Part I [Business](index=7&type=section&id=Item%201.%20Business) Catabasis is a biopharmaceutical company that has shifted its focus to rare diseases, with its lead product candidate, QLS-215, for the treatment of hereditary angioedema (HAE) - The company's primary focus is now on QLS-215, a monoclonal antibody inhibitor of plasma kallikrein for treating hereditary angioedema (HAE), acquired through the Quellis Biosciences merger in January 2021[11](index=11&type=chunk)[234](index=234&type=chunk) - This strategic shift occurred after the company stopped the development of its edasalonexent program for Duchenne Muscular Dystrophy (DMD) in October 2020, following the failure of its Phase 3 PolarisDMD trial to meet primary and secondary endpoints[11](index=11&type=chunk)[234](index=234&type=chunk) - The company plans to submit an Investigational New Drug (IND) application for QLS-215 in the first half of 2022 and initiate a Phase 1a clinical trial, with initial results expected by the end of 2022[11](index=11&type=chunk)[23](index=23&type=chunk) [Overview and Strategy](index=7&type=section&id=Item%201.%20Business%23Overview) Catabasis is a biopharmaceutical company now focused on rare diseases, with QLS-215 for HAE as its lead candidate, acquired via the Quellis Biosciences merger in January 2021 - Acquired Quellis Biosciences, Inc. in January 2021, making QLS-215 for HAE its lead product candidate[11](index=11&type=chunk)[12](index=12&type=chunk) - Announced a private placement in February 2021, resulting in gross proceeds of approximately **$110.0 million**[11](index=11&type=chunk)[12](index=12&type=chunk) - Ceased development of edasalonexent for DMD after the Phase 3 PolarisDMD trial failed to meet its primary endpoint in October 2020[11](index=11&type=chunk) [Product Candidate: QLS-215](index=8&type=section&id=Item%201.%20Business%23Our%20Product%20Candidate) QLS-215 is a humanized monoclonal antibody designed to inhibit plasma kallikrein for HAE, showing higher potency and longer half-life than existing therapies - QLS-215 is a humanized monoclonal antibody targeting plasma kallikrein, a critical enzyme in HAE pathology[13](index=13&type=chunk)[16](index=16&type=chunk) - In a functional assay, QLS-215 showed approximately **10-fold higher potency** (IC90 of **~30 nM**) compared to lanadelumab (IC90 of **~300 nM**)[19](index=19&type=chunk)[20](index=20&type=chunk) - Pharmacokinetic studies in cynomolgus monkeys showed QLS-215 has a half-life of approximately **34 days**, about **3 to 4 times longer** than lanadelumab's **~10-day half-life**[20](index=20&type=chunk)[22](index=22&type=chunk) - The company plans to submit an IND in the first half of 2022, initiate a Phase 1a trial with results by end of 2022, and a Phase 1b/2 trial in HAE patients in 2023 with results by end of 2023[23](index=23&type=chunk) [Competition](index=12&type=section&id=Item%201.%20Business%23Competition) The HAE market is highly competitive with multiple approved therapies and a robust pipeline of investigational treatments from established companies - The HAE market has multiple approved therapies for both on-demand and prophylactic treatment, manufactured by CSL Behring, Takeda, Pharming, and BioCryst[25](index=25&type=chunk) - QLS-215 is expected to compete most directly with Takeda's TAKHZYRO, an approved monoclonal antibody inhibitor of plasma kallikrein[25](index=25&type=chunk) - Numerous other companies have HAE treatments in development, including CSL Behring (Phase 3), KalVista Pharmaceuticals (Phase 2), Ionis Pharmaceuticals (Phase 2), and others with preclinical gene therapy approaches[25](index=25&type=chunk) [Intellectual Property](index=13&type=section&id=Item%201.%20Business%23Intellectual%20Property) The company's intellectual property strategy for QLS-215 relies on patent protection and trade secrets, with a provisional patent application potentially expiring in 2042 - The company owns one U.S. provisional patent application for QLS-215 and its use in treating disorders like HAE. A granted patent from this application would expire in **2042**[26](index=26&type=chunk) - The company intends to apply for patent term extensions under the Hatch-Waxman Act and similar foreign provisions if QLS-215 receives marketing approval[26](index=26&type=chunk) - In addition to patents, the company relies on trade secret protection for proprietary information, particularly concerning manufacturing processes[26](index=26&type=chunk)[27](index=27&type=chunk) [Manufacturing and Supply](index=14&type=section&id=Item%201.%20Business%23Manufacturing%20and%20Supply) Catabasis relies entirely on third-party manufacturers for QLS-215 supply for all study phases and potential commercialization, with cGMP manufacturing planned for 2021 - The company relies on third-party manufacturers for all nonclinical, clinical, and commercial supply of QLS-215 and has no plans to build its own facilities[28](index=28&type=chunk) - Cell line development has commenced, and high-producing proprietary cell lines have been identified. The company plans to initiate cGMP manufacturing for QLS-215 in **2021**[28](index=28&type=chunk) [Government Regulation and Product Approval](index=14&type=section&id=Item%201.