock price to fall. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, we could be subject to sanctions or investigations by the SEC, NASDAQ or other regulatory authorities, which would entail expenditure of additional financial and management resources and could materially adversely affect our stock price. Inferior internal controls could also cause us to fail to meet our reporting obligations or cause investors to lose confidence in our reported financial information, which could have a negative effect on our stock price.

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

        We have incurred substantial losses during our history and do not expect to become profitable in 2014 and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an "ownership change," generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change net operating loss, or NOL, carryforwards and other pre-change tax attributes to offset its post-change income may be further limited. We believe that we have experienced at least one ownership change in the past. We may also experience additional ownership changes as a result of subsequent shifts in our stock ownership, including as a result of this offering. Accordingly, our ability to use our pre-change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. For these reasons, we may not be able to utilize any or a material portion of our NOL carryforwards and other tax attributes.

If we seek and obtain approval to commercialize MRX34 outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

        If MRX34 is approved for commercialization outside the United States, we will likely enter into agreements with third parties to market MRX34 outside the United States. We expect that we will be subject to additional risks related to entering into these international business relationships, including:

35


Table of Contents

We or the third parties upon whom we depend may be adversely affected by natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

        Natural disasters could severely disrupt our operations, and have a material adverse effect on our business, financial condition and results of operations. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business.

        Furthermore, certain integral parties in our supply chain are geographically concentrated and operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse events. Although we believe there to be sufficient alternative suppliers in other geographic locations, if such an event were to affect such existing parties in our supply chain, it could have a material adverse effect on our business.

36


Table of Contents


Risks Related to Intellectual Property

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

        We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications that we own or license may fail to result in issued patents in the United States or in foreign countries in which we pursue protection. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents have issued, or do successfully issue, from patent applications that we own or license, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide any competitive advantage or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened or insufficient, it could undermine our ability to commercialize our product candidates and could have a material adverse effect on our business, financial condition, results of operations and prospects.

        In particular, our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability. To protect our proprietary position, we file patent applications in the United States and in limited jurisdictions abroad related to our product candidates and compounds in development that may become our product candidates. The patent application and approval process is expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Currently, our patent portfolio relating to our proprietary microRNA mimics technology includes nine issued U.S. patents and over 100 U.S. and foreign pending applications that we either own or have in-licensed from third parties, primarily focused on various aspects of microRNA therapeutics, including compositions of various microRNA mimics having particular chemistries, and methods of use as microRNA related therapies. Within this portfolio, we are the sole owner of multiple U.S. and foreign patent applications that relate to various aspects of microRNA therapies, including chemically modified versions of miR-34 not currently used in MRX34 (U.S. Patent No. 8,586,727) and other proprietary compounds that are possible candidates for future product development as microRNA therapeutics. The expiration dates of the currently issued patents within our portfolio range from 2025 through to 2032. Our patents in-licensed from our former parent company, Asuragen, include three issued U.S. patents that cover uses related to certain tumor suppressor microRNAs, as well as a fourth issued patent (U.S. Patent No. 8,563,708) covering chemistries and structures used in therapeutic microRNA mimics, including MRX34. This latter patent is currently expected to expire no earlier than 2028. See "Business—Intellectual Property—Our Patent Portfolio" for a more detailed description of the patents we own or license covering our product candidates.

        If the patent applications we hold or have in-licensed with respect to our programs or product candidates fail to issue, if their breadth or strength of protection is threatened, if we abandon or allow owned or in-licensed patents or patent applications that we are responsible for prosecuting to lapse, or

37


Table of Contents

if our owned and in-licensed patents and patent applications fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future products. We have multiple pending patent applications relating to our product candidates. We cannot offer any assurances about which, if any, patents will issue, the breadth of the claims of any such patent, should it issue, or whether any issued patents will be found invalid and/or unenforceable, will be interpreted narrowly or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in our clinical trials or achieving regulatory approvals, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced. Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to our product candidates. Furthermore, an interference proceeding can be provoked by a third party or instituted by the U.S. Patent and Trademark Office, or USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Even if we obtain patents that cover the manufacture, use and/or sale of our product candidates and such patents are not successfully challenged by any third parties, once the patent life has expired for a product, we may be open to competition from generic medications.

We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses.

        Presently we have rights to certain intellectual property, through licenses from third parties and under patents that we own, related to a subset of the known microRNA targets. Because our programs may involve a range of microRNA targets and specific formulations of microRNA mimics directed to such targets, including targets and formulations that may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or otherwise gain the right to use these proprietary rights. We may be unable to acquire or in-license any necessary or desirable third-party intellectual property rights on reasonable terms, or at all. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive now or in the future. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, including rights related to our lead product candidate, our business, financial condition and prospects for growth could suffer.

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.

        In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary knowhow that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidates discovery and development processes that involve proprietary knowhow, information or technology that is not covered by patents, and to develop and maintain our competitive position. However, trade secrets can be difficult to protect. We seek to protect our proprietary data and

38


Table of Contents

processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and collaborators. Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary knowhow, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA's disclosure policies may change in the future, if at all.

        We also seek to preserve the integrity and confidentiality of our data, trade secrets and knowhow by maintaining physical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. Moreover, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position.

        Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent material disclosure of the intellectual property related to our technologies to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, financial condition and results of operations.

Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court or the USPTO.

        If we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering the manufacture, use or sale, or other aspects of one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Similarly, the outcome following administrative review of a patent that we own or license, such as via a reexamination or opposition proceeding before the USPTO or a foreign body, is unpredictable. If a third party were to prevail, we could lose at least part,

39


Table of Contents

and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our business.

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

        Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates and use our proprietary technology without infringing the intellectual property and other proprietary rights of third parties. Numerous third-party U.S. and non-U.S. issued patents and pending applications exist in the area of microRNA. If any patents or patent applications cover our product candidates or technologies, we may not be free to manufacture or market our product candidates as planned.

        There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our technology or products candidates, including interferences, oppositions and inter partes review proceedings before the USPTO and corresponding foreign patent offices. We also monitor patent prosecution activities and pending applications of competitors and potential competitors in our field in order to identify third party intellectual property rights that could pose a potential threat to our freedom to operate in the market with respect to our product candidates, once commercialized. We are currently pursuing and may in the future pursue available administrative proceedings in the U.S. and foreign patent offices to challenge third party patent rights that could adversely impact our ability to commercialize one or more of our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our current or future product candidates may be subject to claims of infringement of the patent rights of third parties, who may assert infringement claims against us based on existing or future intellectual property rights. Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates and third parties could allege that our technology infringes such claims. Further, because patent applications can take many years to issue, third parties may have currently pending patent applications which may later result in issued patents that our product candidates may infringe, or which such third parties claim are infringed by the use of our technologies. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical and biotechnology industries have produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our product candidates, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid, and we may not be able to do this. Proving that a patent is invalid is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

        If we are found to infringe a third party's intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable

40


Table of Contents

terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble damages and attorneys' fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

        Parties making claims against us for infringement of their intellectual property rights may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we could be required to redesign our infringing products or obtain a license from such third party to continue developing and commercializing our products and technology. However, we may not be able to obtain any required license on commercially reasonable terms, or at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. It may be impossible to redesign our products and technology, or it may require substantial time and monetary expenditure, which could force us to cease commercialization of one or more of our product candidates, or some of our business operations, which could materially harm our business. In addition, in any such proceeding, we may be required to pay substantial damages, including treble damages and attorneys' fees in the event we are found liable for willful infringement.

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

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

        Interference proceedings provoked by third parties or brought by the USPTO or any foreign patent authority may be necessary to determine the priority of inventions with respect to our patents or patent applications. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees.

        We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

41


Table of Contents

        Legal actions to enforce patent rights or other intellectual property rights that we own or license can be expensive and may involve the diversion of significant management time. In addition, these legal actions could be unsuccessful and could also result in the invalidation of our patents or a finding that they are unenforceable. Moreover, third parties may be able to successfully design around our patents using pre-existing technology, by developing new technology or by using similar technology that is outside the scope of our patents. We may or may not choose to pursue litigation or interferences against those that have infringed on our patents, or used them without authorization, due to the associated expense and time commitment of monitoring these activities. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could harm our results of operations.

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

        Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

        As part of ordinary course prosecution and maintenance activities, we determine whether to seek patent protection outside the United States and in which countries. This also applies to patents we have acquired or in-licensed from third parties. In some cases this means that we, or our predecessors in interest or licensors of patents within our portfolio, have sought patent protection in a limited number of countries for patents covering our product candidates, including for patents providing coverage for MRX34. Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and, even in jurisdictions where we have or are able to obtain issued patents, our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license. Moreover, patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries.

42


Table of Contents

The patent protection and patent prosecution for some of our product candidates may be dependent on third parties.

        While we normally seek to obtain the right to control the prosecution and maintenance of the patents relating to our product candidates, there may be times when the filing and prosecution activities for platform technology patents that relate to our product candidates are controlled by our licensors. For example, we do not have the right to prosecute and maintain the patent rights licensed to us relating to the Smarticles technology under our agreement with Marina Biotech, Inc., or Marina. Although we may retain the right to consult on and input into such prosecution and maintenance activities, our overall ability to influence filing and prosecution activities is limited. Further, while we have certain rights to take action to maintain or protect such intellectual property in the event that our licensors determine not to, we may not be aware of any such potential threats to the intellectual property or may be unsuccessful in protecting the intellectual property if we respond to any such challenges by third parties. If these licensors or any of our future licensors fail to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.

If we breach any of the agreements under which we license the use, development and commercialization rights to our product candidates or technology from third parties or, in certain cases, we fail to meet certain development deadlines, we could lose license rights that are important to our business.

        We are a party to a number of license agreements under which we are granted rights to intellectual property that are important to our business and we expect that we may need to enter into additional license agreements in the future. These include our cross license agreement with Asuragen and our exclusive licenses to certain rights relating to microRNAs and their uses as therapeutics including miR-34, from Yale University, or Yale, Marina and the University of Zurich. Our existing license agreements impose, and we expect that future license agreements will impose on us, various development, regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license. Our business could suffer, for example, if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. See "Business—Strategic Partnerships and Collaborations" for a description of our license agreements, which sets forth the material terms and obligations, including a description of the termination provisions, under our agreements with Asuragen, Yale, Marina and the University of Zurich.

        As we have done previously, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we cannot provide any assurances that third-party patents do not exist that might be enforced against our current product candidates or future products in the absence of such a license. We may fail to obtain any of these licenses on commercially reasonable terms, if at all. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could materially harm our business and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation.

43


Table of Contents

        Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues. Disputes may arise between us and our licensors regarding intellectual property subject to a license agreement, including:

        If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

        The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:

        Should any of these events occur, they could significantly harm our business, results of operations and prospects.

44


Table of Contents

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

        We are currently involved in an ongoing inventorship dispute with Yale that affects certain of our patent families, including key patents that provide coverage for MRX34. Under our amended and restated agreement with Yale, we have agreed to a mechanism for determination of the inventorship for patents and patent applications within such patent families. If one or more Yale employees are determined to be sole or joint inventors of any of the patents or patent applications in dispute, although we will retain exclusive commercial rights under such patents and patent applications for all human therapeutic uses through our agreement with Yale, subject to the terms of the agreement, under certain circumstances, our rights may be subject to certain rights of the U.S. government, we may lose control of prosecution and maintenance of such intellectual property, and validity and enforceability of our related patents may be adversely affected. Under our agreement with Yale, we are required to make payments to Yale for achievement of certain development and regulatory milestones by products containing let-7 and to pay royalties, or a specified portion of certain gross revenue received from our sublicensees, upon commercialization and sale of products covered by the patents licensed to us by Yale, including with respect to sales of MRX34. Our financial obligations to Yale, if any, will depend on the particular product and Yale's ownership rights in any patents covering such product. If our rights were also subject to certain rights of the U.S. government, it could, under certain circumstances, limit our ability to continue to manufacture a product or product candidate covered by an affected patent or patent application outside the United States, as is our current practice. See "Business—Strategic Partnerships and Collaborations" for a detailed description of our license agreement with Yale, including our financial obligations to Yale with respect to commercialization of products covered by the license, including MRX34.

        We may also be subject to claims that former or current employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates and companion diagnostic. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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

        Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we employ reputable law firms and other professionals and rely on such third parties to effect payment of these fees with respect to the USPTO and non-U.S. patent agencies with respect to the patents and patent applications we own, and we rely upon our licensors to effect payment of these fees with respect to the patents and patent applications that we license. Even if we do not control prosecution and maintenance of our in-licensed patents, we may be responsible for reimbursing our licensors for some or all of the costs associated with such activities. If we fail to make timely payment to our licensors for such fees, our licensors may have the right to terminate the affected license, in which event we would not be able to market products covered by the license. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, document submission, fee payment and

45


Table of Contents

other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply with respect to the patents and patent applications that we own. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products, and recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

        As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

        On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO has promulgated regulations and developed procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did not come into effect until March 16, 2013. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

A recent decision by the U.S. Supreme Court could adversely affect some of our intellectual property rights.

        Some of our patent claims may be affected by the recent U.S. Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics, widely known as a "gene patent" case. In Myriad, the Supreme Court held that unmodified isolated fragments of genomic sequences, such as the DNA constituting the BRCA1 and BRCA2 genes, are not eligible for patent protection because they constitute a product of nature. The exact boundaries of the Supreme Court's decision remain unclear as the Supreme Court did not address other types of nucleic acids, such as isolated microRNAs. Nevertheless, our patent portfolio contains claims of various types and scope, including chemically modified mimics, such as in MRX34, as well as methods of medical treatment. In our view, the presence of varying claims in our patent portfolio significantly reduces, but does not eliminate, our exposure to potential validity challenges under Myriad or future judicial decisions. However, it is not yet clear what, if any, impact this recent Supreme Court decision or future decisions will have on the operation of our business.

46


Table of Contents

We may be subject to claims that our employees or consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees or consultants have wrongfully used or disclosed alleged trade secrets of former or other employers.

        Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements with our employees and certain collaborators and other third parties with whom we do business include provisions requiring, for instance, such parties to assign rights in inventions to us, we may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Many of our employees and consultants, including our senior management, have been employed or retained by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or knowhow of others in their work for us, and do not perform work for us that is in conflict with their obligations to another employer or any other entity, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. We may also be subject to claims that an employee, advisor, consultant, or independent contractor performed work for us that conflicts with that person's obligations to a third party, such as an employer, and thus, that the third party has an ownership interest in the intellectual property arising out of work performed for us. We are not aware of any threatened or pending claims related to these matters, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable personnel or intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

        Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and/or management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

If we do not obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation, thereby potentially extending the term of our marketing exclusivity for our product candidates, our business may be materially harmed.

        Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates, if any, one of the U.S. patents covering each of such approved product(s) or the use thereof may be eligible for up to five years of patent term restoration under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product. Patent term extension also may be available in certain foreign countries upon regulatory approval of our product candidates. Nevertheless, we may not be granted patent term extension either in the United States or in any foreign country because of, for example, failing to apply within applicable

47


Table of Contents

deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than we request. In addition, if a patent we wish to extend is owned by another party and licensed to us, we may need to obtain approval and cooperation from our licensor to request the extension.

        If we are unable to obtain patent term extension or restoration, or the term of any such extension is less than we request, the period during which we will have the right to exclusively market our product will be shortened and our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially.


Risks Related to Government Regulation

Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with applicable regulatory requirements.

        Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA and/or non-U.S. regulatory authorities. Any regulatory approval that we receive for our product candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain requirements for potentially costly post-marketing follow-up studies to monitor the safety and efficacy of the product. In addition, if the FDA and/or non-U.S. regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, sampling, advertising, promotion and recordkeeping for our products. Manufacturers of our products are required to comply with cGMP regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture our products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved label. As such, we may not promote our products for indications or uses for which they do not have FDA approval.

        If we, any current or future collaborator or a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, such collaborator, the manufacturer or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S. regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including:

48


Table of Contents

        The regulatory requirements and policies may change and additional government regulations may be enacted for which we may also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. In addition, if we or any current or future collaborator are not able to maintain regulatory compliance, we or such collaborator, as applicable, will not be permitted to market our future products and our business will suffer.

The availability of adequate third-party coverage and reimbursement for newly approved products is uncertain, and failure to obtain adequate coverage and reimbursement from third-party payors could impede our ability to market any future products we may develop and could limit our ability to generate revenue.

        There is significant uncertainty related to the third-party payor coverage and reimbursement of newly approved medical products. The commercial success of our future products in both domestic and international markets depends on whether such third-party coverage and reimbursement are available for our future products. Governmental payors, including Medicare and Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to manage their healthcare expenditures and challenging the prices charged for medical products and services by limiting both coverage and the level of reimbursement of new drugs and biologics and, as a result, they may not cover or provide adequate reimbursement for our future products. These payors may not view our future products as cost-effective, and coverage and reimbursement may not be available to our customers, may be limited to certain indications or may not be sufficient to allow our future products to be marketed on a competitive basis. Third-party payors are exerting increasing influence on decisions regarding the use of, and coverage and reimbursement levels for, particular treatments. Cost-control initiatives could cause us to decrease the price we might establish for our products candidates, which could result in lower than anticipated product revenues. If we decrease the prices for our product candidates because of competitive pressures or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenue and profitability will suffer.

If we fail to comply or are found to have failed to comply with FDA and other regulations related to the promotion of our products for unapproved uses, we could be subject to criminal penalties, substantial fines or other sanctions and damage awards.

        The regulations relating to the promotion of products for unapproved uses are complex and subject to substantial interpretation by the FDA and other government agencies. If we receive marketing approval for MRX34 or other product candidates, we will be restricted from promoting the products for uses outside of the approved labeling. However, physicians may nevertheless prescribe products to their patients in a manner that is inconsistent with the approved label. We intend to implement compliance and training programs designed to ensure that our sales and marketing practices comply with applicable regulations. Notwithstanding these programs, the FDA or other government agencies may allege or find that our practices constitute prohibited promotion of our products for unapproved uses. We also cannot be sure that our employees will comply with company policies and applicable regulations regarding the promotion of products for unapproved uses.

