ACHN 2017 Annual Report

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many important factors, such as those set forth in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements. 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. 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, and immune complex membranoproliferative glomerulonephritis, or IC-MPGN, both kidney diseases, 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. In interim data from the first four patients enrolled in our phase II clinical trial for PNH patients, ACH-4471 demonstrated reductions in lactate dehydrogenase, or LDH, a marker of intravascular hemolysis, increases in hemoglobin, and improvements in fatigue score. We believe that our alternative pathway factor D inhibitor compounds may have a pharmacological advantage by potentially preventing extravascular hemolysis, or the destruction of PNH red blood cells outside of blood vessels, while also preventing intravascular hemolysis, or red blood cell destruction within blood vessels. In addition, we believe our alternative pathway factor D inhibitor compounds may be able to treat the proportion of patients with PNH who have a suboptimal response to, or who fail to respond to, currently approved treatments for PNH. We have also generated a platform of additional potent and specific orally-administered compounds that bind to factor D with high affinity, resulting in alternative pathway inhibition. One of these compounds, ACH-5228, is in phase I clinical testing in healthy volunteers, and additional compounds are in IND-enabling preclinical development. We may seek to advance certain of these factor D inhibitors for oral systemic administration to treat C3G, IC-MPGN, PNH, or other complement mediated diseases. We were incorporated on August 17, 1998 in Delaware. Since our inception, we have spent substantial research and development funds to develop our drug candidate pipeline and expect to continue to do so for the foreseeable future. We have incurred losses of $588.8 million from inception through December 31, 2017 and 77