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▪	the potential advantages of XHANCE®, our product candidates and Exhalation Delivery System (EDS) devices and technologies;

▪	our plan to internalize our contract sales team and deploy an additional 20 territory managers in “XHANCE naive” geographies to expand our reach among the ear, nose and throat and allergy specialist universe, and our expectation that doing so will grow the target audience for our sales team by approximately 25% to approximately 9,500 healthcare providers;

▪	our expectation to continue to secure broader market access over time, and our intention to eventually increase the size of our sales force to approximately 120 territory managers based upon an expanded target audience of approximately 14,000 specialists or “specialty-like” primary care physicians;

▪	our expectation to target additional physicians through digital and non-personal promotion in areas where we do and do not have territory managers;

▪	our analyses suggesting that XHANCE will have a comparatively low pharmacy budget impact;

▪	our clinical trial data suggesting that XHANCE may produce an offsetting benefit by helping reduce other healthcare resource utilization;

▪	our belief that the cost of XHANCE to insurance plans will likely be significantly less than the projected costs of monoclonal antibodies that are currently in development for the treatment of nasal polyps;

▪	our believe that the current practice of postoperative intranasal steroid use could support XHANCE’s adoption as a maintenance therapy to improve outcomes following sinus surgery;

▪	planned product development activities, studies and clinical trials, including our plans to initiate a second phase 3b clinical trial of XHANCE in 2019 in pursuit of a follow-on indication for chronic sinusitis;

▪	our intention to execute a branded, multi-channel direct to consumer pilot in three cities targeting diagnosed and undiagnosed nasal polyp patients in 2019, and our anticipation to broaden the direct to consumer pilot to a national campaign in 2020 if the 2019 campaign is successful;

▪	our expectation that our GAAP operating expenses in 2019 will be between $135 - $142 million and that our non-cash stock-based compensation expense will be between $10 - $12 million;

▪	our expectation that our existing cash and cash equivalents will be sufficient to meet our debt service obligations under our Senior Secured Notes, and to carry out our planned development and commercial activities into the fourth quarter of 2020;

▪	our expectation that the average net revenue per prescription for XHANCE in the first quarter of 2019 will be between $155 - $175 and our expectation that the average net revenue per prescription will improve though 2019 and that the full-year 2019 average net revenue per prescription will be between $185 - $205;

▪	the size and growth potential of the markets for XHANCE and our product candidates, and our ability to service those markets;

▪	the rate and degree of market acceptance of XHANCE and our product candidates;

▪	our ability to maintain regulatory approval of XHANCE and our product candidates;

▪	our ability to attract collaborators with development, regulatory and commercialization expertise;

▪	regulatory developments in the United States (U.S.) and foreign countries;

▪	our ability to operate our business without infringing the intellectual property rights of others;

▪	the scope and duration of patent protection and other barriers to entry that we expect to benefit XHANCE and our product candidates;

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▪	the performance of our third-party suppliers, manufacturers and contract sales organizations;

▪	the success of competing products that are or become available;

▪	our expectations regarding our ability to obtain and adequately maintain sufficient intellectual property protection for XHANCE and our other product candidates and to avoid claims of infringement;

▪	our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; and

▪	the accuracy of our estimates regarding expenses, future revenue, capital requirements and need for additional financing;

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Customer Model. We have defined a sales force footprint of approximately 120 territories targeting approximately 14,000 ENTs, allergists and “specialty-like” primary care physicians and have deployed a hybrid sales model that combines an internal sales leadership team with a fully-dedicated contract sales force to call on our target health care provider (HCP) customer universe. We prioritized approximately 80 territories within our sales force footprint to deploy in 2018 based upon pre-launch expectations regarding where we could achieve an estimated 65% commercial market access within each territory. The initial 80 territory managers were deployed in March 2018, actively engaging approximately 7,600 ENTs, allergists and "specialty like" primary care physician targets to promote XHANCE for the treatment of nasal polyps. During the first half of 2019, we plan to internalize our contract sales team and deploy an additional 20 territory managers in “XHANCE naive” geographies to expand our reach among our target physician audience. This is expected to grow the target audience for our sales team by approximately 25% to approximately 9,500 HCPs. We intend to eventually increase the size of our sales force to approximately 120 territory managers to expand our called on target audience to approximately 14,000 ENT, allergists and specialty-like primary care physicians. Additionally, we expect to target additional physicians through digital and non-personal promotion in areas where we do and do not have territory managers.

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XHANCE Patient Affordability Programs. In late August 2018, we implemented our current co-pay savings program. We believe this program, with an indefinite duration, provides an affordability solution for patients that physicians will support. The current program provides patient co-pay assistance including a first prescription at no out-of-pocket cost to patients ($0 co-pay) to commercially insured patients and low subsequent co-pays for refills. Our data suggests these programs are playing a role in building demand for XHANCE, particularly as they become more widely understood in the prescribing community.

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Market Access.  In meeting with pharmacy benefit managers (PBMs) and health insurers/potential payors, we share what we believe is a compelling economic value proposition. Our analyses suggest that XHANCE will have a comparatively low pharmacy budget impact and our clinical trial data suggest that XHANCE may produce an offsetting benefit by helping reduce other healthcare resource utilization, most notably

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Infrastructure. We continue to develop our internal capabilities in a manner commensurate with having become a fully integrated and publicly traded commercial-stage specialty pharmaceutical company. We have implemented an enterprise resource planning system to expand our operational and commercial finance capabilities. We have also implemented a robust healthcare compliance program to guide our staff’s and our partners' compliance with rules and regulations regarding pharmaceutical sales. In managing our growth, we have remained focused on fostering our One Mission culture.

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XHANCE Prescriptions. Based on third-party prescription data as well as data from preferred pharmacy network partners, the total estimated number of XHANCE prescriptions in the second quarter, third quarter and fourth quarter 2018 were 8,611, 9,427, and 14,106, respectively, which represents 50% growth for prescriptions when comparing fourth quarter to third quarter. Estimated XHANCE prescriptions in December 2018 and January 2019 were 4,570 and 6,292, respectively, which represents 38% month-over-month growth. In addition, XHANCE prescriptions for the 4-week periods ended January 25 and February 22, 2019 were 5,156 and 7,186, respectively, which represents period-over-period growth of 39%.

