Longboard Pharmaceuticals, Inc. LBPH  $14.00-$16.00 5.0 million shares Underwriters: Citigroup, Evercore ISI, Guggenheim Securities, Cantor   Co-Managers:  Proposed trade date of 3/12  They are a clinical-stage biopharmaceutical company focused on developing novel, transformative medicines for neurological diseases.

Longboard Pharmaceuticals, Inc.  LBPH

• 5,000,000 shares to be offered between $14.00 and $16.00 per share
• Underwriters: Citigroup, Evercore ISI, Guggenheim Securities, Cantor Co-Managers:
• Proposed trade date of 3/12
• Rating = 3

Click here to view the prospectus.

https://www.sec.gov/Archives/edgar/data/1832168/000119312521072157/d16883ds1a.htm

Company Overview

They are a clinical-stage biopharmaceutical company focused on developing novel, transformative medicines for neurological diseases. They were formed in January 2020 by Arena Pharmaceuticals, Inc. (Arena) to advance a portfolio of centrally acting product candidates designed to be highly selective for specific G protein-coupled receptors (GPCRs). Their small molecule product candidates were discovered out of the same platform at Arena that represents a culmination of more than 20 years of GPCR research. Their pipeline includes:

They also have additional earlier discovery stage compounds.

LP352, their most advanced product candidate, is an oral, centrally acting, 5-HT2c superagonist with negligible observed impact on 5-HT2b and 5-HT2a receptor subtypes in their preclinical studies to date. 5-HT2b and 5-HT2a receptor agonism have been associated with significant adverse side effects, including valvular heart disease and pulmonary arterial hypertension in the case of the 5-HT2b receptor, and hallucinations and mild to severe anxiety in the case of the 5-H2Ta receptor. LP352 has the potential to be a clinically differentiated 5-HT2c superagonist for patients with DEEs, a group of severe early-childhood onset epilepsies characterized by refractory seizures and developmental delay or regression. Certain compounds in the 5-HT2c agonist class have been shown to produce clinical benefit in epilepsy patients, although the side effect profiles of available non-selective 5-HT2 therapies may limit their use due to their activity on receptor subtypes 5-HT2b and 5-HT2a. Fenfluramine, marketed as FINTEPLA, a non-specific 5-HT2 agonist, was recently approved for the treatment of seizures associated with Dravet syndrome by the U.S. Food and Drug Administration (FDA). Fenfluramine has been associated with significant side effects and FINTEPLA has a Risk Evaluation and Mitigation Strategy (REMS) program requirement and a boxed warning. Another 5-HT2c agonist, lorcaserin, is also under evaluation for its potential to reduce seizures in patients with Dravet syndrome and refractory epilepsies. Lorcaserin was discovered by Arena and approved by the FDA for chronic weight management, marketed as BELVIQ by Eisai Inc. and Eisai Co. Ltd. (collectively, Eisai), and withdrawn from the market at the request of the FDA based on a change in the FDA’s risk-benefit assessment for the approved indication. However, the FDA authorized an expanded access program for patients with Dravet syndrome and other refractory epilepsies to continue to receive lorcaserin. An expanded access program allows patients with an immediately life-threatening condition or serious disease or condition to gain access to an investigational medical product for treatment outside of clinical trials when no comparable or satisfactory alternative therapy options are available. LP352 was designed and developed by Arena to be the next generation to lorcaserin, with the goal of being a safer and more effective 5-HT2c agonist. They believe LP352’s potential for high selectivity and novel chemistry may reduce seizures in DEE patients and overcome the known or perceived safety limitations of available drugs in the 5-HT2 class. In the completed single-ascending dose (SAD) portion of the Phase 1 clinical trial, there were no unexpected adverse events (AEs) observed and no cases of serious adverse events (SAEs) reported.

