Part I [Business](index=4&type=section&id=Item%201.%20Business) Aerpio Pharmaceuticals develops Tie2 pathway compounds for ocular and diabetic diseases, with lead candidate AKB-9778 for glaucoma, and is exploring strategic alternatives to maximize shareholder value [Overview](index=4&type=section&id=Overview) - Aerpio is a biopharmaceutical company focused on developing compounds that activate the Tie2 pathway for treating ocular diseases and diabetic complications[6](index=6&type=chunk) - The Phase 2b trial of subcutaneous AKB-9778 for non-proliferative diabetic retinopathy (NPDR) did not meet its primary endpoint[6](index=6&type=chunk) - Based on observed reductions in intraocular pressure (IOP), the company has developed a topical ocular formulation of AKB-9778 for open-angle glaucoma (OAG) and initiated a Phase 1b trial in June 2019[6](index=6&type=chunk) - The company has licensed AKB-4924 (now GB004) to Gossamer Bio, Inc. for the treatment of inflammatory bowel disease (IBD). Gossamer is responsible for all further development and commercialization[6](index=6&type=chunk) [Our Strategy](index=5&type=section&id=Our%20Strategy) - Advance the development of AKB-9778 for open-angle glaucoma, with plans for a Phase 2 clinical trial with results expected in Q1 2021[8](index=8&type=chunk) - Explore strategic options for further development of AKB-9778 in diabetic nephropathy, based on positive UACR data from two clinical trials[9](index=9&type=chunk) - Advance preclinical assets ARP-1536 (monoclonal antibody) and a bispecific antibody for diabetic vascular complications and macular edema[10](index=10&type=chunk) - Engaged financial advisors in October 2019 to explore strategic alternatives, including potential acquisition, merger, or asset sale, to maximize stockholder value[10](index=10&type=chunk) - Implemented a realignment plan in April 2019, reducing the workforce by approximately **41%** to conserve cash for ongoing clinical trials[11](index=11&type=chunk) [Product Pipeline](index=5&type=section&id=Product%20Pipeline) - The company's lead product, AKB-9778, is a first-in-class small molecule inhibitor of vascular endothelial protein tyrosine phosphatase (VE-PTP), which activates the Tie2 pathway[15](index=15&type=chunk)[25](index=25&type=chunk) - In a Phase 1b trial for OAG, topical AKB-9778 added to standard prostaglandin therapy showed a **statistically significant**, placebo-corrected decrease in IOP on Day 7[21](index=21&type=chunk)[23](index=23&type=chunk) - ARP-1536 is a humanized monoclonal antibody in preclinical development targeting VE-PTP, similar to AKB-9778, for diabetic vascular complications[28](index=28&type=chunk) - A bispecific antibody that binds both VEGF and VE-PTP is in development for wet AMD and diabetic macular edema[29](index=29&type=chunk) - AKB-4924 (GB004), a selective HIF-1 alpha stabilizer, was licensed to Gossamer Bio for IBD. Gossamer expects Phase 1b results in ulcerative colitis patients in the first half of 2020[30](index=30&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) Patent Portfolio as of December 31, 2019 | Category | U.S. Patents | U.S. Pending Applications | Foreign Patents | Foreign Pending Applications | | :--- | :--- | :--- | :--- | :--- | | **Total Owned** | 32 | 26 | 274 | 103 | | **ARP-1536 Related** | 7 | 8 | 44 | 36 | | **AKB-9778 Related** | 25 | 18 | 230 | 67 | - Patents and applications cover compositions of matter, methods of use, formulations, and methods of manufacture, with expected expiration dates from 2027 to 2039, excluding potential extensions[34](index=34&type=chunk) - The core composition of matter patents for both ARP-1536 and AKB-9778 are set to expire in 2027, without accounting for possible patent term adjustments or extensions[34](index=34&type=chunk) [Government Regulation](index=13&type=section&id=Government%20Regulation) - The company's products are subject to extensive regulation by the FDA in the United States and other government authorities internationally, covering manufacturing, clinical development, marketing, and pricing[39](index=39&type=chunk) - The FDA approval process for a new drug generally involves extensive nonclinical studies, an Investigational New Drug (IND) application, and multi-phase human clinical trials (Phase 1, 2, 3) to establish safety and efficacy before submitting a New Drug Application (NDA) or Biologics License Application (BLA)[40](index=40&type=chunk)[43](index=43&type=chunk) - The company may seek expedited review programs such as Fast Track Designation, Priority Review, or Breakthrough Therapy Designation to accelerate FDA review and approval[50](index=50&type=chunk) - In the European Union, medicines can be authorized via a centralized procedure through the European Medicines Agency (EMA) or through national authorization procedures. New chemical entities can qualify for **eight years** of data exclusivity and an additional **two years** of market exclusivity[64](index=64&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - Sales of approved products will depend on coverage and reimbursement from third-party payors, who are increasingly challenging prices and examining cost-effectiveness. The Affordable Care Act (ACA) and other legislative measures continue to create