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Commercialize XHANCE in the ENT and allergy specialty segments in the U.S.  When we launched XHANCE in 2018, we initially deployed a specialty sales force of approximately 80 territory managers to call on a defined prescriber base of approximately 6,000 ENT and allergy specialists, as well as approximately 1,500 "specialty-like" primary care physicians, and filled territories were based on regions where we predicted comparatively favorable early market access. Based on results showing growth in prescription volume in the called-on audience and considering increases in market access during 2018 and planned efforts to further increase market access for XHANCE in 2019, we intend to incrementally increase the size of our sales force. In the first half of 2019 we expect to field territory managers in approximately 20 additional territories, increasing coverage to 100 of the approximately 120 territory nationwide structure that was initially established. The 120-territory structure was based on a target audience of approximately 14,000 specialists or "specialty-like" primary care physicians. Additionally, we expect to continue to target physicians through digital and non-personal promotion in areas where we do and do not have territory managers. We believe that approximately 15,000 targeted physicians treat an estimated 3.5 million chronic rhinosinusitis patients, an estimated 1.2 million of whom have chronic rhinosinusitis with nasal polyps. With data suggesting that prescribing continues to be suitably responsive to promotion and as market access improves, we may continue to increase the size of our deployed sales team. In addition, in 2019 we intend to execute a branded direct-to-consumer pilot in three cities targeting diagnosed and undiagnosed nasal polyp patients.

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Pursue pipeline development of XHANCE for chronic sinusitis to broaden our market opportunity. We plan to seek a follow-on indication for XHANCE for the treatment of chronic sinusitis. We met with FDA and, in the fourth quarter of 2018, we initiated a Phase 3b clinical trial program in pursuit of that indication. We believe XHANCE would be the first drug therapy product approved for the treatment of chronic sinusitis. In the future, as appropriate, we plan to broaden our marketing to additional primary care physicians that we believe treat an additional estimated 6.25 million patients in the U.S. with chronic rhinosinusitis, an estimated one-third of whom have chronic rhinosinusitis with nasal polyps. In addition, at some point in the future, we intend to consider directing promotional resources to an additional estimated 20 million adult chronic rhinosinusitis sufferers who are not regularly under the care of physicians for this disease using programs such as direct-to-consumer and direct-to-patient promotion.

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Develop a pipeline of additional products focused on the ENT and allergy specialty segments.  We are evaluating the use of the Optinose EDS to deliver other proprietary drugs or drug combinations to treat diseases primarily managed by ENT and allergy specialists. We also intend to explore complementary drug, diagnostic or device technologies or products to make effective use of our commercial infrastructure. We plan to evaluate strategic licensing, acquisition, development and commercial partnerships that could increase our commercial efficiencies.

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Explore business development activities for Optinose EDS outside of the ENT and allergy segments.  We are exploring the possibility of the use of an Optinose EDS to support development of central nervous system treatments, particularly those enabled by nose-to-brain drug delivery. We have engaged in early stage clinical development activities for OPN-300, which combines an Optinose EDS with oxytocin with potential applications including treatment of Prader-Willi syndrome and autism spectrum disorder. We have completed planned internal development activities for OPN-300 and may pursue external partnerships in the future for further development. In addition, in January 2019, we completed a licensing arrangement with Inexia Limited whereby we granted Inexia an exclusive license to our EDS devices and other intellectual property for the research, development and commercialization of products containing orexin receptor agonist and/or orexin receptor positive modulator molecules. Inexia has announced that specific target indications will be determined as the program advances, and is expected to include narcolepsy, a rare sleep disorder. The Inexia License Agreement has the potential to create value

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Expand XHANCE into international markets.  We have engaged in initial assessment of potential development and commercialization of XHANCE in markets outside the U.S. and currently intend to remain opportunistic in pursuit of select international options. Upon receipt of additional data in the chronic sinusitis indication, we intend to more aggressively explore strategic collaboration opportunities in Europe and the rest of the world in order to maximize the commercial potential and the availability of XHANCE to patients.

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Intranasal Steroids.  Multiple published clinical practice guidelines generally recommend topically-acting INS as the first line of prescription therapy for the treatment of chronic rhinosinusitis with and without polyps. As a result, physicians typically prescribe INS nasal sprays or nasal aerosols despite the fact that there are no FDA-approved products for the treatment of chronic sinusitis without nasal polyps. Therefore, the majority of chronic rhinosinusitis sufferers being treated have tried INS. We estimate that physicians in the U.S. prescribe approximately 17 million INS prescriptions each year for the treatment of chronic rhinosinusitis, which includes, among other INS products, a generic fluticasone propionate nasal spray. Nasonex, or mometasone furoate nasal spray, is currently the only other branded INS approved by the FDA for the treatment of nasal polyps. A generic version of Nasonex, mometasone furoate monohydrate, was approved by the FDA for, among other indications, the treatment of nasal polyps and launched in 2016. Physicians not only prescribe INS as a standalone therapy, but also typically prescribe INS following sinus surgery as some third-party clinical trials suggest that INS treatment can improve symptoms and delay symptom recurrence. In lieu of prescription INS nasal sprays, physicians may recommend use of over-the-counter INS nasal sprays.

▪	Oral steroids.  Physicians may prescribe oral steroids on an episodic basis to patients who have not received sufficient symptomatic relief from INS. Oral steroids are often effective at treating the underlying inflammation associated with the disease and reducing postoperative scarring, but the benefit is temporary. As inflammation returns, many patients resume INS therapy.

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Other medical management.  Physicians commonly employ a variety of other non-surgical treatments in the medical management of chronic rhinosinusitis, including nasal saline rinses, multi-week courses of antibiotics, leukotriene antagonists, decongestants, aspirin desensitization and antifungals. The recognized limitations of drug deposition with current INS cause some physicians to seek out alternative treatment regimens, such as high doses of locally compounded liquid budesonide in high-volume nasal rinses. Chronic rhinosinusitis is one of the most common reasons for adult outpatient antibiotic use in the U.S., comprised of approximately 37 million prescriptions per year.

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Sinus surgery and other procedures.  Physicians generally recommend surgical treatment of chronic rhinosinusitis with and without nasal polyps only after patients fail medical management. The primary surgical alternative is ESS, which attempts to open the sinus drainage pathways while preserving as much bone and sinus tissue lining as possible. The physician typically uses rigid steel instruments and powered cutting tools to remove inflamed tissue, including any nasal polyps, and underlying bone and cartilage to create a larger passage through the nasal anatomy to the sinuses. At the conclusion of the procedure, patients often have their nasal passages packed with a material that acts as a spacer to prevent surgical adhesions and control bleeding. Patients typically require one or more follow-up debridement treatments in

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Limited efficacy of INS treatments using traditional nasal sprays and nasal aerosols.  Although steroids are generally pharmacologically effective, conventional INS, including nasal sprays and nasal aerosols, are unable to effectively and consistently place the steroids onto the primary site of inflammation and nasal polyp origin, high and deep in the nasal passages. These products deposit a majority of the drug in the front of the nose or on the floor of the nasal passages, reducing their effectiveness and leaving many patients without sufficient symptomatic relief.

