UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

☒

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

For the Fiscal Year Ended December 31, 2022

☐

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

For the transition period from ________ to ________

Commission File Number 001-36747

Vivani Medical, Inc.

(Exact name of registrant as specified in its charter)

California

(State or other jurisdiction of incorporation or organization)

02-0692322

(I.R.S. Employer Identification No.)

5858 Horton Street, Suite 280 Emeryville, CA 94608

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (818) 833-5000

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

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock	VANI	NASDAQ
Warrants	VANIW	NASDAQ

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

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

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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

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

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

The aggregate market value of the shares of the registrant’s Common Stock held by non-affiliates of the registrant as of June 30, 2022, computed by reference to the closing sales price on the Nasdaq Capital Market on June 30, 2022, was approximately $57.1 million.

As of March 27, 2023, the registrant had 50,735,770 shares of common stock, no par value per share and 7,680,938 warrants outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders (the “Proxy Statement”) are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Registrant intends to file a definitive proxy statement pursuant to Regulation 14A with the Securities and Exchange Commission (the “SEC”) within 120 days after the end of registrant’s fiscal year end of December 31, 2022.

VIVANI MEDICAL, INC.

FORM 10-K

TABLE OF CONTENTS

		Page

	PART I

Item 1.	Business	5
Item 1A.	Risk Factors	28
Item 1B.	Unresolved Staff Comments	58
Item 2.	Properties	58
Item 3.	Legal Proceedings	58
Item 4.	Mine Safety Disclosures	58

	PART II

Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	59
Item 6.	Reserved	60
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	61
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 8.	Financial Statements and Supplementary Data	68
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	68
Item 9A.	Controls and Procedures	68
Item 9B.	Other Information	69
Item 9C.	Disclosure regarding foreign jurisdictions that prevent inspections	69

	PART III

Item 10.	Directors, Executive Officers and Corporate Governance	70
Item 11.	Executive Compensation	70
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	70
Item 13.	Certain Relationships and Related Transactions, and Director Independence	70
Item 14.	Principal Accounting Fees and Services	70

	PART IV

Item 15.	Exhibits, Financial Statement Schedules	70
Item 16.	Form 10-K Summary	73

SIGNATURES		74

Below is a summary of the principal risk factors related to the Annual Report on Form 10-K (“10-K”) for the fiscal year ended December 31, 2022.

Summary of Risk Factors

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the “Risk Factors” section of this Form 10-K. These risks include, but are not limited to, the following:

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We are a preclinical-stage company with a limited operating history, and have no products approved for commercial sale.

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We are dependent on the successful development, regulatory approval and commercialization of one or more product candidates, and may achieve any of these objectives.

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We intend to utilize the 505(b)(2) pathway for the regulatory approval of NPM-119. Final marketing approval of NPM-119 or any of our other product candidates by the FDA, or other regulatory authorities may be delayed, limited, or denied, any of which would adversely affect our ability to generate operating revenues.

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We will require substantial additional financing to pursue our business objectives, which may not be available on acceptable terms, or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

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Clinical development involves a lengthy and expensive process with uncertain outcomes. We may incur additional costs and experience delays in developing our product candidates, and our clinical development efforts may not yield favorable results.

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From time to time, we expect to release results from preclinical studies and clinical trials. Positive results from preclinical studies and early-stage clinical trials may not be predictive of future results, and initial positive results in any of our clinical trials may not be indicative of results obtained when the trial is completed or in later stage trials.

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Even if a current or future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

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We are subject to a multitude of manufacturing risks, including reliance on third parties, any of which could substantially increase our costs and limit supply of our product candidates.

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We may not be able to protect our proprietary or licensed technology.

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Claims or lawsuits relating to infringement of intellectual property rights brought by or against us may adversely affect our business, financial condition, and results of operations.

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We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

VIVANI MEDICAL, INC.

FORM 10-K

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This Annual Report on Form 10-K, or Annual Report, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Annual Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,”, “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. These forward-looking statements include, but are not limited to, statements about:

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our anticipated operating and financial performance, business plans, and prospects;

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expectations for our products, including anticipated regulatory submissions, study completion, approvals, clinical trial results and other developing data that become available, potential market size, and potential reimbursement pathways;

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the initiation, timing, design, progress and results of our clinical trials, and our research and development program; and

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the success of the business combination on including future capital expenditures, expenses, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined company’s operations and other conditions to the successful synergies of the business combination.

Any forward-looking statements in this Annual Report reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties, assumptions and other factors described under the “Risk Factors” section and elsewhere in this Annual Report, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements as predictions of future events. 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.

This Annual Report also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence 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 reflected 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.

PART I

Item 1. Business

Our Company

Company Overview

Vivani Medical, Inc. (“Vivani,” the “Company,” “we,” “us,” “our” or similar terms) is a preclinical stage biopharmaceutical company which develops miniaturized, subdermal implants utilizing its proprietary NanoPortal™ technology to enable long-term, near constant-rate delivery of a broad range of medicines to treat chronic diseases. Vivani uses this platform technology to develop and potentially commercialize drug implant candidates, alone or in collaboration with pharmaceutical company partners to address a leading cause of poor clinical outcomes in the treatment of chronic disease, medication non-adherence. According to the US Centers for Disease Control and Prevention (CDC), adherence is defined as the extent to which an individual’s behavior, including taking medications, corresponds to recommendations from a health care provider. For example, approximately 50% of patients treated for type 2 diabetes are medication non-adherent, which can lead to poor clinical outcomes. We are developing a portfolio of miniature, sub-dermal drug implant candidates that, unlike most oral and injectable medicines, are designed with the goal of guaranteeing medication adherence by delivering therapeutic drug levels for up to 6 months or the life of the implant. In addition, our aim is to minimize fluctuations in patients’ drug levels through the use of our NanoPortal technology, which may improve the tolerability profiles for medicines that produce side effects associated with fluctuating drug levels in the blood.

Vivani resulted from the August 2022 business combination of Second Sight Medical Products, Inc. (Second Sight) and Nano Precision Medical, Inc. (NPM). Since inception, Vivani’s main priority has been the further development of the Company’s lead program, NPM-119, a miniature, 6-month, GLP-1 implant candidate for the treatment of patients with type 2 diabetes under the Company’s Biopharm Division (formerly NPM). In parallel, Vivani’s new management team remained committed to identifying and exploring strategic options for the Neuromodulation Division (formerly Second Sight) that will enable further development of its pioneering neurostimulation systems to help patients recover critical body functions.

In March 2023, Vivani announced the filing of a Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) for the proposed initial public offering of Cortigent, Inc. (“Cortigent”). Cortigent, currently a wholly-owned subsidiary of Vivani, was formed for the purpose of advancing the business of Vivani’s neuromodulation division and is expected to continue to be majority-owned by Vivani immediately following the initial public offering.

Moving forward, Vivani’s focus will be on the further development of NPM-119 and its emerging pipeline of innovative miniature, long-term drug implants to treat patients with chronic diseases and high unmet medical need. The origins of this business started while its current Vivani CEO and NPM co-founder Adam Mendelsohn and two of his graduate school colleagues at the University of California, San Francisco (UCSF) and the University of California, Berkeley (UCB), entered business school competitions leveraging their growing knowledge of chemistry, drug delivery, and nanoscale technology to propose the development of new miniature, biocompatible, drug implant prototypes capable of releasing therapeutic drug levels over an extended period of time. Based on their success and encouragement from professors and others, including medical device/pharmaceutical icon Al Mann, Dr. Mendelsohn and colleagues started Nano Precision Medical in 2009 and operations began in 2011 in an incubator on the UCB campus. Today, the company has grown to nearly 40 full-time employees and its current headquarters and operations are located at 5858 Horton Street, Emeryville, California.