They are also developing LP143, a CB2 agonist that showed 1,000 times greater selectivity for CB2 than CB1 in preclinical studies, and LP659, a S1P1,5 receptor agonist. Based on their novel chemistry, potential for high selectivity for specific subtypes of GPCRs and favorable blood-brain-barrier penetration, they believe these compounds have the potential to address microglial neuroinflammation, which may drive disease progression in a range of neurodegenerative diseases. LP143 and LP659 were designed by Arena to have more optimized pharmacology and pharmacokinetics (PK) for their intended GPCR targets, including GPCR subtypes, compared to other known compounds. They believe this potential selectivity and specificity could result in superior profiles in the clinic compared to drugs that may not fully engage the intended GPCR target, may cause off-target activity, or may be associated with other undesirable effects. LP143 is a centrally acting, full CB2 agonist being developed for the treatment of neurodegenerative diseases associated with neuroinflammation caused by microglial activation, including ALS. CB2 agonism has been shown in studies to regulate neuroinflammatory processes, including microglial activation, reducing the amount of damage characteristic of degeneration. LP659 is a centrally acting, S1P1,5 receptor modulator for which aberrant modulation has been shown to be involved in a wide range of neurodegenerative diseases.

Their Pipeline

The following table provides an overview of their current programs:

LP352

 They are developing LP352, an oral, centrally acting, 5-HT2c superagonist for DEEs and other epileptic disorders. DEEs are a group of severe early-childhood onset epilepsies characterized by refractory seizures and developmental delay or regression. These diseases are often progressive and resistant to treatment. DEEs encompass a diverse range of etiologies and includes Dravet syndrome and Lennox-Gastaut syndrome, among others. Based on a 2015 U.S. incidence rate for Dravet syndrome and a 2007 incidence rate for Lennox-Gastaut syndrome, there are an estimated 21,000 patients with Dravet syndrome and 47,000 patients with Lennox-Gastaut syndrome in the United States. Based on a 2021 European Union (EU) incidence rate, there are an estimated 21,000 patients with Dravet syndrome in the EU. The number of patients with Lennox-Gastaut syndrome in the EU is less known. LP352 selectively targets the 5-HT2c receptor, which has been shown to upregulate the release of gamma-aminobutyric acid (GABA), a principal neurotransmitter in the brain. This release of GABA increases the threshold for neuronal hyperexcitability, and decreases the likelihood of seizure occurrences. They believe LP352 has the mechanistic potential to reduce the frequency of seizures in Dravet syndrome and Lennox-Gastaut syndrome, as well as a broader epilepsy population.

 They are investigating LP352 in a Phase 1 clinical trial for which the SAD portion has been completed. Initial PK data from the SAD portion of the clinical trial demonstrated dose dependent PK properties with proportional increases in area under the curve (AUC) and maximum serum concentrations (Cmax). No unexpected AEs were observed and no SAEs were reported. They initiated the MAD portion of this clinical trial in February 2021, and expect to report topline data for this portion in the second half of this year. They plan to initiate a Phase 1b/2a clinical trial in the first quarter of 2022, pending authorization to proceed under an IND they intend to submit to the FDA’s Division of Neurology. 

LP143

 They are developing LP143, a centrally acting, full CB2 agonist for neurodegenerative diseases associated with neuroinflammation caused by microglial activation. CB2 agonism has been shown in preclinical studies to regulate neuroinflammatory processes, reducing the neuronal damage characteristic of degeneration. They believe there is a strong rationale for CB2 agonism in neurodegenerative diseases, given increased CB2 expression in patients with these diseases as well as results from animal models. They see potential for a selective CB2 agonist to treat a range of neurodegenerative diseases. LP143, through its selectivity for CB2 versus the cannabinoid type 1 receptor (CB1), was designed to minimize the risk of psychoactive AEs associated with CB1 activation. Their initial focus is on ALS. Most ALS patients experience rapid disease progression and poor prognosis, with paralysis and death seen within a span of two to five years. Preclinical data have demonstrated the benefit of CB2 agonism in a mouse model of ALS, with treated mice demonstrating delays in loss of motor function and improved survival. In preclinical studies, LP143 has demonstrated 1,000-fold greater selectivity for CB2 over CB1, sustained activity over the duration of treatment, and favorable blood-brain-barrier penetration. LP143 is currently in IND-enabling studies and they anticipate submitting an IND to the FDA in the first quarter of 2022.

 LP659

They are developing LP659, a centrally acting, S1P1,5 receptor modulator for neurodegenerative diseases. LP659 was designed for optimized pharmacology, PK and engagement of S1P1,5, which may lead to improved efficacy and safety. LP659 was designed to avoid the negative effects connected to the receptor subtypes 2 and 3, which may be associated with more serious, off-target cardiac, pulmonary, and cancer-related effects. Aberrant S1P receptor modulation has been shown to be involved in a wide range of neurodegenerative diseases, including multiple sclerosis, lupus, Parkinson’s disease and Alzheimer’s disease. Preclinical data demonstrated an initial dose-dependent decrease in disease progression over 17 days in a mouse model of demyelinating disease. LP659 rapidly reduced circulating lymphocytes, which returned to baseline after its clearance. They believe LP659 has high oral bioavailability with a direct impact on CNS glial cell S1P receptors. LP659 is currently in IND-enabling studies and they anticipate submitting an IND to the FDA in the second half of 2022.

