ACHN 2017 Annual Report

Cautionary Note Regarding Forward-Looking Information This Annual Report on Form 10-K contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties. All statements other than statements relating to historical matters (including statements with words such as “believe,” “expect,” “anticipate,” “plan,” “target,” “intend,” “may,” “predict,” “project,” “potential,” “goals,” “will,” “would,” “could,” “should,” “continue” and similar expressions) should be considered forward-looking statements, although not all forward-looking statements contain these identifying words. The forward-looking statements in this Annual Report on Form 10-K include information with respect to our plans and strategy for our business, the possible achievement of discovery and development goals and milestones, our future discovery and development efforts, and our future operating results and financial position. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. These risks and uncertainties include those inherent in pharmaceutical research and development, such as adverse results in our drug discovery and clinical development programs, decisions made by the U.S. Food and Drug Administration and other regulatory authorities with respect to the development and commercialization of our drug candidates, our ability to obtain, maintain and enforce intellectual property rights for our drug candidates, the ability of our competitors to advance their competing drug candidates, our ability to obtain any necessary financing to conduct our planned activities, our dependence on third parties, and other risk factors. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Please refer to the section entitled “Risk Factors” in Part I— Item 1A of this report for a description of risks and uncertainties relating to our business. Unless required by law, we assume no obligation to update these forward-looking statements to reflect events or circumstances that arise after the date hereof. PART I ITEM 1. BUSINESS Overview We are a science-driven, patient-focused biopharmaceutical company seeking to leverage our believed strengths across the continuum from discovery through commercialization by discovering and developing small molecule therapeutics to meet the needs of patients with complement-mediated diseases. We have discovered and developed our complement inhibitor platform, directed at advancing small molecule compounds that have the potential to be used in the treatment of immune-related diseases associated with the alternative pathway of the complement system. The complement system is a part of the human innate immune system and is believed to be comprised of three pathways: the alternative pathway, the lectin pathway and the classical pathway. We are advancing novel small molecules from this platform which target complement factor D, an essential protein within the amplification loop of the alternative pathway. We and experts believe the alternative pathway plays a critical role in a number of disease conditions including rare orphan conditions such as C3 glomerulopathy, or C3G, immune complex membranoproliferative glomerulonephritis, or IC-MPGN, both diseases affecting the kidney, and paroxysmal nocturnal hemoglobinuria, or PNH, a blood disorder, as well as several more prevalent indications. Our lead drug candidate, ACH-4471, has demonstrated preliminary clinical proof-of-concept in patients with C3G and in patients with PNH. In interim data from the first two patients enrolled in our phase II clinical trial for C3G patients, ACH-4471 demonstrated reductions in proteinuria, a marker of renal dysfunction, as well as reductions in biomarkers associated with the over-activation of the complement alternative pathway characteristic of patients with C3G. 1