%20Business%23Government%20Regulation%20and%20Product%20Approval) The company's operations are subject to extensive regulation by the FDA and comparable authorities, requiring a Biologics License Application (BLA) for QLS-215 - The company must secure FDA approval for a Biologics License Application (BLA) for QLS-215 before it can be marketed in the U.S.[33](index=33&type=chunk)[44](index=44&type=chunk) - The company may seek orphan drug designation for QLS-215, which could provide **seven years** of market exclusivity in the U.S. if it is the first to receive approval for the designated rare disease[61](index=61&type=chunk) - The company's business is subject to healthcare laws including the Anti-Kickback Statute, False Claims Act, and pricing and reimbursement regulations, which are evolving due to legislative efforts like the ACA and other reforms[83](index=83&type=chunk)[88](index=88&type=chunk) - Brexit has created regulatory uncertainty for marketing products in the United Kingdom, which now operates under a separate framework from the European Union[81](index=81&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks, primarily its heavy dependence on the success of its single preclinical product candidate, QLS-215 - The business is almost entirely dependent on the success of a single preclinical product candidate, QLS-215, for HAE[4](index=4&type=chunk)[93](index=93&type=chunk) - The company will need substantial additional funding and may be forced to delay or eliminate programs if unable to raise capital on acceptable terms[4](index=4&type=chunk)[124](index=124&type=chunk) - Failure to obtain stockholder approval for the conversion of Series X Preferred Stock could trigger a cash redemption obligation, raising substantial doubt about the company's ability to continue as a going concern[4](index=4&type=chunk)[128](index=128&type=chunk)[208](index=208&type=chunk) - The company faces significant competition from established HAE therapies and a robust pipeline of new treatments from other companies[4](index=4&type=chunk)[117](index=117&type=chunk) [Unresolved Staff Comments](index=77&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - None[223](index=223&type=chunk) [Properties](index=77&type=section&id=Item%202.%20Properties) The company's executive offices are located in Boston, Massachusetts, consisting of approximately 11,000 square feet of subleased office space - The company subleases approximately **11,000 square feet** of office space in Boston, Massachusetts[221](index=221&type=chunk) - The current lease expires in **July 2022**[221](index=221&type=chunk) [Legal Proceedings](index=77&type=section&id=Item%203.%20Legal%20Proceedings) As of the filing date, the company is not a party to any legal proceedings or claims that are expected to have a material adverse effect on its business - The company is not currently party to any claim or litigation expected to have a material adverse effect on its business[222](index=222&type=chunk)[224](index=224&type=chunk) [Mine Safety Disclosures](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[224](index=224&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=79&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 the Nasdaq Global Market under the symbol "CATB", and it has never paid cash dividends - Common stock is traded on the Nasdaq Global Market under the symbol **"CATB"**[227](index=227&type=chunk) - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[229](index=229&type=chunk) - In January and February 2021, the company issued **3,332,669 shares** of common stock and **86,077 shares** of Series X Preferred Stock in connection with the Quellis merger and a private placement financing[230](index=230&type=chunk) [Selected Financial Data](index=80&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable to the company - Not applicable[231](index=231&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=81&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial condition reflects its transition to developing QLS-215, with a net loss of $37.3 million in 2020 and an accumulated deficit of $260.9 million Results of Operations (in thousands) | | Year Ended December 31, | Period-to-Period Change | | :--- | :--- | :--- | | | **2020** | **2019** | **$** | | **Operating expenses:** | | | | | Research and development | $25,590 | $18,317 | $7,273 | | General and administrative | $11,845 | $8,771 | $3,074 | | **Total operating expenses** | **$37,435** | **$27,088** | **$10,347** | | **Loss from operations** | **$(37,435)** | **$(27,088)** | **$(10,347)** | | **Other income, net** | $135 | $795 | $(660) | | **Net loss** | **$(37,300)** | **$(26,293)** | **$(11,007)** | - As of December 31, 2020, the company had an accumulated deficit of **$260.9 million** and has not generated any revenue from product sales[257](index=257&type=chunk)[262](index=262&type=chunk) - The company believes its existing cash, including the **$110.0 million** gross proceeds from