Our Proprietary NanoPortal™ Implant Technology

Vivani’s implant technology, which we refer to as NanoPortal, utilizes a space-efficient design that allows a miniaturized implant to provide many months of therapeutic delivery of potent molecules. The technology has no moving parts, which is intended to minimize fluctuating drug delivery over the duration of the implant and is also tunable. Vivani has primarily been developing implant candidates around peptide therapeutics, but the technology has potential application across a wide range of molecular types. The key innovative component of the technology is a biocompatible titanium-oxide nano-porous membrane which consists of millions of precisely sized nanotubes whose inner diameters represent the only path for drug molecules to exit the reservoir once the implant is fully assembled.

We believe the key to the technology’s ability to achieve near constant release without moving parts is the ability to precisely tune the inner diameter of the nanotubes to the same size range as individual drug molecules. If the inner diameter of the nanotubes is smaller than the size of a given drug molecule, there would be no release at all. If the inner diameter of the nanotubes is much larger than the size of a given drug molecule, the rate at which the drug leaves the reservoir would follow traditional physics and would decrease over time as the drug concentration decreases. However, when the opening is close enough in size to the drug molecules, the drug release is constrained and can result in a variety of desirable delivery profiles, including near constant release. Vivani’s NanoPortal technology has demonstrated near constant release in an animal model for six months.

For drug molecules with adequate potency and stability, NanoPortal can allow minimization of the implant size while extending implant duration. A custom delivery profile can also be achieved by adjusting the number of accessible nanotubes, engineering changes to the implant, and/or changes in formulation parameters. With the design flexibility afforded by the NanoPortal technology, Vivani plans to develop a portfolio of drug implant candidates aimed at addressing chronic diseases with high unmet medical needs.

Vivani’s NanoPortal technology has demonstrated near constant in vitro release for two dose configurations (see left portion of the chart below). In vitro testing was performed at 37°C on implant devices stored in a buffer solution adjusted to a physiological pH of 7.4. For a high-dose configuration, the observed near-constant release was demonstrated over the 12-week measurement period, after which the drug began to be depleted. For a low-dose configuration, the observed near-constant release lasted for 24 weeks. In addition, the near-constant in vitro release observed has been shown to translate into sustained exposure levels in vivo over a 6-month duration in an animal model (depicted in a separate chart below). Finally, NanoPortal has demonstrated minimal in vitro fluctuations during 2.5-hour interval sampling periods which demonstrates a very smooth release profile (see right portion of the chart below for individual device release rates).

Our Emerging Portfolio

Although Vivani’s proprietary NanoPortal implant technology may potentially be broadly applied across a wide range of therapeutic molecules and disease areas, our initial focus is on peptide therapeutics for the treatment of patients with metabolic disease. The pipeline table below-depicts our current portfolio of four distinct pre-clinical stage programs targeting type 2 diabetes (in humans and companion cats), obesity, and NASH (non-alcoholic steatohepatitis).

Below is a summary description of each pipeline program:

NPM-119: This exenatide implant candidate is in preclinical stage development for the treatment of patients with type 2 diabetes with an anticipated duration of six months. Exenatide is a GLP-1 receptor agonist (GLP-1 RA or GLP-1) and was originally approved as the twice-daily subdermal injection, Byetta® (exenatide) injection, approved in 2005 by the U.S. Food and Drug Administration (FDA) as adjunctive therapy to improve glycemic control in patients with type 2 diabetes mellitus who are taking metformin, a sulfonylurea, or a combination of metformin and a sulfonylurea but have not achieved adequate glycemic control. Byetta was the first GLP-1 to reach the U.S. marketplace.

According to the CDC, more than 37 million Americans have diabetes and 90-95% have type 2 diabetes. The total number of people living worldwide with diabetes is projected to rise to 643 million by 2030 and 783 million by 2045. According to the American Diabetes Association (ADA), the total cost of diagnosed diabetes in the U.S. was $327 billion in 2017, including $237 billion for direct medical costs and $90 billion for reduced productivity. In 2022, the global sales of GLP-1 receptor agonists products was nearly $20 billion. Because the current drug adherence rate for type 2 diabetes is only 40-60% for oral and injectable GLP-1 products, Vivani believes there is significant unmet need for a GLP-1 implant that could address non-adherence. Vivani holds all commercial rights to NPM-119.

We believe NPM-119, our lead drug implant candidate, has the potential to address two important limitations of the GLP-1category, namely, poor real-world medication adherence, and a potentially undesirable gastrointestinal tolerability profile.

To address real-world medication adherence, NPM-119 is designed to provide 6 months of steady dosing from a single miniature, subdermal implant. Current GLP-1 products are associated with only 50-60% real-world medication adherence. Non-adherent patients do not receive the full potential benefits of existing treatments. In addition, medication non-adherence for patients with type 2 diabetes is associated with approximately $5,500 per non-adherent patient in avoidable healthcare costs associated with unnecessary acute care and hospitalization visits. NPM-119 has the potential to offer a highly differentiated 6-month dosage form to address the medication adherence challenge. Results from a small, third-party market research study funded by Vivani indicate that the majority of physicians will be highly likely to recommend a product with the NPM-119 target product profile to their type 2 diabetes patients. In the market research study, primary care physicians (n=10) provided an average rating of 8.3 out of 10 in terms of likelihood of recommending a product with NPM-119’s target product profile. These preliminary results are encouraging since 90% of type 2 diabetes patients are treated in a primary care setting.

A well-documented side effect of the GLP-1 class is poor gastrointestinal (GI) tolerability. GI intolerance can present as nausea and vomiting which can lead to volume loss (hypovolemia), acute kidney injury (AKI) and potentially major cardiovascular adverse events. GI-related issues are the most commonly reported side effect for all drugs in the GLP-1class. In responding to a marketing application filed for Intarcia Therapeutics’ ITCA 650 exenatide implant candidate, with a proposed indication for use as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes mellitus (T2DM), the FDA stated in a July 29, 2022 letter that they believe that marked increases in the dose of a GLP-1 are responsible for increased risk of GI intolerance. The establishment of marked GLP-1 dose increases being responsible for GI intolerance combined with the daily in vitro variability exhibited by ITCA 650 resulted in the FDA summarizing their findings as “The clinical data in the three pivotal clinical trials for ITCA 650–including the high rates of nausea, vomiting, and diarrhea, the high rates of discontinuations due to these adverse gastrointestinal reactions, and most notably, the increased risk of acute kidney injury (AKI) comprise safety signals whose root cause can reasonably be concluded to be irregular and uncontrolled exenatide release” and “The data provided to validate the limits of the in vitro dose delivery specifications did not support the safe and effective use of the device constituent of ITCA 650.” We believe Vivani’s NanoPortal technology, which is specifically designed and tested to deliver regular and controlled exenatide release, may overcome these challenges. Our NanoPortal implant technology has no moving parts that could otherwise contribute to variations in drug release rates. NanoPortal has demonstrated the ability to release exenatide with minimal fluctuations in vitro on time scales that are even shorter than a day as exhibited by the 2.5-hour in vitro release rates that are shown in the Technology section above. Since the half-life of exenatide in humans is 2.4-4 hours, steady release from one 2.5-hour interval to the next is expected to be associated with minimal device-related exposure fluctuations, potentially minimizing the opportunity for gastrointestinal events.

