Churchill Capital Corp. XI Class A (CCXI) Risk Analysis

In order to market any approved products, we must build and maintain our sales, marketing, managerial and other non-technical capabilities, or make arrangements with third parties to perform these services. We have entered into the Avacopan Agreement with Vifor for development and commercialization of TAVNEOS outside of the United States and Vifor has in turn sublicensed its right to commercialize TAVNEOS in Japan to its sublicensee Kissei. We retain commercialization rights to TAVNEOS in the United States. To the extent we rely directly or indirectly on third parties such as Vifor for marketing and distributing our approved drug candidates, any revenue we receive will depend upon the efforts and capabilities of third parties, which may not be successful and are only partially within our control. When working with marketing partners, our drug product revenue is likely to be lower than if we directly marketed or sold our drug products. Future collaborators may fail to develop or effectively commercialize our drug candidates because they cannot obtain necessary regulatory approvals, development or commercialization is not commercially reasonable, they elect to pursue competitive drug products outside of the collaboration, or for other reasons. If we are unable to enter into arrangements with third parties to commercialize any approved drug products on acceptable terms or at all, we may not be able to successfully commercialize our present or future drug products or we will have to market these drug products ourselves, which will be expensive and require us to build our own commercial infrastructure in foreign jurisdictions, which we do not have experience doing. We cannot assure you we will be successful in any of these initiatives. If we are not successful in commercializing our drug products, either on our own or through collaborations with third parties, any future drug product revenue will be materially adversely affected.

Although we have obtained regulatory approval for TAVNEOS in the United States, Japan and the European Union, many of our pipeline drug candidates are in the early stages of drug discovery or are in clinical trials or, with respect to TAVNEOS, are in research programs for potential additional indications, and are prone to the risks of failure inherent in drug development. Similarly, additional indications for our most advanced program, TAVNEOS, are at different stages of development, including preclinical studies or clinical trials. We will need to conduct significant additional preclinical studies and clinical trials for many of our drug candidates or future indications before we can demonstrate that such drug candidates or approved products are safe and effective for the proposed indications to the satisfaction of the FDA, the European Medicines Agency, or EMA, and other regulatory authorities. Preclinical studies and clinical trials are expensive and uncertain processes that take years to complete. For example, we incurred significant expenses related to the IND submission and the completed single ascending dose Phase I clinical trial for CCX915, our first generation CCR2 drug candidate, which did not advance into Phase II clinical trials because its pharmacokinetic, or PK, properties in humans did not meet our expectations. Failure can occur at any stage of the process, and we cannot assure you that any of our drug candidates will demonstrate safety and efficacy in clinical trials or result in commercially successful drug products. We cannot assure you that our ongoing clinical trials or any future clinical trial of any of our drug products or drug candidates will be completed on schedule, or at all, or whether our planned clinical trials will start in a timely manner. The commencement of our planned clinical trials could be substantially delayed or prevented by a number of factors, including: - delays or failures in obtaining sufficient quantities of the API and/or drug product;- delays or failures in reaching agreement on acceptable clinical trial agreement terms or clinical trial protocols with prospective sites;- delays or failures in obtaining institutional review board, or IRB, or ethics committee approval to conduct a clinical trial at a prospective site;- the need to successfully complete, on a timely basis, preclinical safety pharmacology or toxicology studies;- the limited number of, and competition for, suitable sites to conduct the clinical trials;- the limited number of, and competition for, suitable participants for enrollment in the clinical trials;- the FDA or foreign regulatory authorities disagreeing as to the design or implementation of our clinical studies;- obtaining regulatory authorizations to commence a trial; or - the continuing impact of COVID-19 and governments response to COVID-19 on any of the previously mentioned factors for us or third-party contractors. The completion of our clinical trials could also be substantially delayed or prevented by a number of factors, including: - changes to clinical trial protocols;- slower than expected rates of participant recruitment and enrollment;- failure of participants to complete the clinical trials;- failure of our third party vendors to timely or adequately perform their contractual obligations relating to the clinical trials or in accordance with regulatory requirements;- inability or unwillingness of participants or medical investigators to follow our clinical trial protocols;- inability to monitor participants adequately during or after treatment;- termination of the clinical trials by one or more clinical trial sites;- unforeseen safety issues;- occurrence of serious adverse events in trials of the same class of agents conducted by other companies;- patients choosing an alternative treatment for the indication for which we are developing our drug candidates, or participating in competing clinical trials;- selection of clinical end points that require prolonged periods of clinical observation or analysis of the resulting data;- lack of efficacy demonstrated during clinical trials;- lack of adequate funding to continue the clinical trials;- the need for unexpected discussions with the FDA, EMA or other foreign regulatory authorities regarding the scope or design of our clinical trials or the need to conduct additional trials;- unforeseen delays by the FDA, EMA or other foreign regulatory authorities after submission of our results;- a facility manufacturing our drug candidates or any of their components being ordered by the FDA or foreign regulatory authorities to temporarily or permanently