49


Table of Contents

        Over the past several years, a significant number of pharmaceutical and biotechnology companies have been the target of inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and other sales practices, including the Department of Justice and various U.S. Attorneys' Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys General offices. These investigations have included claims asserting alleged violations of various federal and state laws and regulations, including antitrust laws, the Food, Drug and Cosmetic Act, the False Claims Act, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and reimbursement from government programs such as the Medicare and Medicaid programs. Many of these investigations originate as "qui tam" actions, commonly referred to as "whistleblower suits," under the False Claims Act, often brought by current or former employees. Under the False Claims Act, any individual can bring a claim on behalf of the government alleging that a person or entity has presented a false claim, or caused a false claim to be submitted, to the government for payment. In a qui tam suit, the government must decide whether to intervene and prosecute the case. If it declines, the individual may pursue the case alone. The person bringing a qui tam suit is entitled to a share of any recovery or settlement, up to a certain cap; the relator's share depends on the extent of the relator's involvement in the case and whether the government intervenes.

        If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations. Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects and reputation.

If approved, MRX34 or any future products may cause or contribute to adverse medical events that we are required to report to regulatory agencies, and if we fail to do so we could be subject to sanctions that would materially harm our business.

        If we are successful in commercializing MRX34 or any other products, FDA and foreign regulatory agency regulations require that we report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would 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, the FDA or a foreign regulatory agency could take action, including criminal prosecution, the imposition of civil monetary penalties, seizure of our products or delay in approval of future products. Through the first 47 weeks of our Phase 1 clinical trial, all 26 patients treated with MRX34 experienced at least one adverse event. The most common adverse events have been fever, chills, fatigue, thrombocytopenia, diarrhea, back pain and nausea, which have been manageable with standard interventions used by oncologists. See "Business—MRX34: Our Lead Product Candidate" for a more detailed description of the adverse events experienced during the course of the MRX34 clinical development program.

50


Table of Contents

Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our product candidates internationally.

        We may seek a distribution and marketing collaborator for MRX34 or other product candidates. In order to market our product candidates in the European Economic Area, or EEA (which is comprised of the 28 Member States of the EU plus Norway, Iceland and Liechtenstein), and many other foreign jurisdictions, we or any such collaborator must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

        Under these two procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

        We have had limited interactions with foreign regulatory authorities, and the approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We or may not obtain foreign regulatory approvals on a timely basis, if at all. We may not be able to file for regulatory approvals and even if we file, we may not receive necessary approvals to commercialize our product candidates in any market.

Healthcare reform measures could hinder or prevent our product candidates' commercial success.

        In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system that could affect our future revenues and profitability and the future revenues and profitability of our potential customers. Federal and state lawmakers regularly propose and, at times, enact legislation that results in significant changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For example, in March 2010, the President signed one of the most significant healthcare reform measures in decades, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act. It contains a

51


Table of Contents

number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs. The Affordable Care Act, among other things:

        Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. On August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve its targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation's automatic reductions to several government programs. These reductions include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

        There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at containing or lowering the cost of health care. We cannot predict the initiatives that may be adopted in the future or their full impact. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of health care may adversely affect:

        In light of widely publicized events concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Governmental Accounting Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and establishment of risk management programs that may, for instance, restrict distribution of drug products. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical trials and the drug approval process. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result

52


Table of Contents

in substantial additional expense and a delay or failure in obtaining approval or approval for a more limited indication than originally sought. In, addition, because of the serious public health risks of high profile adverse safety events with certain products, the FDA may require, as a condition of approval, costly risk management programs which may include safety surveillance, restricted distribution and use, patient education, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, preapproval of promotional materials and restrictions on direct-to-consumer advertising.

If we fail to comply with healthcare regulations, we could face substantial penalties and our business, results of operations and financial condition could be adversely affected.

        Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients' rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The regulations that may affect our ability to operate include, without limitation:

        The recently enacted Affordable Care Act, among other things, amends the intent requirement of the Federal Anti-Kickback Statute 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. In addition, 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.

        The Affordable Care Act also imposes new reporting and disclosure requirements on drug manufacturers for any "transfer of value" made or distributed to prescribers and other healthcare providers. In addition, drug manufacturers will also be required to report and disclose any investment interests held by physicians and their immediate family members during the preceding calendar year. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (and up to an aggregate of $1 million per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests not reported in an annual submission.

53


Table of Contents

        In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing. Some states mandate implementation of compliance programs and/or the tracking and reporting of gifts, compensation, and other remuneration to physicians. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may violate one or more of the requirements.

        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 financial results. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.


Risks Related to Our Common Stock and This Offering

The price of our common stock may be volatile, and you may not be able to resell your shares at or above the initial public offering price.

        The initial public offering price for the shares of our common stock sold in this offering has been determined by negotiation between the underwriters and us. This price may not reflect the market price of our common stock following this offering. You may be unable to sell your shares of common stock at or above the initial public offering price due to fluctuations in the market price of our common stock. Factors that could cause volatility in the market price of our common stock include, but are not limited to:

54


Table of Contents

        In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that have been often unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

        Based on the beneficial ownership of our common stock as of December 31, 2013, after this offering, our officers and directors, together with holders of 5% or more of our outstanding common stock before this offering and their respective affiliates, will beneficially own approximately        % of our common stock (assuming no exercise of the underwriters' option to purchase additional shares of common stock). Accordingly, these stockholders will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with your interests. For example, these stockholders could delay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise.

We are an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from

55


Table of Contents

the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

        In addition, Section 102 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. An "emerging growth company" can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to "opt out" of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

        If our existing stockholders or holders of our options sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. The perception in the market that these sales may occur could also cause the trading price of our common stock to decline. Based on 84,031,765 shares of common stock outstanding as of December 31, 2013, upon the completion of this offering, we will have outstanding a total of            shares of common stock, assuming no exercise of the underwriters' option to purchase additional shares of common stock. Of these shares, only the shares of common stock sold by us in this offering, plus any shares sold upon exercise of the underwriters' option to purchase additional shares of common stock, will be freely tradable without restriction, unless held by our affiliates, in the public market immediately following this offering.

        A total of            shares of common stock are not subject to lock-up agreement with the underwriters and therefore will be eligible for sale in the public market 90 days after the date of this prospectus. After the lock-up agreements expire,            shares of common stock will be eligible for sale in the public market, subject to volume limitations under Rule 144 under the Securities Act, with respect to shares held by directors, executive officers and other affiliates. The underwriters may, however, in their sole discretion, permit our officers, directors and other stockholders and the holders of our outstanding options who are subject to the lock-up agreements to sell shares prior to the expiration of the lock-up agreements. Sales of these shares, or perceptions that they will be sold, could cause the trading price of our common stock to decline.

        In addition, based on the number of shares subject to outstanding awards under our 2008 Long Term Incentive Plan, or 2008 Plan, or available for issuance thereunder, as of December 31, 2013, and including the initial reserves under our 2014 Equity Incentive Award Plan, or 2014 Plan,                   shares of common stock that are either subject to outstanding options, outstanding but subject to vesting, or reserved for future issuance under the 2008 Plan or 2014 Plan will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. We also plan to file a registration statement permitting shares of common stock issued in the future pursuant to the 2008 Plan and 2014 Plan to be freely resold by plan participants in the public market, subject to the lock-up agreements, applicable vesting schedules and, for shares held by directors, executive officers and other affiliates, volume limitations under Rule 144 under the Securities Act. The 2014 Plan also contains provisions for the annual increase of the number of shares reserved for issuance under such plans, as

56


Table of Contents

described elsewhere in this prospectus, which shares we also intend to register. If the shares we may issue from time to time under the 2008 Plan or 2014 Plan are sold, or if it is perceived that they will be sold, by the award recipient in the public market, the trading price of our common stock could decline.

        Certain holders of 84,020,766 shares of our common stock will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described above. See "Description of Capital Stock—Registration Rights." Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Sales of such shares could also cause the trading price of our common stock to decline.

If there is no viable public market for our common stock, you may not be able to sell your shares at or above the initial public offering price.

        Prior to this offering, there has been no public market for our common stock, and there can be no assurance that a regular trading market will develop and continue after this offering or that the market price of our common stock will not decline below the initial public offering price. The initial public offering price was determined through negotiations between us and the underwriters and may not be indicative of the market price of our common stock following this offering. Among the factors considered in such negotiations were prevailing market conditions, certain of our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. See "Underwriting" for additional information.

Investors in this offering will suffer immediate and substantial dilution of their investment.

        If you purchase common stock in this offering, you will pay more for your shares than our pro forma as adjusted net tangible book value per share. Based upon an assumed initial public offering price of $        per share, the midpoint of the range on the cover page of this prospectus, you will incur immediate and substantial dilution of $        per share, representing the difference between our assumed initial public offering price and our pro forma as adjusted net tangible book value per share. Based upon the assumed initial public offering price of $        per share, purchasers of common stock in this offering will have contributed approximately        % of the aggregate purchase price paid by all purchasers of our stock but will own only approximately        % of our common stock outstanding after this offering. For information on how the foregoing amounts were calculated, see "Dilution."

To the extent outstanding stock options are exercised, there will be further dilution to new investors.

        We issued options in the past to acquire common stock at prices significantly below the initial offering price. As of December 31, 2013, there were 5,323,318 shares of common stock subject to outstanding options with a weighted average exercise price of $0.16 per share. To the extent that these outstanding options are ultimately exercised, you will incur further dilution, and our stock price may decline.

Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

        We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

57


Table of Contents

        If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

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

        We discuss our plan for the use of the net proceeds of this offering in the sections entitled "Use of Proceeds" and "Business." However, within the scope of our plan, and in light of the various risks to our business that are set forth in this section, our management will have broad discretion over the use of the net proceeds from this offering. Because of the number and variability of factors that will determine our use of such proceeds, you may not agree with how we allocate or spend the proceeds from this offering. We may pursue collaborations or clinical trials that do not result in an increase in the market value of our common shares and that may increase our losses. Our failure to allocate and spend the net proceeds from this offering effectively would have a material adverse effect on our business, financial condition and results of operations. Until the net proceeds are used, they may be placed in investments that do not produce significant investment returns or that may lose value.

Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management.

        Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:

58


Table of Contents

        In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who, together with its affiliates, owns or within the last three years has owned 15% or more of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Delaware law may discourage, delay or prevent a change in control of our company. Furthermore, our amended and restated certificate of incorporation will specify that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders. We believe this provision benefits us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.

        Provisions in our charter and other provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

Our employment agreements with our officers may require us to pay severance benefits to any of those persons who are terminated in connection with a change of control of us, which could harm our business, financial condition or results of operations.

        Our officers are parties to employment agreements providing for aggregate cash payments of up to approximately $771,285 at March 31, 2014 for severance and other benefits in the event of a termination of employment in connection with a change of control of us. The payment of these severance benefits could harm our business, financial condition and results of operations. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future; therefore, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

        We have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, the terms of any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

59


Table of Contents

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

        The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our common stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our stock price and trading volume to decline.

Changes in, or interpretations of, accounting rules and regulations could result in unfavorable accounting charges or require us to change our compensation policies.

        Accounting methods and policies for biopharmaceutical companies, including policies governing revenue recognition, research and development and related expenses and accounting for stock-based compensation, are subject to further review, interpretation and guidance from relevant accounting authorities, including the SEC. Changes to, or interpretations of, accounting methods or policies may require us to reclassify, restate or otherwise change or revise our financial statements, including those contained in this prospectus.

60


Table of Contents


Special Note Regarding Forward-Looking Statements

        This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate," "continue," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "should," "target," "will," "would" and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

        These forward-looking statements are based on management's current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management's beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be

61


Table of Contents

inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under "Risk Factors" and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See "Where You Can Find More Information."

62


Table of Contents


Use of Proceeds

        We estimate that the net proceeds from the sale of                shares of common stock in this offering will be approximately $             million at an assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that net proceeds will be approximately $             million after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $             million, assuming the assumed initial public offering price stays the same. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.

        At December 31, 2013, we had cash and cash equivalents of $23.2 million. We currently estimate that we will use the net proceeds from this offering, together with our existing cash and cash equivalents, as follows:

        This expected use of net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress of our development, the status of and results from preclinical testing or clinical trials, as well as any collaborations that we may enter into with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. Due to the many variables inherent to the development of our product candidates, we cannot currently predict the stage of development we expect the net proceeds of this offering to enable us to achieve for our clinical studies and product candidates. We have no current agreements, commitments or understandings for any material acquisitions or licenses of any products, businesses or technologies.

        Based on our planned use of the net proceeds from this offering and our existing cash and cash equivalents described above, we estimate that such funds will be sufficient to fund operations at least over the next 12 months.

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

63


Table of Contents


Dividend Policy

        We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

64


Table of Contents


Capitalization

        The following table sets forth our capitalization at December 31, 2013:

        You should read this information together with our audited financial statements and related notes appearing elsewhere in this prospectus and the information set forth under the headings "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

65


Table of Contents

 
  At December 31, 2013  
 
  Actual   Pro Forma   Pro Forma
As Adjusted
 
 
  (unaudited)
 
 
  (in thousands, except share and per
share data)

 

Series A convertible preferred stock, $0.001 par value per share, 3,192,083 shares authorized, 3,192,083 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

  $ 6,384   $                     

Series B convertible preferred stock, $0.001 par value per share, 540,341 shares authorized, 540,341 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

    1,500                         

Series B-1 convertible preferred stock, $0.001 par value per share, 10,914,647 shares authorized, 10,914,647 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

    7,498                         

Series C convertible preferred stock, $0.001 par value per share, 69,353,712 shares authorized, 69,353,695 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

    35,301                         

Stockholders' equity (deficit):

                   

Preferred stock, $0.001 par value per share; no shares authorized, issued and outstanding, actual;                  shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

                            

Common stock, $0.001 par value per share; 93,000,000 shares authorized; 30,999 shares issued and outstanding, actual;                 shares authorized,                 shares issued and outstanding, pro forma;                 shares authorized,                  shares issued and outstanding, pro forma as adjusted

        84                     

Additional paid-in capital

    890     51,489                     

Accumulated deficit

    (30,804 )   (30,804 )                   
               

Total stockholders' (deficit) equity

    (29,914 )   20,769                     
               

Total capitalization

  $ 20,769   $ 20,769                     
               
               

        Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $             million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

66


Table of Contents

        The outstanding share information in the table above excludes the following:

67


Table of Contents


Dilution

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the net tangible book value per share of our common stock after this offering. At December 31, 2013, we had a historical net tangible book value (deficit) of $(29.9) million, or $(965.00) per share of common stock. Our net tangible book value represents total tangible assets less total liabilities and convertible preferred stock, all divided by the number of shares of common stock outstanding on December 31, 2013. Our pro forma net tangible book value at December 31, 2013, before giving effect to this offering, was $20.8 million, or $0.25 per share of our common stock. Pro forma net tangible book value, before the issuance and sale of shares in this offering, gives effect to:

        After giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of $            per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value at December 31, 2013 would have been approximately $             million, or $            per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $            per share to existing stockholders and an immediate dilution of $            per share to new investors. The following table illustrates this per share dilution:

Assumed initial public offering price per share

        $           

Historical net tangible book value per share at December 31, 2013

  $ (965.00 )             

Pro forma increase in net tangible book value per share

    965.25               

Pro forma net tangible book value per share at December 31, 2013

    0.25               

Increase in pro forma net tangible book value per share attributable to new investors

             
             

Pro forma as adjusted net tangible book value per share after this offering

             
             

Dilution per share to new investors participating in this offering

        $           
             
             

        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value at December 31, 2013 after this offering by approximately $             million, or approximately $            per share, and would decrease (increase) dilution to investors in this offering by approximately $            per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value at December 31, 2013 after this offering by approximately $             million, or approximately $            per share, and would decrease (increase) dilution to investors in this offering by approximately $            per share, assuming the assumed initial public offering price per share remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

68


Table of Contents

        If the underwriters fully exercise their over-allotment option, pro forma as adjusted net tangible book value after this offering would increase to approximately $            per share, and there would be an immediate dilution of approximately $            per share to new investors.

        To the extent that outstanding options with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share, before giving effect to the issuance and sale of shares in this offering, are exercised, new investors will experience further dilution. If all of our outstanding options described above were exercised, our pro forma net tangible book value at December 31, 2013, before giving effect to the issuance and sale of shares in this offering, would have been approximately $21.6 million, or approximately $0.24 per share, and our pro forma as adjusted net tangible book value at December 31, 2013 after this offering would have been approximately $             million, or approximately $            per share, causing dilution to new investors of approximately $            per share.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

        The following table shows, at December 31, 2013, on a pro forma as adjusted basis, after giving effect to the pro forma adjustments described above, the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $            per share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
   
   
  Total
Consideration
   
 
 
  Shares Purchased    
 
 
  Average
Price Per
Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

                   % $                % $           

Investors participating in this offering

                                 $           
                         

Total

                 100 % $              100 %      
                         
                         

        The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding at December 31, 2013 and excludes the following:

69


Table of Contents


Selected Financial Data

        The following selected statement of operations data for the years ended December 31, 2011, 2012 and 2013, and the selected balance sheet data at December 31, 2012 and 2013 have been derived from our audited financial statements included elsewhere in this prospectus. The balance sheet data at December 31, 2011 have been derived from our audited financial statements not included in this prospectus. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period.

        The information set forth below should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus and with our financial statements and notes thereto included elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2011   2012   2013  
 
  (in thousands, except share and per share data)
 

Statement of Operations Data:

                   

Operating expenses:

                   

Research and development

  $ 980   $ 2,742   $ 4,391  

General and administrative

    1,504     1,562     2,384  
               

Total operating expenses

    2,484     4,304     6,775  

Other income (expense):
Change in fair value of option liability

   
   
   
339
 

Gain on extinguishment of note payable

        1,001      

Interest expense

    (399 )   (355 )    
               

Net loss

  $ (2,883 ) $ (3,658 ) $ (6,436 )
               
               

Less: Accretion and dividends on convertible preferred stock

    (1,276 )   (6,142 )   (2,324 )
               

Net loss attributable to common stockholders

  $ (4,159 ) $ (9,800 ) $ (8,760 )
               
               

Net loss per share attributable to common stockholders, basic and diluted

  $ (183.91 ) $ (373.52 ) $ (293.92 )
               
               

Common shares used to compute basic and diluted net loss per share attributable to common stockholders

    22,614     26,237     29,804  
               
               

Pro forma net loss per common share (unaudited)—basic and diluted

              $ (0.13 )
                   
                   

Common shares used to compute pro forma net loss per share (unaudited)—basic and diluted

                51,440,488  
                   
                   

70


Table of Contents


 
  At December 31,  
 
  2011   2012   2013  
 
  (in thousands)
 

Balance Sheet Data:

                   

Cash and cash equivalents

  $ 939   $ 13,266   $ 23,182  

Total assets

    1,076     13,706     23,684  

Total liabilities

    1,559     4,641     2,915  

Convertible preferred stock

    14,112     33,433     50,683  

Common stock

             

Additional paid-in capital

            890  

Accumulated deficit

    (14,595 )   (24,368 )   (30,804 )

Total stockholders' (deficit) equity

    (14,595 )   (24,368 )   (29,914 )

71


Table of Contents


Management's Discussion and Analysis of Financial Condition and
Results of Operations

        You should read the following discussion and analysis of financial condition and results of operations together with the section entitled "Selected Financial Data" and our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Risk Factors" section.