An investigational new drug application (IND) to support the initiation of clinical studies with NPM-119 is planned for submission in 2023. Vivani’s initial clinical study, called LIBERATE-1, is designed as a 12-week, randomized, Phase 2 clinical study to investigate the safety, tolerability and full pharmacokinetic profile of NPM-119 in patients with type 2 diabetes. The study will include a Bydureon BCise® (exenatide extended-release injectable suspension) comparator, will investigate glycemic control as a secondary endpoint, and will also evaluate changes in weight. The study will recruit patients on a non-exenatide GLP-1 therapy which will be discontinued prior to randomization. Conditional institutional review board (IRB) approval has been obtained pending IND clearance. The LIBERATE-1 study design was discussed in multiple FDA interactions and is planned to initiate in mid-2023, subject to IND clearance. The pharmacokinetic profile obtained in a preclinical study with the NPM-119 configuration (n=8) intended for use in LIBERATE-1 is provided in the graphic below. The left axis shows experimentally measured exenatide plasma concentrations from rats implanted with NPM-119. The right axis shows expected exenatide plasma concentrations in humans, assuming there are no NPM-119 specific translation effects, based on previously established clearance rate differences between rats and humans when exposed to steady state delivery of exenatide. Since the EC₅₀ (concentration of exenatide which provides half maximal response) is 0.0835 ng/mL, this pharmacokinetic profile is expected to provide therapeutic exposure levels of exenatide in humans unless, for example, there are any device-specific pharmacokinetic translation effects from rats to humans which the results of LIBERATE-1 will determine.

Vivani has also made progress towards preparing for future clinical development of NPM-119. In the second half of 2023, Vivani is planning to relocate into a new facility designed to provide suitable capacity for manufacturing of clinical materials for registration studies as well as commercial-scale supply. Based on preliminary discussions with the FDA, Vivani intends to pursue the 505(b)(2) pathway and believes that a single pivotal trial evaluating a 6-month NPM-119 configuration that is representative of the proposed commercial configuration may be sufficient to support registration in the U.S. That said, throughout the NPM-119 development process, we also intend to further engage with regulatory authorities on the timing, duration, endpoints, number of enrolled patients and other aspects of trial design for future clinical trials of NPM-119.

We have conducted a pre-clinical study to evaluate proof-of-concept activity of NPM-119. In that study, a six-month implantation of NPM-119 into rats was associated with steady exenatide concentration over the duration of the implant, as depicted in the figure below.

In addition to the NPM-119 program targeting the treatment of patients with type 2 diabetes, Vivani believes that the results of LIBERATE-1, if favorable, could support the further exploration of NPM-119 for obesity with a higher dose configuration. This would be similar to the strategy Novo Nordisk has taken with its semaglutide injection franchise, Ozempic® and Wegovy® for type 2 diabetes and obesity, respectively.

OKV-119: This exenatide implant is under development for the treatment of obese and diabetic companion cats. In 2017, there were over 90 million cats in the U.S. 20-30 million cats have obesity, and 2-4 million cats have diabetes. Over $100 billion is spent on pets in the U.S. each year, this spending is expected to triple over the next 10 years, and pet health is the fastest-growing sub-segment of this market. Since cats are difficult to medicate, we believe that a small subdermal implant administered by a veterinarian can be a welcome option for many pet owners, if approved.

The program is partnered with Okava Pharmaceuticals, Inc. (“Okava”) who is responsible for management and funding of the development and regulatory activities of OKV-119 and, if approved, ultimate commercialization of this product. In 2022, OKV-119 advanced out of the feasibility stage after having produced in vivo data demonstrating a configuration that provided adequate exenatide exposure to companion felines over a 12-week duration. Vivani does not anticipate any significant Vivani focus beyond the support of product development and manufacturing activities.

NPM-139 : This implant candidate is in feasibility testing for the treatment of patients with obesity. The undisclosed compound, is the proprietary molecule of a large pharmaceutical company with whom we have entered into a material transfer agreement to conduct feasibility studies. The undisclosed compound is the drug substance in an approved product which is marketed in the U.S. for the treatment of obesity. Although the initial target product profile is under development as a six-month implant, we believe this product candidate has the potential for once-yearly administration based on preliminary results of feasibility testing to date.

The market for GLP-1 therapy in the treatment of patients with obesity is also attractive and growing rapidly. As an example, Novo Nordisk’s Wegovy® (semaglutide injection) sold $336M in the fourth quarter of 2022, which represents a 111% increase quarter-over-quarter from the third quarter of 2022.

NPM-159 : This potential six-month implant candidate is in feasibility testing for the treatment of patients with non-alcoholic steatohepatitis (NASH). The undisclosed compound is the proprietary molecule of a large pharmaceutical company with whom we have entered into a material transfer agreement to conduct feasibility studies. The undisclosed compound is in a drug class that has already demonstrated, in clinical trials by a third party, signals of clinical activity for the treatment of NASH, and multiple product candidates based on that drug class are currently under development in the U.S.

Beyond our current pipeline, Vivani intends to apply its extensive experience and proprietary implant technology to develop a pipeline of drug implant candidates that have the potential to address chronic diseases with high unmet medical needs across multiple therapeutic categories and disease areas. For example, Vivani is also following the evaluation of the GLP-1 agonist semaglutide in the treatment of NASH and Alzheimer’s disease . If one or more of these trials shows encouraging results, Vivani believes that a miniature long-term drug implant could have the potential to be an attractive alternative treatment option in these underserved patient populations.

Our Strategy

Vivani’s mission is to provide people with the freedom to live healthier. Vivani develops miniaturized drug implants using its proprietary NanoPortal implant technology to enable delivery of a broad range of medicines to treat chronic diseases. These products, designed to address poor medication adherence, are anticipated to significantly improve the health of otherwise non-adherent patients and to provide assurance to their family members and to the health care professionals who treat them.

Vivani plans to initially test its technology and business model through the clinical and regulatory development of its lead program, NPM-119 (exenatide implant). The active drug, exenatide, is a member of the GLP-1 receptor agonist class of drugs. Drug products, including drug substances within this relatively new drug class, have already been successfully developed and marketed for the treatment of both type 2 diabetes and obesity and GLP-1 products are the category leader in revenue for both the type 2 diabetes and obesity drug treatment categories. In addition, GLP-1 receptor agonists have shown promising early clinical results in NASH and they are being evaluated in other therapeutic areas including Alzheimer’s disease. Vivani intends to complete IND-enabling studies and submit an IND to permit a first-in-human (FIH) study of NPM-119 in type 2 diabetes in 2023. In addition, Vivani intends to advance its early-stage programs in obesity and NASH with two undisclosed collaborations with global pharmaceutical companies. Its business strategy includes:

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Announcing top-line results from LIBERATE-1 in the first half of 2024;

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Utilizing the 505(b)(2) abbreviated approval pathway for NPM-119 and, where applicable, for other programs whenever feasible;

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Advancing the feasibility assessments for NPM-139 and NPM-159 in 2023;

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Developing manufacturing capabilities and systems to produce materials for a future clinical development of our product candidates;

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Maintaining, expanding, and protecting its intellectual property portfolio;

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Seeking regulatory approvals for any product candidates that successfully complete clinical trials; and

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Adding operational, financial, and management information systems and personnel, including personnel to support its planned product development and commercialization efforts, as well as to support its regulatory responsibilities as a public reporting company.

Competition

Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We face competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, generic drug companies, drug delivery companies and academic and research institutions. Some of these companies are developing therapies that are directly competitive to our approach. We believe the key competitive factors that will affect the development and commercial success of our product candidates include ease of administration and convenience of dosing, therapeutic efficacy, safety and tolerability profiles and cost. Many of our potential competitors have substantially greater financial, technical and human resources than we do, as well as more experience in the development of product candidates, obtaining FDA and other foreign regulatory approvals of products, and the commercialization of those products. Consequently, our competitors may develop similar products to address the indications targeted by our current product candidates or for other indications we may pursue in the future, and such competitors’ products may be more effective, better tolerated and less costly than our product candidates. Our competitors may also be more successful in manufacturing and marketing their products than we are. We will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and patient enrollment in clinical trials.