shut down; any changes to our manufacturing process that may be necessary or desired;- any changes to our manufacturing process that may be necessary or desired; or - third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; or - the continuing impacts of COVID-19 and governments responses to COVID-19 on the healthcare system and treatment centers, supply chains, the global economy, and cross-border transactions and business continuity for us or third-party contractors. We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs or ethics committees of the institutions in which such trials are being conducted, the Data Safety Monitoring Board, or DSMB, for such trial or the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination 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 product, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Any failure or significant delay in completing clinical trials for our drug products or drug candidates would harm the commercial prospects for our drug products or drug candidates and adversely affect our financial results. Additionally, changes in regulatory requirements and guidance or other external circumstances may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to regulatory agencies and ethics committees for reexamination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we terminate, any of our clinical trials, the commercial prospects for our drug products or drug candidates may be harmed and our ability to generate drug product revenues will be reduced or delayed. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of a drug candidate or of a proposed use for a drug product.

Our clinical trials 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 drug candidates or drug products present an unacceptable safety risk or lack of efficacy to the clinical trial participants in the proposed use. In addition, IRBs or regulatory authorities 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 participants. Administering any drug candidate or drug product to humans may produce undesirable side effects. The existence of undesirable side effects resulting from our drug candidates or drug products could cause us or regulatory authorities, such as the FDA, to interrupt, delay or halt clinical trials of our drug candidates or drug products and could result in the FDA or foreign regulatory authorities denying further development or approval of our drug candidates or drug products for any or all targeted indications. Further, chemokine receptors and chemoattractant receptors are a novel class of targets. As a result, we may experience unforeseen adverse side effects with our existing drug products and drug candidates and future drug candidates for such targets, including TAVNEOS and CCX507. As of the date of this Annual Report on Form 10-K, nine of our drug candidates have been tested in human beings. Later trials could reveal unforeseen adverse events. The safety PK results from preclinical studies may not be indicative of results observed in subsequent clinical trials. We have not completed studies on the long-term effects associated with the use of our drug candidates. Completion of studies of these long-term effects may be required prior to regulatory approval and would delay our introduction of our drug candidates into the market. Further, post-marketing studies could also be required at any time after regulatory approval of any of our drug products. For example, the FDA issued post-marketing requirements and post-marketing commitments upon the approval of TAVNEOS, which includes post-marketing studies. Absence of long-term data may also limit the approved uses of our drug products to short-term use, particular indications or limited patient populations. Some or all of our drug products or drug candidates may prove to be unsafe for human use. Undesirable side effects caused by our drug products or drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or other regulatory authorities. Drug-related side effects could affect participant recruitment or the ability of enrolled participants to complete a trial or result in potential drug product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly. Given the serious nature of the conditions we are treating in our clinical trials, and the multiple concomitant medications including our active drug candidates that our participants are treated with, adverse events have been reported in our clinical studies. While such adverse events may be found to be not related to our drug product or drug candidates, such events may create a negative safety perception and may require warnings or other safety-related language in product labeling and marketing where attribution cannot be definitively established. In post-marketing monitoring for approved products, as greater numbers of patients use a drug product following its approval, an increase in the incidence or severity of side effects or the incidence of other post-approval problems that were not seen or anticipated during pre-approval clinical trials could result in a number of potentially significant negative consequences, including that regulatory authorities may withdraw their approval of the drug product, regulatory authorities may require the addition of labeling statements, limitations of use or contraindications, or inclusions of additional safety information or warnings (including Boxed Warnings), or impose additional safety monitoring or reporting requirements. We may also be required to change the way the drug product is administered, its packaging or to conduct additional and potentially costly clinical trials, be required to implement a REMS or similar risk management measures. For example, the FDA has required us to create a medication guide for TAVNEOS outlining the risks of adverse events for distribution to patients. In addition, we could be sued and held liable for harm caused to patients, and our reputation may suffer. Any of these events could substantially increase the costs and expenses of developing, commercializing and marketing any such drug candidates or could harm or prevent sales of any approved drug products.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline and preliminary data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as participant enrollment continues and more participant data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate or drug product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our drug candidates, or our drug products for new indications, may be harmed, which could harm our business, operating results, prospects or financial condition.