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Short-term benefits of oral steroids outweighed by significant side effects.  Oral steroids offer only temporary benefit and are limited by the risk of significant systemic side effects associated with both short- and long-term use. These side effects include, among others, weight gain; increased risk of infections; loss of bone mineral density; death of bone tissue; cataract formation; glaucoma; adrenal suppression; and psychiatric complications, including mania, depression, and psychosis.

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Varying degrees of efficacy with other medical management.  Other non-surgical treatments have varying degrees of supporting data and efficacy. In addition, high-volume steroid nasal rinses are difficult to administer, can be costly, may risk systemic side effects due to the absorption of the steroid into the body, can be associated with fluid draining from the nose after the procedure and are difficult for patients to comply with over prolonged courses of outpatient therapy.

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Sinus surgery and other procedures are costly and may not be a complete solution.  The effectiveness of sinus surgery varies significantly and many patients experience persistent or recurrent symptoms. Reports indicate that nasal polyp regrowth following surgery occurs in as high as 60% of cases within four years. In addition, it has been reported that up to 80% of patients continued to have symptoms within two years of surgery. Because sinus surgery is often not curative and may not address the underlying cause of the inflammation, many patients receive short- and long-term courses of INS after surgery and approximately 20% of patients elect surgical revisions. Postoperative scarring and persistent inflammation are common and can compromise symptom outcomes and also negatively impact the ability of the sinuses to heal. Sinus surgery is also a costly procedure, with estimated costs on average $13,500 per procedure. While balloon sinus dilation has the ability to open sinuses in a less invasive manner, it also may not address the underlying cause of the inflammation associated with chronic rhinosinusitis and is costly. Similarly, steroid-releasing sinus implants have limited duration of anti-inflammatory effect, are costly and face reimbursement challenges.

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Potential future biologic monoclonal antibodies treatment may be costly, difficult to administer or have negative side effects. The risks and benefits associated with the use of biologic monoclonal antibodies for the treatment of nasal polyps are not yet fully established. We expect the use of biologic monoclonal antibodies for the treatment of nasal polyps to be costly, with estimated costs of approximately $37,000 per year based on the doses being studied in nasal polyps and the current costs per dose in other indications. These drugs also require subcutaneous injections or intravenous administration that require frequent physician office visits. We believe the systemic nature of these treatments, which target components of the immune response, may result in more adverse side effects than treatments with topically-acting steroids.

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High patient dissatisfaction with current INS treatments.  In a market research study that we commissioned, we surveyed 438 patients with chronic sinusitis with and without nasal polyps. In this study, approximately 80% of the patients reported being frustrated with the symptom relief offered from their current INS medication and approximately 90% of the patients reported they would be interested in using a new product if it would improve symptom relief.

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Strong physician interest in XHANCE product profile.  We surveyed approximately 700 physicians, consisting of 400 ENT and allergy specialists and 300 primary care physicians that currently treat patients with chronic sinusitis with and without nasal polyps. Approximately 75% of these physicians, including both specialists and primary care physicians, agreed, in part, that INS medications do not work well in patients with chronic sinusitis due to their belief that conventional INS do not sufficiently reach the high and deep regions of the nasal passages where inflammation occurs. In addition, 70% to 80% of these physicians reported that they would "definitely" or "probably" prescribe their patients a product with a clinical profile similar to XHANCE. As of February 8, 2019, 4,920 healthcare professionals have prescribed XHANCE as a result of our direct selling efforts targeting approximately 7,500 physicians and indirect promotional efforts.

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Fluticasone propionate is the most widely-prescribed INS in the U.S.  XHANCE contains fluticasone propionate, a potent, well-characterized, second-generation, anti-inflammatory corticosteroid with a low bioavailability, meaning that only a small percentage of the drug is absorbed into the body. Corticosteroids provide multiple anti-inflammatory mechanisms of action and are used in forms such as pills, creams, inhalers and nasal sprays, to treat many sites of inflammation.

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XHANCE was designed to overcome the limitations of current INS therapies by delivering medication high and deep in the nasal passages. In multiple studies utilizing advanced imaging, an Optinose EDS produced a differentiated pattern of drug delivery with significant drug deposited at the primary site of inflammation high and deep in the nasal passages where nasal polyps or inflamed and swollen membranes produce nasal symptoms and can obstruct normal sinus ventilation and drainage.

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Strong clinical data demonstrating safety and efficacy.  In two randomized, double-blinded, placebo-controlled Phase 3 pivotal clinical trials evaluating adult patients with nasal polyps, we met our co-primary endpoints of statistically significant reductions of nasal congestion/obstruction symptoms and total polyp grade. XHANCE also produced treatment benefits in all four defining symptoms of chronic rhinosinusitis, as

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▪	XHANCE is easy to use.  In a market study that we commissioned, 98% of patients reported that XHANCE was easy to use after four weeks of use and 93% stated the ease of use was comparable to other INS.

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Potential for broad payor access. Prior to the XHANCE launch in 2018, we commissioned a market research study that surveyed 26 health insurance plans representing over 150 million covered lives. Most payors reacted positively to a profile of XHANCE with respect to its product design, mechanism of action and efficacy results based upon our clinical data. This research further suggested that market access for XHANCE would be dependent on XHANCE's pricing. A majority of payors surveyed in our study indicated that they do not intend to actively manage INS products priced below a certain dollar threshold and many surveyed payors indicated that they would provide access without prior authorization to INS products priced within a certain dollar range. The surveyed payors reported the following potential coverage based on the XHANCE profile: (i) no step edits on plans covering approximately 27% of commercial lives, meaning that payors would not require patients to use generic INS before seeking reimbursement for XHANCE, (ii) a single step edit on plans covering approximately 48% of commercial lives, (iii) a prior authorization requirement on plans covering approximately 10% of commercial lives and (iv) no coverage by plans covering approximately 15% of commercial lives.

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Cost-Effective Solution.  We launched XHANCE with a price comparably to the only other branded INS that is approved to treat nasal polyps, but at a price higher than generic INS products. We believe XHANCE offers a cost-effective, clinical benefit to payors when compared to surgery and expensive monoclonal antibodies and that this benefit will reduce the perceived need for multiple step-edits and prior authorizations, which we believe will increase the likelihood of successful commercial adoption of XHANCE.

