ACHN 2017 Annual Report

face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a product and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. In addition, changes to formulations of drug candidates may result in delays and requirements for additional clinical testing. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the drug candidates. Even if we, or any future collaborators, believe that the results of clinical trials for our drug candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our drug candidates. In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same drug candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, variability of the disease being studied, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our drug candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced drug candidates, and, correspondingly, our business and financial prospects would be negatively impacted. We may expend our resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and drug candidates for specific indications may not yield any commercially viable drug candidates. For example, we are currently focusing our efforts in developing ACH-4471 and certain next generation compounds for both C3G and PNH. If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the drug candidate. We recently implemented a plan to reduce our staff levels and eliminate certain personnel and other costs, which could significantly adversely affect our ability to continue to discover and develop new compounds. In February 2018, we implemented a restructuring plan that will reduce employee headcount by approximately 20% to approximately 70 employees in March 2018. The restructuring plan was implemented following a strategic assessment of our portfolio. During the assessment, our management team and board of directors concluded that our strategic focus would be on the development of our existing clinical candidates, ACH-4471 and ACH-5228, and late-stage preclinical compound, ACH-5548. We assessed the staffing levels required to accomplish our revised strategic goals and determined to reduce our staff across several functional areas. Our restructuring efforts may disrupt our staff and our business, and we may not be successful in advancing our existing clinical candidates and late-stage compounds through preclinical and clinical trials, or in discovering or developing new compounds as a result of lower staffing levels and a reduction in our spending plan. Clinical drug development involves a lengthy and expensive process with an uncertain outcome. Clinical testing is expensive, time-consuming and uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our drug candidates is susceptible to the risk of failure inherent at any stage of drug development, including failure to 35