uncertainty and potential downward pressure on drug pricing[69](index=69&type=chunk)[71](index=71&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, clinical, regulatory, and market risks, including substantial losses, reliance on its lead candidate, and stock volatility - **Financial Risks:** The company has a history of significant net losses (**$23.3 million** in 2019) and an accumulated deficit of **$142.2 million** as of year-end 2019. It will require substantial additional financing to continue development, and failure to obtain it could force termination of programs[81](index=81&type=chunk)[84](index=84&type=chunk) - **Clinical & Regulatory Risks:** The business heavily depends on the success of AKB-9778. The subcutaneous formulation failed its primary endpoint in a Phase 2b trial for NPDR. The new topical formulation for glaucoma faces a lengthy and uncertain clinical and regulatory process[93](index=93&type=chunk)[95](index=95&type=chunk) - **Third-Party Reliance:** Aerpio relies on third-party CROs for clinical trials and contract manufacturers for product supply. Any failure by these third parties to perform adequately could delay or derail development and commercialization[107](index=107&type=chunk)[109](index=109&type=chunk) - **Strategic Risks:** The ongoing exploration of strategic alternatives may not result in a transaction and could be disruptive to business operations and employee retention. A corporate restructuring in April 2019 reduced the workforce by **41%**, which may have unanticipated negative consequences[87](index=87&type=chunk) - **Market & Stock Risks:** The company faces competition from major pharmaceutical companies with greater resources. If approved, its products may not achieve market acceptance or adequate reimbursement. The company's stock price is highly volatile, and it faces a risk of being delisted from the Nasdaq Capital Market for failing to meet the minimum bid price requirement[143](index=143&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties) The company's corporate headquarters are located in a leased 7,580 square foot office space in Cincinnati, Ohio. The lease for this facility is set to expire on July 31, 2021 - Corporate headquarters are located in a 7,580 square foot leased office space in Cincinnati, Ohio[179](index=179&type=chunk) - The current lease expires on July 31, 2021[179](index=179&type=chunk) [Legal Proceedings](index=61&type=section&id=Item%203.%20Legal%20Proceedings) As of the filing date of this Annual Report on Form 10-K, Aerpio Pharmaceuticals, Inc. is not involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[181](index=181&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under 'ARPO', experienced price volatility in 2019, and does not plan to pay dividends - The company's common stock trades on the Nasdaq Capital Market under the symbol "ARPO"[184](index=184&type=chunk) 2019 Common Stock Price Range | Quarter | High | Low | | :--- | :--- | :--- | | First | $4.25 | $0.88 | | Second | $1.16 | $0.85 | | Third | $0.90 | $0.61 | | Fourth | $0.70 | $0.45 | - As of March 9, 2020, there were 125 stockholders of record[186](index=186&type=chunk) - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[187](index=187&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2019, Aerpio shifted focus to glaucoma, incurred a **$23.3 million** net loss, reduced expenses, and holds **$38.5 million** cash, sufficient through Q2 2021 [Results of Operations](index=66&type=section&id=Results%20of%20Operations) Consolidated Operations (Years Ended December 31) | Line Item | 2019 | 2018 | | :--- | :--- | :--- | | License revenue, and other | $0 | $20,157,430 | | Research and development | $12,824,402 | $17,852,756 | | General and administrative | $9,756,185 | $13,485,918 | | Restructuring expense | $1,863,495 | $0 | | **Total operating expenses** | **$24,444,082** | **$31,338,674** | | **Loss from operations** | **($24,444,082)** | **($11,181,244)** | | **Net and comprehensive loss** | **($23,270,514)** | **($10,396,635)** | - Research and development expenses decreased by **$5.0 million** (**28.2%**) in 2019 due to lower spending on clinical trials (TIME-2b completion vs. Phase 1 Glaucoma initiation) and reduced R&D personnel costs[210](index=210&type=chunk) - General and administrative expenses decreased by **$3.7 million** (**27.7%**) in 2019, primarily due to a **$2.5 million** decrease in stock-based compensation and lower employee-related expenses following the company's restructuring[211](index=211&type=chunk) - Restructuring expenses of **$1.9 million** were recorded in 2019 due to a reduction in headcount, with no similar expenses in 2018[212](index=212&type=chunk) [Liquidity and Capital Resources](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) Key Financial Position Data (as of December 31) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $38.5 million | $62.6 million | | Accumulated deficit | $142.2 million | $119.0 million | - The company believes its existing cash and cash equivalents of **$38.5 million** will be sufficient to fund planned operations at least through the second quarter of 2021[218](index=218&type=chunk) Summary of Cash Flows (Years Ended December 31) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($23,852,522) | ($5,808,046) | | Net cash used in investing activities | ($236,952) | ($37,912) | | Net cash provided by financing activities | $0 | $48,195,859 | | **Net (decrease) increase in cash** | **($24,089,474)** | **$42,349,901** | | Cash at end of year | $38,524,536 | $62,614,010 | - Net cash used in operating activities was significantly higher in 2019 (**$23.9 million**) compared to 2018 (**$5.8 million**), as 2018 results were offset by the **$20.0 million** upfront payment from the Gossamer License Agreement[219](index=219&type=chunk)[222](index=222&type=chunk) - Financing activities provided **$48.1 million** in 2018 from an underwritten public offering, with no similar financing activity in 2019[224](index=224&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=73&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) Audited consolidated financial statements for 2019 and 2018 show a **$23.3 million** net loss in 2019, with total assets decreasing to **$39.9 million** [Consolidated Balance Sheets](index=76&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Data (as of December 31) | Account | 2019 | 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $38,524,536 | $62,614,010 | | Total current assets | $39,570,475 | $63,984,083 | | **Total assets** | **$39,936,786** | **$64,123,492** | | **Liabilities & Equity** | | | | Total current liabilities | $3,334,005 | $5,456,917 | | Total liabilities | $3,401,443 | $5,456,917 | | Total stockholders' equity | $36,535,343 | $58,666,575 | | **Total liabilities and stockholders' equity** | **$39,936,786** | **$64,123,492** | [Consolidated Statements of Operations and Comprehensive Loss](index=77&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Consolidated Statement of Operations Data (Years Ended December 31) | Account | 2019 | 2018 | | :--- | :--- | :--- | | License revenue, and other | $0 | $20,157,430 | | Research and development | $12,824,402 | $17,852,756 | | General and administrative | $9,756,185 | $13,485,918 | | Restructuring expense | $1,863,495 | $0 | | Loss from operations | ($24,444,082) | ($11,181,244) | | **Net and comprehensive loss** | **($23,270,514)** | **($10,396,635)** | | **Net loss per share (basic and diluted)** | **($0.57)** | **($0.31)** | [Consolidated Statements of Cash Flows](index=79&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statement of Cash Flows Data (Years Ended December 31) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($23,852,522) | ($5,808,046) | | Net cash used in investing activities | ($236,952) | ($37,912) | | Net cash provided by financing activities | $0 | $48,195,859 | | **Net (decrease) increase in cash** | **($24,089,474)** | **$42,349,901** | | Cash at end of year | $38,524,536 | $62,614,010 | [Controls and Procedures](index=97&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2019[336](index=336&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[337](index=337&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of 2019 that materially affected, or are reasonably likely to materially affect, these controls[339](index=339&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=99&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the Definitive Proxy Statement[342](index=342&type=chunk) [Executive Compensation](index=99&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the Definitive Proxy Statement[343](index=343&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=99&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the Definitive Proxy Statement[343](index=343&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=99&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the Definitive Proxy Statement[344](index=344&type=chunk) [Principal Accounting Fees and Services](index=99&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2020 Annual Meeting of Stockholders - Information is incorporated by reference from the Definitive Proxy Statement[344](index=344&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=100&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements included in the report and provides an index of all exhibits filed with the Form 10-K - The consolidated financial statements required by this item are located in a separate section beginning on page 73 of the report[347](index=347&type=chunk) - An index of exhibits is provided, listing key documents such as the Certificate of Incorporation, By-laws, Warrant Agreements, equity incentive plans, the Gossamer License Agreement, and various employment agreements[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ 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: 001-38560 Aerpio Pharmaceuticals, Inc. (Exact Name of Registrant as Specified in its Charter) Delaw ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ 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: 001-38560 Aerpio Pharmaceuticals, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware E ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |-------------------------------------------------|-- ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Aerpio Pharmaceuticals focuses on developing first-in-class ocular disease treatments, with lead candidate AKB-9778 for NPDR and POAG, supported