Overview

        We are a clinical stage biopharmaceutical company developing a broad pipeline of leading microRNA-based oncology therapeutics. microRNAs are recently discovered, naturally occurring, short ribonucleic acid, or RNA, molecules, or oligonucleotides, that play a critical role in regulating key biological pathways. Misexpression of even a single microRNA can contribute to disease development and tumor suppressor microRNAs are commonly reduced in cancer. Our scientists and others at leading academic institutions have identified numerous tumor suppressor microRNAs that play key roles in preventing normal cells from becoming cancerous. Our therapeutic approach is to bring this tumor suppressor activity back into tumor cells by successfully delivering microRNA mimics, which are copies of naturally occurring microRNAs. This approach is known as microRNA replacement therapy. Based on our preclinical data, we believe our tumor suppressor microRNA mimics kill cancer cells by regaining control over multiple oncogenic pathways and represent a new paradigm in cancer therapy, which may have the potential to create more effective cancer drugs. Our lead product candidate, MRX34, which is currently being evaluated in a Phase 1 clinical trial, is the first microRNA-based replacement therapy to be tested in cancer patients, both in liver-based cancers and in hematological malignancies, and is supported by a comprehensive preclinical dataset.

        We have developed a broad product pipeline of multiple tumor suppressor microRNA mimics. We believe that these mimics have the potential to become promising new oncology therapeutics due to their capacity to regulate many different oncogenes across multiple oncogenic pathways. We believe our technology is supported by a strong intellectual property position, which we continue to expand and strengthen. Our scientists have also discovered functions of microRNAs in numerous diseases other than cancer, which may provide us an opportunity to expand this novel technology into other therapeutic areas of unmet medical need. We believe these microRNAs represent future partnering or diversification opportunities.

        We were incorporated in 2007 under the laws of Delaware and were maintained as a wholly-owned subsidiary of our former parent company, Asuragen, Inc., or Asuragen, until the end of 2009, when we became an independent entity.

        Our operations have focused on developing our understanding of and capabilities in microRNA biology, identifying potential product candidates, undertaking preclinical studies, initiating and conducting a clinical trial, protecting and enhancing our intellectual property estate and providing general and administrative support for these activities. We have not generated any revenue from product sales and, to date, have funded our operations primarily through the private placement of convertible preferred stock, federal and state government grants and support from our former parent company, Asuragen. From our inception through December 31, 2013, we have raised an aggregate of approximately $59.4 million to fund our operations, of which approximately $48.1 million was from the issuance of preferred stock for cash and assets and approximately $11.3 million was from federal and state grants.

72


Table of Contents

        Since our inception, we have incurred significant operating losses. Our net losses were $2.9 million, $3.7 million and $6.4 million for the years ended December 31, 2011, 2012 and 2013, respectively. At December 31, 2013, we had an accumulated deficit of $30.8 million. We expect to continue to incur significant expenses and operating losses over the next several years. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase significantly as we conduct clinical trials for MRX34 and other product candidates; manufacture clinical trial materials; continue to discover, validate and develop additional novel product candidates; expand and protect our intellectual property portfolio; and hire additional development and scientific personnel. In addition, upon the consummation of this offering, we expect to incur additional costs associated with operating as a public company.

Financial Operations Overview

Revenue

        We have not generated any revenue from product sales or from collaborations. In the future, we may generate revenue from collaborations and licenses. Revenue may fluctuate from period to period, and the timing and extent of any future revenue will depend on our ability to advance our product candidates through the clinical trial process and to obtain regulatory approval and our ability, or our future partners' ability, to commercialize our product candidates.

Research and Development Expenses

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

        Research and development costs are expensed as incurred. In certain circumstances, we will make nonrefundable advance payments to purchase goods and services for future use pursuant to contractual arrangements. In those instances, we defer and recognize an expense in the period that we receive or consume the goods or services.

        Our research and development expenses have been offset by proceeds derived from federal and state grants. These government grants, which have supplemented our research efforts on specific projects, generally provide for reimbursement of approved costs, as defined in the terms of the grant awards. The proceeds from these reimbursement grants are treated as a reduction to the associated expenses as the allowable expenses are incurred.

73


Table of Contents

        In August 2010, we received a $10.3 million commercialization award from the State of Texas through The Cancer Prevention Research Institute of Texas, or CPRIT. The CPRIT grant was a three-year award that was funded annually, and funding of the grant was completed in January 2014. At December 31, 2013, all proceeds from this grant had been recognized, and there was approximately $144,000 still owed on the grant pending final review by the State of Texas. We accounted for advances received for the award as deferred grant reimbursement. Under the terms of the award, we are required to pay to CPRIT a portion of our revenues from sales of certain products by us, or received from our licensees or sublicensees, at a percentage in the low single digits until the aggregate amount of such payments equals a specified multiple of the grant amount, and thereafter at a rate of less than one percent, subject to our right, under certain circumstances, to make a one-off payment in a specified amount to CPRIT to buy out such payment obligations.

        At December 31, 2013, we had three National Institutes of Health, or NIH, grants ongoing with approximately $301,000 incurred and approximately $581,000 still to be incurred on those grants.

        At any point in time, we typically have various early stage research and drug discovery projects ongoing. Our internal resources, employees and infrastructure are not directly tied to any one research or drug discovery project and are typically deployed across multiple projects. As such, we do not maintain information regarding the costs incurred for these early stage research and drug discovery programs on a project-specific basis. However, we have spent and are currently spending the vast majority of our research and development resources on our lead product candidate, MRX34.

        Most of our product development programs are at an early stage, and successful development of future product candidates from these programs is highly uncertain and may not result in approved products. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming, and we expect our research and development expenses to increase for the foreseeable future as we advance our research programs toward the clinic and initiate and continue clinical trials. The probability of success for each product candidate may be affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability. We anticipate we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the scientific and clinical success of each future product candidate, as well as ongoing assessments as to each future product candidate's commercial potential. Completion dates and completion costs can vary significantly for each future product candidate and are difficult to predict. We will need to raise additional capital and may seek strategic alliances in the future in order to advance the various products in the pipeline and other products that may be developed.

General and Administrative Expenses

        General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance and support functions. Other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing, tax and legal services. We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs associated with being a publicly-traded company. These increases will likely include legal fees, accounting fees, directors' and officers' liability insurance premiums and fees associated with investor relations.

Critical Accounting Policies and Estimates

        This management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements

74


Table of Contents

requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the revenue and expenses incurred during the reported periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, revenue recognition and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions.

        While our significant accounting policies are described in the notes to our financial statements appearing in this prospectus, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Stock-Based Compensation

        We estimate the fair value of our stock-based awards to employees using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions, including: (1) the expected volatility of our stock; (2) the expected term of the award; (3) the risk-free interest rate; and (4) expected dividends. Due to the lack of a public market for the trading of our common stock and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. For these analyses, we have selected companies with comparable characteristics to ours, including enterprise value, risk profiles, position within the industry and historical share price information, sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected life of our employee stock options using the "simplified" method, whereby the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted.

        We are also required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. Stock-based compensation expense recognized in the financial statements is based on awards that are ultimately expected to vest.

        We have computed the fair value of employee stock options at the date of grant using the following assumptions:

 
  Year Ended December 31,
 
  2011   2012   2013

Expected term (years). 

  3.8 - 6.3   4.3 - 6.1   5.6 - 6.1

Risk-free interest rate

  1.6% - 3.1%   0.5% - 1.0%   0.9% - 2.0%

Expected volatility. 

  96.0% - 104.7%   80.3% - 85.5%   74.7% - 76.2%

Expected dividend rate

  0.0%   0.0%   0.0%

75


Table of Contents

        Stock-based compensation expense was allocated as outlined below:

 
  Year Ended
December 31,
 
 
  2011   2012   2013  
 
  (in thousands)
 

Research and development

  $ 3   $ 6   $ 55  

General administrative

    35     18     108  
               

Total

  $ 38   $ 24   $ 163  
               
               

        At December 31, 2013, we had $332,000 of total unrecognized compensation expense, net of related forfeiture estimates. We expect the impact of our stock-based compensation expense for stock options to grow in future periods due to the potential increases in the value of our common stock and headcount.

JOBS Act

        Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other companies.

Results of Operations

Comparison of Years Ended December 31, 2012 and 2013

 
  Year Ended
December 31,
   
   
 
 
  Dollar
Change
   
 
 
  2012   2013   % Change  
 
  (in thousands)
   
 

Statement of operations data:

                         

Operating expenses:

                         

Research and development, before grant reimbursement

  $ 6,380   $ 8,241   $ 1,861     29.2 %

Less grant reimbursement

    (3,638 )   (3,850 )   (212 )   5.8 %
                     

Research and development

    2,742     4,391     1,649     60.1 %

General and administrative

    1,562     2,384     822     52.6 %
                     

Total operating expenses

    4,304     6,775     2,471     57.4 %

Other income (expense):

                         

Change in fair value of option liability

        339     339     100.0 %

Gain on extinguishment of note payable

    1,001         (1,001 )   (100.0 )%

Interest expense

    (355 )       355     (100.0 )%
                     

Net loss

  $ (3,658 ) $ (6,436 ) $ (2,778 )   75.9 %
                     
                     

Research and Development Expenses

        Research and development expenses were $4.4 million for the year ended December 31, 2013, which was an increase of $1.6 million, or 60%, compared to research and development expenses of $2.7 million for the year ended December 31, 2012. The net change was due to an increase in overall research and development spending.

76


Table of Contents

        Research and development spending, prior to offset by grant reimbursement, was $8.2 million for the year ended December 31, 2013, which was an increase of $1.9 million, or 29%, compared to research and development spending of $6.4 million for the year ended December 31, 2012. The increase in research and development spending in 2013 was primarily due to the initiation of our Phase 1 clinical trial in April 2013, including the costs of conducting the trial and adding headcount for clinical operations, and additional spending on intellectual property, including a payment of $1.0 million to Marina Biotech, Inc., or Marina. This increase was partially offset by a decrease in spending for clinical trial drug costs and outsourced preclinical studies that had been conducted in 2012 in anticipation of the submission of the Investigational New Drug, or IND, for MRX34 to the Federal Drug Administration, or FDA, in 2013.

        We offset research and development expenses by $3.85 million of grant proceeds for the year ended December 31, 2013 and $3.64 million for the same period in 2012, an increase of approximately $212,000, or 6%. In both 2013 and 2012, over 95% of the total grant proceeds recognized by us related to the CPRIT grant. The increase in grant and research proceeds in 2013 was primarily due to the timing of the expenses being incurred that are reimbursed by state and federal grants.

General and Administrative Expenses

        General and administrative expenses were $2.4 million for the year ended December 31, 2013, which was an increase of approximately $0.8 million, or 53%, compared to general and administrative expenses of $1.6 million for the year ended December 31, 2012. Prior to 2013, a number of administrative functions had been provided by our former parent company, Asuragen, including accounting and finance, legal, human resources and purchasing, and the costs for these administrative functions were covered by a shared services agreement between us and Asuragen. Beginning in 2013, these administrative functions were transitioned to us, and the additional costs were incurred related to these functions, including additional headcount, new systems, professional fees, outside consultants and transition costs. There were also increases in the costs of audit and tax, legal and stock-based compensation from 2012 to 2013.

Change in Fair Value of Option Liability

        In October 2012, we completed an initial closing of an offering of Series C convertible preferred stock. The purchasers of the convertible preferred stock in the initial closing received an option to participate in the second closing for the same number of shares and at the same price as the initial closing. At the time of the initial closing, the fair value of this option to participate in the second closing was calculated using an option pricing model, and the effect of this non-cash accounting adjustment was to record an option liability on the balance sheet for the fair value that was calculated. The option liability is marked to fair value at each reporting period and any changes in fair value are recorded in the statement of operations.

        When the second closing of the Series C convertible preferred stock was completed in December 2013, we had a one-time non-cash gain on the change in the fair value of the option and the balance of the option liability was reclassified to additional paid-in capital.

Gain on Extinguishment of Note Payable

        In conjunction with a unit investment in 2009 from the Texas Emerging Technology Fund, or the TETF, an economic development affiliate of the State of Texas, we issued a note payable and a warrant to purchase our capital stock. The note payable was initially recorded net of the computed debt discount resulting from the warrant value. In October 2012, the arrangement with the TETF was amended. As part of the amendment, our note with the TETF was deemed satisfied in full and canceled and we were released of all repayment obligations. In conjunction with this release, we

77


Table of Contents

recognized a gain on the extinguishment of the note payable and related accrued interest of $1.0 million in 2012.

Interest Expense

        Interest expense decreased from $355,000 for the year ended December 31, 2012 to zero for the year ended December 31, 2013 due to the extinguishment of the note payable related to the TETF in October 2012. We did not have any debt obligations outstanding during 2013.

Comparison of Years Ended December 31, 2011 and 2012

 
  Year Ended
December 31,
   
   
 
 
  Dollar
Change
   
 
 
  2011   2012   % Change  
 
  (in thousands)
   
 

Statement of operations data:

                         

Operating expenses:

                         

Research and development, before grant reimbursement

  $ 3,333   $ 6,380   $ 3,047     91.4 %

Less grant reimbursement

    (2,353 )   (3,638 )   (1,285 )   (54.6 )%
                     

Research and development

    980     2,742     1,762     179.7 %

General and administrative

    1,504     1,562     58     3.8 %
                     

Total operating expenses

    2,484     4,304     1,820     73.2 %

Other income (expense):

                         

Gain on extinguishment of note payable

        1,001     1,001     100.0 %

Interest expense

    (399 )   (355 )   44     (11.0 )%
                     

Net loss

  $ (2,883 ) $ (3,658 ) $ (775 )   26.9 %
                     
                     

Research and Development Expenses

        Research and development expenses were $2.7 million for the year ended December 31, 2012, which was an increase of approximately $1.8 million, or 180%, compared to research and development expenses of $1.0 million for the year ended December 31, 2011.

        Research and development spending, prior to the offset of grant reimbursements, was $6.4 million for the year ended December 31, 2012, which was an increase of approximately $3.1 million, or 91%, compared to research and development spending, prior to the offset of grant reimbursements, of $3.3 million for the year ended December 31, 2011. The increase in research and development spending in 2012 was primarily due to higher personnel costs, increased research activities, increased costs related to in-house and outsourced preclinical studies, payments associated with an amended license agreement with Marina and increased clinical trial drug costs.

        Research and development spending was partially offset by grant reimbursements of $3.64 million for the year ended December 31, 2012 and $2.35 million for the year ended December 31, 2011, an increase of $1.29 million, or approximately 55%. The proceeds related to the CPRIT grant increased by $1.5 million to $3.7 million in 2012 from $2.2 million in 2011, while the proceeds related to federal grants decreased from $446,000 in 2011 to $164,000 in 2012. The change in proceeds recognized from the grants from year to year was due to the timing of the expenses incurred related to the specific grants.

78


Table of Contents

General and Administrative Expenses

        General and administrative expenses were $1.56 million for the year ended December 31, 2012, which was an increase of approximately $58,000, or 4%, compared to $1.50 million for the year ended December 31, 2011. In both 2012 and 2011, a number of administrative functions were provided by our former parent company, Asuragen, including accounting and finance, legal, human resources and purchasing, and the costs for these administrative functions were covered by a shared services agreement between us and Asuragen.

Gain on Extinguishment of Note Payable

        As discussed above, in October 2012, the arrangement with the TETF was amended, our note with the TETF was deemed satisfied in full and canceled and we were released of all repayment obligations. In conjunction with this release, we recognized a gain on the extinguishment of the note payable and related accrued interest of $1 million in 2012.

Interest Expense

        Interest expense decreased from approximately $399,000 for the year ended December 31, 2011 to approximately $355,000 for the year ended December 31, 2012 primarily due to the extinguishment of the TETF note in October 2012.

Liquidity and Capital Resources

Liquidity and Capital Expenditures

        Since inception, at December 31, 2013, our operations have been financed primarily by net proceeds of $48.1 million from the sales of shares of our convertible preferred stock for cash and assets and $11.3 million from federal and state grants. At December 31, 2013, we had $23.2 million of cash and cash equivalents.

        Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

        We believe that our existing cash and cash equivalents as of December 31, 2013, along with the estimated net proceeds from this offering, will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

        Our future capital requirements are difficult to forecast and will depend on many factors, including:

79


Table of Contents

        The following table shows a summary of our cash flows for the years ended December 31, 2011, 2012 and 2013:

 
  Year Ended December 31,  
 
  2011   2012   2013  
 
  (in thousands)
 

Net cash provided by (used in):

                   

Operating activities

  $ (4,573 ) $ (4,520 ) $ (6,496 )

Investing activities. 

            (7 )

Financing activities

    1,454     16,847     16,419  
               

Net increase (decrease)

  $ (3,119 ) $ 12,327   $ 9,916  
               
               

Operating Activities

        Net cash used in operating activities was $6.5 million for the year ended December 31, 2013, compared to net cash used in operations of $4.5 million for the same period in 2012. The increase in 2013 in overall spending in the prior year was primarily due to increased headcount, initiation of clinical trials, increased license fees to Marina, increased spending on intellectual property and increased administrative-related costs. This increase was partially offset by the timing of a grant payment from CPRIT, which was delayed from 2012 to 2013.

        Net cash used in operating activities was $4.5 million for the year ended December 31, 2012, compared to $4.6 million used in operating activities for the year ended December 31, 2011. We had increased spending in 2012 for research and development activities. However, this increase was offset by the timing and size of the grant payment from CPRIT, a portion of which was delayed from 2011 to 2012.