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Efficient entry in the ENT and Allergy specialty segments:  In 2018 we deployed an efficient, go-to-market commercialization model, including the build-out of our commercial team and organization. Our fully-dedicated specialty sales force of approximately 80 territory managers initiated promotion of XHANCE in March 2018 to a defined prescriber base of approximately 6,000 ENT and allergy specialists, as well as approximately 1,500 "specialty-like" primary care physicians. During the first half of 2019, we plan to internalize our contract sales team and deploy an additional 20 territory managers in “XHANCE naive” geographies to expand our reach among the ENT and allergy specialty universe. This is expected to grow the target audience for our sales team by approximately 25% to approximately 9,500 healthcare providers. Because we expect to continue to secure broader market access over time, we intend to eventually increase the size of our sales force to approximately 120 territory managers based upon an expanded target audience of approximately 14,000 specialists or "specialty-like" primary care physicians. Additionally, we expect to target additional physicians through digital and non-personal promotion in areas where we do and do not have territory managers. We believe that approximately 15,000 physicians treat an estimated 3.5 million chronic rhinosinusitis patients, an estimated 1.2 million of whom have chronic rhinosinusitis with nasal polyps.

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Targeted patient demand generation: In 2019, we intend to execute a branded, multi-channel direct to consumer (DTC) pilot in three cities targeting diagnosed and undiagnosed nasal polyp patients. Based upon extensive patient research, we believe a high level of frustration exists among nasal polyp patients and these patients are motivated to seek new treatments to relieve their suffering. If successful, we anticipate broadening the DTC pilot to a national campaign in 2020.

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Facilitate broader adoption:  We are pursing a follow-on indication for XHANCE for the treatment of chronic sinusitis. If approved for the follow-on indication, we intend to broaden our commercialization efforts to target primary care physicians that we believe treat an additional estimated 6.25 million U.S. patients with chronic rhinosinusitis, an estimated one-third of whom have chronic rhinosinusitis with nasal polyps. We may target these physicians through a commercial partnership.

▪	Activate broad patient demand:  At some point in the future, we intend to consider directing promotional resources to an additional estimated 20 million chronic rhinosinusitis sufferers who are not regularly under the care of physicians for this disease using programs such as direct-to-consumer and direct-to-patient promotion.

▪	Define a clear patient type for XHANCE.  We are focusing on moderate-to-severely symptomatic nasal polyp patients who have not achieved satisfactory results with currently available INS.

▪	Establish a compelling brand position in the medical continuum of care.  In an effort to establish our brand position within the continuum of care, we are, among other things, educating physicians, payors and patients on XHANCE's unique mechanism of action and differentiated efficacy profile.

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Develop a meaningful payor and patient-friendly value proposition.  We are establishing a meaningful value proposition for physicians, payors and patients by highlighting the potential for XHANCE to reduce or delay the need for surgical intervention, reduce antibiotic prescribing and increase patient satisfaction with treatment outcomes. We believe the health economic data related to XHANCE are compelling. Our analyses show that XHANCE will have a comparatively low pharmacy budget impact and our clinical trial data suggest that XHANCE may produce an offsetting benefit by helping reduce the rate of surgery and its related costs. For an insurance plan, this could represent a potential overall cost reduction for the population of patients with chronic rhinosinusitis with nasal polyps, as the overall cost of XHANCE would be less than the offsetting costs related to the reduction in surgeries. During clinical studies, XHANCE was also associated with an improvement in reported work productivity in treated patients, which should be valued by employers and patients. In addition, we believe the cost of XHANCE to insurance plans will likely be significantly less than the projected costs of monoclonal antibodies that are currently in development for the treatment of nasal polyps. Furthermore, we developed and implemented a patient affordability program that reduces the real and perceived economic barriers for patients to experience the potential benefits of XHANCE.

▪	Drive awareness, adoption and access.  We are engaging with physicians and payors to educate both constituencies about XHANCE and its benefits, with the goal of securing broad market access for XHANCE through specialty and retail pharmacies.

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Physicians:  In early March 2018, we trained and deployed a dedicated sales force of 80 territory managers to promote XHANCE to our target audience of ENTs, allergists and "specialty-like" primary care physicians. The focus of the sales team is to (i) highlight the unmet medical need and limitations of current treatments, (ii) define the target nasal polyp patient type for XHANCE, (iii) differentiate EDS and highlight the strong data supporting the efficacy of XHANCE and, (iv) ensure HCP awareness and appreciation of the XHANCE patient affordability program. In April 2019, we plan to increase our sales force by 20 territory managers and expand our reach within our target physician audience by approximately 25%.

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Payors:  We continue to engage with payors with the objective of securing broad market access in the commercial segment by targeting Tier 3 payor coverage, single step edit with no prior authorization. Specifically, we are targeting pharmaceutical benefit managers, national plans and regional plans representing, in the aggregate, up to approximately 160 million of the estimated 180 million U.S. covered commercial lives. We also intend to contract for Medicare Part D and Medicaid lives.

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Patients:  We have completed the build-out of a patient and physician support ecosystem in an effort to accelerate physician adoption and reduce the risk of patient abandonment during the fulfillment process. This ecosystem includes (i) patient samples, (ii) a co-pay assistance program for patients who have commercial coverage, (iii) savings cards for cash payors, (iv) reimbursement support programs for the retail channel, (v) a supplemental distribution channel through preferred pharmacy network partners to assist patients with the complexities of the payor landscape, and (vi) a patient assistance program to provide access to XHANCE to people who have no or inadequate insurance.

▪	Drive product awareness and appreciation of the clinical differentiation of XHANCE

◦	Executed broad multi-channel awareness campaign leveraging digital, non-personal promotion, journal advertising, and an 85 person nurse educator team calling on a universe of about 7,000 ENT and allergists and achieved 87% aided branded awareness of XHANCE among the ENT and allergy specialist universe prior to launch.

◦	Finalized XHANCE core marketing strategies and launch tactic including a compliant, value optimizing and cost-effective promotion mix to appropriately engage our target audience

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During the early launch phase of XHANCE, we introduced the XHANCE Xperience program to offer physicians and their patients an opportunity to gain initial experience with XHANCE. As part of this program, patients received up to two XHANCE prescriptions at no out-of-pocket cost to them ($0 co-pay). In order to receive the second prescription, patients were required to complete a brief survey regarding their use of XHANCE. The survey results were encouraging and also provided physicians an opportunity to receive individual feedback on early patient responses to treatment. As planned, we closed the Xperience program to new enrollments at the end of June 2018. From March 2018 through June 2018, over 11,000 patients were prescribed XHANCE through the XHANCE Xperience program by over 3,000 physicians.

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Based upon a quantitative Awareness, Trial and Usage (ATU) market research study that we commissioned in January 2019, a majority of ENT and allergy specialists in our target audience, believed that XHANCE performed better on several efficacy measures than traditional intranasal steroids (e.g. Flonase) including improvement of four core symptoms of CRS with nasal polyps (congestion, rhinorrhea, facial pain and pressure and loss of sense of taste/smell), reduction in nasal polyp grade, polyp elimination, and improvement in quality of life.