In the United States, under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition. Such diseases and conditions are those that affect fewer than 200,000 individuals in the United States, or if they affect more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making a drug available in the United States for these types of diseases or conditions will be recovered from sales of the drug. Orphan drug designation must be requested before submitting an NDA. If the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by that agency. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process, but it can lead to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers. If a drug that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the drug is entitled to orphan drug marketing exclusivity for a period of seven years. TAVNEOS received orphan drug exclusivity for its indication in ANCA-associated vasculitis, with the seven years starting from the date of approval. Orphan drug marketing exclusivity generally prevents the FDA from approving another application, including a full NDA, to market the same drug or biological product for the same disease or condition for seven years, except in limited circumstances, including if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. For purposes of small molecule drugs, the FDA defines "same drug" as a drug that contains the same active chemical entity and is intended for the same use as the drug in question. A designated orphan drug may not receive orphan drug marketing exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Orphan drug marketing exclusivity rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. The criteria for designating an "orphan medicinal product" in the EU are similar in principle to those in the United States. Under Article 3 of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if its sponsor can establish that (i) the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (ii) either (a) such condition affects no more than 5 in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (iii) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the medicinal product will be of significant benefit to those affected by the condition. The application for orphan designation must be submitted before the application for marketing authorization, and the designation is reviewed at the time of marketing authorization approval to determine if the status is maintained. In the EU, orphan drug designation entitles an applicant to financial incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized marketing authorization procedure. Upon grant of a marketing authorization, orphan medicinal products are entitled to ten years of market exclusivity for the approved therapeutic indication, which means that the EMA and European Commission cannot accept another marketing authorization application, grant a marketing authorization, or accept an application to extend a marketing authorization for a similar product for the same indication for a period of ten years. TAVNEOS received approval in the EU in January 2022, and the orphan drug designation was reviewed at that time. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan, or PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. Orphan medicinal product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The ten-year market exclusivity in the EU may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan designation, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity, or where the prevalence of the condition has increased above the threshold. Additionally granting of an authorization for another similar orphan medicinal product where another product has market exclusivity can happen at any time: (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant cannot supply enough orphan medicinal product or (iii) where the applicant consents to a second orphan medicinal product application. In Japan, orphan designation is applied for and received for an indication under development. Up to 10 years of orphan exclusivity, known as the re-examination period, is granted for the product after approval. TAVNEOS received orphan designation in March 2019. At the time of approval in Japan in September 2021, TAVNEOS received a 10-year re-examination period. The orphan drug exclusivity may be rescinded by the Japanese government in certain circumstances. The FDA granted orphan drug designation for TAVNEOS for the treatment of C3G and ANCA-associated vasculitis, including GPA, formerly known as Wegener's granulomatosis, MPA and Churg-Strauss syndrome. Upon approval of TAVNEOS by the FDA as an adjunctive treatment for adult patients with severe active ANCA-associated vasculitis in combination with standard therapy including glucocorticoids the FDA granted us orphan drug exclusivity, which means that the FDA cannot approve the same drug for the same disease or condition for a period of seven years, except where a subsequent applicant for the same drug demonstrates that its product is clinically superior to TAVNEOS or we otherwise are unable to assure sufficient quantities. The scope of the exclusivity may also be challenged. In November 2014, the European Commission granted orphan drug designation for avacopan for the treatment of GPA and MPA, and, in June 2017, for the treatment of C3G. Upon approval, the orphan drug designation status was determined to be maintained. TAVNEOS also received a 10 year re-evaluation period for market exclusivity in Japan at approval in September 2021. However, we cannot assure you that we will be able to maintain orphan drug exclusivity for TAVNEOS in the U.S., in the EU, and Japan or that we will be able to obtain or maintain orphan drug exclusivity for any of our drug candidates, if they are approved for any orphan-designated use in any jurisdiction, in a timely manner or at all, or that a competitor will not obtain orphan drug exclusivity that could block the regulatory approval of any of our drug candidates for several years. If we are unable to maintain or obtain orphan drug exclusivity, our ability to generate sufficient revenues may be negatively affected. If a competitor is able to obtain orphan drug exclusivity that would block our drug candidates' regulatory approval, our ability to generate revenues would be significantly reduced, which would harm our business prospects, financial condition and results of operations.