Investing Activities

        The net cash used in investing activities for the periods presented relates entirely to the purchases of property and equipment, primarily computer equipment. The amount spent in the year ended December 31, 2013 was approximately $7,000. There were no investing activities in 2012 or 2011.

Financing Activities

        Net cash provided by financing activities was $16.4 million and $16.8 million for the years ended December 31, 2013 and 2012, respectively. For both 2013 and 2012, the net cash provided by financing activities is primarily due to the net proceeds from the sale of our Series C convertible preferred stock. The initial funding of the Series C convertible preferred stock was in October 2012 and the second funding was in December 2013. The net cash provided by financing activities for the year ended December 31, 2011 was from the sale of our Series B convertible preferred stock.

Contractual Obligations and Commitments

        In January 2013, we entered into an agreement with Asuragen under which we share space with Asuragen and Asuragen provides certain services to us. These services include information technology services, facilities-related services, warehouse services, shipping and receiving and other services. The

80


Table of Contents


term of the services agreement expires in December 2014, with commitment for payments in 2014 totaling approximately $528,000.

 
  Payment due by period  
 
  Total   Less than
1 year
  1 - 3 years   3 - 5 years   More than
5 years
 
 
  (in thousands)
 

Contractual Obligations:

                               

Services Agreement with Asuragen. 

  $ 528   $ 528   $   $   $  
                       

Total

  $ 528   $ 528   $   $   $  
                       
                       

Off-balance Sheet Arrangements

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

Quantitative and Qualitative Disclosures about Market Risk

        The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. At December 31, 2013, we had cash and cash equivalents of $23.2 million, consisting of interest-bearing money market accounts and prime money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, we do not believe a change in interest rates would have a material effect on the fair market value of our cash equivalents.

81


Table of Contents


Business

Overview

        We are a clinical stage biopharmaceutical company developing a broad pipeline of leading microRNA-based oncology therapeutics. microRNAs are recently discovered, naturally occurring, short ribonucleic acid, or RNA, molecules, or oligonucleotides, that play a critical role in regulating key biological pathways. Misexpression of even a single microRNA can contribute to disease development and tumor suppressor microRNAs are commonly reduced in cancer. Our scientists and others at leading academic institutions have identified numerous tumor suppressor microRNAs that play key roles in preventing normal cells from becoming cancerous. Our therapeutic approach is to bring this tumor suppressor activity back into tumor cells by successfully delivering microRNA mimics, which are copies of naturally occurring microRNAs. This approach is known as microRNA replacement therapy. Based on our preclinical data, we believe our tumor suppressor microRNA mimics kill cancer cells by regaining control over multiple oncogenic pathways and represent a new paradigm in cancer therapy, which may have the potential to create more effective cancer drugs.

        In extensive in vivo testing, our lead therapeutic product candidate, MRX34, a mimic of the naturally occurring tumor suppressor microRNA miR-34, caused significant tumor regression at different dose levels and with different dosing regimens in mouse models of human hepatocellular carcinoma, or HCC. As a result of these findings, we initiated our Phase 1 cancer clinical trial in April 2013, which made MRX34 the first microRNA replacement therapy product candidate to enter a clinical trial in cancer. We expect completed results from our Phase 1 clinical trial in liver-based cancers by the end of the first quarter of 2015 and completed results from our hematological malignancy cohort in mid-2015. We publicly disclosed interim data available through the first 47 weeks of our Phase 1 clinical trial with respect to the liver-based cohort at the 2014 Annual Meeting of American Association for Cancer Research held in San Diego, CA, which data are summarized below in "MRX34: Our Lead Product Candidate."

        Our early research and discovery work originated in 2002 at Ambion, Inc. and formed the initial basis for our patent portfolio, and later continued at our former parent company, Asuragen, Inc. This pioneering work allowed us to develop deep knowhow and expertise in the science underlying microRNAs, their potential applications in complex diseases and various approaches to the systemic delivery of oligonucleotides. We have benefited from the recent expansion of oligonucleotide therapeutic development programs, including those featuring small interfering RNAs, or siRNAs, which have also produced improved systemic oligonucleotide delivery technologies. While similar in structure, microRNAs are clearly differentiated from siRNAs through their biological heritage and activity. In contrast to the man-made sequences of siRNAs, microRNAs are naturally occurring small RNA molecules that are highly conserved among mammals and are instrumental for normal cell development and function.

        Our microRNA mimics feature two complementary RNA strands that are hybridized to produce a double-stranded RNA. The active strand has a sequence that is identical to the microRNA normally expressed in a cell, while the second, passenger strand is modified to facilitate proper loading of the active strand into the cytoplasmic protein complex necessary for microRNA function inside the cells. To deliver these double-stranded microRNA mimics to cancer cells, we utilize an innovative liposomal formulation called Smarticles®. After a comprehensive evaluation of more than 10 preclinical or clinical stage lipid- and polymer-based nanoparticle delivery technologies, we selected Smarticles based on a number of identified efficacy and safety parameters.

        We are developing a broad product pipeline of multiple tumor suppressor microRNA mimics that we believe have the potential to become promising new oncology therapeutics. We have therapeutic use claims related to 15 tumor suppressor microRNAs as well as patents containing composition of matter claims for multiple chemistries and structures that are, or may be used in or contemplated for use with,

82


Table of Contents

our therapeutic microRNA mimics. The following chart provides summary information on the most advanced microRNA mimics in our pipeline:

GRAPHIC

        We believe tumor suppressor microRNA mimics have great potential as cancer therapeutics due to their capacity to regulate many different oncogenes across multiple oncogenic pathways, as compared to other targeted therapies that affect only one or two oncogenes or oncogenic pathways. We believe our technology is supported by a strong intellectual property position, which we continue to expand and strengthen. Our scientists have also discovered functions of microRNAs in numerous diseases other than cancer, which may provide us an opportunity to expand this novel technology into other therapeutic areas of unmet medical need. We believe these microRNAs represent future partnering or diversification opportunities.

        We chose to develop a mimic of miR-34 as our lead therapeutic candidate following a series of preclinical studies conducted by us, as well as with academic collaborators, that suggested the molecule has the ability to:

        We believe that the impressive anti-cancer activity of the miR-34 mimic in nonclinical studies is derived from the capacity of miR-34 to regulate more than 20 oncogenes, whereas many existing cancer therapies target only one or two oncogenes or pathways. Based upon our nonclinical research, we believe controlling multiple cancer pathways may also reduce the risk of one of the more prevalent problems of modern cancer therapies, the development of drug resistance. Since tumor suppressor microRNAs are natural molecules expressed in normal tissues and cells, we also believe that undesired, or so-called "off-target," side effects due to sequence mismatches are less likely to be associated with our microRNA mimic approach.

        We initiated clinical development of MRX34 in April 2013 with a multi-center Phase 1 clinical trial that is continuing to enroll patients with unresectable primary liver cancer or solid cancers with liver involvement. We have also expanded the Phase 1 clinical trial with a separate cohort of patients with

83


Table of Contents

hematological malignancies, which may include non-Hodgkin's lymphoma, acute myelogenous leukemia, acute and chronic lymphocytic leukemia, chronic myelogenous leukemia in accelerated or blast phase, multiple myeloma and myelodysplastic syndrome. Primary objectives of the Phase 1 clinical trial, including the hematological malignancy cohort, are to establish the maximum tolerated dose and an appropriate dose for Phase 2 clinical trials. Secondary objectives are to assess the safety, tolerability and pharmacokinetic profile of MRX34 after intravenous dosing as well as to assess any biological and clinical activity. Through the first 47 weeks of our Phase 1 clinical trial, the maximum tolerated dose has not be reached and the most common adverse events associated with MRX34 have been fever, chills, fatigue, thrombocytopenia, diarrhea, back pain and nausea, which have been manageable with standard interventions used by oncologists. See "MRX34: Our Lead Product Candidate" below for a more detailed description of the adverse events experienced during the course of the MRX34 clinical development program.

        The ongoing Phase 1 clinical trial in liver-based cancers is expected to be completed by the end of the first quarter of 2015, and the hematological malignancy cohort is targeted for completion in mid-2015. We expect to conduct a potential end of Phase 1 meeting with respect to both study parts in the first half of 2015 with the Food and Drug Administration, or FDA, to discuss next steps in the clinical development program. We expect to initiate a Phase 2 clinical program for MRX34 in mid-2015.

        Nonclinical data suggest that microRNA therapeutics and certain standard of care drugs are synergistic because of their different mechanisms of action. Therefore, we continue to conduct in vitro and in vivo testing of combinations of MRX34 with standard of care cancer drugs, which we believe would further broaden the development and commercial opportunities for MRX34.

        Our pipeline contains multiple tumor suppressor microRNAs that, like miR-34, have demonstrated the ability to inhibit cancer cell proliferation and tumor growth in preclinical studies by co-regulating the expression of multiple oncogenes. Each of the tumor suppressor microRNAs regulate a different set of genes that influence how effective they might be in treating individuals with different types of cancer.

84


Table of Contents

microRNAs: A Unique Class in the RNA Therapeutics Space

        The landscape of various RNA-based therapeutic technologies has rapidly expanded over the past few years, mostly due to advances in the delivery of these molecules to their intended targets. We are aware of several companies that are working specifically to develop RNA therapeutics, which we believe generally fall into the following categories:

GRAPHIC

        While other companies in the field of microRNAs have focused primarily on inhibiting overexpressed microRNAs by antagonists known as anti-miRs, we have focused on introducing microRNAs that are underexpressed in disease through the use of microRNA mimics. This is in part due to what we believe is stronger therapeutic activity of microRNA mimics compared to anti-miRs. Within the group of companies in the microRNA space, we are the first company to clinically employ microRNA mimics. The approach, technological and therapeutic focus and status of lead programs for these microRNA companies are as follows:

Company
  microRNA
Approach
  Technology
Focus
  Therapeutic Focus & Status of
Lead Program
Mirna Therapeutics, Inc.   microRNA mimics   Replacement of underexpressed tumor suppressor microRNAs   Cancer
MRX34:
1st microRNA mimic in Phase 1

InteRNA Technologies B.V.

 

microRNA mimics

 

Replacement of underexpressed tumor suppressor microRNAs

 

Cancer
Preclinical
IND ~2015

miRagen Therapeutics, Inc.

 

anti-miRs

 

Inhibition of overexpressed microRNAs

 

anti-miR-208 in heart failure
IND ~2014

Regulus Therapeutics, Inc.

 

anti-miRs

 

Inhibition of overexpressed microRNAs

 

RG-101 (anti-miR-122 in HCV)
in Phase 1

Santaris Pharma A/S

 

anti-miRs

 

Inhibition of overexpressed microRNAs

 

Miramersen
(anti-miR122 in HCV)
in Phase 2

85


Table of Contents

        We believe that microRNA-based therapies have the potential to become a new class of drugs with broad therapeutic application based on the following:

Our Business Origin

        We trace our lineage back to Ambion, Inc., or Ambion, which developed and marketed research reagents for RNA analyses. Ambion was one of the first companies to investigate microRNAs, initiating a microRNA research program in 2002 that resulted in the creation of a research and discovery platform and the application of a number of key technologies to discover microRNAs that could be used as therapeutics and diagnostics. Patent applications that identify which microRNAs might be used to treat patients with cancers, cardiovascular diseases, neurodegenerative diseases and others, as well as technologies for preparing microRNA mimics, resulted from these early research and discovery efforts.

        Following the sale of Ambion in 2005, the intellectual property related to the clinical uses of microRNAs and a core group of scientists with microRNA and technology development experience were spun-out to form Asuragen, Inc., or Asuragen, with the intent of focusing on the diagnostic and therapeutic applications of microRNA. Preclinical proof-of-concept for microRNA-based therapy led Asuragen to create Mirna Therapeutics, Inc. in late 2007, which was maintained as a wholly-owned subsidiary of Asuragen until the end of 2009 when we became an independent entity. We hold an irrevocable exclusive license to the intellectual property related to the use of microRNAs originally discovered at Ambion in the field of therapeutics, as well as employ the key scientists who conducted the early research on microRNA-based therapeutics.

The Current Challenges in Cancer and Cancer Therapies

        Cancer continues to be a leading cause of mortality and morbidity worldwide. The impact of cancer on mortality rates is predicted to increase further with the aging of the population, poor health

86


Table of Contents

habits and the emergence of new epidemiological drivers of cancers. The average age of a newly diagnosed cancer patient in the United States has now climbed to 65 years, and cancer is increasingly being seen in individuals with multiple co-morbidities. Thus, the challenge of providing therapies that are well tolerated and do not seriously diminish quality of life is becoming as important as the inherent aspects of the cancer treatment itself.

        Over the past two decades, cancer drug development has moved from systemic cytotoxic chemotherapy to more targeted therapies, with approximately 1,000 targets discovered and close to 800 drugs in development aimed at specific targets. First-generation targeted therapies have generally produced lower levels of toxicity than systemic cytotoxic therapies with variable efficacy outcomes. More recent efforts at improving the efficacy of cancer drug targeting have focused on defining subgroups of patients, with the aid of modern molecular diagnostics, on combinations of targeted therapies with complementary mechanisms and on combinations of targeted therapies with chemotherapy or biological agents.

        For the next wave of targeted cancer therapies to produce a measurable improvement over current technology, we believe it will need to yield drugs that can disrupt multiple oncogenic pathways. We believe the field of microRNA represents a highly promising area for the development of new cancer agents that can appropriately modulate combinations of oncogenic targets within cancer cells while minimizing toxicity to normal tissues.

        By replacing underexpressed tumor suppressor microRNAs to sufficient levels predictably and tolerably, we believe we have the potential to transform the current disease treatment paradigm across a wide variety of cancers provided that the delivery of microRNAs is achieved at sufficient levels. We also believe our microRNA mimics have the mechanistic flexibility to be used as:

Our Strengths

        Our strengths include the following:

87


Table of Contents

Our Strategy

        Key elements of our strategy are:

88


Table of Contents

Our Approach

microRNA Biology

        RNA plays an essential role in the process used by cells to encode and translate genetic information from DNA to proteins. RNA is comprised of subunits called nucleotides and is synthesized from a DNA template by a process known as transcription. Transcription generates different types of RNA, including messenger RNAs that carry the information for proteins in the sequence of their nucleotides. In contrast, microRNAs are short RNAs, or oligonucleotides, that do not code for proteins, but rather ensure that the over 20,000 human protein-encoding genes are produced in the proper cells and at the proper levels by coordinating the production of proteins from messenger RNAs that are produced in each cell. microRNA-encoding genes emerged several hundred million years ago and their presence is believed to be a driving factor in the emergence and diversity of vertebrates in the ecosystem. Without microRNAs, cells and tissues within humans and other vertebrates would not be able to develop or function properly or respond to changes in the internal or external environments.

89


Table of Contents

        Transcription of microRNA genes produces RNA molecules that are typically several thousand nucleotides in length and feature an extended hairpin containing the short sequence that eventually becomes the mature microRNA, as shown below.

GRAPHIC

   

    Step 1.  Long microRNAs precursors are transcribed from DNA in the nucleus and exported to the cytoplasm.

    Step 2.  These pre-microRNAs are then cleaved by a double-strand specific ribonuclease, also called Dicer.

    Step 3.  The cleaved double-stranded RNA is bound by the RNA-induced silencing complex, or RISC, which discards one of the two strands and uses the resulting 19-23 nucleotide mature microRNA as a guide sequence to bind and regulate the translation of messenger RNAs with target sites for the bound microRNA.
        

        In humans, each microRNA binds to and regulates the translation of up to several hundred target messenger RNAs. Coordinating the translation of multiple, related genes allows a microRNA to regulate gene networks involved in key biological pathways. Given the importance of microRNAs in coordinating gene expression, it is not surprising that the altered expression of even a single microRNA appears to contribute to a variety of human diseases, including cancer. More than 10 years ago, while working at Ambion, our scientists discovered through extensive microRNA expression and functional assay work on patient tissue samples from different cancers and normal adjacent tissues, that microRNAs are differently expressed in cancer tissue compared to normal adjacent tissue and that several naturally occurring microRNAs function as tumor suppressors by regulating the expression of key oncogenes and preventing the development, progression and dissemination of cancer. Other scientists at leading academic institutions that have also identified the key role that microRNAs play in tumor suppression include Dr. Frank Slack at Yale University, Drs. Carlo Croce and George Calin at Thomas Jefferson University and Ohio State University, Dr. Gregory Hannon at Cold Spring Harbor Laboratory, Dr. Judy Lieberman at Harvard Medical School and Dr. Joshua Mendell at Johns Hopkins University.

        To enable therapeutic application of these tumor suppressor microRNAs, we pioneered technologies for creating RNA molecules that function as natural microRNAs when they enter human

90


Table of Contents

cells. These RNA molecules, which we call microRNA mimics, may be used to replace those tumor suppressor microRNAs that are lost, or underexpressed, in cancer cells. We have designed a proprietary, simple double-stranded microRNA mimic construct for our therapeutic product candidates. The structure of the microRNA mimics we use features two complementary RNA molecules that form a small double-stranded RNA molecule with no overhangs. One strand, the active strand, is an exact copy of the naturally occurring microRNA sequence. The passenger strand is a complement to the active strand with modifications that prevent it from being active in the cytoplasm of the cancer cell, where microRNAs exhibit their cellular function. As discussed further below, we have issued patents and pending patent applications on this design, regardless of therapeutic indications, as well as other intellectual property on multiple specific chemistries and structures that may be used in therapeutic microRNA mimics.

miR-34

        miR-34 is one of the most widely published tumor suppressor microRNAs. Studies have revealed that the levels of miR-34 are reduced in the tumors of patients with a wide variety of cancers, as exemplified in the graph below.

GRAPHIC

        The underexpression of miR-34 in cancers appears to be due to the fact that miR-34 expression is affected by p53, a well-known tumor suppressor that is often mutated and less active in tumors. Published data suggest that miR-34 functions akin to the tumor suppressor function of p53, controlling many genes and pathways that are also associated with p53.

91


Table of Contents

        Based on published reports from microRNA scientists at numerous research institutions, miR-34 plays a key role in controlling the expression of more than 20 oncogenes, as shown in the figure below. This includes targets that are the focus of currently-marketed and investigational cancer drugs, such as inhibitors of: CDK4/6 (palbociclib); MET (cabozantinib, or Cometriq®); MEK (trametinib, or MekinistTM); HDAC1 (vorinostat, or Zolina®); BCL-2 (PNT2258); AXL (BMS-777607); WNT/beta-catenin/LEF1 (vantictumab); BIRC5 (terameprocol); PDGFR-a (CP-868,596); and NOTCH-1 (BMS-906024).