Their Company History

They were established in January 2020 as Arena Neuroscience, Inc., a wholly owned subsidiary of Arena, based in San Diego, California. They changed their name to Longboard Pharmaceuticals, Inc. and launched as an independent company in October 2020. Building on Arena’s 20-year history in discovering, developing and optimizing GPCR therapies, they believe they are well positioned to execute their clinical development programs. They are initially focused on developing LP352, LP143, and LP659, which Arena designed to have distinct chemistry and therapeutic profiles from Arena’s other product candidates with similar mechanisms of actions.

IPO Detail

This is the initial public offering of Longboard Pharmaceuticals, Inc. and no public market currently exists for its common stock. Longboard Pharmaceuticals, Inc. is offering 5,000,000 shares of common stock as described in the prospectus. The company expects the initial public offering price of its common stock to be between $14.00 and $16.00 per share. The company has applied to list its common stock on the NASDAQ Global Market under the symbol “LBPH.”

They have two classes of common stock: the voting common stock offered hereby and non-voting common stock. The rights of the holders of common stock and non-voting common stock are identical, except with respect to voting and conversion. Each share of common stock is entitled to one vote and is not convertible into any other class of their share capital. Shares of non-voting common stock are non-voting, except as may be required by law. Each share of non-voting common stock may be converted at any time into one share of common stock at the option of its holder, subject to the beneficial ownership limitations provided for in their amended and restated certificate of incorporation.

They have entered into an Exchange Agreement, dated March 5, 2021, with certain holders of their Series A preferred stock , pursuant to which they agreed to issue, immediately prior to the closing of this offering, newly issued shares of their non-voting common stock in exchange for outstanding shares of their Series A preferred stock, in an amount such that shares held by such holder, including any shares purchased in this offering and shares of voting common stock issued upon conversion of Series A preferred stock, will result in such holder beneficially owning not more than 9.99% of their common stock as of immediately following the closing of this offering

Use of Proceeds

They estimate that their net proceeds from this offering will be approximately $67.4 million (or approximately $77.9 million if the underwriters exercise their option to purchase additional shares of their common stock in full). They anticipate that they will use the net proceeds of this offering, together with their existing cash and cash equivalents, as follows:

They may also use a portion of the remaining net proceeds from this offering to in-license, acquire, or invest in complementary businesses, technologies, products or assets. However, they have no current commitments or obligations to do so.

They believe, based on their current operating plan, that the net proceeds from this offering, together with their existing cash and cash equivalents, will be sufficient to fund their operations for at least the next 24 months. It is difficult to predict the cost and timing required to complete their clinical trials due to, among other factors, their lack of experience as a company with initiating and conducting clinical trials, filing requirements with and feedback from various regulatory agencies, the rate of patient enrollment in their planned clinical trials, clinical trial results, any impacts from the COVID-19 pandemic, and the actual costs of manufacturing and supplying their product candidates.

Competition

Market Opportunity

Overview of the Forms of Epilepsy

 Epilepsy spans all age groups and in many cases is debilitating, with a large portion of patients resistant to pharmacologic treatment, underscoring a large unmet need. Epilepsy is currently estimated to affect up to 1.2% percent of the U.S. population or approximately 3.4 million individuals, with roughly 150,000 new cases diagnosed each year. They are initially focused on DEEs, which are a group of severe early childhood-onset epilepsies characterized by refractory seizures and developmental delay or regression and include Dravet syndrome and Lennox-Gastaut syndrome, among others, but the 5-HT2c pathway has been implicated in a broader set of epilepsies. Based on a 2015 U.S. incidence rate for Dravet syndrome and a 2007 incidence rate for Lennox-Gastaut syndrome, there are an estimated 21,000 patients with Dravet syndrome and 47,000 patients with Lennox-Gastaut syndrome in the United States. Based on a 2021 European Union (EU) incidence rate, there are an estimated 21,000 patients with Dravet syndrome in the EU. The number of patients with Lennox-Gastaut syndrome in the EU is less known.