by third-party manufacturing and strategic collaborations * Aerpio is a biopharmaceutical company focused on advancing **first-in-class treatments for ocular disease**, with its lead product candidate, **AKB-9778**, being developed for non-proliferative diabetic retinopathy (NPDR)[6](index=6&type=chunk) * The company's strategy is to become a leader in **Tie2-targeted therapeutics** by advancing AKB-9778 for diabetic retinopathy and other indications like primary open angle glaucoma (POAG), and exploring strategic collaborations[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk) * In June 2018, Aerpio licensed AKB-4924 to Gossamer Bio, Inc. for an **upfront payment of $20 million**, with potential for up to **$400 million in future milestone payments** and tiered royalties[8](index=8&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) * The company relies on **third-party contract manufacturers** for the production of its product candidates and does not own or operate manufacturing facilities[62](index=62&type=chunk) [Product Pipeline](index=4&type=section&id=Item%201.%20Business.Product%20Pipeline) The company's pipeline is led by AKB-9778, a Tie2 activator in Phase 2b for NPDR and planned Phase 1b for POAG, alongside preclinical assets and a licensed candidate * **AKB-9778 for NPDR**: A Phase 2b trial (TIME-2b) has enrolled **167 patients** to evaluate improvement in Diabetic Retinopathy Severity Score (DRSS), with top-line results expected in **March 2019**[6](index=6&type=chunk)[35](index=35&type=chunk) * **AKB-9778 for POAG**: A topical formulation is planned for a Phase 1b clinical trial in **Q2 2019** to evaluate its potential in reducing intraocular pressure[8](index=8&type=chunk)[10](index=10&type=chunk)[52](index=52&type=chunk) * **ARP-1536**: A humanized monoclonal antibody targeting VE-PTP is in preclinical development for diabetic vascular complications[8](index=8&type=chunk)[53](index=53&type=chunk) * **AKB-4924 (GB004)**: Licensed to Gossamer Bio for inflammatory bowel disease (IBD), with Gossamer responsible for all further development and commercialization[8](index=8&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) [Intellectual Property and Competition](index=18&type=section&id=Item%201.%20Business.Intellectual%20Property%20and%20Competition) The company holds numerous patents for its lead candidates, expiring in 2027, and faces significant competition from major pharmaceutical companies with established products for diabetic eye diseases * The company's patent portfolio includes **23 U.S. patents** and **199 foreign patents** directed toward AKB-9778, with composition of matter patents set to expire in **2027**[57](index=57&type=chunk) * Key competitors in the diabetic retinopathy (DR) and diabetic macular edema (DME) space include large pharmaceutical companies such as **Roche/Genentech** and **Regeneron**, with products like Lucentis and Eylea[58](index=58&type=chunk)[60](index=60&type=chunk) [Government Regulation](index=19&type=section&id=Item%201.%20Business.Government%20Regulation) The company's operations are subject to extensive FDA and international regulations, encompassing multi-phase clinical trials, manufacturing compliance, lengthy approval processes, and ongoing post-market oversight, including pricing and reimbursement rules * The FDA approval process for new drugs is extensive, requiring nonclinical studies, an Investigational New Drug (IND) application, and multi-phase human clinical trials (Phase 1, 2, 3) to establish safety and efficacy[66](index=66&type=chunk)[69](index=69&type=chunk) * Manufacturing facilities are subject to FDA inspection for compliance with **current Good Manufacturing Practices (cGMP)**, and clinical sites are inspected for **Good Clinical Practices (GCP)**[73](index=73&type=chunk) * The company is subject to various healthcare laws, including the federal **Anti-Kickback Statute**, **False Claims Act**, and the **Physician Payment Sunshine Act**, which regulate interactions with healthcare providers[100](index=100&type=chunk) * Sales of approved products will depend on coverage and reimbursement from **third-party payors**, who are increasingly challenging prices and examining cost-effectiveness[96](index=96&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including financial losses, dependence on lead candidate AKB-9778, reliance on third parties, intellectual property challenges, intense competition, market acceptance hurdles, and significant stockholder influence * The company has a history of significant net losses, including **$10.4 million in 2018**, and an accumulated deficit of **$119.0 million** as of December 31, 2018, requiring substantial additional financing[106](index=106&type=chunk)[108](index=108&type=chunk) * The business is heavily dependent on the success of its lead product candidate, **AKB-9778**, which is in Phase 2 development and faces a lengthy and uncertain path to potential regulatory approval and commercialization[114](index=114&type=chunk) * Aerpio relies on **third-party CROs** to conduct clinical trials and on **third-party manufacturers**, which reduces control over these critical activities and introduces risks related to performance, compliance, and