The competition for Vivani will be dependent upon the individual product candidate in development. For Vivani’s lead asset, NPM-119, the competition could be defined as any drug product/manufacturer approved for use in the treatment of patients with type 2 diabetes. However, we believe that our more direct competitors comprise other GLP-1 receptor agonist and combination products with a GLP-1 receptor agonist component approved or in development for type 2 diabetes only. In May 2022, Lilly’s Mounjaro™ (tirzepatide) was approved as the first and only combination GIP and GLP-1 receptor agonist for the treatment of adults with type 2 diabetes. Manufacturers with approved GLP-1 receptor agonists include Lilly, Novo Nordisk, AstraZeneca, and Sanofi.

In addition to the marketed GLP-1 products, Intarcia Therapeutics has continued to seek approval of ITCA 650 (six-month exenatide implant) for the treatment of patients with type 2 diabetes since 2016. In public correspondence, FDA asserted that the ITCA 650 NDA did not meet criteria for approval because (i) data submitted in the application do not show that the product would be safe under the proposed conditions of use and (ii) the methods used in, and the facilities and controls used for, the manufacture, processing, or packing of the product are not shown to be adequate to preserve its identity, strength, quality, and purity. Further correspondence disclosed additional deficiencies which included, but were not limited to, data that did not demonstrate adequate device reliability in regard to dose delivery. While the ultimate fate of ITCA 650 remains unclear from a regulatory approval perspective, the information provided by FDA and Intarcia, informs our development path and regulatory strategy. In addition, the support for a six-month exenatide implant provided by patients, physicians, key opinion leaders and the American Diabetes Association provides confidence for the NPM-119 opportunity.

We believe the challenges experienced by ITCA 650 may have been related to Intarcia’s proprietary implant technology. The potential differentiation between Intarcia’s DUROS (osmotic pump) implant technology and Vivani’s NanoPortal (no moving parts) implant technology could be a key differentiator based on recent FDA correspondence. In addition, Vivani’s NanoPortal technology should also allow for a much smaller size implant and corresponding needle gauge, which may facilitate easier insertion and removal of NPM-119 compared to ITCA 650. Although no head-to-head clinical studies of NPM-119 and ITCA 650 have been conducted, there are differences in the underlying delivery technology between these two drug/device combination candidates, which may result in different release profiles, as depicted below:

NPM-119

NPM-119 (exenatide implant) candidate is a GLP-1 receptor agonist in development for the treatment of type 2 diabetes. Competition in the GLP-1 class for this indication includes the following:

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Lilly (Trulicity®/dulaglutide) and (Mounjaro™/ GIP and dulaglutide dual agonist)

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Novo Nordisk (Victoza®/liraglutide); (Ozempic®/semaglutide); and (Rybelsus®/semaglutide)

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AstraZeneca (Bydureon BCise®/exenatide); and (Byetta®/exenatide)

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Sanofi (Adlyxin®/lixisenatide)

We believe NPM-119, our lead drug implant candidate, has the potential to address two important aspects of the GLP-1category which are associated with the above-mentioned products, namely, poor real-world medication adherence and potential undesirable gastrointestinal tolerability.

NPM-139

NPM-139 (undisclosed active pharmaceutical ingredient) is in feasibility testing for the treatment of patients with obesity. According to the World Obesity Atlas 2022, one billion adults globally will have obesity (BMI ≥30 kg/m2), or about 18% of the adult population, by 2030. In addition, it is expected that there will be 103 million children and 150 million adolescents living with obesity by 2030 as well.

Competition in the treatment of obesity includes the following:

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Teva’s Adipex® (phentermine) and generics

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Roche’s Xenical® (orlistat) generics

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Vivus’s Qsymia® (phentermine/topiramate extended release)

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Orexigen’s Contrave® (bupropion/naltrexone)

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Novo Nordisk’s Saxenda® (liraglutide) and Wegovy® (semaglutide)

NPM-159

NPM-159 (undisclosed active pharmaceutical ingredient) is in feasibility testing for the treatment of non-alcoholic steatohepatitis (NASH). According to the American Liver Foundation, approximately 5% of the U.S. adult population have NASH. About 20% of the U.S. adult population have non-alcoholic fatty liver disease (NAFLD). NASH is the more severe form of NAFLD in which patients have hepatitis or swelling or inflammation of the liver and liver cell damage.

There are no currently approved drugs for the treatment of NASH. Although the active drug in NPM-159 is undisclosed, there is encouraging preliminary clinical data from another member in this class of drugs.

Sales and Marketing

Vivani currently does not have a commercial infrastructure in any geography. As we progress our programs through development, we may build a commercial infrastructure in the United States and selected other territories to support the commercialization of each of our product candidates when we believe a regulatory approval in a particular territory is likely. We intend to conduct market research in connection with designing our commercialization strategy for each of our product candidates. We may seek licensing or other strategic collaborations with, for example, global pharmaceutical company partners, to support our commercialization efforts. We will consider a range of options including building a commercial capability internally, leveraging third-party biopharmaceutical commercialization organizations, other strategic partners, distributors and/or contract sales forces to expand the commercial availability of our product candidates when appropriate.

Our Corporate Information

Vivani was incorporated under the laws of California on December 17, 2009. Its operations began in 2010. Vivani’s corporate office is located at 5858 Horton St. #280, Emeryville, California, 94608; its telephone number is (415) 506-8462; and its website is located at www.vivani.com. In November 2022, Vivani signed a long-term lease for a new facility at 1350 South Loop Road, Alameda, CA 94502 to accommodate office space, R&D, analytical labs and a GMP manufacturing suite to support our research and development activities. We plan to initiate our move into the new facility in September 2023 and have it completed by the end of 2023.

Chemistry, Manufacturing, and Controls

Vivani has developed production processes and quality systems to support the manufacture of NPM-119 clinical materials for use in the currently planned first-in-human (LIBERATE-1) clinical study. A small number of processes are continuing to be refined prior to the production of the materials to be used in the study. In addition, efforts have also been initiated to support potential subsequent clinical investigations .

Vivani has established in-house research, development, and manufacturing capabilities in its corporate headquarters in Emeryville, California, U.S. Vivani has also engaged with contract manufacturers and/or analytical laboratories for selected processes when appropriate. In general, Vivani purchases the drug substance from a third-party manufacturer and all assembly processes in which the drug substance is present, including the associated in-process testing, are intended to be performed by contract manufacturers . Several device components and all raw materials are purchased from outside vendors according to established specifications. The device assembly processes, including the associated in-process testing, and final product testing are anticipated to be performed by Vivani in Emeryville. The custom applicator , which is intended to facilitate subdermal placement of the implant in patients, has been designed and will be manufactured by a contract manufacturer. Several device components and the drug substance are purchased from outside vendors according to established specifications.

As the NPM-119 program advances, Vivani may also engage with additional contract analytical and manufacturing organizations as needed. Currently, Vivani is not a party to any long-term, commercial manufacturing agreements.

Intellectual Property

As of March 27, 2023, Vivani held or controlled 14 issued U.S. patents, 8 pending U.S. patent applications, and 12 patents in various jurisdictions outside the United States. Additionally, Vivani is pursuing 22 corresponding patent applications that are pending in various foreign jurisdictions. Further advancement of Vivani’s intellectual property portfolio will require the filing of patent applications related to its proprietary manufacturing process and product candidates. Vivani has patents extending into Australia, China, Germany, India, Japan, Netherlands, New Zealand, Republic of Korea, Russia and the United States of America, as well as trade secrets protecting Vivani’s intellectual property. Vivani’s patent prosecution strategy includes exploration of opportunities to expand its patent life and use cases in order to broaden its existing patent portfolio.