GRAPHIC

        The considerable reduction of miR-34 levels observed in cancer stem cells suggests that the microRNA might play a functional role in preventing normal cells from acquiring stem-like properties like cell self-renewal which can contribute to the development of cancer. In partnership with an academic collaborator, we successfully demonstrated that introducing miR-34 into prostate cancer stem cell populations can significantly reduce their stem-like properties and limit their capacity to form tumors. Similar results have been obtained from studies using pancreatic and gastric cancer stem cells. We believe the ability of miR-34 to inhibit cancer stem cells has significant implications for cancer therapy since the cancer stem cells present in tumors are thought to be the primary drivers of tumor growth, metastasis and resistance to therapy.

microRNA Mimic Delivery

        Systemic delivery of oligonucleotides, including microRNAs, has been a major challenge, principally due to the fact that these molecules have to overcome multiple barriers after intravenous administration before reaching their ultimate place of action, which is the RISC in the cytoplasm of cancer cells. Significant hurdles must be overcome at each step:

        Encapsulation of these oligonucleotides inside delivery nanoparticles overcomes several of these hurdles, and we believe there has been significant progress over the past decade in the design and implementation of novel delivery technologies. Due to the importance of delivery to the success of our product candidates, we have closely monitored progress over the last several years. As a result, our

92


Table of Contents

team is very focused on, and has become very efficient in, assessing and evaluating new and existing technologies for delivery of our microRNA mimics.

        Our initial progress on the systemic delivery of microRNA mimics was achieved through the use of a lipid-oil formulation, known as neutral lipid emulsion, or NLE, which was co-developed and co-patented by our scientists in cooperation with BIOO Scientific Inc. While NLE was used successfully in initial animal experiments, concerns about formulation components led us over the past few years to systematically evaluate more than 10 delivery technologies that were already in, or were close to being in, the clinic. This approach saved us considerable time and costs, as chemistry, manufacturing and control aspects of these delivery systems had already been achieved and included as part of IND applications in conjunction with other pharmaceutical compounds at the FDA and comparable filings with the European Medicines Agency, or EMA. We carried out formal evaluations of these different proprietary delivery systems under material transfer agreements in conjunction with our microRNA mimics, thereby providing us with formulations of our microRNA compounds for in vivo and ex vivo testing. As part of this evaluation program, we looked at several efficacy and safety parameters, as shown below, all of which were considered important in our selection process.

GRAPHIC

        We determined that the Smarticles formulation technology, owned by Marina Biotech, Inc., or Marina, had the most favorable combination of the key parameters of high therapeutic activity and low toxicity, without immunostimulatory activity. In December 2011, we obtained an exclusive license from Marina under its rights to the Smarticles technology. Our license from Marina grants us exclusive rights (including the right to sublicense) under the Smarticles technology to develop, manufacture and commercialize products containing miR-34, and, pursuant to a recent amendment, three other promising tumor suppressor microRNA targets selected by us.

93


Table of Contents

        Smarticles feature amphoteric, pH-sensitive lipids that are positively charged, or cationic, during liposome formation to ensure efficient encapsulation of the negatively charged miR-34 mimic, but these become negatively charged, or anionic, lipid nanoparticles during systemic delivery at normal, neutral to slightly basic, pH levels in serum, thereby minimizing immune stimulation and maximizing circulation time and tissue uptake. The Smarticles formulation demonstrated key benefits in preclinical studies, including the ability to deliver very high numbers of microRNA mimics to tumors, as shown below.

GRAPHIC

        We observed dramatic efficacy using the Smarticles formulation in two orthotopic tumor models of liver cancer, Hep3B and HuH-7, with full regression of established liver tumors at different dose levels and with different treatment regimens. In addition, the Smarticles formulation offers a promising biodistribution pattern after intravenous administration in mice and non-human primates, with delivery of high copy numbers not only to the liver and spleen, which is to be expected with liposomal formulations generally, but also to other highly vascularized tissues, such as lung, adrenal gland, stomach and kidney, and also to bone marrow in non-human primates. As shown in the following figures, the Smarticles formulation was found to deliver to both healthy and cancerous cells, with a high number of copies of the miR-34 mimic delivered to tumors located in the liver, lymph nodes (melanoma metastases), lung and colon, as well as to highly vascularized tissues, including liver, spleen, adrenal gland and kidney.

94


Table of Contents



GRAPHIC

        This pattern of biodistribution upon intravenous administration is also well documented for other liposomal formulations, with highest levels of delivery to the liver and spleen.

        The Smarticles formulation involves negatively charged liposomes, which we believe might limit the liver toxicity and immunostimulatory effects that has plagued positively charged liposomal formulations that have been used for other oligonucleotide-based therapies. There has been no statistically significant elevation in mice and non-human primate cytokine studies with Smarticles-formulated microRNA mimics, or in a human whole blood assay of key human cytokines, indicative of a potentially induced immune response. No significant changes in serum level of cytokines such as interferon-a, TNF-a, IL-1 and IL-12 have been observed. Variable dose-related increases in IL-6 were seen, but these increases were not statistically significant as compared to the control group and were not of a magnitude that we believe would cause clinical concern.

        Based on Smarticles' safety profile and high delivery to the liver, we selected patients with primary liver cancer or solid tumors with liver involvement as the initial target group for testing. We have expanded testing to patients with hematological malignancies based on our internal research and third-party data which support high delivery to the bone marrow and malignant lymphocytes. Although we remain confident in our selection of Smarticles for our lead therapeutic candidate, we are continuing to evaluate different delivery technologies for potential use in conjunction with miR-34 and the other microRNA mimics in our pipeline for the purposes of optimizing delivery of our drug candidates to a broader group of tissues and organs.

Pipeline Products

        We have identified multiple tumor suppressor microRNAs that, like miR-34, have demonstrated the ability to inhibit cancer cell proliferation and tumor growth in preclinical studies by co-regulating the expression of multiple oncogenes. As shown in the table below, each of the tumor suppressor microRNAs regulate a different set of genes, which will influence how effective they might be in treating individuals with different types of cancer. We have chosen MRX34 for our lead therapeutic

95


Table of Contents

candidate based upon the activity of miR-34 across a wide range of cancers, and the multitude of scientific publications demonstrating the profile of miR-34 as a regulator of oncogenic pathways. We believe clinical demonstration of the therapeutic activity of MRX34 will provide proof-of-concept for microRNA replacement therapy generally and not only facilitate the further clinical development of MRX34, but also encourage the clinical development of therapies using other microRNAs in our patent portfolio. The following table summarizes the key oncogenic targets for our most advanced tumor suppressor microRNA mimics in our pipeline.

GRAPHIC

        The selection of additional tumor suppressor microRNAs will depend upon market opportunities and the identification of cancer types for which systemic delivery of a microRNA mimic is possible. Toward this end, we are presently evaluating additional oligonucleotide delivery technologies so that we might identify those that are able to facilitate the accumulation of microRNA mimics to therapeutically active levels in target areas other than the liver, for tumor types where the Smarticles delivery formulation has proven to be insufficient.

MRX34: Our Lead Product Candidate

        The active drug substance within MRX34 is a double-stranded RNA mimic of the tumor suppressor microRNA, miR-34, that inhibits cell cycle progression and induces cancer cell death. We performed cell culture studies that revealed that introducing a mimic of miR-34 into cancer cell lines derived from patients with liver, lung, colon, pancreatic and breast cancers results in significant reductions in cell proliferation. In various preclinical studies, miR-34 also inhibited formation of cancer stem cells, which are believed to contribute to the development, metastasis and therapeutic resistance of tumors. Studies performed at other laboratories have indicated that increasing miR-34 levels also inhibit the proliferation of cancer cells derived from patients with malignant melanoma, B-cell lymphoma and multiple myeloma.

Market Opportunity

        According to the World Health Organization, liver cancer is the third leading cause of cancer deaths worldwide. HCC is the most prevalent form of liver cancer and is the most common cancer in some parts of the world, with more than one million new cases diagnosed each year worldwide according to the National Cancer Institute. According to recent reports from the Centers for Disease Control, HCC rates in the United States are increasing with common risk factors including alcohol consumption, metabolic syndrome, chronic hepatitis B or C infection and Type 2 diabetes. Patients diagnosed with HCC have a poor prognosis, with a very low five-year survival rate of less than 10%. Treatment options include surgical resection, liver transplantation, radiofrequency ablation and

96


Table of Contents

chemoembolization, or delivery of a drug mixed with particles through an arterial catheter directly into the tumor's blood supply. The only systemic drug therapy approved for the treatment of unresectable HCC is the drug sorafenib (Nexavar), which provides a 2.8 months median overall survival benefit based on a median overall survival of 10.7 months compared to 7.9 months for a placebo.

        Non-Hodgkin's lymphomas, or NHL, are a heterogeneous group of lymphoproliferative disorders originating in B- or T-lymphocytes or natural-killer cells. In the United States, approximately 70,000 new cases are diagnosed each year with 19,000 deaths per year. Diffuse large B-cell lymphomas are the most common type of NHL in adults. Follicular lymphoma is the most common subtype of indolent NHL, with a vast majority of cases having deregulated expression of BCL2, a direct target of miR-34. Although a large fraction of patients with NHL can achieve complete response and long-term survival following treatment with a chemo-immunotherapy containing rituximab (Rituxan®), a significant fraction of patients have either refractory disease or disease relapse.

        Lung cancer is the leading cause of cancer deaths worldwide, causing 1.59 million deaths in 2012 according to the World Health Organization. The five-year survival rate for patients with lung cancer is 10-15%. Treatments include surgery and radiation therapy for early stage disease and chemotherapy and targeted therapy for metastatic disease. Most of the lung cancers are classified as NSCLC and currently approved targeted therapies include erlotinib (Tarceva). Even though erlotinib can have dramatic effects against NSCLC, especially those tumors with epidermal growth factor receptor, or EGFR, mutations, virtually all patients become resistant to erlotinib.

MRX34 Clinical Development Program

        We are currently enrolling patients with unresectable primary liver cancer or metastatic solid tumors with liver involvement in a multicenter, open-label Phase 1 clinical trial. We filed our IND application with the FDA on February 27, 2013 for the use of MRX34 in the treatment of patients with unresectable primary liver cancer or metastatic solid tumors with liver involvement. Following the 30-day review period of the application, the IND cleared on March 29, 2013. The Institutional Review Board, or IRB, approved the study protocol on April 9, and the first patient was treated on April 22, 2013. New indications may be added by submitting a protocol amendment to the existing IND application, and we filed our first amendment (sequence 0013) to investigate MRX34 in connection with the treatment of hematological malignancies on January 31, 2014. The primary objectives of the Phase 1 clinical trial, including the hematological malignancy cohort, are to establish the maximum tolerated dose and an appropriate dose for Phase 2 clinical trials. The secondary objectives of the Phase 1 clinical trial are to assess the safety, tolerability and pharmacokinetic profile of MRX34 after intravenous dosing as well as to assess any biological and clinical activity.

        MRX34 is administered as a single agent intravenously twice a week for three weeks with one week off, in 28-day cycles, until disease progression or intolerance. The Phase 1 clinical trial consists of an initial dose-escalation phase of approximately 30 patients, followed by an expansion phase of approximately 18 additional patients after a maximum tolerated dose and recommended Phase 2 doses are identified. In the expansion phase, patients being treated at the recommended Phase 2 dose are required to undergo tumor biopsies to identify potential analytes for assessing activity of miR-34 and/or predicting response to MRX34.

        We currently have five sites in the United States enrolling patients, including the Cancer Treatment and Research Center's Institute for Drug Development at the University of Texas Health Science Center at San Antonio, Texas, The University of Texas Southwestern Medical Center in Dallas, Texas, Virginia Piper Cancer Center at Scottsdale Healthcare Corp, Scottsdale, Arizona, the Mayo Clinic, Phoenix, Arizona, and The University of Texas MD Anderson Cancer Center, Houston, Texas. In addition to our U.S. study sites, we have received approval to add three additional clinical sites in the Republic of Korea, where there is a particularly high incidence of HCC.

97


Table of Contents

        Through the first 47 weeks of our Phase 1 clinical trial, 26 patients have been treated with escalating doses of MRX34, starting at the 10 mg/m2 dose level. All 26 patients experienced at least one adverse event. Fever, chills, fatigue, thrombocytopenia, diarrhea, back pain and nausea were the most common adverse events, some of which were characterized as severe and related to the administration of MRX34. These adverse events associated with MRX34 have been manageable with standard interventions used by oncologists, such as administering other medications that prevent or reduce side effects, temporary slowing of infusions or delaying dosing. One patient with a previous history of kidney injury from prior cisplatin-based chemotherapy developed a dose-limiting toxicity of grade 3 acute kidney injury following MRX34 dosing at 20 mg/m2 dose level. After the MRX34 dose, the patient experienced nausea, vomiting, diarrhea and dehydration, which resulted in acute kidney injury. MRX34 was discontinued with a resolution of the acute kidney injury over the next 2 weeks. Subsequently, 17 additional patients have received MRX34 at higher dose levels, some as high as a 70 mg/m2, without acute kidney injury. The maximum tolerated dose has not been reached and MRX34 dose escalation is continuing with additional patients being enrolled into the study.

        The primary objectives of the Phase 1 clinical trial, including the hematological malignancy cohort, are to establish the maximum tolerated dose and an appropriate dose for Phase 2 clinical trials. Secondary objectives are to assess the safety, tolerability and pharmacokinetic profile of MRX34 after intravenous dosing as well as to assess any biological and clinical activity. This Phase 1 clinical trial is not designed to show statistical significance.

        We believe that, because the tumor suppressor miR-34 has been shown to be underexpressed in many solid tumors and hematological malignancies, there are potential product development and commercial opportunities in tumor types other than the ones we are currently studying in the Phase 1 clinical trial. Biodistribution studies in mouse and non-human primates have shown that MRX34 is distributed to not only liver and spleen, but also in high levels to other highly vascularized tissues such as lung, kidney, adrenals and stomach, and also into bone marrow in non-human primates. We are conducting in vivo studies, either in-house or through academic collaborators, to further support our ability to deliver MRX34 to tissues outside of the liver. For example, our collaborators at Yale University, or Yale, have shown that delivery of MRX34 through tail vein injection in a genetically-engineered mouse model with very aggressive lung cancer leads to tumor growth inhibition and a statistically significant improvement in animal survival with MRX34 compared to placebo.

        Another company in the oligonucleotide space, ProNAi Therapeutics, Inc., recently presented interim data from an ongoing Phase 2 clinical trial in patients with NHL on their lead therapeutic product, PNT2258, which showed that Smarticles are able to deliver oligonucleotide payloads to malignant lymphocytes. Although PNT2258 employs a single-stranded DNA-molecule instead of a double-stranded microRNA mimic, the oligonucleotide of PNT2258 is encapsulated in the same liposomal Smarticles formulation as we are using in MRX34. Based on these encouraging delivery data, we have expanded the current Phase 1 clinical trial for MRX34 to include a separate cohort of approximately 15 patients with hematological malignancies, which could include acute myeloid leukemia, acute lymphoblastic leukemia, chronic lymphoblastic leukemia, chronic myeloid leukemia in accelerated or blast phase, lymphoma, multiple myeloma and myelodysplastic syndrome. These patients are given MRX34 at a daily dosing regimen on the first five days of 21-day cycles until disease progression or intolerance. This portion of the clinical trial is initially enrolling patients at two locations, the Mayo Clinic in Phoenix, Arizona and The University of Texas MD Anderson Cancer Center.

        Furthermore, we have recently shown that intra-peritoneal administration of MRX34 in mice with intra-peritoneally located ovarian cancers leads to accumulation of miR-34 in the tumors. Given the fact that miR-34 is severely underexpressed (> 90%) in either p53 wild-type or p53-mutated ovarian cancers, this might provide another opportunity to pursue a cancer type with high unmet medical need and with the use of a different route of administration.

98


Table of Contents

MRX34 Preclinical Development Program

        We utilized two different models of liver cancer in mice to develop and characterize MRX34. These preclinical studies revealed that intravenous injections of MRX34 caused a greater than 100-fold increase in miR-34 levels in liver tumor cells and a corresponding reduction in the expression of oncogenes that are targets for the natural miR-34. Efficacy studies have revealed that intravenous injections of MRX34 three times per week at doses as low as 0.03 mg/kg and dosing as infrequent as once per week at 3.0 mg/kg can cause mature human primary liver tumors in mice to regress, as shown in the following table.

GRAPHIC

        We compared the therapeutic activity of MRX34 to sorafenib (Nexavar), which is the current standard of care for patients with HCC, in a 16-week orthotopic human liver cancer mouse model. After the human liver tumors were developed in livers of mice over the first four weeks of the study, the mice were dosed for six weeks followed by an additional six weeks of off-treatment monitoring for health and liver tumor growth. We dosed the mice by tail vein injection every other day with MRX34 at a rate of 0.3 mg/kg or by oral daily dosing with sorafenib at a rate of 30 mg/kg. As control groups for our study, we used a phosphate buffered saline buffer as well as a scrambled microRNA sequence formulated in the Smarticles delivery formulation, or miR-NC. Each of the two control groups were dosed by the same route and on the same dosing regimen as MRX34. During the six-week dosing period, as well as during the six-week period after the final dose, we measured the weights of the mice biweekly and conducted health checks twice daily. As shown in the following graph, due to the aggressive nature of these tumors, none of the mice in either of the control groups survived the full duration of the study, as we observed large tumors in each of the mice. By comparison, two of the mice from the sorafenib group did not survive the full duration of the study, while all of the mice from the MRX34 group survived. Following the study, tumors were detected in three of the mice from the sorafenib group, while no tumors were detected in any of the eight mice comprising the MRX34 dosing group. We concluded from the study that the systemic delivery of MRX34 not only led to full

99


Table of Contents

regression of established liver tumors, but also had eliminated the potentially remaining viable liver cancer cells in the mice, with no tumor recurrence during the off-treatment follow-up period.

GRAPHIC

        We believe that the potency exhibited by MRX34 in the liver cancer efficacy studies is derived from the ability of the small microRNA to regulate multiple genes and pathways that are important for HCC development and growth.