▪	Design and deploy our customer facing model to drive physician trial and adoption

◦	Designed hybrid sales model that leverages a fully dedicated contract sales organization reporting into an Optinose Sales Leadership Team

◦	Defined footprint of approximately 120 territories that will ultimately target approximately about 14,000 ENTs, allergists and “specialty like” primary care physicians

◦	Recruited, hired and trained 11 Optinose Regional Business Directors with an average of approximately 11 years of sales leadership experience

◦	In partnership with our contract sales organization, approximately 80 territory managers were recruited, hired and trained. The territory managers have an average of 13 years of pharmaceutical sales experience and over 70% have experience in the respiratory therapeutic category. The

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◦	In April 2019, we plan to expand our sales force by 20 territory managers to call on an incremental 1,800 "XHANCE naive" physicians. We also intend to internalize the contract sales force in April 2019.

▪	Engage commercial payors with the objective of securing tier 3 commercial coverage

◦	Developed compelling economic value proposition

◦	Created value pack, budget impact model, supporting health economics and outcomes research (HEOR) payor messages and payor partnership models

◦	Completed pricing study to inform pricing decision and contracting strategy and launched with a Wholesaler Acquisition Cost (WAC) of $425 per unit of XHANCE. As of January 1, 2019, the WAC price for XHANCE was $468.12 per unit.

◦	Created HEOR-related communication tools for use with payors

◦	Completed development of our clinical and economic evidence of pharmaceuticals in support of formulary consideration using the Academy of Managed Care Pharmacy (AMCP) Dossier format

◦	Engaged with approximately 40 plans representing approximately 85% of commercial lives

◦	Introduced co-pay assistance program and other patient affordability programs to appropriately support patient access to XHANCE

◦	Based on currently available third-party data and our internal analyses as of December 31, 2018, we believe greater than 75% of commercially insured lives in the U.S. are plans that cover XHANCE in a tier 3 position

▪	two randomized, double-blinded, placebo-controlled Phase 3 pivotal clinical trials designed to compare the safety and efficacy of XHANCE to a placebo EDS in adults with bilateral nasal polyps, which we refer to as NAVIGATE I and NAVIGATE II or collectively, our pivotal clinical trials;

▪	two open-label Phase 3 clinical trials to evaluate the safety of XHANCE in adults with symptoms of chronic sinusitis with or without nasal polyps, which we refer to as EXHANCE-3 and EXHANCE-12 or collectively, our supportive clinical trials; and

▪	one Phase 1, open-label, randomized, single-dose, bioavailability study to compare the bioavailability of fluticasone propionate from XHANCE to Flonase and Flovent HFA in healthy patients and patients with mild-to-moderate asthma.

▪	In our pivotal clinical trials, XHANCE produced statistically significant benefits on both of the co-primary endpoints: a reduction of nasal congestion/obstruction symptoms at week 4 and a reduction in total polyp grade at week 16.

▪	Patients with nasal polyps generally experienced greater improvements in symptoms and reductions in polyp grade with longer duration of use.

▪	In our pivotal clinical trials, approximately 16% of patients treated with XHANCE had nasal polyps eliminated (polyp grade 0) in at least one nostril after 16 weeks of treatment, and approximately 27% had nasal polyps eliminated in at least one nostril after an additional eight weeks of treatment. In our supportive

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▪	In our pivotal clinical trials, XHANCE produced improvement across all four defining symptoms of chronic rhinosinusitis.

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Over 85% of patients receiving XHANCE across our pivotal clinical trials reported improvement, and approximately two-thirds reported being "much" or "very much" improved, compared to approximately one-third of patients in the placebo EDS group. In our supportive clinical trials, approximately 70% of patients with symptoms of chronic sinusitis, both with and without nasal polyps, reported that they were "much" or "very much" improved after treatment with XHANCE.

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On a Sinonasal Outcome Test-22, the improvement with the 186- and 372-microgram (mcg) doses of XHANCE was superior to the placebo EDS in both NAVIGATE I and NAVIGATE II. The magnitude of improvement associated with treatment with XHANCE was approximately 20 points. Although cross-trial comparisons have significant limitations and must be interpreted with caution, in a previous third-party study evaluating a large cohort (n=1468) of patients who were underwent sinus surgery, the degree of change on this outcome measure was approximately 18 points.

▪	After 12 months of treatment with XHANCE in our supportive clinical trials, at least 50% of patients had a Sinonasal Outcome Test-22 score that was at or below 9.3, which is the average score that has been reported for healthy individuals.

▪	XHANCE was well tolerated and had an adverse event profile generally similar to that observed in several comparably designed third party studies, including those of mometasone furoate in nasal polyps patients and of fluticasone propionate formulations in nasal polyp and allergic rhinitis patients.

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(1)	The p-value (probability value) is a measure of statistical significance reflecting the likelihood that an observed result occurred by chance.

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Sinonasal Outcome Test-22.  In a Sinonasal Outcome Test-22, which broadly assesses the impact of nasal polyps on certain outcomes, including the symptoms of nasal polyps, functioning and quality of life, the change observed with the 186- and 372-mcg doses of XHANCE was superior to the placebo EDS in both of the pivotal clinical trials. The magnitude of improvement associated with treatment with XHANCE was approximately 20 points.

▪	Quality of Sleep.  A positive impact of XHANCE on sleep was shown for the 372-mcg dose in both pivotal clinical trials through the "Sleep" sub-scale of the Sinonasal Outcome Test-22 and, in NAVIGATE II, a positive effect was further shown across a number of the sub-scales of the MOS-Sleep-R, a validated set of measures commonly used in clinical studies to assess changes in sleep quality.

▪	Defining Symptoms.  The 186- and 372-mcg treatment groups, in pooled data for NAVIGATE I and NAVIGATE II, achieved statistically significant improvement in all four of the core defining symptoms of nasal polyps at the end of the double-blinded phase.

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Patient Global Impression of Change.  Patient global impression of change is a summary measure of treatment benefit from the perspective of the patient measuring their perception of improvement or worsening of their condition. At the end of the double-blinded phase, the percentage of patients who were improved was substantially higher with XHANCE compared with the placebo EDS. Of the patients receiving 186 or 372 mcg of XHANCE, 86% reported improvement combined across both pivotal clinical trials, and 65.9% reported being "much" or "very much" improved. A post-hoc analysis of a subgroup of patients in the NAVIGATE I and II trials who were using a marketed INS at the time of study entry showed similar results, with 65% of patients treated with 186 or 372 mcg of XHANCE reporting being "much" or "very much improved" after 16 weeks of treatment compared with 28% of patients treated with the placebo EDS.