Below is a further description of certain of Vivani’s key issued patents, including the category of protection, expiration date, number of related patents issued in foreign jurisdictions and the product candidates to which each patent relates. Vivani currently holds or controls:

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14 patents issued in the United States (U.S. Patent Nos. 7,687,431, 9,814,867, 9,770,412, 10,479,868, 11,021,576, 10,045,943, 10,688,056, 9,511,212, 10,105,523, 10,792,481, 10,525,248, 11,129,791, 11,191,935 and 11,191,935) and 12 patents issued in foreign jurisdictions. The patents are directed to the manufacture and use of a drug delivery system and more specifically, to a titania nanotube membrane and capsule utilizing the proprietary NanoPortal technology platform. The methods include methods of drug delivery and treatment with a composition such as exenatide, methods to implant a drug delivery system, and methods of manufacturing a nanoporous membrane, as well as an implantable drug delivery system, a titania nanotube membrane, and titania nanotubes. These U.S. patents relate to an apparatus to implant a drug delivery system, an implantable drug delivery system comprising exenatide, a titania nanotube membrane, a method of making a titania nanotube membrane, and a method of making titania nanotubes, which are expected to expire in 2025-2038, while patents issued in foreign jurisdictions are expected to expire in 2024-2035;

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4 patents issued in the United States (U.S. Patent Nos. 9,511,212, 10,792,481, 11,129,791 and 11,478,430), which are also directed to implantable drug delivery devices. These U.S. patents relate to exenatide and are expected to expire in 2035 and 2037;

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3 patents issued in the United States (U.S. Patent Nos. 10,525,248, 10,105,523 and 11,191,935), which are also directed to apparatuses and methods for promoting fluid uptake. These U.S. patents relate to an apparatus to implant a drug delivery system and are expected to expire in 2036 and 2038;

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5 patents issued in the United States (U.S. Patent Nos. 10,479,868, 11,021,576, 10,045,943, 10,688,056 and 11,478,430) and 3 patent issued in a foreign jurisdiction which are also directed to formulations. These U.S. patents relate to an exenatide composition and an implantable drug delivery system comprising exenatide and are expected to expire in 2035;

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1 patent issued in the United States (U.S. Patent No. 9,770,412), which is also directed to coated nanoporous membranes. This U.S. patent relates to a method of manufacturing a nanoporous membrane and a nanopore membrane, which is expected to expire in 2035;

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1 patent issued in the United States (U.S. Patent No. 9,814,867) and 4 patents issued in foreign jurisdictions, which are also directed to titania nanotube membranes. This U.S. patent relates to a method of making a titania nanotube membrane and is expected to expire in 2034;

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1 patent issued in the United States (U.S. Patent No. 7,687,431) and 5 patents issued in foreign jurisdictions, which are also directed to nanotube fabrication. This U.S. patent relates to a method of making titania nanotubes and is expected to expire in 2025; and

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8 pending U.S. applications and 22 applications pending in foreign jurisdictions, which are directed to implantable drug delivery devices, methods to control release, and formulations.

Wherever possible, Vivani seeks to protect its inventions by filing U.S. patents as well as foreign counterpart applications in select other countries. Because patent applications in the U.S. are maintained in secrecy for at least eighteen months after the applications are filed, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, Vivani cannot be certain that it was the first to make the inventions covered by each of its issued or pending patent applications, or that Vivani was the first to file for protection of inventions set forth in such patent applications. Vivani’s planned, or potential products may be covered by third-party patents or other intellectual property rights, in which case continued development and marketing of its products would require a license. Required licenses may not be available to Vivani on commercially acceptable terms, if at all. If Vivani does not obtain these licenses, it could encounter delays in product introductions while it attempts to design around the patents, or Vivani could find that the development, manufacture, or sale of products requiring such licenses are not possible.

In addition to patent protection, Vivani also relies on know-how, trade secrets, and the careful monitoring of proprietary information, all of which can be difficult to protect. Vivani seeks to protect some of its proprietary technology and processes by entering into confidentiality agreements with its employees, consultants, and contractors. These agreements may be breached, Vivani may not have adequate remedies for any breach and its trade secrets may otherwise become known or be independently discovered by competitors. To the extent that Vivani’s employees or its consultants or contractors use intellectual property owned by others in their work for Vivani, disputes may also arise as to the rights in related or resulting know-how and inventions.

Government Regulation

Regulatory authorities in the U.S. at the federal, state, and local level and in other countries extensively regulate, among other things, the research and clinical development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing, pricing, and export and import of drugs, medical devices and combinations of drugs and devices (combination products) such as those we are developing. Generally, before a new drug or drug-device combination product can be marketed, considerable data demonstrating its quality, safety, and efficacy must be obtained, organized into a format specific to each regulatory authority, submitted for review, and approved by the relevant regulatory authority.

In the U.S., the FDA regulates drugs, devices and combination products under the Federal Food, Drug, and Cosmetic Act (FDCA), and its implementing regulations. These products are also subject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s, or another regulatory authority’s, refusal to approve pending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, debarment, refusals of government contracts, restitution, disgorgement, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.

U.S. Drug Development

Our product candidates are subject to regulation as combination products, which means that they are composed of both a drug product and device product. If marketed individually, each component would be subject to different regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary jurisdiction over its regulation based on a determination of the combination product’s primary mode of action, which is the single mode of action that provides the most important therapeutic action. In the case of our product candidates, the primary mode of action is attributable to the drug component of the product, which means that the FDA’s Center for Drug Evaluation and Research has primary jurisdiction over the premarket development, review and approval of our product candidates. Accordingly, we plan to investigate our products through the IND framework and seek approval through the NDA pathway. The process required by the FDA before a drug may be marketed in the U.S. generally involves the following:

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completion of extensive preclinical laboratory tests, animal studies and formulation studies in accordance with applicable regulations, including the FDA’s Good Laboratory Practice regulations;

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submission to the FDA of an IND, which must become effective before human clinical trials may begin;

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approval by an independent institutional review board (IRB) representing each clinical site before each clinical trial may be initiated;

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performance of adequate and well-controlled human clinical trials in accordance with an applicable IND and other clinical study related regulations, sometimes referred to as good clinical practices (GCP) regulations, to establish the safety and efficacy of the proposed drug for its proposed indication;

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submission to the FDA of an NDA which, for a combination product like our product candidates, is expected to include information and data regarding the drug delivery device technology;

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satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with the FDA’s current good manufacturing practice requirements (cGMP);

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potential FDA inspection of Vivani ,the clinical trial sites or other vendors that generated the data in support of the NDA;

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payment of associated user fees;

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review by an FDA advisory committee, where appropriate or if applicable;

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FDA review and approval of the NDA prior to any commercial marketing or sale; and

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compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy (REMS), and the potential requirements to conduct post-approval studies.

Once a pharmaceutical product candidate is identified for development, it enters the preclinical testing stage. Preclinical tests include laboratory evaluations of product chemistry, toxicity, formulation and stability, as well as animal studies. A sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, to the FDA as part of the IND. An IND is an exemption from the FDCA that allows an unapproved product to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans. The sponsor must also include a protocol detailing, among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation. Some preclinical testing may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions related to a proposed clinical trial and places the trial on a clinical hold within that 30-day period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the FDA at any time before or during clinical trials due to safety concerns or non-compliance, and may be imposed on all drug products within a certain class of drugs. The FDA also can impose partial clinical holds, for example, prohibiting the initiation of clinical trials of a certain duration or for a certain dose.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations. These regulations include the requirement that all research subjects provide informed consent in writing before their participation in any clinical trial. Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution, and the IRB must conduct continuing review and reapprove the study at least annually. An IRB considers, among other things, whether the risks to individuals participating in the clinical trial are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

Each new clinical protocol and any amendments to the protocol must be submitted for FDA review, and to the IRBs for approval. Protocols detail, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.