supply[125](index=125&type=chunk)[127](index=127&type=chunk) * The company faces risks of intellectual property infringement claims and challenges to the validity of its patents, with composition-of-matter patents for its lead candidates expiring in **2027**[132](index=132&type=chunk)[138](index=138&type=chunk)[143](index=143&type=chunk) * Commercial success is uncertain and depends on market acceptance, establishing sales and marketing capabilities, and securing adequate coverage and reimbursement from payors, which is increasingly difficult due to cost-containment pressures[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) * As of December 31, 2018, executive officers, directors, and principal stockholders owned approximately **44.7%** of the company's common stock, allowing them to exert significant influence over corporate matters[178](index=178&type=chunk) [Unresolved Staff Comments](index=61&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission * None [Properties](index=61&type=section&id=Item%202.%20Properties) The company does not own any real estate and leases all its facilities, including its corporate headquarters in Cincinnati, Ohio, and smaller offices in Massachusetts and Michigan * The company leases three properties: **7,580 sq ft in Cincinnati, OH** (lease expires July 2021), **4,000 sq ft in Lexington, MA** (lease expires Dec 2021), and **687 sq ft in Dexter, MI** (lease expires Oct 2019)[190](index=190&type=chunk) [Legal Proceedings](index=61&type=section&id=Item%203.%20Legal%20Proceedings) As of the filing date of this report, Aerpio is not involved in any material legal proceedings * The company is not currently involved in any material legal proceedings[191](index=191&type=chunk) [Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company * Not applicable Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=62&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock began trading on Nasdaq in June 2018, with 222 stockholders of record as of March 2019, and has never paid cash dividends, nor made stock repurchases in 2018 * The company's common stock was uplisted to the Nasdaq Capital Market on **June 26, 2018**, under the symbol "**ARPO**"[194](index=194&type=chunk) Stock Price Performance | Period | High ($) | Low ($) | | :--- | :--- | :--- | | **2018** | | | | Q1 | 5.25 | 4.00 | | Q2 | 5.00 | 3.29 | | Q3 | 4.35 | 3.00 | | Q4 | 3.17 | 1.56 | | **2017** | | | | Q3 | 6.75 | 5.90 | | Q4 | 6.60 | 4.00 | * As of **March 1, 2019**, there were **222 stockholders of record**[196](index=196&type=chunk) * The company has never declared or paid cash dividends and does not intend to in the foreseeable future[197](index=197&type=chunk) [Selected Financial Data](index=62&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company * Not applicable [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2018, Aerpio recognized $20.2 million in license revenue, reducing its net loss to $10.4 million, while increasing R&D and G&A expenses, and significantly improving liquidity to $62.6 million, sufficient to fund operations into Q2 2020 [Results of Operations (2018 vs. 2017)](index=65&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis.Results%20of%20Operations) For 2018, the company reported $20.2 million in license revenue, a 47.0% increase in R&D expenses to $17.9 million, and a 45.9% increase in G&A expenses to $13.5 million, resulting in a reduced net loss of $10.4 million Key Financial Performance (2018 vs. 2017) | Metric | 2018 ($) | 2017 ($) | Change (%) | | :--- | :--- | :--- | :--- | | License Revenue | 20,157,430 | 0 | N/A | | R&D Expenses | 17,852,756 | 12,147,132 | +47.0% | | G&A Expenses | 13,485,918 | 9,241,411 | +45.9% | | Loss from Operations | (11,181,244) | (21,388,543) | -47.7% | | Net Loss | (10,396,635) | (21,400,606) | -51.4% | * The increase in R&D expense was primarily attributed to the ongoing activity for the **TIME-2b clinical trial for AKB-9778**, initiated in Q2 2017[216](index=216&type=chunk) * The increase in G&A expense was mainly due to a **$2.8 million increase in stock-based compensation** and a **$1.4 million increase in personnel-related expenses**[216](index=216&type=chunk) [Liquidity and Capital Resources](index=66&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis.Liquidity%20and%20Capital%20Resources) As of December 31, 2018, the company's cash and cash equivalents significantly increased to $62.6 million, driven by a $48.1 million public offering and a $20.0 million upfront payment from the Gossamer license, with current cash projected to fund operations into Q2 2020 * Cash and cash equivalents were **$62.6 million** at December 31, 2018[221](index=221&type=chunk) * In June/July 2018, the company received net proceeds of approximately **$48.1 million** from an underwritten public offering[221](index=221&type=chunk)[227](index=227&type=chunk) * In June 2018, the company received a **$20.0 million upfront payment** from the Gossamer License agreement[221](index=221&type=chunk) Cash Flow Summary | Cash Flow Activity | Year Ended Dec 31, 2018 ($) | Year Ended Dec 31, 2017 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (5,808,046) | (18,883,535) | | Net cash (used in)/provided by investing activities | (37,912) | 41,104 | | Net cash provided by financing activities | 48,195,859 | 37,496,846 | * Management believes existing cash will fund operations at least into **Q2 2020**[203](index=203&type=chunk)[221](index=221&type=chunk) [Critical Accounting Policies and Estimates](index=68&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis.Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies include Revenue Recognition (applying a five-step model), Prepaid and Accrued Research and Development Expenses (estimating third-party costs), and Stock-Based Compensation (using Black-Scholes with subjective assumptions) * **Revenue Recognition**: The company adopted **ASC 606** on January 1, 2018, using a five-step model to recognize revenue from contracts, including identifying performance obligations and allocating transaction price[234](index=234&type=chunk)[272](index=272&type=chunk) * **Prepaid and Accrued R&D Expenses**: The company estimates expenses for services performed by third parties (like CROs) but not yet invoiced, based on contract terms and vendor communication[237](index=237&type=chunk) * **Stock-Based Compensation**: The company uses the **Black-Scholes model** to estimate the fair value of stock options, requiring subjective inputs, with stock-based compensation expense at **$3.4 million in 2018**[240](index=240&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=72&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk is minimal, as its cash and cash equivalents are held in short-term investments with minimal exposure to interest rate fluctuations * The company's cash and cash equivalents consist of funds in short-term investments with maturities of **three months or less**, resulting in minimal interest rate risk[244](index=244&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) The audited consolidated financial statements for 2018 and 2017, reported by Ernst & Young LLP, show a significant increase in cash and assets in 2018, and a reduced net loss of $10.4 million due to license revenue Consolidated Balance Sheet Data (as of Dec 31) | Metric | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | 62,614,010 | 20,264,109 | | Total Assets | 64,123,492 | 21,027,653 | | Total Liabilities | 5,456,917 | 3,592,164 | | Total Stockholders' Equity | 58,666,575 | 17,435,489 | Consolidated Statement of Operations Data (for year ended Dec 31) | Metric | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | License revenue, and other | 20,157,430 | 0 | | Research and development | 17,852,756 | 12,147,132 | | General and administrative | 13,485,918 | 9,241,411 | | Net and comprehensive loss | (10,396,635) | (21,400,606) | Consolidated Statement of Cash Flows Data (for year ended Dec 31) | Metric | 2018 ($) | 2017 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (5,808,046) | (18,883,535) | | Net cash provided by financing activities | 48,195,859 | 37,496,846 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=96&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any matter of accounting principles, practices, or financial disclosure * None [Controls and Procedures](index=96&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2018, management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective * Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[335](index=335&type=chunk) * Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018, based on the COSO 2013 framework[336](index=336&type=chunk) [Other Information](index=96&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item * None Part III [Directors, Executive Officers and Corporate Governance](index=97&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2019 proxy statement * Information is incorporated by reference from the Definitive Proxy Statement[338](index=338&type=chunk) [Executive Compensation](index=97&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2019 proxy statement * Information is incorporated by reference from the Definitive Proxy Statement[339](index=339&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=97&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2019 proxy statement * Information is incorporated by reference from the Definitive Proxy Statement[339](index=339&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=97&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's 2019 proxy statement * Information is incorporated by reference from the Definitive Proxy Statement[340](index=340&type=chunk) [Principal Accounting Fees and Services](index=97&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2019 proxy statement * Information is incorporated by reference from the Definitive Proxy Statement[340](index=340&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=98&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists the financial statements included in the report and provides an index of all exhibits filed with the Form 10-K, including key agreements and plans * This section contains the consolidated financial statements and a list of all exhibits filed with the report[343](index=343&type=chunk) * Key exhibits listed include the **License Agreement with Gossamer Bio, Inc.**, the **2017 Stock Option and Incentive Plan**, and various executive employment agreements[345](index=345&type=chunk)[346](index=346&type=chunk)