the February 2021 Financing, is sufficient to fund operations through **2023**, but this is contingent on stockholder approval of the Series X Preferred Stock conversion[262](index=262&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern due to a potential cash redemption of Series X Preferred Stock if stockholder approval for conversion is not obtained[265](index=265&type=chunk)[308](index=308&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=90&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity related to its cash, cash equivalents, and short-term investments, totaling $44.9 million as of December 31, 2020 - The primary market risk is interest rate sensitivity for its cash, cash equivalents, and short-term investments, which totaled **$44.9 million** at year-end 2020[273](index=273&type=chunk) - Due to the short-term and low-risk nature of its investments, a **10% change** in interest rates is not expected to have a material effect on the portfolio's fair market value[273](index=273&type=chunk) [Financial Statements and Supplementary Data](index=90&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's consolidated financial statements and the independent auditor's report, which expresses substantial doubt about the company's ability to continue as a going concern - The independent auditor's report from Ernst & Young LLP expresses substantial doubt about the Company's ability to continue as a going concern[291](index=291&type=chunk) Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | $47,456 | $41,780 | | **Total Liabilities** | $6,787 | $6,060 | | **Total Stockholders' Equity** | $40,669 | $35,720 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | **Total operating expenses** | $37,435 | $27,088 | | **Net loss** | $(37,300) | $(26,293) | | **Net loss per share** | $(2.03) | $(2.35) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=90&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 - There has been no change of accountants nor any disagreements with accountants[273](index=273&type=chunk) [Controls and Procedures](index=90&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2020**[274](index=274&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and believes it was effective as of **December 31, 2020**[276](index=276&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[276](index=276&type=chunk) [Other Information](index=91&type=section&id=Item%209B.%20Other%20Information) This item is not applicable - Not Applicable[276](index=276&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=92&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[278](index=278&type=chunk) [Executive Compensation](index=92&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[278](index=278&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=92&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership by beneficial owners and management, and equity compensation plans, is incorporated by reference from the company's 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[278](index=278&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=92&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related person transactions and director independence is incorporated by reference from the company's 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[279](index=279&type=chunk) [Principal Accountant Fees and Services](index=92&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information detailing fees paid to and services provided by the principal accountant is incorporated by reference from the company's 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the definitive proxy statement for the **2021 Annual Meeting of Stockholders**[279](index=279&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=93&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and the report of the independent registered public accounting firm, along with a comprehensive list of exhibits filed with the Form 10-K - This section includes the consolidated financial statements and the Report of Independent Registered Public Accounting Firm[282](index=282&type=chunk)[283](index=283&type=chunk) - A list of all exhibits filed with the Form 10-K is provided, including key agreements related to the Quellis merger, financing, and stock plans[284](index=284&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) [Form 10-K Summary](index=96&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[288](index=288&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.001 par value per share CATB The Nasdaq Stock Market LLC FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ...