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Need for Surgery.  Surgical eligibility was assessed using study-defined criteria. Surgery was not necessarily planned or pending for these patients. The proportion of patients meeting the study-defined surgical eligibility criteria among the 186-mcg and 372-mcg dose groups combined across both pivotal trials was reduced by 54% after 16 weeks of treatment with XHANCE versus 36% with the EDS-placebo group and was reduced by approximately 64% after the additional eight weeks of active treatment with the 372-mcg dose.

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Complete Response Analysis.  The polyp grading scale is neither linear nor a direct measure of polyp mass, making it difficult to interpret mean change scores. Therefore, we also performed a complete response analysis to evaluate the percentage of patients who had nasal polyps eliminated (polyp grade 0) on at least one side of the nasal passages. The percentage of patients who had nasal polyps eliminated on at least one side of the nasal passages at the end of the double-blinded phase was 14.1% in the 186- and 372-mcg dose groups combined across both pivotal clinical trials, compared to 7.8% of placebo EDS recipients. By the end of 24 weeks, after all patients received up to an additional eight weeks of active treatment with the 372-mcg dose, the complete response rate was 17.3% in patients previously treated with the placebo EDS compared to 26.2% in patients who previously received XHANCE across the 186- and 372-mcg dose groups in both pivotal clinical trials.

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On the Lund-Mackay scale, which is an endoscopic objective assessment of disease in the nasal passages, scores for edema, nasal discharge and nasal polyps decreased through up to 12 months of treatment, with similar benefits observed in patients who did or did not have nasal polyps at baseline. Among those patients entering the clinical trials with endoscopic evidence of edema within the nasal cavity, approximately 35% with polyps and 53% without polyps in EXHANCE-3 and 50% with polyps and 56% without polyps in EXHANCE-12 no longer had observable edema by the end of the study.

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Patients with nasal polyps experienced improvement in nasal polyp grades. As observed in the pivotal clinical trials, mean nasal polyp grading scale scores improved more with longer durations of treatment. In addition, the percentage of nasal polyp patients with a polyp grade of 0 on at least one side of the nose was 47.1% in EXHANCE-12 and 48.0% in EXHANCE-3 by the end of their participation in the study.

▪	Mean total Sinonasal Outcome Test-22 scores improved throughout both supportive clinical trials. After 12 months of treatment with XHANCE in our supportive clinical trials, at least 50% of patients had a score that was at or below 9.3, which is the average score that has been reported for healthy individuals.

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Strong patent protection.  Our XHANCE U.S. patent portfolio consists of 13 issued device and method of use patents expiring through 2034, three issued design patents expiring through 2030 and U.S. patent applications that, if granted, would expire through 2034. We rely primarily on the protections afforded by device and method of use patents. Our issued U.S. patents and patent applications for XHANCE are based on an Optinose EDS, including the combination of this technology with fluticasone propionate.

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Complex drug-delivery system.  We believe the unique features of an Optinose EDS, as well as its delivery of a topical-acting corticosteroid, affords us significant protection against generic competition, as well as against a potential 505(b)(2) NDA, that seeks to reference XHANCE in order to obtain approval for a therapeutically equivalent, substitutable competitor product. XHANCE, utilizing our proprietary EDS, presents human factors engineering complexities for drug-device combination products and chemistry, manufacturing and controls challenges unique to suspension and respiratory products. Any future substitutable generic entrant will need to have considerable combination product know-how to develop and validate a substitutable drug delivery device or technology to compete with an Optinose EDS.

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Clinical and regulatory complexity.  We have conducted a clinical development program comprised of over 1,500 patients to support our NDA for XHANCE to treat nasal polyps, including human factors studies and Phase 3 clinical trial assessments evaluating and validating the use of an Optinose EDS. As with other drugs that primarily have local activity, we believe the regulatory pathway for products seeking approval as substitutable generic equivalents to XHANCE will be more complex and costly than the pharmacokinetic studies generally required for systemically-acting medications. We believe current FDA guidance for substitutable INS generally requires the demonstration of "clinical bioequivalence," which has caused developers to conduct non-inferiority clinical trials. Clinical trials in nasal polyps are different from those that have been performed to support approval of generic INS for allergic rhinitis. We believe potential generic competitors to XHANCE must not only demonstrate efficacy versus placebo, but must also show equivalent efficacy and safety outcomes to establish clinical bioequivalence to XHANCE, requiring a significant amount of time and capital investment and presenting clinical development uncertainties.

▪	Three-year regulatory exclusivity.  The FDA has granted XHANCE a three-year period of regulatory exclusivity that will end in September 2020. This exclusivity means that we are afforded at least three years in which to market our product free of generic or 505(b)(2) competition post-NDA approval.

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A supply agreement with Hovione Inter Ltd (Hovione) for the supply of fluticasone propionate, the active pharmaceutical ingredient included in the liquid suspension formulation. This agreement has a term of five years from commercial launch of XHANCE, subject to earlier termination or extension in accordance with the terms of the agreement. Either we or Hovione may terminate the agreement prior to that date for uncured material breach or insolvency of the other party. We may also terminate the agreement in the event Hovione, among other things, (i) loses any required FDA approval rendering it unable to fulfill its contractual obligations, (ii) is engaged in felonious or fraudulent activities or (iii) does not submit a Corrective and

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A manufacture and supply agreement with Contract Pharmaceuticals Limited Canada (CPL) for the formulation and assembly of the finished drug product during the fill/pack operation. This agreement terminates in September 2022, subject to earlier termination or extension in accordance with the terms of the agreement. Either we or CPL may terminate the agreement prior to that date by mutual consent or for uncured material breach by or insolvency of the other party. We may also terminate the agreement if, among other things, any intellectual property of any third party is reasonably alleged by a third party to be infringed, misappropriated or otherwise violated by the manufacture, import, use, sale or distribution of XHANCE or if any regulatory authority requires us to cease production of the sale of XHANCE.

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A manufacturing services agreement with Advance Mold & Manufacturing, Inc. (Flex) for the manufacture of the liquid delivery sub-assembly, which consists of injection molded parts and other purchased components. The initial term of the agreement expires on October 24, 2021 but will automatically renew for successive one-year terms unless either party provides at least ninety days prior written notice to the other that it does not intend to renew the agreement. We have certain rights to terminate the agreement, including upon advance notice to Flex, if Flex fails an inspection or suffers a disciplinary action by a governmental authority and fails to cure such issue within a specified period of time, or if Flex fails to gain recommendation for approval by the FDA to manufacture the liquid delivery subassembly component to be manufactured pursuant to the agreement. Either party may terminate the Agreement for uncured material breaches or insolvency of the other party.