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

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Phase 1. The product is initially introduced into a small number of healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion and, if possible, to gain early evidence on effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be unavoidably toxic, the initial human testing may be conducted in patients.

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Phase 2. Involves clinical trials in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage and schedule.

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Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit relationship of the product and provide an adequate basis for product labeling.

Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 trials. Companies that conduct certain clinical trials also are required to register them and post the results of completed clinical trials on a government-sponsored database, such as ClinicalTrials.gov in the United States, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected adverse events, findings from other studies that suggest a significant risk to humans exposed to the product, findings from animal or in vitro testing that suggest a significant risk to human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, if at all. The FDA or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product has been associated with unexpected serious harm to patients. 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 a trial may move forward at designated check points based on access to certain data from the study. The clinical trial sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. In addition, for certain combination products it may be necessary to conduct human factors studies prior to NDA submission to ascertain the usability of the product by patients in real-world settings.

NDA and FDA Review Process

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the drug, proposed labeling and other relevant information, are submitted to the FDA as part of an NDA for a new drug, requesting approval to market the product. An NDA for a new drug must contain proof of the drug’s safety and efficacy. The submission of an NDA is subject to the payment of a substantial application user fee, and the sponsor of an approved NDA is also subject to an annual program user fee; although a waiver of some such fees may be obtained under certain limited circumstances. For example, the agency will waive the application fee for the first human drug application that a small business or its affiliate submits for review.

The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. The FDA typically makes a decision on accepting an NDA for filing within 60 days of receipt. The decision to accept the NDA for filing means that the FDA has made a threshold determination that the application is sufficiently complete to permit a substantive review. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (PDUFA), the FDA’s goal to complete its substantive review of a standard NDA and respond to the applicant is ten months from the receipt of the NDA. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification and may go through multiple review cycles.

After the NDA submission is accepted for filing, the FDA reviews the NDA to determine, among other things, whether the proposed product is safe and effective for its intended use, and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity, strength, quality and purity. During its review, the FDA will likely re-analyze the clinical trial data, which could result in extensive discussions between the FDA and us during the review process. The review and evaluation of an NDA by the FDA is extensive and time consuming and may take longer than originally planned to complete, and we may not receive a timely approval, if at all. The FDA may refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. In addition, before approving an NDA, the FDA may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities, it may issue an approval letter or a complete response letter (CRL). An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A CRL indicates that the review cycle of the application is complete and the application will not be approved in its present form. A CRL usually describes all the specific deficiencies in the NDA identified by the FDA. The CRL may require additional clinical data and/or an additional pivotal Phase 3 clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, nonclinical studies or manufacturing. If a CRL is issued, the applicant may either resubmit the NDA, addressing all the deficiencies identified in the letter, or withdraw the application. Even if such data and information are submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive, and the FDA may interpret data differently than we interpret the same data.

There is no assurance that the FDA will ultimately approve a product for marketing in the United States, and we may encounter significant difficulties or costs during the review process. If a product receives marketing approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct postmarket testing or clinical trials and surveillance to monitor the effects of approved products. For example, the FDA may require Phase 4 clinical trials to further assess drug safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved products that have been commercialized. The FDA may also place other conditions on approvals including the requirement for a REMS to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS 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. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products. Product approvals may be withdrawn for non-compliance with regulatory requirements or if problems occur following initial marketing.

505(b)(2) Approval Process

NDAs for most new drug products are based on at least two adequate and well-controlled clinical studies and must contain substantial evidence of the safety and effectiveness of the proposed new product for the proposed use. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is authorized, however, to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. An application under 505(b)(2) provides an alternate regulatory pathway for the FDA to approve a new product and permits reliance for such approval on published literature or an FDA finding of safety and effectiveness for a previously approved similar drug product, or published literature. Specifically, Section 505(b)(2) permits the filing of an NDA where one or more of the investigations relied upon by the applicant for approval were not conducted by or for the applicant and for which the applicant has not obtained a right of reference.

Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternative and potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous approval is scientifically appropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. Typically, 505(b)(2) applicants must perform additional trials to support the change from the previously approved drug and to further demonstrate the new product’s safety and effectiveness. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Pediatric Trials

Under the Pediatric Research Equity Act (PREA), an NDA or supplement to an NDA must contain data to assess the safety and efficacy of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDCA requires that a sponsor who is planning to submit a marketing application for a drug or biological product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan (PSP) within sixty days of an end-of-Phase 2 meeting or as may be agreed between the sponsor and FDA. The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the sponsor must reach agreement on the PSP. A sponsor can submit amendments to an agreed-upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials, and/or other clinical development programs. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of data or full or partial waivers.

Post-Marketing Requirements

Any products for which we receive FDA approval are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse events with the product, providing the regulatory authorities with updated safety and efficacy information, and product sampling and distribution requirements in accordance with the Prescription Drug Marketing Act, a part of the FDCA. Moreover, each component of a combination product retains its regulatory status (as a drug or device, for example) and is subject to the requirements established by the FDA for that type of component. The FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market.

Prescription drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug promotion and advertising, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their first use. In addition, a pharmaceutical company must comply with restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry-sponsored scientific and educational activities, and requirements for promotional activities involving the internet. Although physicians may prescribe legally available drugs for off-label uses, manufacturers and their agents may not market or promote such off-label uses or provide off-label information in the promotion of drug products that is not consistent with the approved labeling for those products. The FDA and other regulatory and enforcement authorities actively enforce laws and regulations prohibiting promotion of off-label uses and the promotion of products for which marketing approval has not been obtained. A company that is found to have improperly promoted off-label uses may be subject to corrective advertising in addition to significant liability, which may include civil and administrative remedies as well as criminal sanctions.

In the U.S., once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA. The FDA regulations require that combination products be manufactured in specific approved facilities and in accordance with cGMPs applicable to drugs and devices, including certain QSR requirements. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMPs, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market. Additionally, manufacturers and other parties involved in the drug supply chain for prescription drug products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the U.S.

The FDA also may require post-marketing testing, known as Phase 4 testing, a risk evaluation and mitigation strategy (REMS) to assure the safe use of the drug, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. Discovery of previously unknown problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, untitled or warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development and impact approved products already on the market.

Orphan Designation and Exclusivity

The FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States. Alternatively, orphan drug designation may be available if the disease or the condition affects 200,000 or more individuals in the United States and there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales 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. In addition, if a product is the first to receive FDA approval of the indication for which it has orphan designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same orphan indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for which the orphan product has exclusivity, which may permit off-label use for the orphan indication. Orphan product exclusivity also could block the approval of one of our products for seven years if a competitor obtains approval of the same drug or biological product as defined by the FDA for the same orphan indication or if our product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity.

U.S. Marketing Exclusivity

Market exclusivity provisions under the FDCA can delay the submission or the approval of certain marketing applications. The FDCA provides a five-year period of non-patent data exclusivity within the U.S. to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application (ANDA) or 505(b)(2) NDA, submitted by another company for another drug based on the same active moiety, regardless of whether the drug is intended for the same indication as the original innovative drug or for another indication, where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement to one of the patents listed with the FDA by the innovator NDA holder.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to conduct, or obtain a right of reference to, all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the U.S. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity if a sponsor conducts clinical trials in children in response to a Written Request from the FDA. The issuance of a Written Request does not require the sponsor to undertake the described clinical trials.