• Dravet Syndrome—Dravet syndrome is an early childhood-onset CNS disease that results in severe epileptic seizures typically occurring within the first year after birth. Incidence for Dravet syndrome is approximately 1:15,000 in the United States, and 90% of the associated mutations are de novo (not passed from a parent). Mortality rate for Dravet syndrome patients is higher than general epilepsy patients, with a rate of 15-20% by adulthood. The disease is genetically linked, with 70% to 85% of cases characterized by mutations in the SCN1A gene. Mutations cause defects in the function of the sodium ion channel. Seizures due to Dravet syndrome are typically difficult to control and require life-long treatment.
• Lennox Gastaut Syndrome—Lennox-Gastaut syndrome is a severe form of childhood-onset epilepsy with prevalence of approximately 1:7,000 in the United States. The age of onset is typically between three and five years and affected children typically experience cognitive dysfunction, leading to developmental and behavioral problems. Lennox-Gastaut syndrome is characterized by multiple seizure types, with the most common associated seizures being tonic and atonic seizures. Seizures due to Lennox-Gastaut syndrome are difficult to control and generally require life-long treatment. The pathophysiology of Lennox-Gastaut syndrome is less well-known than that of Dravet syndrome.

ALS Background

Disease Overview—ALS is a progressive nervous system disease that leads to muscle weakness and paralysis. The disease is characterized by rapid progression of muscle wasting and weakness until death ensues due to respiratory muscle failure. Most ALS patients experience rapid disease progression and poor prognosis, with paralysis and death seen within a span of two to five years from diagnosis. The prevalence in the United States was estimated at approximately 16,000 people as of 2015 and the prevalence in the EU is estimated at approximately 29,000 people as of 2015. The rate of incidence is estimated at 2:100,000 people, with approximately 5,000 people in the United States diagnosed each year. The primary pathology associated with ALS involves motor neuron degeneration. Most causes of ALS are unknown, with two primary suggested theories involving neuroinflammation and oxidative damage. There is a growing body of evidence that microglia, a type of non-neuronal (glial) cell located throughout the brain and spinal cord, are activated in ALS and are key to motor neuron degeneration and disease progression. It is also believed that ALS could have multifactorial etiology, with environmental factors contributing to disease pathology.

 Current Treatment Paradigm—There is currently no cure for ALS. Rilutek (riluzole) and Radicava (edaravone) are the only FDA approved drugs to slow disease progression in ALS but there remains significant unmet medical need. Rilutek was approved by the FDA in 1995 as the first treatment for ALS. The approval was based on two studies demonstrating a survival benefit of two to three months. Radicava was approved by the FDA in 2017 based on the findings of a Phase 3 clinical trial conducted in Japan. Results showed patients on Radicava experienced a 33% slower decline in their ability to perform everyday activities versus patients on a placebo. Radicava did not demonstrate a significant survival benefit.

Target Markets

Company's Unique Strengths

LP352, their most advanced product candidate, is an oral, centrally acting, 5-HT2c superagonist with negligible observed impact on 5-HT2b and 5-HT2a receptor subtypes in their preclinical studies to date. 

In the SAD and food effect portions of the clinical trial, LP352 demonstrated favorable PK and pharmacodynamic effects (with target plasma exposure (minimum serum concentration) measured based on prolactin levels), including dose dependent PK properties with proportional increases in AUC and Cmax.

Preclinical data have demonstrated the benefit of CB2 agonism in a mouse model of ALS, with treated mice demonstrating delays in loss of motor function and improved survival.

In preclinical studies, LP143 has demonstrated 1,000-fold greater selectivity for CB2 over CB1, sustained activity over the duration of treatment, and favorable blood-brain-barrier penetration. 

LP659 acts as a S1P1 and S1P5 receptor subtypes modulator with no observed impact on S1P2 or S1P3 and has been selectively developed to cross the blood-brain barrier and target neurodegenerative diseases. The S1P receptor has been well-validated in slowing the progression of neurodegeneration, notably in multiple sclerosis, for which disease area the FDA has approved three S1P receptor modulators. LP659 was designed to avoid the negative effects connected to the receptor subtypes 2 and 3, which may be associated with more serious, off-target cardiac, pulmonary, and cancer-related effects.