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Phase 1 clinical trials involve the initial administration of the investigational drug to humans, typically to a small group of healthy human patients, but occasionally to a group of patients with the targeted disease or disorder. Phase 1 clinical trials generally are intended to determine the metabolism and pharmacologic actions of the drug, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness.

▪	Phase 2 clinical trials generally are controlled studies that involve a relatively small sample of the intended patient population, and are designed to develop initial data regarding the product's effectiveness, to determine dose response and the optimal dose range, and to gather additional information relating to safety and potential AEs.

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Phase 3 clinical trials are conducted after preliminary evidence of effectiveness has been obtained, and are intended to gather the additional information about safety and effectiveness necessary to evaluate the drug's overall risk-benefit profile, and to provide a basis for physician labeling. Generally, Phase 3 clinical development programs consist of expanded, large-scale studies of patients with the target disease or disorder to obtain statistical evidence of the efficacy and safety of the drug at the proposed dosing regimen.

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The federal Anti-kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. A violation of the Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to violate it. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly and practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceuticals, including certain discounts, or engaging such individuals as consultants, speakers or advisors, may be subject to scrutiny if they do not fit squarely within the exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, there are no safe harbors for many common practices, such as educational and

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The federal civil False Claims Act prohibits any person from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds, or knowingly making, using, or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. Actions under the False Claims Act may be brought by private individuals known as qui tam relators in the name of the government. In recent years, several pharmaceutical and other healthcare companies have faced enforcement actions under the False Claims Act for, among other things, providing free product to customers with the expectation that the customers would bill federal programs for the product, and other interactions with prescribers and other customers including interactions that may have affected customers' billing or coding practices on claims submitted to the federal government. Other companies have faced enforcement actions for causing false claims to be submitted because of the company's marketing the product for unapproved, and thus non-reimbursable, uses. Federal enforcement agencies also have shown increased interest in pharmaceutical companies' product and patient assistance programs, including reimbursement and co-pay support services, and a number of investigations into these programs have resulted in significant civil and criminal settlements.

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The Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which we refer to collectively as HIPAA, prohibits, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private third-party payors. HIPAA also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services. We may obtain health information from third parties that are subject to privacy and security requirements under HIPAA and we could potentially be subject to criminal penalties if we, our affiliates, or our agents knowingly obtain or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

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The majority of states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Several states now require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to individual health care providers in those states. Some of these states also prohibit certain marketing-related activities including the provision of gifts, meals, or other items to certain health care providers. Other states have laws requiring pharmaceutical sales representatives to be registered or licensed, and still others impose limits on co-pay assistance that pharmaceutical companies can offer to patients. In addition, several states require pharmaceutical companies to implement compliance programs or marketing codes.

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The Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held in the company by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse-midwives.

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▪	continue to commercialize XHANCE and further scale up external manufacturing and distribution capabilities to commercialize XHANCE or any other product candidate for which we may obtain regulatory approval;

▪	continue to focus our regulatory compliance efforts on requirements applicable to marketed drugs;

▪	continue clinical development activities for XHANCE, including the U.S. Food and Drug Administration (FDA) mandated pediatric studies, and a Phase 3b clinical trial in pursuit of a follow-on indication for the treatment of chronic sinusitis;

▪	seek to discover and develop, in-license or acquire additional products, product candidates and technology;

▪	maintain, expand and protect our intellectual property portfolio;

▪	hire additional commercial, clinical, manufacturing and scientific personnel;

▪	add operational, financial and management information systems and personnel, including personnel to support commercialization efforts; and

▪	incur additional legal, accounting and other expenses in operating as a publicly traded commercial-stage company.

▪	our ability to successfully commercialize XHANCE for the treatment of nasal polyps;

▪	our ability to successfully complete required clinical trials and submit a supplemental new drug application to the FDA and obtain regulatory approval for XHANCE for the treatment of chronic sinusitis;

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▪	our ability to complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities, if we choose to commercialize XHANCE outside the U.S.;

▪	the size of the markets in the territories for which we gain regulatory approval;

▪	the performance of our contract sales organization, and once onboarded our internal sales team, in marketing and promoting XHANCE;

▪	our ability to maintain and further develop a commercial organization capable of sales, marketing and distribution for XHANCE and any of our other product candidates for which we may obtain marketing approval;

▪	our ability to maintain commercially reasonable agreements with wholesalers, distributors and other third parties in our supply chain;

▪	our success in establishing a commercially viable price for our products;

▪	our success in defending against potential generic competition and other developments in our market generally;

▪	our ability to manufacture commercial quantities of our products at acceptable cost levels;

▪	our ability to obtain coverage and adequate reimbursement from third parties, including government payors;

▪	our ability to commercialize and/or find a partner to commercialize AVP-825; and

▪	our ability to successfully complete development activities, including the necessary clinical trials, with respect to our other product candidates.

▪	the success of our commercialization of XHANCE for the treatment of nasal polyps including, among other things, patient and physician acceptance of XHANCE and our ability to obtain adequate insurance coverage and reimbursement for XHANCE;

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▪	the cost of commercialization activities for XHANCE, including product manufacturing, distribution, marketing and sales;

▪	net product revenues received from sales of XHANCE;

▪	the costs and timing of internalizing and expanding our sales force;

▪	the level of co-pay assistance and other patient affordability programs offered for XHANCE;

▪	our clinical development plans for XHANCE, including FDA-mandated pediatric studies and clinical trials for the supplemental indication for the treatment of chronic sinusitis;

▪	the outcome, timing and cost of the regulatory approval process of XHANCE for chronic sinusitis by the FDA, including the potential for the FDA to require that we perform more studies and clinical trials than those that we currently expect;

▪	the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights;

▪	the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;

▪	fluctuations in the three-month LIBOR-based floating interest rate of our Notes;

▪	the initiation, progress, timing, costs and results of clinical trials and other research and development related to additional product candidates; and

▪	the extent to which we in-license, acquire or otherwise partner in development of other products, product candidates or technologies.

▪	seek strategic collaborations to assist in the commercialization of XHANCE in the U.S. and other markets;

▪	significantly delay, scale back or discontinue the development of XHANCE for the treatment of chronic sinusitis;

▪	relinquish or license on unfavorable terms our rights to our EDS devices and technologies or other product candidates that we otherwise would seek to develop or commercialize ourselves;

▪	delay, limit, reduce or terminate the drug development of our current or future product candidates, or seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or

▪	significantly curtail our operations.

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•	our default in a payment obligation under the Notes;

•	our breach of the restrictive covenants or other terms of the Notes;

•	our breach of reporting obligations;

•	our failure to properly maintain the collateral; and

•	certain specified insolvency and bankruptcy-related events.