        In collaboration with Yale, we evaluated the therapeutic effects of MRX34 in the KRASLSL-G12D/TP53fl/fl genetically engineered mouse model of NSCLC. Orthotopic lung tumors were initiated by the intratracheal delivery of adenovirus carrying cre recombinase, leading to activation of the KRAS mutant and a concomitant loss of p53. Both genetic alterations are common in human lung cancers. Lung lesions typically show an aggressive growth behavior and frequently cause death. Continuous dosing of MRX34 demonstrated a statistically significant prolongation of survival of the tumor-bearing mice relative to mice that were dosed with a Smarticles-formulated negative control microRNA. The results of this study suggest that systemic delivery of MRX34 had a therapeutic effect in orthotopic lung tumors.

GRAPHIC

        We have also evaluated MRX34 using different mouse models of ovarian cancer and confirmed that intraperitoneal injections of the therapeutic candidate produces elevated levels of miR-34 in ovarian tumors growing in the peritoneal space. This suggests that MRX34 might have applications in patients with ovarian cancer.

100


Table of Contents

Combination Therapy for MRX34

        Since most cancer therapeutics are used in combination to increase efficacy while minimizing toxicity, we have initiated a program to evaluate MRX34 in combination with various standard of care cancer drugs. We chose tumor models and chemotherapeutic agents based on the predicted patient profile in our future expanded clinical development program for MRX34. These included patients with primary liver cancer or advanced lung, colon and pancreatic cancers that have metastasized to the liver.

        Using a panel of four human liver cancer cell lines, our in vitro studies have shown that our miR-34 mimic, which is the drug substance of MRX34, cooperates synergistically with sorafenib (Nexavar), which is the standard of care for use in patients with HCC, to inhibit cancer cell proliferation. When used in combination, both the miR-34 mimic and sorafenib were more effective at lower doses both across cell lines and at various drug ratios. Data in Hep3B cells showed that the dose requirement for sorafenib to induce 50% cancer cell inhibition could be reduced by eight- and 19-fold in the presence of 1 nM and 1.6 nM miR-34 mimics, respectively. The dose requirement for the miR-34 mimic to induce 50% cancer cell inhibition could be reduced by up to seven-fold in the presence of sorafenib. The superior inhibitory activity of the combination demonstrated in these in vitro studies was confirmed in an animal study during which mice were treated with the combination or with each of the single agents alone for approximately two weeks. Our data showed that liver tumors from animals treated with the combination were significantly smaller than tumors from animals that received either miR-34 mimic or sorafenib alone.

        In clinical practice, a combination of MRX34 and sorafenib could potentially be more effective by increasing the potency and/or reducing the toxicity of each individual drug, and thus ultimately, once approved and marketed, potentially increase the lifespan of liver cancer patients and significantly expand the market opportunity for both drugs. Cell culture models of human non-small cell lung cancer have been used to show that combining our miR-34 mimic with erlotinib (Tarceva) creates a synergistic effect, and thus yields a potent therapy for non-small cell lung cancer in human cell lines that are resistant to erlotinib alone. This application could significantly increase the number of lung cancer patients who could be treated with erlotinib and also further expand the market potential for MRX34. Additional in vivo testing is in process.

        In collaboration with one of our scientific advisors, Dr. Frank Slack at Yale, we have shown that combining the tumor suppressor microRNAs miR-34 and let-7 in the same Smarticles liposomal delivery formulation leads to superior therapeutic activity in a genetically engineered mouse model of lung cancer. The miR-34 and let-7 combination showed higher level of tumor growth inhibition than either liposomal miR-34 or let-7 alone in this very aggressive lung cancer model. A combination of MRX34 and let-7 or another microRNA mimic could potentially create synergy by increasing the combined potency and thus ultimately, once approved and marketed, potentially increase the lifespan of lung cancer patients and significantly expand the market opportunity for both drugs.

Manufacturing

        We contract with third parties to manufacture our compounds for nonclinical and clinical testing purposes and intend to do so in the future. We also expect to rely upon third parties to produce materials required for the commercial production of our product candidates if we succeed in obtaining the necessary regulatory approvals. We do not currently own or operate facilities for product manufacturing, storage and distribution or testing. We have personnel with the technical, manufacturing, analytical, quality and project management experience to oversee contract manufacturing and testing activities and to compile manufacturing and quality information for our regulatory submissions.

        Manufacturing is subject to extensive regulations that impose various procedural and documentation requirements, which govern recordkeeping, manufacturing processes and controls,

101


Table of Contents

personnel, quality control and quality assurance. Our systems and contractors are required to be in compliance with these regulations, and we assess such compliance regularly through performance monitoring as well as a formal audit program.

        We continue to take steps to reduce our costs by working to improve yield in the manufacturing of the microRNA mimic, the drug substance, the liposomal formulation and the drug product, and we have and will continue to manage our vendor and supplier costs and evaluate alternative manufacturers and suppliers for MRX-34 and our other pipeline candidates. As we move further through clinical development towards commercialization of MRX34 and our other pipeline microRNA mimics, we will need to work with our third party manufacturers to scale up the manufacturing processes for such products, and we expect we will be able to realize additional efficiencies resulting from increased scale of production, which we believe will result in lower costs and better operating margins.

Drug Substance

        We currently use NITTO DENKO Avecia, or Avecia, to manufacture our MRX34 drug substance. We entered into a long term clinical supply agreement with Avecia in March 2012, and we believe that Avecia has the technical, analytical, quality and regulatory expertise to reliably produce our miR-34 mimic in sufficient quantity and of acceptable quality to support our development program through at least Phase 3 clinical studies, and to scale up such manufacturing process to support commercial production of MRX34. To ensure adequate supply and supply continuity, we may evaluate backup suppliers for our MRX34 drug substance, as well as the drug substance for our pipeline microRNA mimics in the future.

        The process for the manufacturing of our miR-34 mimic drug substance utilizes well-established solid phase synthesis chemistry. The raw materials used in the process are readily available from a number of qualified suppliers. We currently rely on Avecia to manage the supply chain for the raw materials used in the process.

Drug Product

        Our drug product for both MRX34 and our other microRNA mimics consists of the drug substance formulated in the Smarticles liposomal delivery system. The drug product is provided as a concentrated, frozen aqueous solution that is defrosted, thawed and diluted for infusion in the clinic.

        Polymun Scientific Immunbiologische Forschung GmbH, or Polymun, located in Austria, is currently the exclusive manufacturer of drug product for our lead therapeutic candidate, MRX34. In November 2012, we entered into a manufacturing and supply agreement with Polymun for the formulation, manufacture and packaging of MRX34 final drug product. Manufacture of the drug product for our microRNA mimics in conjunction with the Smarticles delivery system requires a high level of technical expertise, and Polymun is one of a limited number of contract manufacturers with the knowhow to manufacture drug product for our drug candidate in sufficient quantity and of sufficient quality to meet our projected clinical and commercial needs. We believe that Polymun currently has the capability to provide a sufficient quantity of drug product through at least Phase 3 clinical studies of MRX34, and although Polymun does not currently have the capability to scale up their manufacturing process to support commercialization of MRX34, we believe that Polymun will have sufficiently expanded its operations before we reach potential commercialization of MRX34 such that it should be able to provide a sufficient quantity of drug product to support such commercialization of MRX34. In the meantime, we intend to continue to work with Polymun in relation to both our clinical supply and increasing production capacity for our projected commercial needs, but also to evaluate other potential manufacturers of drug product for our microRNA mimics. See "Business—Strategic Partnerships and Collaborations" for a detailed description of our manufacturing and supply agreement with Polymun, including material terms relating to circumstances permitting termination of this agreement.

102


Table of Contents

        The liposomal formulation manufactured by Polymun is a combination of readily available excipients, plus two lipid specialty excipients which are both currently manufactured by a single supplier. We are actively developing additional suppliers for the key specialty excipients to mitigate our supply chain risk and reduce cost.

        The product is shipped and stored under frozen conditions. Based on current stability studies, we expect that the drug product will be stable over the time period anticipated for currently-planned clinical studies.

Research and Development

        We are conducting clinical trials and other development activities to support the development of MRX34 and our other product candidates. In the years ended December 31, 2011, 2012 and 2013, we incurred $1.0 million, $2.7 million and $4.4 million, respectively, of research and development expense.

Intellectual Property

        We strive to protect and enhance the proprietary technologies that we believe are important to our business, including seeking and maintaining patents intended to cover our products and compositions, their methods of use and any other inventions that are important to the development of our business. We also rely on trade secrets to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.

        Our success will depend in part on our ability to obtain and maintain patent and other proprietary protection for commercially important technology, inventions and knowhow related to our business, defend and enforce our patents, maintain our licenses, preserve our trade secrets and operate without infringing valid and enforceable patents and other proprietary rights of third parties. We also rely on continuing technological innovation and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of microRNA therapeutics. Our objective is to continue to expand our intellectual property portfolio to protect and bolster our position as a leader in the field of microRNA therapeutics.

Our Patent Portfolio

        We are the owner or licensee of a portfolio of patents and patent applications and possess substantial knowhow that protects various aspects of our business. The patent families comprising our patent portfolio are primarily focused on various aspects of microRNA therapeutics, including compositions of various microRNA mimics, such as mimics having particular chemistries, and methods of use as microRNA related therapies, including our lead product candidate MRX34. As of February 28, 2014, our patent portfolio relating to our proprietary microRNA mimics technology included nine issued U.S. patents and over 100 U.S. and foreign pending applications that we either own or have in-licensed from third parties. The expiration dates of the currently issued patents range from 2025 through to 2032.

        We in-license a significant portion of our patent portfolio, relating to methods of use and compositions based on various microRNAs associated with a variety of cancers and certain other diseases, from our founding company, Asuragen, under a fully paid-up, royalty-free, fully sublicensable and irrevocable cross-license granting us exclusive rights to these patents and patent applications in the field of therapeutics. Asuragen retains exclusive rights in these patents in fields outside therapeutics, including diagnostics. To date, the patent families in-licensed from Asuragen have resulted in three issued U.S. patents to various uses related to 14 tumor suppressor microRNAs, and there are multiple applications pending within and outside the United States, including Europe, Canada, Australia and Japan. A fourth issued U.S. patent from these patent families (U.S. Patent No. 8,563,708), claims multiple chemistries and structures used in therapeutic microRNA mimics, including the

103


Table of Contents

double-stranded mimic structure used in MRX34, our lead product candidate. These patent families are also included within the patents licensed under our agreement with Yale, and are therefore subject to the terms of the February 2014 amended and restated agreement as described below in "Strategic Partnerships and Collaborations—Yale University." The '708 patent is currently expected to expire no earlier than 2028, including patent term adjustment, and may be subject to additional extension, including under the Hatch-Waxman Act. We will require Asuragen's cooperation to obtain such term extension, if applicable.

        We are the sole owner of multiple U.S. and foreign patent applications that relate to various aspects of microRNA therapies. Some of these patent families relate to chemically modified versions of miR-34 not currently used in MRX34 and other proprietary compounds that are possible candidates for future product development as microRNA therapeutics. For example, one of our owned patents (U.S. Patent No. 8,586,727) claims miR-34 mimics with certain nucleotide modifications. Assuming all maintenance fees are paid, the '727 patent and any related patents that may issue from this patent family are projected to expire at the earliest in 2032, subject to any adjustment or extension to which we may be entitled under applicable law. The corresponding foreign applications are currently pending in Europe, Canada, Australia, Japan and certain other jurisdictions.

        We are the exclusive licensee under a patent family owned by the University of Zurich relating to treatment of certain types of B-cell lymphoma with certain microRNA mimics, including miR-34. Patent applications from this family are currently pending in the United States and Europe.

        We are the exclusive licensee under a license to one or more patent families owned by Yale relating to uses of the let-7 microRNA. To date, there are two issued U.S. patents and several issued European patents. These patents and patent applications applicable to let-7 are currently expected to expire no earlier than 2025, including patent term adjustment, and may be subject to additional extension, including under the Hatch-Waxman Act.

Patent Term

        The term of individual patents and patent applications in our portfolio will depend upon the legal term of the patents in the countries in which they are obtained. In most countries, the patent term is 20 years from the date of filing of the patent application (or parent application, if applicable). For example, if an international Patent Cooperation Treaty, or PCT, application is filed, any patent issuing from the PCT application in a specific country expires 20 years from the filing date of the PCT application. In the United States, however, if a patent was in force on June 8, 1995, or issued on an application that was filed before June 8, 1995, that patent will have a term that is the greater of twenty years from the filing date or 17 years from the date of issue.

        Under the Hatch-Waxman Act, the term of a patent that covers an FDA-approved drug or biological product may also be eligible for patent term extension, or PTE. PTE permits restoration of a portion of the patent term of a U.S. patent as compensation for the patent term lost during product development and the FDA regulatory review process if approval of the application for the product is the first permitted commercial marketing of a drug or biological product containing the active ingredient. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of a new drug application, or NDA, plus the time between the submission date of an NDA and the approval of that application. The Hatch-Waxman Act permits the owner of a patent to apply for a PTE for only one patent applicable to an approved drug, and the maximum period of restoration is five years beyond the expiration of the patent. A PTE cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, and a patent can only be extended once, and thus, even if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions may be available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of an NDA, we expect to apply for PTEs for patents covering our product candidates and their methods of use, or to work with our licensors, as owners of such patents, to obtain such extensions, if available.

104


Table of Contents

Competition

        The biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies and proprietary products. While we believe that our intellectual property portfolio, scientific expertise and leading clinical position in the microRNA field provide us with competitive advantages, we face potential competition from many different sources, including larger and better-funded pharmaceutical and biotechnology companies. We compete with other companies that are focused on microRNA therapeutics, including both (i) replacement therapy approaches that involve the delivery of mimics, and (ii) inhibition approaches that involve the use of anti-miRs. Any products that we may commercialize will have to compete with existing therapies and new therapies that may become available in the future.

        We are aware of several companies that are working specifically to develop microRNA therapeutics. InteRNA Technologies, or InteRNA, a privately held company based in The Netherlands, also has focused on microRNA replacement therapy with microRNA mimics delivered through liposomal formulations. InteRNA's initial target indication is malignant melanoma, and they are in preclinical development with plans to initiate testing in humans in 2015. MiReven Pty Ltd, or MiReven, a privately held company based in Western Australia, focuses on the replacement of tumor suppressor miR-7 in different tumor types. miR-7 has been shown to inhibit an essential growth receptor for cancer, known as the epidermal growth factor receptor, as well as its associated signaling pathways that promote cancer development. MiReven is in preclinical development and is currently evaluating delivery technologies. miRagen Therapeutics, Inc., or miRagen, a privately held company based in Boulder, Colorado, uses anti-miRs with an initial focus in cardiovascular and metabolic diseases. miRagen is in preclinical development, has entered into a partnership with Laboratoires Servier to focus on three different targets in the cardiovascular and metabolic space and has also expressed interest in pursuing microRNA mimic development, which they call "pro-miRs." Regulus Therapeutics, Inc., or Regulus, is a publicly traded company based in Carlsbad, California, which primarily focuses on anti-miRs technology, or the inhibition of overexpressed microRNAs. Regulus has focused on a number of indications, including hepatitis C, kidney fibrosis and cancer. They initiated their first clinical trial for RG-101, their lead anti-miR therapeutic program, against miR-122 for hepatitis C in March 2014, while other programs are still in preclinical development. Regulus has numerous research and development collaborations with large pharmaceutical and biotechnology companies, including AstraZeneca plc, Biogen Idec, Inc., GlaxoSmithKline plc and Sanofi S.A. Santaris Pharma A/S, or Santaris, is a publicly traded company based in Denmark using RNA-targeted antagonist therapy for diseases including metabolic disorders, infectious and inflammatory diseases, cancer and rare genetic disorders. Santaris has drug candidates in Phase 1 and Phase 2 clinical trials, and their lead therapeutic product, an antagonist to miR-122, has reached late Phase 2 clinical testing for hepatitis C.

        These competitors also compete with us in recruiting human capital and securing licenses to complementary technologies or specific microRNAs that may be critical to the success of our business. They also compete with us for potential funding from the pharmaceutical industry.

Government Regulation

        The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those we are developing. These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and export and import of our product candidates.

105


Table of Contents

        In the United States, the FDA regulates drug products under the Federal Food, Drug and Cosmetic Act, or FFDCA, and the FDA's implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. If we fail to comply with applicable FDA or other requirements at any time during the drug development process, clinical testing, the approval process or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include, among other things, the FDA's refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, product recalls, clinical holds, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution. Any FDA enforcement action could have a material adverse effect on us.

        FDA approval is required before any new unapproved drug or dosage form, including a new use of a previously approved drug, can be marketed in the United States. The process required by the FDA before a drug may be marketed in the United States generally involves:

        The nonclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, if at all. Nonclinical tests include laboratory evaluation of product chemistry, formulation, stability and toxicity, as well as animal studies to assess the characteristics and potential safety and efficacy of the product. The results of nonclinical tests, together with manufacturing information, analytical data and a proposed clinical trial protocol and other information, are submitted as part of an IND to the FDA. Some nonclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises concerns or questions relating to one or more proposed clinical trials and places the clinical trial on a clinical hold, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, a submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development.

        Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the

106


Table of Contents

effectiveness criteria to be used. Each protocol must be submitted to the FDA as part of the IND. An IRB for each medical center proposing to conduct a clinical trial must also review and approve a plan for any clinical trial before it can begin at that center and the IRB must monitor the clinical trial until it is completed. The FDA, the IRB, or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk. Clinical testing also must satisfy cGCP requirements, including the requirement to obtain effective informed consent from study subjects.

        All clinical research performed in the United States in support of an NDA must be authorized in advance by the FDA under the IND regulations and procedures described above. However, a sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA so long as the clinical trial is conducted in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the greater protection to the participants in the clinical trial.

Clinical Trials

        For purposes of NDA submission and approval, clinical trials are typically conducted in three or four sequential phases, which may overlap or be combined.

        The FDA, the IRB or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the study. We may also voluntarily suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

107


Table of Contents

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

New Drug Applications

        The results of nonclinical studies and of the clinical trials, including negative or ambiguous results as well as positive findings, together with other detailed information, including extensive manufacturing information and information on the composition of the drug, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use.