We have invested a substantial amount of capital resources on the development, registration and commercialization of TAVNEOS, which was approved in the United States in October 2021 as an adjunctive treatment for adult patients with severe active ANCA-associated vasculitis, specifically granulomatosis with polyangiitis, or GPA, and microscopic polyangiitis, or MPA, the two main forms of ANCA-associated vasculitis, in combination with standard therapy including glucocorticoids, and not for the elimination of glucocorticoid use, and was approved in Japan in September 2021 for the treatment of patients with MPA and GPA and in the European Union, or EU, in January 2022 in combination with a rituximab or cyclophosphamide regimen for the treatment of adult patients with severe active GPA or MPA. We cannot be certain that TAVNEOS will be successfully commercialized. Our ability to generate revenue from drug product sales depends heavily on our success in many areas, including but not limited to: - successfully commercializing TAVNEOS, either independently or with marketing service providers;- the effectiveness of our sales and marketing strategy and operations, and obtaining market acceptance of TAVNEOS, including garnering market share from existing and future treatment alternatives;- maintaining compliance with all regulatory requirements applicable to TAVNEOS and our commercial activities, including the post-marketing requirements and post-marketing commitments required by the FDA;- obtaining coverage and adequate reimbursement from third-party payors;- the continued acceptability of the safety profile of TAVNEOS and the occurrence of any unexpected side effects, adverse reactions or misuse, including potential business impact such as the need to withdraw the drug product (either voluntarily or at the request of the FDA or foreign regulatory authorities), loss of support by the advocacy communities or loss of positive corporate reputation resulting in related unfavorable media coverage in these areas;- successfully managing third-party service providers involved in the manufacturing and development of TAVNEOS;- successfully completing the development of TAVNEOS in other indications by generating safety, tolerability and efficacy data that are satisfactory to the FDA and foreign regulatory authorities in other territories;- obtaining regulatory approvals to market TAVNEOS for other indications;- negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;- maintaining, protecting and expanding the portfolio of intellectual property rights, including patents, trade secrets and know how; and - attracting, hiring and retaining qualified personnel. In our efforts to market TAVNEOS in the United States and in foreign jurisdictions for its approved indication, our revenue will be dependent, in part, on the size of the markets in the United States, or in other territories where we may seek and obtain regulatory approval, the number of competitors in such markets, the acceptance of the price of the drug product in those markets and the ability to obtain reimbursement at any price. If the number of our addressable patients is not as large as we estimate or the reasonably accepted population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such drug products. If we are not able to generate substantial revenue from the sale of approved drug product, we may never become profitable.

As we commercialize TAVNEOS, or conduct additional clinical trials on TAVNEOS or our drug candidates, these efforts could reveal a high and unacceptable incidence and severity of undesirable side effects. Undesirable side effects could adversely affect patient enrollment in clinical studies, cause us or regulatory authorities to interrupt, delay or halt clinical studies or result in the delay, denial or withdrawal of regulatory approval by the FDA or foreign regulatory authorities. Undesirable or adverse side effects also could result in regulatory authorities mandating a more restrictive prescribing label for the drug product, which, in turn, could limit the market acceptance of the drug product even if approved for marketing and commercialization. Drug-related side effects could result in potential product liability claims. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations, business and financial condition. In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, significant negative media attention, withdrawal of clinical study participants, costs due to related litigation, distraction of management's attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our current drug product or any future drug product, product recalls, restrictions on labeling, marketing or promotion, decreased demand for our drug products, if approved for marketing, and loss of revenue. Additionally, if we or others later identify undesirable side effects caused by either TAVNEOS or any drug candidate, either in the post-marketing setting or in clinical trials, a number of potentially significant negative consequences could result, including but not limited to: - the delay, prevention or withdrawal of approvals by regulatory authorities;- the requirement of additional warnings or other language in the prescribing label;- the requirement of a REMS plan or similar risk management measures;- litigation and the potential to be held liable for harm caused to patients;- the recall or withdrawal of the drug product;- fines, injunctions, or imposition of civil or criminal penalties; and - an adverse effect on our reputation. Any of these events could prevent us from achieving or maintaining market acceptance of TAVNEOS or any other drug product for which we obtain approval, and could significantly harm our business, results of operations, financial condition and prospects.