Healthcare Laws & Regulations

In the U.S., the research, manufacturing, distribution, sale and promotion of drug products and medical devices are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers for Medicare & Medicaid Services (“CMS”), other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General), the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency, state Attorneys General and other state and local government agencies. For example, sales, marketing, and scientific/educational grant programs must comply with the federal Anti-Kickback Statute, the federal False Claims Act, the privacy regulations promulgated under the Health Information Portability and Accountability Act of 1996 (“HIPAA”), and similar state laws. Pricing and rebate programs must also comply with the Medicaid Drug Rebate Program requirements of the Omnibus Budget Reconciliation Act of 1990, as amended, provisions of the Inflation Reduction Act of 2022, and the Veterans Health Care Act of 1992, as amended. The handling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Products must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. All of these activities are also potentially subject to federal and state consumer protection and unfair competition laws.

The Medicare Modernization Act (MMA) established the Medicare Part D program to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage of outpatient prescription drugs. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription drugs may increase demand for products for which Vivani may receive regulatory approval. However, any negotiated prices for Vivani’s products (if covered by a Part D prescription drug plan) will likely be lower than the prices Vivani might otherwise obtain. Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from non-government payors.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage, and security requirements intended to prevent the unauthorized sale of pharmaceutical products.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of Vivani’s products. Historically, products launched in the European Union do not follow price structures of the U.S. and generally tend to be priced significantly lower than in the U.S.

In the U.S., once Vivani has products on the market, the company will be subject to complex laws and regulations pertaining to healthcare “fraud and abuse,” including, but not limited to, the federal Anti-Kickback Statute, the federal False Claims Act, and other state and federal laws and regulations. The federal 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, or other good or service for which payment in whole or in part 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, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, many states have adopted laws similar to the federal 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 Vivani’s future sales and marketing practices or Vivani’s future relationships with medical professionals might be challenged under anti-kickback laws, which could harm Vivani.

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 Vivani 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, Vivani’s future activities relating to the reporting of wholesaler or estimated retail prices for Vivani’s products, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state, and third-party reimbursement for Vivani’s products, and the sale and marketing of Vivani’s products, are subject to scrutiny under this law. For example, pharmaceutical companies have been found liable under the federal False Claims Act in connection with their off-label promotion of drugs. Penalties for a federal False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of between $11,181 and $22,363 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, conduct those results in a federal False Claims Act violation may also implicate various federal criminal statutes. If the government were to allege that Vivani was, or convict Vivani of, violating these false claims laws, Vivani could be subject to a substantial fine. In addition, private individuals could bring actions under the federal False Claims Act and certain states have enacted laws modelled after the federal False Claims Act.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

The federal physician payment transparency requirements, sometimes referred to as the “Sunshine Act” under the ACA require certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report to HHS information related to payments and other transfers of value made to physician (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other licensed health care practitioners and teaching hospitals; as well as the ownership and investment interests of such physicians and their immediate family members;

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, also imposes obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, as well as their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, there may be additional federal, state and non-U.S. laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and may be broader in scope than their federal equivalents; some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.

State laws governing the privacy and security of health information in certain circumstances may also apply, many of which differ from each other in significant ways and often are not pre-empted by HIPAA, thus complicating compliance efforts, and analogous foreign laws and regulations.

In addition, federal consumer protection and unfair competition laws broadly regulate marketplace activities and activities that potentially harm consumers.

Similar healthcare laws and regulations in the European Union and other non-U.S. jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, (“GDPR”), which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the EU (including health data). There are also an increasing number of state laws that require manufacturers to make reports to states on pricing and marketing information. Many of these laws contain ambiguities as to what is required to comply with the laws. In addition, as discussed below, a similar federal requirement requires manufacturers to track and report to the federal government certain payments made to physicians and teaching hospitals in the previous calendar year. These laws may affect Vivani’s sales, marketing and other promotional activities by imposing administrative and compliance burdens on Vivani. In addition, given the lack of clarity with respect to these laws and their implementation, Vivani’s reporting actions could be subject to the penalty provisions of the pertinent state, and soon federal, authorities.

The failure to comply with regulatory requirements subjects companies to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a company to enter into supply contracts, including government contracts.

Changes in regulations, statutes or the interpretation of existing regulations could impact Vivani’s business in the future by requiring, for example: (1) changes to Vivani’s manufacturing facility; (2) additions or modifications to product labeling; (3) the recall or discontinuation of Vivani’s products; or (4) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of Vivani’s business.

Healthcare Reform & the Patient Protection and Affordable Care Act

Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare costs, and those methods are not always specifically adapted for new technologies such as gene therapy and therapies addressing rare diseases such as those we are developing. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the PPACA, was enacted, which includes measures that significantly change the way healthcare is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical industry are the following:

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The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s covered outpatient drugs furnished to Medicaid patients. Effective in 2010, the PPACA made several changes to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum basic Medicaid rebate on most branded prescription drugs and biologic agents to 23.1% of the AMP and adding a new rebate calculation for “line extensions” (i.e., new formulations, such as extended release formulations) of solid oral dosage forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP. The PPACA also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers to pay rebates on Medicaid managed care utilization and by expanding the population potentially eligible for Medicaid drug benefits.

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In order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported by the manufacturer. The PPACA expanded the types of entities eligible to receive discounted 340B pricing, although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication. In addition, as 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above could cause the required 340B discount to increase.

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The PPACA imposes a requirement on manufacturers of branded drugs and biologic agents to provide a 50% discount off the negotiated price of branded drugs dispensed to Medicare Part D patients in the coverage gap (i.e., “donut hole”). This requirement was later increased to a 70% discount.

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The PPACA imposes an annual, non-deductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications.

Since its enactment, there have also been executive, judicial, and Congressional challenges to certain aspects of the PPACA. In June 2021, the United States Supreme Court held that Texas and other challengers had no legal standing to challenge the PPACA, dismissing the case without specifically ruling on the constitutionality of the PPACA. Accordingly, the PPACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will impact our business, financial condition, and results of operations. Complying with any new legislation or changes in healthcare regulation could be time-intensive and expensive, resulting in material adverse effect on our business.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year. Subsequent legislation extended the 2% payment reduction which remains in effect through 20310. Under current legislation the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. Due to the Statutory Pay-As-You-Go Act of 2010, estimated budget deficit increases resulting from the American Rescue Plan Act of 2021, and subsequent legislation, Medicare payments to providers will be further reduced starting in 2025 absent further legislation. The U.S. American Taxpayer Relief Act of 2012 further reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Further, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

Additionally, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, and review the relationship between pricing and manufacturer patient programs. President Biden has issued multiple executive orders that have sought to reduce prescription drug costs. Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that they will continue to seek new legislative measures to control drug costs.

The Inflation Reduction Act of 2022, or IRA includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket cap for Medicare Part D beneficiaries to $2,000 starting in 2025 (thereby effectively eliminating the so-called “donut hole”); impose new manufacturer financial liability on certain drugs under Medicare Part D; allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation, and delay the rebate rule that would limit the fees that pharmacy benefit managers can charge. The effects of the IRA on our business and the healthcare industry in general is not yet known.