        Once an NDA has been accepted for filing, by law the FDA has 180 days to review the application and respond to the applicant. However, the review process is often significantly extended by FDA requests for additional information or clarification. Under the Prescription Drug User Fee Act, the FDA has a goal of responding to NDAs within 10 months of the filing date for standard review, but this timeframe is also often extended. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving an application, the FDA will inspect the facility or the facilities at which the finished drug product, and sometimes the active drug ingredient, is manufactured, and will not approve the drug unless cGMP compliance is satisfactory. The FDA may also inspect the sites at which the clinical trials were conducted to assess their compliance, and will not approve the drug unless compliance with cGCP requirements is satisfactory.

        After the FDA evaluates the NDA and conducts its inspections, it may issue an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. Even if such data are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret data. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategy, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product's safety and effectiveness after commercialization. Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods after approval to determine the overall survival benefit of the drug. The FDA has the authority to prevent or limit further marketing of a drug based on the results of these post-marketing programs.

        Drugs may be marketed only for the FDA approved indications and in accordance with the provisions of the approved labeling. Further, if there are any modifications to the drug, including

108


Table of Contents

changes in indications, labeling, or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require us to develop additional data or conduct additional nonclinical studies and clinical trials. Depending on the nature of the change proposed, an NDA supplement must be filed and approved before the change may be implemented. For many proposed post-approval changes to an NDA, the FDA has up to 180 days to review the application. As with new NDAs, the review process is often significantly extended by the FDA requests for additional information or clarification.

        The testing and approval processes require substantial time, effort and financial resources, and each may take several years to complete. The FDA may not grant approval on a timely basis, or at all. Even if we believe a clinical trial has demonstrated safety and efficacy of one of our drug candidates for the treatment of a disease, the results may not be satisfactory to the FDA. Nonclinical and clinical data may be interpreted by the FDA in different ways, which could delay, limit or prevent regulatory approval. We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or preclude us from marketing drugs. The FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the drugs.

Other Regulatory Requirements

        Any drugs manufactured or distributed by us or our collaborators pursuant to FDA approvals would be subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences associated with the drug. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural and documentation requirements upon us and our third party manufacturers. Failure to comply with the statutory and regulatory requirements can subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties. We cannot be certain that we or our present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If we or our present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution or withdraw approval of the NDA for that drug.

        The FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available drugs for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers' communications regarding off-label use.

Expedited Review and Accelerated Approval Programs

        A sponsor may seek approval of its product candidate under programs designed to accelerate FDA's review and approval of NDAs. For example, Fast Track Designation may be granted to a drug intended for treatment of a serious or life-threatening disease or condition that has potential to address unmet medical needs for the disease or condition. The key benefits of fast track designation are the

109


Table of Contents

eligibility for priority review, rolling review (submission of portions of an application before the complete marketing application is submitted), and accelerated approval, if relevant criteria are met. Based on results of clinical studies submitted in an NDA, upon the request of an applicant, the FDA may grant the NDA a priority review designation, which sets the target date for FDA action on the application at six months after the FDA accepts the application for filing. Priority review is granted where there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. Priority review designation does not change the scientific/medical standard for approval or the quality of evidence necessary to support approval.

        Under the accelerated approval program, the FDA may approve an NDA on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Post-marketing studies or completion of ongoing studies after marketing approval are generally required to verify the drug's clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit. In addition, the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was enacted and signed into law in 2012, established the new Breakthrough Therapy designation. A sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. We may consider seeking Breakthrough Therapy designation of MRX34 in the future.

Orphan Drug Designation and Exclusivity

        Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally defined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan exclusivity or if FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. However, the FDA can still approve other drugs that have a different active ingredient for use in treating the same indication or disease. While we have not sought or obtained orphan drug designation for MRX34, we plan to seek such designation in the future for HCC, certain hematological malignancies or other potential future indications.

110


Table of Contents

Other Healthcare Laws

        Although we currently do not have any products on the market, if our drug candidates are approved and we begin commercialization, we may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security, price reporting and physician sunshine laws and regulations.

        The Anti-Kickback Statute makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully solicit, receive, offer, or pay any remuneration that is intended to induce the referral of business, including the purchase, order, or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to five years in prison, and can also result in criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, many states have adopted laws similar to the Anti-Kickback Statute. Some of these state prohibitions apply to the referral of patients for healthcare services reimbursed by any insurer, not just federal healthcare programs such as Medicare and Medicaid. Due to the breadth of these federal and state anti-kickback laws, the absence of guidance in the form of regulations or court decisions, and the potential for additional legal or regulatory change in this area, it is possible that our future sales and marketing practices and/or our future relationships with physicians might be challenged under these laws, which could harm us.

        The federal False Claims Act prohibits anyone from knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Although we would not submit claims directly to payors, manufacturers can be held liable under these laws if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products, and the sale and marketing of our products, are subject to scrutiny under this law. For example, pharmaceutical companies have been prosecuted under the federal False Claims Act in connection with their off-label promotion of drugs. Penalties for False Claims Act violations include three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes. If the government were to allege that we were, or convict us of, violating these false claims laws, we could be subject to a substantial fine and may suffer a decline in our stock price. In addition, private individuals have the ability to bring actions under the federal False Claims Act and certain states have enacted laws modeled after the federal False Claims Act.

        In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, imposed new reporting requirements on drug manufacturers for payments made by them, and, in some case, their distributors, to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (and up to an aggregate of $1 million per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests not reported in an annual submission. The period between August 1, 2013 and December 31,

111


Table of Contents

2013 was the first reporting period, and manufacturers were required to report aggregate payment data by March 31, 2014, and will be required to report detailed payment data and submit legal attestation to the accuracy of such data during Phase 2 of the program (which begins in May 2014 and extends for at least 30 days). Thereafter, manufacturers must submit reports by the 90th day of each calendar year thereafter. Such information will be made publicly available on or before September 30, 2014.

        There are also an increasing number of state laws that require manufacturers to implement compliance programs, impose restrictions on drug manufacturer marketing practices and require the tracking and reporting of gifts, compensation and other remuneration to physicians and other health care providers. These laws may affect our sales, marketing and other promotional activities by imposing administrative and compliance burdens on us. In addition, given the lack of clarity with respect to these laws and their implementation, our reporting actions could be subject to the penalty provisions of the pertinent state and federal authorities.

        Because we intend to commercialize products that could be reimbursed under a federal healthcare program and other governmental healthcare programs, we will have to develop a comprehensive compliance program that establishes internal controls to facilitate adherence to the rules and program requirements to which we will or may become subject. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Coverage and Reimbursement

        Sales of our products, if approved, will depend, in part, on the extent to which our products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for certain medical products and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost containment programs, including price controls and restrictions on reimbursement. and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our products once approved or a decision by a third-party payor to not cover our products could reduce or eliminate utilization of our products and have a material adverse effect on our sales, results of operations and financial condition. In addition, state and federal healthcare reform measures have been and 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 products once approved or additional pricing pressures.

Health Care Reform

        In March 2010, the Affordable Care Act, was enacted, which includes measures that have or will significantly change the way health care is financed by both governmental and private insurers. Among the provisions of Affordable Care Act of greatest importance to the pharmaceutical industry are the following:

112


Table of Contents

        Many of the details regarding the implementation of Affordable Care Act are yet to be determined, and, at this time, it remains unclear the full effect that Affordable Care Act would have on our business.

        Other legislative changes have also been proposed and adopted in the United States since the Affordable Care Act was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our future customers and accordingly, our financial operations.

113


Table of Contents

International Regulation

        In addition to regulations in the United States, we, or our collaborators, will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our future drugs. Whether or not we obtain FDA approval for a drug, we or our collaborators must obtain approval of the drug by the comparable regulatory authorities of foreign countries before commencing clinical trials or marketing of the drug in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

        Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized, decentralized or mutual recognition procedure. The centralized procedure provides for the grant of a single marking authorization that is valid for all European Union member states. The decentralized procedure includes selecting one "reference member state," or RMS, and submitting to more than one member state at the same time. The RMS National Competing Authority conducts a detailed review and prepares an assessment report, to which concerned member states provide comment. The mutual recognition procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marking authorization may submit an application to the remaining member states post-initial approval. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval.

        In addition to regulations in Europe and the United States, we, or our collaborators, will be subject to a variety of foreign regulations governing clinical trials and commercial distribution of our future drugs.

Environmental Regulation

        We are subject to numerous foreign, federal, state and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions, product stewardship and end-of-life handling or disposition of products, and environmental protection, including those governing the generation, storage, handling, use, transportation and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. Although the costs to comply with applicable laws and regulations, including requirements in the European Union relating to the restriction of use of hazardous substances in products, have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.

Employees

        As of December 31, 2013, we had 18 full-time employees, of whom two have medical degrees and three have Ph.D. degrees. Of these full-time employees, 14 employees are engaged in research and development activities and four employees are engaged in finance, human resources and general management. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our relations with our employees to be good.

Facilities and Services Agreement with Asuragen

        Our corporate headquarters is located in Austin, Texas. In January 2013, we entered into an agreement with Asuragen under which we share space with Asuragen and Asuragen provides certain services to us. These services include information technology services, facilities-related services,

114


Table of Contents

warehouse services, shipping and receiving and other services. The facility we occupy as a part of this agreement encompasses approximately 9,510 square feet of office and laboratory space, the laboratory space of which we share with Asuragen. The term for the agreement expires in December 2014 but may be terminated earlier by either party with six months' notice. We believe that our facility is currently sufficient to meet our needs and that suitable additional or alternative space would be available to us when needed.

Strategic Partnerships and Collaborations

Asuragen, Inc.

        In 2009, we in-licensed or acquired certain patents and applications relating to certain aspects of microRNA compounds, targets for microRNAs and methods of use of such compounds from our founding company, Asuragen, and entered into a cross license with Asuragen, under which Asuragen granted us an exclusive, fully sublicensable, fully paid-up, royalty-free, perpetual and irrevocable license in the field of therapeutics, under patents and applications retained by it relating to microRNAs and their uses. Asuragen retains all rights in the fields outside therapeutics under the patents and applications that it retained and licensed to us, and we have granted to Asuragen an exclusive (even as to us), fully sublicensable, royalty-free, perpetual and irrevocable license in the field of diagnostics under the patents and applications relating to microRNA that we solely own as a result of the acquisition, and we retain all rights in therapeutics and all other fields outside diagnostics. Under our cross license agreement with Asuragen, as amended in 2012, we have the right to control the prosecution and maintenance of our owned patent families as well as certain patent families owned by Asuragen. Each party retains the right to enforce the patents that it owns against third parties, with the exception of certain foundational patents that are owned by Asuragen. Additionally, certain of these Asuragen patents are included within the patents licensed under our agreement with Yale, and are therefore subject to the terms of the February 2014 amended and restated agreement as described below in "Strategic Partnerships and Collaborations—Yale University."

Marina Biotech, Inc.

        In December 2011, we entered into a license agreement with Marina Biotech, Inc., or Marina, pursuant to which Marina granted us an exclusive license under its proprietary liposomal delivery technology, NOV340, known under the brand name "Smarticles," to develop and commercialize drug products incorporating Smarticles in combination with our lead therapeutic product, MRX34, for the prevention and treatment of cancer and any other disease in humans and animals, with the exception of DNA interference human therapeutic use. In December 2013, the license agreement was amended to modify certain payment obligations with respect to MRX34, and to include within the scope of our exclusive license three additional specific microRNAs selected by us. We are required to use commercially reasonable efforts to commercialize licensed products in specified major markets, and in other markets where we consider it is commercially reasonable to do so. We are responsible, at our cost, for all development of manufacturing processes and scale-up for the licensed technology in connection with our licensed products.

        We have paid Marina approximately $1.7 million in the aggregate to date in up-front and milestone payments and as consideration for the inclusion within the license of the three additional compounds. As we progress development and commercialization of products covered by the license, we will be required to make payments to Marina based upon the achievement of certain development and regulatory milestones, totaling up to $6 million in the aggregate for each licensed product. We are also required to pay up to an additional $4 million per licensed product upon the achievement of certain regulatory milestones for a specified number of additional indications, leading to a maximum cap on all milestone payments of $10 million per product. The exception to this is for our lead therapeutic product, MRX34, where the aggregate of all remaining development and regulatory milestone payments

115


Table of Contents

due to Marina, including for all additional indications, is $4.5 million. In addition to milestone payments, we will be required to pay low single digit royalties on net sales of licensed products other than MRX34, subject to customary reductions and offsets. As a result of our 2013 amendment to our agreement with Marina, we are no longer required to pay a royalty to Marina with respect to sales of our lead therapeutic product, MRX34. For licensed products other than MRX34, our obligation to pay royalties to Marina will expire on a country-by-country and licensed product-by-licensed product basis upon the later of the expiration of all patents covering such licensed product in such country, or 10 years from the first commercial sale of such product in such country. If we sublicense the rights granted to us under the Marina license, we are required to pay a portion of any revenue we receive from such sublicensees at a tiered percentage between the very low single digits and the mid-teens, depending on the circumstances in which the sublicense is entered into.

        We may terminate our agreement with Marina for any reason by giving 60 days' notice to Marina. Either party may terminate the agreement upon the insolvency of the other party or upon 90 days' notice to the other party for the uncured material breach of the agreement, with the exception of non-payment which permits Marina to terminate the agreement upon 30 days' notice to us. Absent earlier termination, our agreement with Marina will remain in force on a licensed product-by-licensed product and country-by-country basis until the earlier of the expiration of our obligation to pay royalties with respect to such licensed product in such country, or the end of the calendar quarter in which sales of a generic version of such licensed product exceed a specified proportion of the aggregate sales of such licensed product in such country.

Yale University

        In 2006, Asuragen entered into an exclusive license agreement with Yale that granted to Asuragen an exclusive, worldwide, fully sublicenseable license for all human therapeutic and diagnostic uses under certain patent rights relating to microRNAs arising from the laboratory of Dr. Frank Slack at Yale. This agreement was assigned to us by Asuragen in connection with our acquisition of certain assets, including patent rights, in 2009. In addition, some of the patent filings in our intellectual property portfolio that are licensed to us by Asuragen are also included in the patents licensed under the Yale agreement as a result of possible co-ownership with Yale of these patents. These patents that are covered by both the Yale and Asuragen licenses include certain patent rights that are currently held solely in the name of Asuragen and cover certain aspects relating to the composition and method of use of specified microRNA mimics, including MRX-34 and let-7, while those patent families that are solely subject to our license from Yale cover certain uses of let-7. In February 2014, we amended and restated our agreement with Yale to modify, among other things, the procedure for determining the inventorship of such patents and applications. Under the terms of our amended and restated agreement with Yale, an independent third party expert will be engaged to determine the inventorship, and hence the ownership, of such patents and applications. These patents and applications will remain subject to all the terms of our license agreement with Yale, irrespective of whether we are, or Yale is, determined to be the inventor and owner of such patents and applications. If Yale is determined to be the inventor and owner, in whole or in part, of any of these patents and applications, we will retain our exclusive license to such patent rights, subject to the terms of the license agreement. Our financial obligations to Yale, if any, will depend on the particular product and Yale's ownership rights in any patents covering such product.

        We are required to use reasonable commercial efforts with respect to development and commercialization of products covered by our license agreement with Yale and to fulfill certain specified development and regulatory diligence criteria, or achieve specified development milestones by specified dates, in some cases subject to an extension upon payment of certain fees, for products covered by the agreement.

116


Table of Contents

        We will be required to pay royalties to Yale on net sales of licensed products that contain specified microRNAs, including MRX34 and products containing let-7, at a percentage ranging from the very low to the low single digits, subject to customary reductions and offsets. Our obligation to pay royalties to Yale will expire on a licensed product-by-licensed product and country-by-country basis upon the earlier of the expiration of the last valid claim of a licensed patent covering such licensed product or the launch of a generic version of such product in such country that has been approved by the applicable regulatory authority in such country. We will also be required to pay to Yale a portion of specified gross revenue that we receive from our sublicensees at percentages ranging from the mid-single digits up to the very low twenties, depending on the particular product and Yale's ownership rights, if any, in the patents covering such product.

        We will also be required to make payments for achievement of certain development and regulatory milestones by products containing one specified microRNA and covered by the licensed patents of up to $600,000 in the aggregate for each such product, subject to reduction in certain circumstances. In addition, we are required to pay an annual license maintenance fee and minimum annual royalties under certain circumstances.

        We have the right to terminate our agreement with Yale for any reason upon three months' written notice to Yale, and either party may terminate the agreement on 60 days' notice for the uncured material breach of the other party. Yale may terminate our agreement, on a licensed product miRNA category-by-licensed product miRNA category basis, if we fail to meet specified diligence obligations within specified time periods, subject to our right to extend such periods with respect to one such product by making specified extension payments and to renegotiate such time periods under certain circumstances with respect to the other two products. Yale may also terminate our agreement in its entirety immediately upon notice to us if we fail to maintain adequate insurance or become insolvent. In the event that our license agreement with Yale is terminated, we would lose our rights under any licensed patents that are solely owned by Yale. With respect to any patents or patent applications that are or are determined to be jointly owned by Asuragen and Yale, although we would retain rights under the Asuragen license with respect to such patents that would remain exclusive as to Asuragen, we would lose our rights under Yale's interest in such patents following any termination of the Yale license. As a result, we would lose our exclusivity with respect to such jointly owned patents in the United States and our ability to exploit the patents outside the United States without cooperation of the co-owner could be impaired. Absent earlier termination, our agreement with Yale will remain in force on a country-by-country basis until the expiration of the last valid claim of the licensed patents, whether owned by us or by Yale.

University of Zurich

        In March 2013, we entered into an exclusive, worldwide, royalty-bearing license, with the right to grant sublicenses, with the University of Zurich under certain patent rights relating to the treatment of certain types of B-cell lymphoma with microRNA mimics, in the fields of therapeutics and diagnostics. We are required to pay an annual license maintenance fee, and upon commercialization of any products covered by the licensed patent rights, we will be required to pay the University of Zurich a royalty on net sales of products covered by the licensed patents by us, our affiliates or sublicensees in the very low single digits, and a portion of other fees received from any sublicensees at a percentage in the mid-teens. We are required to use commercially reasonable efforts to develop, manufacture, sell and market licensed products. If we fail to comply with our diligence obligations, then under certain circumstances, the University of Zurich may terminate our agreement immediately upon notice to us.

        We have the right to terminate our agreement with the University of Zurich for any reason upon six months' prior notice. The University of Zurich may terminate our agreement immediately upon notice to us in certain circumstances if we fail to meet our diligence obligations. The University of Zurich may also terminate the agreement upon 60 days' written notice to us in the event of our

117


Table of Contents

uncured material breach of the agreement, or immediately upon notice to us in the event of our insolvency or if we challenge or assist any third party to challenge the validity of the licensed patents.