Edasalonexent Clinical Development - Edasalonexent is a late-stage therapeutic candidate for Duchenne Muscular Dystrophy (DMD), designed to limit muscle degeneration, promote muscle regeneration, and reduce inflammation and fibrosis[7, 72] - The Phase 3 PolarisDMD trial enrolled 131 boys ages 4 to 7, with top-line results expected in Q4 2020[26, 30] - In the Phase 2 MoveDMD trial and open-label extension, all assessments of function stabilized on Edasalonexent compared to the off-treatment control period[48] - Edasalonexent has been well-tolerated in more than 150 years of cumulative patient exposure[25, 72] - A trial in non-ambulatory DMD patients is expected to initiate in 2021 with support from Duchenne UK, who granted over $600,000 in funding[71] Market Opportunity and Commercial Strategy - DMD affects 1 in 3,500-5,000 males worldwide, with a median life expectancy of approximately 30 years[8, 82, 83] - Approximately 40% of patients are diagnosed by age 4[82, 85] - The company has developed strong relationships with global Duchenne patient advocacy organizations[86] - Most US Duchenne patients have access to expert care and treatment through concentrated treatment centers[92, 94] - Edasalonexent aims to be a foundational therapy for all patients affected by Duchenne, regardless of dystrophin mutation, and can be used as mono- or potential combo-therapy[20, 99]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements show increased total assets to $57.1 million driven by financing activities, alongside a growing net loss of $17.5 million for the first half of 2020 [Condensed Consolidated Balance Sheet](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2020, total assets increased to $57.1 million, primarily driven by a substantial rise in cash and cash equivalents reflecting recent financing activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $51,885 | $9,899 | | Short-term investments | $2,001 | $26,345 | | Total current assets | $55,598 | $38,958 | | **Total assets** | **$57,087** | **$41,780** | | **Liabilities & Equity** | | | | Total current liabilities | $5,509 | $5,032 | | **Total liabilities** | **$6,227** | **$6,060** | | **Total stockholders' equity** | **$50,860** | **$35,720** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported increased operating and net losses for the three and six-month periods ended June 30, 2020, compared to 2019, due to higher research and development expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,750 | $5,160 | $12,039 | $9,357 | | General and administrative | $2,803 | $2,165 | $5,555 | $4,302 | | **Total operating expenses** | **$9,553** | **$7,325** | **$17,594** | **$13,659** | | Loss from operations | $(9,553) | $(7,325) | $(17,594) | $(13,659) | | **Net loss** | **$(9,508)** | **$(7,131)** | **$(17,460)** | **$(13,169)** | | Net loss per share | $(0.53) | $(0.62) | $(1.03) | $(1.24) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2020, a net cash increase of $41.7 million was driven by $31.9 million in financing activities, offsetting cash used in operations Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,455) | $(12,325) | | Net cash provided by (used in) investing activities | $24,310 | $(14,229) | | Net cash provided by financing activities | $31,889 | $20,875 | | **Net increase (decrease) in cash** | **$41,744** | **$(5,679)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's focus on edasalonexent for DMD, significant financing activities raising over $31 million, and management's belief that current cash is sufficient for at least twelve months - The company's lead program is edasalonexent, an oral small molecule for the treatment of Duchenne muscular dystrophy (DMD), which has received orphan drug, fast track, and rare pediatric disease designations from the FDA[18](index=18&type=chunk) - In January 2020, the company raised **net proceeds of $24.6 million** from an underwritten public offering of 5,290,000 shares of common stock[21](index=21&type=chunk) - During the first six months of 2020, the company sold 1,100,001 shares through its ATM Programs, generating **net proceeds of $7.3 million**[20](index=20&type=chunk) - As of June 30, 2020, the company had **$53.9 million in cash, cash equivalents, and short-term investments**, which is believed to be sufficient to fund operations for at least the next twelve months[24](index=24&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the focus on developing edasalonexent, rising expenses due to clinical trial activities, and a strengthened liquidity position providing a cash runway through Q3 2021 [Overview](index=17&type=section&id=Overview) Catabasis is a clinical-stage biopharmaceutical company focused on its lead product candidate, edasalonexent, with top-line Phase 3 trial results expected in Q4 2020 - The company's lead product candidate is edasalonexent, an oral small molecule for treating Duchenne muscular dystrophy (DMD)[57](index=57&type=chunk) - The Phase 3 PolarisDMD trial completed enrollment with 131 boys, and **top-line results are expected in the fourth quarter of 2020**, with a goal to submit an NDA in 2021[58](index=58&type=chunk) - Contingency plans for the COVID-19 pandemic have been implemented for clinical trials, including delivery of study drugs to homes and use of telehealth, though the full impact on timelines remains uncertain[60](index=60&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Operating expenses increased for the three and six months ended June 30, 2020, driven by higher costs for the edasalonexent program and commercialization activities Comparison of Operating Expenses (in thousands) | Expense Category | Q2 2020 | Q2 2019 | Change | 6 Months 2020 | 6 Months 2019 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & development | $6,750 | $5,160 | $1,590 | $12,039 | $9,357 | $2,682 | | General & administrative | $2,803 | $2,165 | $638 | $5,555 | $4,302 | $1,253 | | **Total operating expenses** | **$9,553** | **$7,325** | **$2,228** | **$17,594** | **$13,659** | **$3,935** | - The increase in R&D expenses for the six months ended June 30, 2020 was primarily due to a **$1.6 million increase in costs for the edasalonexent program** and a $0.6 million increase in employee-related expenses[90](index=90&type=chunk) - The increase in G&A expenses for the six months ended June 30, 2020 was mainly attributable to a **$0.9 million increase in consulting and professional services** for ongoing commercialization activities[91](index=91&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was significantly strengthened by raising $31.9 million in the first half of 2020, providing sufficient capital to fund operations through Q3 2021 - As of June 30, 2020, the company had **$53.9 million in cash, cash equivalents and short-term investments**[93](index=93&type=chunk) - The company raised **net proceeds of $24.6 million** from the January 2020 public offering and **$7.3 million from ATM offerings** in the first six months of 2020[94](index=94&type=chunk)[95](index=95&type=chunk) - Existing cash is expected to be **sufficient to support operating expenses through the third quarter of 2021** and beyond a potential NDA filing[103](index=103&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity on its investment portfolio, which is not considered material due to the portfolio's short-term, low-risk nature - The company's primary market risk exposure is interest rate sensitivity on its **$53.9 million portfolio** of cash, cash equivalents, and short-term investments[111](index=111&type=chunk) - Due to the short-term and low-risk nature of the investment portfolio, an immediate **10% change in interest rates is not expected to have a material effect**[111](index=111&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls during the quarter - Management concluded that as of June 30, 2020, the company's **disclosure controls and procedures were effective** at the reasonable assurance level[114](index=114&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the three months ended June 30, 2020[116](index=116&type=chunk) PART II. OTHER INFORMATION [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks related to its need for additional funding, heavy dependence on a single product candidate, and uncertainties from the COVID-19 pandemic [Risks Related to Financial Position and Need for Capital](index=28&type=section&id=Risks%20Related%20to%20Financial%20Position%20and%20Need%20for%20Capital) The company requires substantial additional funding to continue operations, with existing cash projected to last only through Q3 2021 and a history of significant losses - The company will need **substantial additional funding** and could be forced to delay, reduce, or eliminate product development or commercialization efforts if unable to raise capital[119](index=119&type=chunk) - Existing cash, cash equivalents, and short-term investments are expected to **fund operations through the third quarter of 2021**, but this estimate is based on assumptions that may prove wrong[124](index=124&type=chunk) - The company has incurred significant losses since inception, with an **accumulated deficit of $241.1 million** as of June 30, 2020, and expects to incur significant losses for at least the next several years[131](index=131&type=chunk) [Risks Related to Discovery, Development and Commercialization](index=31&type=section&id=Risks%20Related%20to%20Discovery,%20Development%20and%20Commercialization) The company's prospects depend almost entirely on the success of its lead candidate, edasalonexent, which faces risks from the COVID-19 pandemic and substantial competition - The company is **heavily dependent on the success of its single lead product candidate**, edasalonexent, and any setback would substantially harm the business[139](index=139&type=chunk)[140](index=140&type=chunk) - The **COVID-19 pandemic may delay clinical trials** and disrupt regulatory activities, and the use of telehealth assessments could impact the FDA's view of data integrity[143](index=143&type=chunk)[145](index=145&type=chunk) - The company faces **substantial competition** from approved DMD therapies like EXONDYS 51, VYONDYS 53, and EMFLAZA, as well as from numerous other companies developing treatments[192](index=192&type=chunk)[194](index=194&type=chunk) [Risks Related to Dependence on Third Parties](index=45&type=section&id=Risks%20Related%20to%20Dependence%20on%20Third%20Parties) The company relies on third-party CROs and CMOs, including sole-source suppliers, for critical clinical trial and manufacturing functions, creating significant operational risk - The company relies on third parties, such as CROs, to conduct its clinical trials, **limiting its control over these activities** while remaining responsible for compliance with standards like cGCPs[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The company relies on third-party contract manufacturers, including **single-source suppliers** for its active pharmaceutical ingredient and a key starting raw material, which increases the risk of manufacturing delays and supply interruptions[225](index=225&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) - The company expects to seek collaborations for development and commercialization, but may not be able to establish them on reasonable terms, which could force it to **alter or delay its plans**[211](index=211&type=chunk)[212](index=212&type=chunk) [Risks Related to Intellectual Property](index=50&type=section&id=Risks%20Related%20to%20Intellectual%20Property) The company's success hinges on its ability to obtain and defend patent protection for its products, which is an uncertain process, and it also faces risks related to trade secret protection - The company's ability to successfully commercialize its products depends on obtaining and maintaining sufficient patent protection, but the **patent process is highly uncertain** and patents may be challenged or circumvented[235](index=235&type=chunk)[237](index=237&type=chunk) - The company may become involved in **expensive and time-consuming lawsuits** to protect its patents or defend against claims that it infringes on the intellectual property of others[244](index=244&type=chunk)[246](index=246&type=chunk) - The company relies on trade secrets for its technology platform, which are at risk of being disclosed or independently developed by competitors if **confidentiality agreements are breached**[242](index=242&type=chunk)[243](index=243&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance](index=55&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance) The company faces a lengthy and uncertain regulatory approval process, extensive ongoing regulation post-approval, and complex compliance requirements for healthcare and data privacy laws - The **marketing approval process is expensive, time-consuming, and uncertain**, and the company may be unable to obtain approvals for its product candidates[263](index=263&type=chunk) - Recently enacted and future healthcare legislation may increase the difficulty and cost of obtaining marketing approval and could **negatively affect product pricing and reimbursement**[289](index=289&type=chunk)[290](index=290&type=chunk) - The company is subject to complex global privacy and data security requirements, such as the GDPR, and **failure to comply could result in significant fines** and penalties[309](index=309&type=chunk)[310](index=310&type=chunk) [Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including the company's stock incentive plan and certifications required by the Sarbanes-Oxley Act - The report includes certifications from the principal executive officer and principal financial officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[361](index=361&type=chunk) [Signatures](index=76&type=section&id=SIGNATURES) The report was duly signed and authorized on August 10, 2020, by the company's Treasurer and Vice President of Finance - The Form 10-Q was **signed on August 10, 2020**, by Noah C Clauser, Treasurer and Vice President of Finance[362](index=362&type=chunk)[363](index=363&type=chunk)

Edasalonexent's Potential in DMD - Edasalonexent, an oral NF-κB inhibitor, shows promise in slowing disease progression and preserving muscle function in Duchenne Muscular Dystrophy (DMD)[5] - The Phase 3 PolarisDMD trial, designed for global registration, is fully enrolled, with top-line results expected in Q4 2020[5, 16] - The PolarisDMD trial enrolled 131 patients across 8 countries[19] - The Phase 3 PolarisDMD trial and Phase 2 MoveDMD trial have similar baseline characteristics, supporting the assumptions on which the Phase 3 trial was powered[36, 37] Clinical Trial Results - Phase 2 MoveDMD trial and open-label extension demonstrated clinically meaningful slowing of disease progression with edasalonexent[24] - Edasalonexent significantly improved the rate of change of MRI T2 compared to the off-treatment control period in the Phase 2 MoveDMD trial and open-label extension[28] - Muscle enzymes significantly decreased on edasalonexent, supporting a positive impact on muscle health in the Phase 2 MoveDMD trial and open-label extension[27] - Edasalonexent showed potential for positive cardiac effects in DMD, with a significant decrease in mean resting heart rate in the Phase 2 MoveDMD trial and open-label extension[31, 33] Market and Commercial Opportunity - DMD affects approximately 1 in 3,500-5,000 males worldwide[38] - Approximately 15,000 males in the US and 19,000 males in the EU are affected by DMD[39]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR o 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: 001-37467 Catabasis Pharmaceuticals, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 26-3687168 (State or Other ...