Further, healthcare reform measures have been the subject to several executive orders of the Biden Administration, including orders that address pharmaceutical pricing. In July 2021, for example, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at increasing competition for prescription drugs. In response to this executive order, the Department of Health and Human Services (“HHS”) has released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and potential legislative policies that Congress could pursue to advance these principles. In addition, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases, which may adversely affect our profitability. At the state level, a number of states are considering or have recently enacted state drug price transparency and reporting laws that could substantially increase our compliance burdens and expose us to greater liability under such state laws if and when we begin commercialization after obtaining regulatory approval for any of our product candidates.

Properties

Our principal offices and facilities are located at 5858 Horton Street, Emeryville, CA 94608 and 13170 Telfair Avenue, Sylmar CA 91342 and are both leased.

In November 2022, Vivani signed a long-term lease for a new facility at 1350 South Loop Road, Alameda, CA 94502 to accommodate office space, R&D, analytical labs and a GMP manufacturing suite to support our research and development activities for our Biopharm Division. We plan to initiate our move into the new facility in September 2023 and have it completed by the end of 2023.

On February 1, 2023 our Neuromodulation division entered into a lease agreement, effective March 1, 2023, to sublease office space to replace their existing headquarters, which lease expired March 1, 2023.

Employees

As of December 31, 2022, we had 14 employees in our Neuromodulation division and 36 employees in our Biopharm Division. Of these persons, all are employed in the United States. We believe that the continued success of our business will depend, in part, on our ability to attract and retain qualified personnel, and we are committed to developing our people and providing them with opportunities to contribute to our growth and success. None of these employees is covered by a collective bargaining agreement, and we believe our relationship with our employees is good to excellent.

Available Information

Our website address is www.vivani.com. We make available free of charge through a link provided at our website our Forms 10-K, 10-Q and 8-K as well as any amendments thereto. These reports are available as soon as reasonably practicable after they are filed with the Securities and Exchange Commission.

Item 1A. Risk Factors

This Form 10-K contains forward-looking information based on our current expectations. Because our business is subject to many risks and our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of important factors that could affect our business, operating results, financial condition and the trading price of our common stock. You should carefully consider these risk factors, together with all of the other information included in this Form 10-K as well as our other publicly available filings with the SEC.

Risks Related to Our Financial Position and Need for Additional Capital

We are a preclinical-stage company with a limited operating history, and have no products approved for commercial sale.

We are a preclinical-stage biopharmaceutical company. In August 2022, we completed a business combination of Second Sight Medical Products, Inc. (Second Sight) and Nano Precision Medical, Inc. (Nano Precision Medical), to form our current company. Following the business combination, we are focusing primarily on the development of our proprietary NanoPortal technology and the development of miniaturized, subdermal drug implants capable of the long-term delivery of medicine in patients with chronic diseases with high unmet medical need. Our pipeline includes our current product candidates NPM-119, NPM-159, NPM-139 and OKV-119, which we have partnered with Okava Pharmaceuticals, Inc. All of our product candidates are in early-stage development and none of our product candidates have entered into clinical-stage testing, been approved for marketing, or are being marketed or commercialized.

As a result, we have no meaningful historical operations upon which to evaluate our business and prospects and we have not yet demonstrated an ability to successfully initiate and conduct clinical trials or obtain marketing approval for any of our product candidates or otherwise successfully overcome the risks and uncertainties frequently encountered by companies in the biopharmaceutical industry. We have not generated any revenues to date, and we continue to incur significant research and development and other expenses. As a result, we have not been profitable and have incurred operating losses in every reporting period since our inception. For the years ended 2021 and 2022, we reported net losses of $12.8 million and $13.9 million, respectively, and had an accumulated deficit of $72.8 million as of December 31, 2022.

For the foreseeable future, we expect to continue to incur significant and increasing losses as we expand our research and development activities, seek regulatory approvals for our product candidates and begin to commercialize them if they are approved by the U.S. Food and Drug Administration (the “FDA”) the European Medicines Agency (the “EMA”) or comparable foreign authorities. Even if one or more of our product candidates complete their clinical development, achieve marketing approval and are commercialized, we may never become profitable.

In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced biopharmaceutical companies in rapidly evolving fields. If one or more of our product candidates receive marketing approval, we also may need to transition from a company with a research and development focus to a company capable of supporting commercial activities. We have not yet demonstrated an ability to successfully overcome such risks and difficulties, or to make such a transition.

We do not anticipate generating revenue from product sales for the foreseeable future and may never be profitable.

The viability of our business depends on our ability to generate revenue from product sales. Vivani’s current pipeline is focused on the development of our proprietary NanoPortal™ technology and the development of miniaturized, subdermal drug implants capable of the long-term delivery of medicine in patients with chronic diseases with high unmet medical need. However, we may never be able to develop or commercialize marketable products from our current pipeline or achieve profitability. Revenue from the sale of any product candidate for which regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which regulatory approval is obtained, the accepted price for the product, the acceptance of the product by physicians and patients, the ability to obtain reimbursement at any price and whether we own the commercial rights for that territory. In addition, if the market size for our product candidates is smaller than estimated, the indication or intended use approved by regulatory authorities is narrower than expected, or the target patient population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products, even if approved. Even if we are able to generate revenue from the sale of any approved products, we may not become profitable. Even if we achieve profitability in the future, such profitability may not be sustained in subsequent periods.

Our ability to generate revenue and achieve profitability depends significantly on our ability, either independently or in collaboration with third parties, to achieve several objectives, including:

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successful completion of preclinical studies resulting in data that is supportive of advancing to an IND submission;

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successful submission and acceptance of INDs or comparable applications;

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successful initiation of clinical trials;

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successful and timely completion of nonclinical and clinical development of our product candidates;

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establishing and maintaining relationships with contract research organizations (CROs) and clinical sites for the clinical development of our product candidates;

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timely receipt of marketing approvals from applicable regulatory authorities for any product candidates for which we successfully complete clinical development;

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developing an efficient and scalable manufacturing process for our candidates, including obtaining finished products that are appropriately packaged for sale;

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establishing and maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for our product candidates, if approved;

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successful commercial launch following any marketing approval, including the development of a commercial infrastructure, whether in-house or with one or more collaborators;

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a continued acceptable safety profile following any marketing approval of our product candidates;

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commercial acceptance of our product candidates by patients, the medical community and third-party payors;

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satisfying any required post-marketing approval commitments to applicable regulatory authorities;

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identifying, assessing, and developing new product candidates;

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obtaining, maintaining, and expanding patent protection, trade secret protection and regulatory exclusivity in the United States and target international markets;

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protecting our rights in our intellectual property portfolio;

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defending against third-party interference or infringement claims, if any;

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entering into, on favorable terms, any collaboration, licensing, or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;

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obtaining coverage and adequate reimbursement by third-party payors for our product candidates;

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addressing any competing therapies and technological and market developments; and

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attracting, hiring, and retaining qualified personnel.

We may never be successful in achieving its objectives and, even if we do, may never generate revenue that is significant or large enough to achieve or maintain profitability. Any failure to become and remain profitable would decrease the value of our company and could impair our ability to maintain or further our research and development efforts, raise additional necessary capital, grow our business, and continue our operations.

Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is a very time-consuming, expensive, and uncertain process that takes years to complete. Our operations have consumed substantial amounts of cash, and we expect our expenses to increase in connection with our ongoing activities, particularly as we conduct clinical trials of our product candidates. Even if one or more of our product candidates is approved for commercial sale, we will incur significant costs associated with sales, marketing, manufacturing, and distribution activities. Our expenses could increase beyond expectations if required by the FDA, the European Medicines Agency (EMA) or other regulatory agencies to perform clinical trials or preclinical studies in addition to those that we currently anticipate. Other unanticipated costs may also arise. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate the actual amount of resources and funding that will be neces

SEC Form 10-K filed by Vivani Medical Inc.