CPRIT

        In August 2010, we entered into a grant contract with the Cancer Prevention and Research Institute of Texas, or CPRIT, under which we received a $10.3 million commercialization award from the State of Texas through CPRIT. CPRIT was established to expedite innovation and commercialization in the area of cancer research and to enhance access to evidence-based prevention programs and services throughout the State of Texas. The award was a three-year award that was funded annually, and the contract terminated on January 31, 2014, subject to our receipt of a final payment of approximately $144,000 pending final review by the State of Texas and our obligations to make certain payments that survive termination. Under the terms of the award, we will be required to pay to CPRIT a portion of our revenues from sales of certain products by us, including sales of MRX34, or received from our licensees or sublicensees, at a percentage in the low single digits until the aggregate amount of such payments equals a specified multiple of the grant amount, and thereafter at a rate of less than one percent, subject to our right, under certain circumstances, to make a one-off payment in a specified amount to CPRIT to buy out such payment obligations. We will also be required to repay CPRIT the total amount of the grant proceeds under certain circumstances of relocation of our principal place of business outside Texas during a specified period following the final payment of grant funding to us.

Polymun Scientific Immunbiologische Forschung GmbH

        In November 2012, we entered into a supply agreement with Polymun for the formulation, manufacture and supply of a liposomal formulation of finished drug product for our lead product candidate, MRX34, utilizing the NOV340 Smarticles technology licensed to us by Marina in conjunction with Polymun's proprietary technology relating to the production of liposomal formulations, for use by us in our clinical trials for MRX34. The agreement contains terms and conditions generally consistent with an agreement for manufacture and supply of a pharmaceutical product for clinical purposes, including with respect to supply of product in accordance with specifications and quality assurance and quality control activities. We have also entered into a separate quality agreement with Polymun governing all supply of product under the agreement. Under our agreement with Polymun, we retain all intellectual property rights arising as a result of the activities under the agreement, subject to certain limited exceptions relating to Polymun's proprietary technology. The agreement remains in force until completion of the activities set forth under any statements of work executed under the agreement, unless earlier terminated by either party. Either we or Polymun may terminate the agreement on 30 days' written notice in the event of the other party's uncured material breach or insolvency.

Legal Proceedings

        From time to time, we are subject to various legal proceedings, claims and administrative proceedings that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this prospectus, we do not believe we are party to any claim, proceeding or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

118


Table of Contents


Management

Executive Officers and Directors

        The following table sets forth information regarding our executive officers and directors, as of April 15, 2014:

Name
  Age   Position(s)

Executive Officers

         

Paul Lammers, M.D., M.Sc. 

    56   Director, President and Chief Executive Officer

Jon Irvin

    56   Chief Financial Officer

Sinil Kim, M.D. 

    58   Chief Medical Officer and Vice President of Oncology

Casi DeYoung

    43   Chief Business Officer

Non-Employee Directors

   
 
 

 

Michael Powell, Ph.D.(2)

    59   Chairman of the Board

Elaine V. Jones, Ph.D.(1)

    59   Director

Edward Mathers(2)

    54   Director

Matthew Winkler, Ph.D.(1)

    61   Director

Corey Goodman, Ph.D.(1)

    62   Director

Clay B. Siegall, Ph.D.(2)

    53   Director

(1)
Member of the audit committee.

(2)
Member of the compensation committee.

Executive Officers

        Paul Lammers, M.D., M.Sc. Dr. Paul Lammers has served as a member of our board of directors and as our President and Chief Executive Officer since November 2009. Previously, Dr. Lammers was the President of Repros Therapeutics Inc., or Repros Therapeutics, a biopharmaceutical company, from February 2009 until October 2009. From August 2002 until September 2008, Dr. Lammers served as the Chief Medical Officer for EMD Serono, Inc., a biopharmaceutical division of Merck KGaA, a global pharmaceutical and chemical group. Previously, Dr. Lammers served as the Senior Vice President of clinical and regulatory affairs at Zonagen, Inc., which later became Repros Therapeutics. Dr. Lammers began his career with Organon International, a pharmaceutical company, spending eight years in the commercial and clinical operations in Europe and the United States. Dr. Lammers received a M.Sc. and M.D. from the Catholic University (Radboud University) in Nijmegen, The Netherlands. Dr. Lammers has been chosen to serve on our board of directors due to his management experience in multiple pharmaceutical and biopharmaceutical companies.

        Jon Irvin. Mr. Jon Irvin has served as our Chief Financial Officer since November 2012, first as a Chief Financial Officer Consultant with Bridgepoint Consulting, LLC, or Bridgepoint, a consulting firm providing financial consulting assistance to various organizations, and then as our employee beginning in April 2013. Mr. Irvin was a Chief Financial Officer Consultant with Bridgepoint from March 2012 to June 2013. From December 2010 to March 2012, Mr. Irvin was an independent consultant in Austin, Texas. From September 2005 to December 2010, Mr. Irvin served as the Chief Executive Officer and Vice President of Finance for Voxpath Networks, Inc., a telecommunications and intellectual property company. Previously, Mr. Irvin held various finance positions at Reddwerks Corporation, a software company, Esoterix, Inc., a medical labs company, Topaz Technologies, a pharmaceutical software company, and BioNumerik Pharmaceuticals, Inc., a pharmaceutical company. Mr. Irvin was previously an accountant with Price Waterhouse and Ernst & Young. Mr. Irvin received a B.S. in Accounting from the University of Illinois.

119


Table of Contents

        Sinil Kim, M.D. Dr. Sinil Kim has served as our Chief Medical Officer and Vice President of Oncology since May 2013. Previously, Dr. Kim served as a Senior Director and Global Clinical Leader at Pfizer, Inc., a global pharmaceutical company, from May 2005 until May 2013. Dr. Kim served as a Director of Clinical Oncology with Bristol-Myers Squibb, a global pharmaceutical company, from September 2002 to May 2005. Dr. Kim co-founded DepoTech Corp, a pharmaceutical company, in 1989. Dr. Kim received a B.S. in Chemistry and M.D. from the University of Washington and completed his post-doctoral fellowship in hematology and oncology at the University of California, San Diego.

        Casi DeYoung. Ms. Casi DeYoung has served as our Chief Business Officer since March 2014. From May 2008 to December 2013, Ms. DeYoung served as the Vice President of Business Development for Reata Pharmaceuticals, Inc., a biopharmaceutical company. Previously, Ms. DeYoung served as the Vice President of Business Development for ODC Therapy, Inc., an immunotherapy company. From 2000 to 2005, Ms. DeYoung served in various roles, including the Director of Global Oncology Operations, for EMD Pharmaceuticals, Inc., the U.S. affiliate of Merk KGaA, a global healthcare company. Ms. DeYoung received a B.S. in Chemistry from Southwestern University and an M.B.A. from the University of Texas at Austin.

Board Composition

        Michael Powell, Ph.D. Dr. Michael Powell has served as Chairman of our board of directors since October 2012. Since 1997, Dr. Powell has been a General Partner of Sofinnova Ventures, a venture capital firm. Previously, Dr. Powell has held positions at Genentech, Inc., a biotechnology company, Cytel Inc., a research and development company, and Syntex Research Group, a pharmaceutical company. Dr. Powell is currently a director of Labrys Biologics, Inc., a biotechnology company, Alvine Pharmaceuticals, Inc., a biopharmaceutical company, Ascenta Therapeutics, Inc., a biopharmaceutical company, Catalyst Biosciences, Inc., a biopharmaceutical company, and Ocera Therapeutics, Inc., a publicly traded biopharmaceutical company. Dr. Powell is an Adjunct Professor at the University of Kansas. Dr. Powell is the Board President of the AIDS Vaccine Advocacy Coalition and serves on the advisory board of the Institute for the Advancement of Medical Innovation at the University of Kansas. Dr. Powell received a B.S. in Chemistry from Scarborough College, a Ph.D. in Physical Chemistry from the University of Toronto and completed his post-doctorate work in Bioorganic Chemistry at the University of California. Dr. Powell has been chosen to serve on our board of directors due to his experience with the life sciences and pharmaceutical industries and the venture capital industry.

        Elaine V. Jones, Ph.D. Dr. Elaine V. Jones has served as a member of our board of directors since October 2012. Since December 2008, Dr. Jones has served as Executive Director, Venture Capital of Pfizer Venture Investments, the venture capital arm of Pfizer, Inc., a global pharmaceutical company. Dr. Jones is currently a director of Aquinox Pharmaceuticals, Inc., a publicly-traded pharmaceutical company, where she also serves as the chair of the audit committee. Dr. Jones is also currently a director of Flexion Therapeutics, Inc., a pharmaceutical company, Autifony Therapeutics Ltd., a biotechnology company, and Mission Therapeutics Ltd., a biopharmaceutical company. From 2003 to November 2008, Dr. Jones served as a general partner of Euclid SR Partners, a venture capital firm. From 1999 to 2003, Dr. Jones held various positions at S.R. One, the venture fund of GlaxoSmithKline plc, a global pharmaceutical company. Dr. Jones received a B.S. in Biology from Juniata College and a Ph.D. in Microbiology from the University of Pittsburgh. Dr. Jones has been chosen to serve on our board of directors due to her experience with the life sciences and pharmaceutical industries, pharmaceutical science and the venture capital industry.

        Edward Mathers. Mr. Ed Mathers has served as a member of our board of directors since October 2012. Since August 2008, Mr. Mathers has been a Partner at New Enterprise Associates, Inc., or NEA, a private venture capital firm focusing on technology and healthcare investments. Mr. Mathers serves on the board of directors of Envisia Therapeutics, Inc., a biopharmaceutical company, Liquidia

120


Table of Contents

Technologies, a biotechnology company, Ra Pharmaceuticals, Inc., a pharmaceutical company, Rhythm Pharmaceuticals, a pharmaceutical company, and Lumos Pharma, a biotechnology company. From 2002 to 2008, Mr. Mathers served as Executive Vice President, Corporate Development and Venture at MedImmune, Inc., or MedImmune, and led its venture capital subsidiary, MedImmune Ventures, Inc. Before joining MedImmune in 2002, he was Vice President, Marketing and Corporate Licensing and Acquisitions at Inhale Therapeutic Systems. Previously, Mr. Mathers spent 15 years at Glaxo Wellcome, Inc. where he held various sales and marketing positions. Mr. Mathers received a B.S. in Chemistry from North Carolina State University. Mr. Mathers has been chosen to serve on our board of directors due to his experience with the healthcare and pharmaceutical industries and his broad management experience.

        Matthew Winkler, Ph.D. Dr. Matthew Winkler has served as a member of our board of directors since December 2007. Since January 2013, Dr. Winkler has been the Chairman of the board of directors and the Chief Scientific Officer of Asuragen, Inc., or Asuragen, a molecular diagnostic and pharmacogenomics service company, where he also served as the Chief Executive Officer from March 2006 to December 2012. Prior to Asuragen, Dr. Winkler was the founder and Chief Executive Officer of Ambion, Inc., a privately held company that developed and sold research reagents for RNA analysis. Since June 2010, Dr. Winkler has served on the board of Second Genome, a biotherapeutics company. Dr. Winkler received a B.S. in Genetics and a Ph.D. in Zoology from the University of California at Berkeley. Dr. Winkler has been chosen to serve on our board of directors due to his management experience in the life sciences and pharmaceutical industries.

        Corey Goodman, Ph.D. Dr. Corey S. Goodman has served as a member of our board of directors since December 2009. Since June 2009, Dr. Goodman has been a Managing Partner of venBIO, a private equity firm specializing in life sciences. Dr. Goodman serves as Chairman of the board of directors of Second Genome, Inc., or Second Genome, a biotherapeutics company, Oligasis, a pharmaceutical company, Ossianix, Inc., a biotherapeutics company, Solstice Biologics LLC, or Solstice, a biotherapeutics company, and Labrys Biologics, Inc., or Labrys, a biotechnology company. Previously, Dr. Goodman co-founded each of Labrys, Second Genome, Solstice, Exelixis, Inc., a biopharmaceutical company, and Renovis Surgical Technologies, Inc., or Renovis, a medical device company, and served as Chief Executive Officer of Renovis from 2001 to 2007. From 2007 to May 2009, Dr. Goodman was the President of the Pfizer, Inc. Biotherapeutics and Bioinnovation Center and a member of its executive leadership team. Dr. Goodman has been an Adjunct Professor at the University of California at San Francisco since 2007 and is an elected member of the U.S. National Academy of Sciences, the American Academy of Arts and Sciences and the American Philosophical Society. Dr. Goodman previously served as the Chair of the National Research Council's Board on Life Sciences. Dr. Goodman is also an advisor to several university innovation centers and disease foundations. Dr. Goodman received a B.S. in Biology from Stanford University, a Ph.D. in Neuroscience from the University of California at Berkeley, and was a postdoctoral fellow at the University of California at San Diego. Dr. Goodman has been chosen to serve on our board of directors due to his experience as a venture capital investor, director and executive of multiple biotechnology and pharmaceutical companies.

        Clay B. Siegall, Ph.D. Dr. Clay B. Siegall has served a member of our board of directors since January 2013. Dr. Siegall founded Seattle Genetics, Inc., or Seattle Genetics, a biotechnology company, in 1997, where he has served as the Chief Executive Officer since November 2002, as the President since June 2000 and as the Chairman of the board of directors since March 2004. Dr. Siegall also served as the Chief Scientific Officer of Seattle Genetics from December 1997 until November 2002. Dr. Siegall currently serves on the board of directors of Alder BioPharmaceuticals, Inc., a biopharmaceutical company, and Ultragenyx Pharmaceutical, a pharmaceutical company. Prior to co-founding Seattle Genetics, Dr. Siegall was with the Bristol-Myers Squibb Pharmaceutical Research Institute from 1991 to 1997, most recently as a Principal Scientist. From 1988 to 1991, Dr. Siegall was a Staff Fellow/Biotechnology Fellow at the National Cancer Institute, National Institutes of Health.

121


Table of Contents

Dr. Siegall received a B.S. in Zoology from the University of Maryland and a Ph.D. in Genetics from George Washington University. Dr. Siegall has been chosen to serve on our board of directors due to his experience as a director and executive of multiple healthcare and biopharmaceutical companies.

Director Independence

        Our board of directors currently consists of seven members. Our board of directors has determined that          of our directors, other than Dr. Paul Lammers, qualify as "independent" directors in accordance with the NASDAQ listing requirements. Dr. Lammers is not considered independent because he is an employee of Mirna. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In addition, as required by NASDAQ rules, our board of directors has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director's business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

        In accordance with our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the consummation of this offering, our directors will be divided among the three classes as follows:

        Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company.

Voting Arrangements

        Pursuant to an amended and restated voting agreement, as amended, that we entered into with certain holders of our common stock and certain holders of our convertible preferred stock:

122


Table of Contents

        The holders of our common stock and convertible preferred stock who are parties to the amended and restated voting agreement, as amended, are obligated to vote for such designees. The provisions of this voting agreement will terminate upon the consummation of this offering and there will be no further contractual obligations regarding the election of our directors. Our directors hold office until their successors have been elected and qualified or appointed, or the earlier of their death, resignation or removal.

Leadership Structure of the Board

        Our board of directors has separated the positions of Chairman of the board and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the board to lead the board in its fundamental role of providing advice to and independent oversight of management. The board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as Chairman of the board, particularly as the board's oversight responsibilities continue to grow. While our bylaws and corporate governance guidelines do not require that our Chairman and Chief Executive Officer positions be separate, the board believes that having separate positions and having an independent outside director serve as Chairman is the appropriate leadership structure for the company at this time and demonstrates our commitment to good corporate governance. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.

Role of Board in Risk Oversight Process

        Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

123


Table of Contents

        Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure, our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The audit committee also monitors compliance with legal and regulatory requirements. Our nominating and governance committee monitors the effectiveness of our corporate governance guidelines and considers and approves or disapproves any related-persons transactions. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Audit Committee

        Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee:

        The current members of our audit committee are                            ,                             , and                            .                             serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. Our board of directors has determined that                            is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. Under the rules of the SEC, members of the audit committee must also meet heightened independence standards. However, a minority of the members of the audit committee may be exempt from the heightened audit committee independence standards for one year from the date of effectiveness of the registration statement of which this prospectus forms a part. Our board of directors has determined that each of                            ,                             and                             are independent under the applicable rules of

124


Table of Contents

NASDAQ. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ.

Compensation Committee

        Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and recommends corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives and recommends to our board of directors the compensation of these officers based on such evaluations. The compensation committee also recommends to our board of directors the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance by the compensation committee with its charter. The current members of our compensation committee are                            ,                             and                             .                             serves as the chairperson of the committee. Each of the members of our compensation committee is independent under the applicable rules and regulations of NASDAQ, is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act and is an "outside director" as that term is defined in Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, or Section 162(m). The compensation committee operates under a written charter.

Nominating and Corporate Governance Committee

        The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters. The current members of our nominating and corporate governance committee are                             ,                             and                             .                             serves as the chairman of the committee. Each of the members of our nominating and corporate governance committee is an independent director under the applicable rules and regulations of NASDAQ relating to nominating and corporate governance committee independence. The nominating and corporate governance committee operates under a written charter.

Compensation Committee Interlocks and Insider Participation

        During 2013, each of Michael Powell, Ph.D., Edward Mathers, and Clay Siegall, Ph.D. served as members of our compensation committee. Paul Lammers, M.D., M.Sc., our Chief Executive Officer, also served as a member of our compensation committee for a period of five months until Dr. Siegall was appointed by our board to replace Dr. Lammers as a member on June 6, 2013. Other than Dr. Lammers, none of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers on our board of directors or compensation committee.

Board Diversity

        Upon consummation of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for

125


Table of Contents

election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:

        Currently, our board of directors evaluates, and following the consummation of this offering will continue to evaluate, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

Code of Business Conduct and Ethics

        We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Following the consummation of this offering, the code of business conduct and ethics will be available on our website at www.mirnarx.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website. The reference to our web address does not constitute incorporation by reference of the information contained at or available through our website.

Limitation on Liability and Indemnification Matters

        Our amended and restated certificate of incorporation, which will become effective immediately prior to the consummation of this offering, or our amended and restated certificate of incorporation, contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for: