AKAO 2017 Annual Report

6 • Commercialize our products directly in the United States and through commercialization partners elsewhere. We have global commercialization rights to our leading drug candidates. If approved, we intend to commercialize plazomicin directly using a targeted hospital-based sales force in the United States, where MDR infections, including CRE, are concentrated in resistance hotspots. Outside the United States, we intend to commercialize plazomicin with global and/or regional partners. We seek to collaborate with companies that have an existing commercial presence and experience in targeted geographic markets outside the United States, which we believe would position us to efficiently maximize the commercial potential of our products, including plazomicin. • Establish and leverage collaborations with non-commercial organizations for scientific expertise and funding support. We collaborate with government agencies and non-profit foundations to support our discovery efforts and advance the product candidates in our pipeline. We have received funding support for both plazomicin and our C-Scape program. We have received $124.3 million in funding under a contract with BARDA for the development of plazomicin. We entered into another BARDA contract for up to $18.0 million of which $12.0 million is committed for the development of C-Scape, with $11.0 million remaining of committed funding available as of December 31, 2017. We have grant funding for up to $10.5 million over a three-year research term and have received a $10 million equity investment from the Bill & Melinda Gates Foundation (the “Gates Foundation”) to support the therapeutic antibody program and the discovery of drug candidates intended to prevent neonatal sepsis. In the past, we have also received funding support from agencies such as the National Institute of Allergy and Infectious Diseases (“NIAID”), National Institutes of Health (“NIH”), the U.S. Department of Defense (“DOD”), the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (“CARB-X”) and The Wellcome Trust, a global charitable foundation. We also partner and collaborate with leading academics, scientists, clinicians, public health organizations, and our scientific advisory board to enhance our internal discovery and development expertise, and to jointly sponsor funding proposals. • Build a portfolio of differentiated products for the treatment of MDR gram-negative infections and other disease areas. Since we commenced operations in 2004, we have focused on the discovery and development of antibiotics to treat gram-negative infections and have developed proprietary know-how about the relationship between compound structure and potency against gram-negative bacteria through our work on multiple antibiotic classes. We are using this expertise to build a portfolio of product candidates for the treatment of infections due to MDR pathogens. Patients with these infections have limited or inadequate therapeutic options leading to high rates of morbidity and mortality as well as significantly increased healthcare costs. We believe the greatest unmet medical need lies among patients with infections due to MDR gram-negative bacteria, where there is a significant and growing problem and the industry pipeline of drug candidates is limited. In addition, with our research antibody platform, we will selectively explore other therapeutic areas where there is a critical public health need and where we can leverage our expertise to address the unmet need in a unique way. Antibacterials Background Antibacterials, which, for small molecules, we refer to interchangeably as antibiotics, are drugs used to treat infections that are caused by bacteria. The introduction of antibiotics is recognized as one of the most transformative events in medicine. Prior to the introduction of the first antibiotics in the 1930s and 1940s, bacterial infections were often fatal, and invasive surgery was accompanied by a high risk of infectious complications. Today, antibacterials are used routinely to treat and prevent infection. According to IMS Health, antibiotics accounted for $38.6 billion in sales globally in 2016. There are two main varieties of bacteria, based on a common laboratory staining test known as the “Gram stain.” Gram-positive bacteria are surrounded by a single lipid membrane and a thick cell wall. Common gram- positive pathogens include Staphylococcus aureus (including methicillin-resistant strains), Streptococcus species, and Clostridium difficile . In contrast, gram-negative bacteria are encircled by two lipid membranes, an inner membrane and an outer membrane, with a thinner cell wall in between. Gram-negative bacteria include Pseudomonas aeruginosa , Acinetobacter baumannii , and the Enterobacteriaceae, a family of related organisms that includes Escherichia coli , Klebsiella pneumoniae , Enterobacter, Salmonella, and Shigella species. Drugs that act in the cytoplasm of gram-negative bacteria must cross both the inner and outer membranes, whereas drugs that just act on gram-positive bacteria only have to cross one membrane. Each membrane in gram-negative bacteria excludes