Company's Unique Risks

They have a very limited operating history, and they have incurred losses since their inception and anticipate that they will continue to incur significant losses for the foreseeable future. They may never generate any revenue or become profitable or, if they achieve profitability, they may not be able to sustain it. They were incorporated in January 2020 and they have a very limited operating history upon which you can evaluate their business and prospects. Their operations to date have been primarily focused on organizing and staffing their company, research and development activities, business planning, raising capital, in-licensing intellectual property rights and establishing their intellectual property portfolio, and providing general and administrative support for these operations. LP352, their most advanced product candidate, is in early clinical development, while their other product candidates, LP143 and LP659, are in the preclinical stage.

Even if this offering is successful, they will require substantial additional capital to finance their operations, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force them to delay, limit or terminate certain of their product development efforts or other operations.

They are early in their development efforts and have only one product candidate, LP352, in early clinical development. All of their other product candidates are in the preclinical stage. If they are unable to advance their product candidates in clinical development, obtain regulatory approval and ultimately commercialize their product candidates, or experience significant delays in doing so, their business will be materially harmed.

They are in the process of completing their first Phase 1 clinical trial, have never conducted later-stage clinical trials or submitted an NDA, and may be unable to do so for any of their product candidates.

They currently have no marketing and sales organization and have no experience as a company in commercializing products, and they may have to invest significant resources to develop these capabilities. If they are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell their products, they may not be able to generate product revenue.

Coverage and adequate reimbursement may not be available for their current or any future product candidates, which could make it difficult for them to sell profitably, if approved.

They depend on intellectual property licensed from Arena, the termination of which could result in the loss of significant rights, which would harm their business.

They do not have their own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of their current and any future product candidates. This reliance on third parties increases the risk that they will not have sufficient quantities of their product candidates or such quantities at an acceptable cost, which could delay, prevent or impair their development or commercialization efforts.

They intend to rely on third parties to conduct, supervise and monitor their preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm their business.

Reliance on third parties requires them to share their trade secrets, which increases the possibility that a competitor will discover them or that their trade secrets will be misappropriated or disclosed.

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

Arena currently performs or supports many of their operating activities and will continue to do so after the closing of this offering pursuant to a services agreement, and if they are unable to replicate or replace these functions if this services agreement is terminated, their operations could be adversely affected.

COVID-19 has impacted and could continue to adversely impact their business. As a result of the COVID-19 pandemic, they have faced and may continue to face delays in meeting their anticipated timelines for their ongoing and planned clinical trials. Specifically, the initiation of the MAD portion of the Phase 1 clinical trial of LP352 was delayed, in part, as a result of the impact of the COVID-19 pandemic on the clinical site in the United Kingdom that conducted the SAD portion of the Phase 1 clinical trial for LP352, and subsequently they modified the protocol and relocated the MAD portion of such trial to a new clinical site in the United States. 

Their principal stockholders and management own a significant percentage of their stock and will be able to exert significant control over matters subject to stockholder approval. Prior to this offering, their executive officers, current directors, greater than 5% holders, and their affiliates beneficially owned approximately 93.3% of their common stock as of December 31, 2020, assuming the automatic conversion of all 5,600,000 outstanding shares of their Series A preferred stock into 7,728,000 shares of their common stock upon the closing of this offering and giving no effect to the Exchange. Upon the closing of this offering, that same group will hold approximately 57.3% of their outstanding common stock, assuming (i) the issuance of 3,629,400 shares of non-voting common stock in exchange for 2,630,000 shares of Series A preferred stock pursuant to the Exchange, (ii) the automatic conversion of 2,970,000 outstanding shares of their Series A preferred stock into 4,098,600 shares of their common stock, and (iii) the sale of 5,000,000 shares of common stock in this offering. Therefore, even after this offering, these stockholders will have the ability to influence them through this ownership position.

The dual class structure of their common stock may limit your ability to influence corporate matters and may limit your visibility with respect to certain transactions. The dual class structure of their common stock may limit your ability to influence corporate matters. Holders of their common stock are entitled to one vote per share, while holders of their non-voting common stock are not entitled to any votes. Nonetheless, each share of their non-voting common stock may be converted at any time into one share of their common stock at the option of its holder by providing written notice to them, subject to the limitations provided for in their amended and restated certificate of incorporation to become effective upon the closing of this offering. Consequently, if holders of their non-voting common stock following this offering exercise their option to make this conversion, this will have the effect of increasing the relative voting power of those prior holders of their non-voting common stock, and correspondingly decreasing the voting power of the holders of their common stock, which may limit your ability to influence corporate matters.

Participation in this offering by certain of their existing stockholders and their affiliated entities may reduce the public float for their common stock. If any of their existing stockholders and their affiliated entities purchase shares of their common stock in this offering, such purchases would reduce the available public float of their common stock because such purchasers would be restricted from selling such shares during the 180-day period following this offering and thereafter would be subject to volume limitations pursuant to restrictions under applicable securities laws. As a result, any purchase of shares of their common stock by their existing stockholders and their affiliated entities in this offering will reduce the liquidity of their common stock relative to what it would have been had these shares been purchased by investors that were not their stockholders.

Bottom Line

They are a clinical-stage biopharmaceutical company focused on developing novel, transformative medicines for neurological diseases. They were formed in January 2020 by Arena Pharmaceuticals, Inc. (Arena) to advance a portfolio of centrally acting product candidates designed to be highly selective for specific G protein-coupled receptors (GPCRs). LP352, their most advanced product candidate, is an oral, centrally acting, 5-HT2c superagonist with negligible observed impact on 5-HT2b and 5-HT2a receptor subtypes in their preclinical studies to date. LP352 has the potential to be a clinically differentiated 5-HT2c superagonist for patients with DEEs, a group of severe early-childhood onset epilepsies characterized by refractory seizures and developmental delay or regression. They believe LP352’s potential for high selectivity and novel chemistry may reduce seizures in DEE patients and overcome the known or perceived safety limitations of available drugs in the 5-HT2 class. Based on their novel chemistry, potential for high selectivity for specific subtypes of GPCRs and favorable blood-brain-barrier penetration, they believe these compounds have the potential to address microglial neuroinflammation, which may drive disease progression in a range of neurodegenerative diseases. CB2 agonism has been shown in studies to regulate neuroinflammatory processes, including microglial activation, reducing the amount of damage characteristic of degeneration. LP659 is a centrally acting, S1P1,5 receptor modulator for which aberrant modulation has been shown to be involved in a wide range of neurodegenerative diseases. They are developing LP659, a centrally acting, S1P1,5 receptor modulator for neurodegenerative diseases. LP659 was designed for optimized pharmacology, PK and engagement of S1P1,5, which may lead to improved efficacy and safety. LP659 was designed to avoid the negative effects connected to the receptor subtypes 2 and 3, which may be associated with more serious, off-target cardiac, pulmonary, and cancer-related effects.

Epilepsy is currently estimated to affect up to 1.2% percent of the U.S. population or approximately 3.4 million individuals, with roughly 150,000 new cases diagnosed each year.  Based on a 2015 U.S. incidence rate for Dravet syndrome and a 2007 incidence rate for Lennox-Gastaut syndrome, there are an estimated 21,000 patients with Dravet syndrome and 47,000 patients with Lennox-Gastaut syndrome in the United States. Based on a 2021 European Union (EU) incidence rate, there are an estimated 21,000 patients with Dravet syndrome in the EU. The number of patients with Lennox-Gastaut syndrome in the EU is less known. . Most ALS patients experience rapid disease progression and poor prognosis, with paralysis and death seen within a span of two to five years from diagnosis. The prevalence in the United States was estimated at approximately 16,000 people as of 2015 and the prevalence in the EU is estimated at approximately 29,000 people as of 2015. The rate of incidence is estimated at 2:100,000 people, with approximately 5,000 people in the United States diagnosed each year.

LP352, their most advanced program, is a 5-HT2c superagonist currently in a Phase 1 clinical trial for the treatment of DEEs, including Dravet syndrome and Lennox-Gastaut syndrome. They expect data from the MAD portion in the second half of this year and intend to initiate a Phase 1b/2a clinical trial of LP352 in DEEs in the first quarter of 2022. They intend to progress LP143 into clinical development for neurodegenerative diseases associated with neuroinflammation caused by microglial activation. They expect to submit an IND to the FDA in the first quarter of 2022. They expect to submit an IND to the FDA in the second half of 2022. They believe LP659 may have potential in several diseases associated with neuroinflammation, including multiple sclerosis. Their current product focus is on targets that are well characterized in neurological diseases but for which there are limitations with currently available therapies. They also plan to continue to identify and develop additional novel product candidates that align with their focus. They plan to explore collaborations opportunistically to maximize the value of their pipeline. They intend to retain significant economic and commercial rights to their programs in key geographic areas that are core to their long-term strategy.

LP352, their most advanced product candidate, is an oral, centrally acting, 5-HT2c superagonist with negligible observed impact on 5-HT2b and 5-HT2a receptor subtypes in their preclinical studies to date. In the SAD and food effect portions of the clinical trial, LP352 demonstrated favorable PK and pharmacodynamic effects (with target plasma exposure (minimum serum concentration) measured based on prolactin levels), including dose dependent PK properties with proportional increases in AUC and Cmax. Preclinical data have demonstrated the benefit of CB2 agonism in a mouse model of ALS, with treated mice demonstrating delays in loss of motor function and improved survival. In preclinical studies, LP143 has demonstrated 1,000-fold greater selectivity for CB2 over CB1, sustained activity over the duration of treatment, and favorable blood-brain-barrier penetration. LP659 acts as a S1P1 and S1P5 receptor subtypes modulator with no observed impact on S1P2 or S1P3 and has been selectively developed to cross the blood-brain barrier and target neurodegenerative diseases. The S1P receptor has been well-validated in slowing the progression of neurodegeneration, notably in multiple sclerosis, for which disease area the FDA has approved three S1P receptor modulators. LP659 was designed to avoid the negative effects connected to the receptor subtypes 2 and 3, which may be associated with more serious, off-target cardiac, pulmonary, and cancer-related effects.

They have a very limited operating history, and they have incurred losses since their inception and anticipate that they will continue to incur significant losses for the foreseeable future. They may never generate any revenue or become profitable or, if they achieve profitability, they may not be able to sustain it. Even if this offering is successful, they will require substantial additional capital to finance their operations. They are early in their development efforts and have only one product candidate, LP352, in early clinical development. All of their other product candidates are in the preclinical stage. If they are unable to advance their product candidates in clinical development, obtain regulatory approval and ultimately commercialize their product candidates, or experience significant delays in doing so, their business will be materially harmed. They are in the process of completing their first Phase 1 clinical trial, have never conducted later-stage clinical trials or submitted an NDA, and may be unable to do so for any of their product candidates. They currently have no marketing and sales organization and have no experience as a company in commercializing products, and they may have to invest significant resources to develop these capabilities. Coverage and adequate reimbursement may not be available for their current or any future product candidates, which could make it difficult for them to sell profitably, if approved. They depend on intellectual property licensed from Arena, the termination of which could result in the loss of significant rights, which would harm their business. They do not have their own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of their current and any future product candidates. They intend to rely on third parties to conduct, supervise and monitor their preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm their business. Reliance on third parties requires them to share their trade secrets, which increases the possibility that a competitor will discover them or that their trade secrets will be misappropriated or disclosed. They may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect their ability to develop and market their products. Arena currently performs or supports many of their operating activities and will continue to do so after the closing of this offering pursuant to a services agreement, and if they are unable to replicate or replace these functions if this services agreement is terminated, their operations could be adversely affected. As a result of the COVID-19 pandemic, they have faced and may continue to face delays in meeting their anticipated timelines for their ongoing and planned clinical trials. Specifically, the initiation of the MAD portion of the Phase 1 clinical trial of LP352 was delayed, in part, as a result of the impact of the COVID-19 pandemic on the clinical site in the United Kingdom that conducted the SAD portion of the Phase 1 clinical trial for LP352, and subsequently they modified the protocol and relocated the MAD portion of such trial to a new clinical site in the United States.  Upon the closing of this offering, their executive officers, current directors, greater than 5% holders, and their affiliates will hold approximately 57.3% of their outstanding common stock, assuming (i) the issuance of 3,629,400 shares of non-voting common stock in exchange for 2,630,000 shares of Series A preferred stock pursuant to the Exchange, (ii) the automatic conversion of 2,970,000 outstanding shares of their Series A preferred stock into 4,098,600 shares of their common stock, and (iii) the sale of 5,000,000 shares of common stock in this offering. Therefore, even after this offering, these stockholders will have the ability to influence them through this ownership position. If holders of their non-voting common stock following this offering exercise their option to make this conversion, this will have the effect of increasing the relative voting power of those prior holders of their non-voting common stock, and correspondingly decreasing the voting power of the holders of their common stock, which may limit your ability to influence corporate matters.