•	sell, transfer, lease or dispose of our assets;

•	create, incur or assume additional indebtedness;

•	encumber or permit liens on certain of our assets;

•	make restricted payments, including paying dividends on, repurchasing or making distributions with respect to our common stock;

•	make specified investments (including loans and advances);

•	consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•	enter into certain transactions with our affiliates;

•	grant certain license rights related to our products, technology and other intellectual property rights; and

•	permit our cash and cash equivalents held in certain deposit accounts to be less than $10,000,000 at any time.

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▪	our ability to manufacture commercial quantities of XHANCE at a reasonable cost and with sufficient speed to meet commercial demand;

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▪	our ability to manage our third-party sales organization, and once onboarded our internal sales team, to market, promote and sell XHANCE;

▪	our success in educating physicians, patients and caregivers about the benefits, administration and use of XHANCE;

▪	the availability, perceived advantages, relative cost, relative safety and relative efficacy of competing products;

▪	the availability of coverage and adequate reimbursement for XHANCE;

▪	our ability to commercialize XHANCE at a profitable average net revenue per prescription;

▪	our ability to contract with wholesalers distributors and/or preferred pharmacy network partners (PPNPs) on acceptable terms;

▪	our ability to obtain regulatory approval for XHANCE for a follow-on indication for the treatment of chronic sinusitis;

▪	the effectiveness of our marketing campaigns;

▪	our ability to attract and retain qualified pharmaceutical industry personnel;

▪	our effective use of promotional resources;

▪	a continued acceptable safety profile for XHANCE;

▪	our ability to obtain and maintain appropriate state licenses in the states in which we sell or intend to sell XHANCE; and

▪	our ability to successfully defend any challenges to our intellectual property relating to XHANCE.

▪	demonstration of clinical safety and efficacy;

▪	relative convenience and ease of administration;

▪	pricing and cost-effectiveness;

▪	availability of alternative treatments and perceived advantages over such alternative treatments;

▪	the clinical indications for which XHANCE is approved;

▪	the prevalence and severity of any AEs;

▪	limitations or warnings contained in the FDA-approved label for XHANCE;

▪	the effectiveness of our or any future collaborators' sales and marketing strategies;

▪	consolidation among healthcare providers, which increases the impact of the loss of any relationship;

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▪	our ability to obtain and maintain sufficient third-party coverage and adequate reimbursement; and

▪	the willingness of patients to pay out-of-pocket in the absence of third-party coverage.

▪	a covered benefit under its health plan;

▪	appropriate and medically necessary for the specific condition or disease;

▪	cost effective; and

▪	neither experimental nor investigational.

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▪	our commercial operations could be significantly disrupted;

▪	the availability of XHANCE to patients could be disrupted; and

▪	we may not achieve the sales of XHANCE that we expect, which could decrease our revenues.

▪	not provide us accurate or timely information regarding their inventories, the number of patients who are using our products or complaints about our products;

▪	reduce or discontinue their efforts to sell or support or otherwise not effectively sell or support our products;

▪	not devote the resources necessary to sell our products in the volumes and within the time frames that we expect;

▪	engage in unlawful or inappropriate business practices that result in legal or regulatory enforcement activity which could result in liability to our Company or damage our goodwill with patients; or

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▪	be unable to satisfy financial obligations to us or others.

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▪	we may be forced to suspend marketing of XHANCE;

▪	the FDA may withdraw its approval of XHANCE or impose restrictions on its distribution;

▪	the FDA may require additional warnings or contradictions in the label that could diminish the usage or otherwise limit the commercial success of XHANCE;

▪	we may be required to conduct additional post-marketing studies;

▪	we could be sued and held liable for harm caused to patients; and

▪	our reputation may suffer.

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▪	issue a warning letter asserting that we are in violation of the law;

▪	seek an injunction or impose civil or criminal penalties or monetary fines;

▪	suspend, modify or withdraw regulatory approval;

▪	suspend any ongoing clinical trials;

▪	refuse to approve a pending NDA or a pending application for marketing authorization or supplements to an NDA or to an application for marketing authorization submitted by us;

▪	seize our product candidate; and/or

▪	refuse to allow us to enter into supply contracts, including government contracts.

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the federal Anti-Kickback Statute, prohibits persons or entities from, among other things, knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or order of, any good or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

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the federal civil False Claims Act (which can be enforced through "qui tam," or whistleblower actions, by private citizens on behalf of the federal government) prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the U.S. federal government.

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the federal federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

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numerous federal and state laws and regulations that address privacy and data security, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act (FTC Act)), govern the collection, use, disclosure and protection of health-related and other personal information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating relevant compliance efforts.

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a majority of states whom have adopted laws and regulations analogous to federal laws, including state anti-kickback and false claims laws, that may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers. Other states have adopted laws that, among other things, require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities. In addition, some states have laws requiring pharmaceutical sales representatives to be registered or licensed, and still others impose limits on co-pay assistance that pharmaceutical companies can offer to patients.

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the Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children's Health Insurance Program (with certain exceptions) to report annually to CMS information related to direct or indirect payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held in the company by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists and certified nurse-midwives.

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▪	an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs or biologic agents;

▪	an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

▪	expansion of healthcare fraud and abuse laws, including the U.S. civil False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

▪	a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer's outpatient drugs to be covered under Medicare Part D;

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▪	extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

▪	price reporting requirements for drugs that are inhaled, infused, instilled, implanted, or injected;

▪	expansion of eligibility criteria for Medicaid programs;

▪	expansion of the entity types eligible for discounts under the Public Health Service's 340B drug pricing program;

▪	a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians; and

▪	a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

▪	decreased demand for XHANCE;

▪	injury to our reputation and significant negative media attention;

▪	termination of clinical trial sites or entire trial programs that we conduct in the future relating to XHANCE or our other product candidates;

▪	withdrawal of clinical trial participants from any future clinical trial relating to XHANCE or our other product candidates;

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▪	significant costs to defend the related litigation;

▪	substantial monetary awards to patients;

▪	loss of revenue;

▪	diversion of management and scientific resources from our business operations; and

▪	an increase in product liability insurance premiums or an inability to maintain product liability insurance coverage.

▪	the FDA may not accept our NDA filing;

▪	the FDA may disagree with the design, scope or implementation of our clinical trials;

▪	we may be unable to demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for its proposed indication;

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▪	we may be unable to demonstrate that a product candidate's clinical and other benefits outweigh its safety risks;

▪	the FDA may disagree with our interpretation of data from preclinical studies or clinical trials;

▪	the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA;

▪	the FDA may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

▪	the approval policies or regulations of the FDA may change in a manner rendering our clinical data insufficient for approval.

▪	inability to raise funding necessary to initiate or continue a clinical trial;

▪	delays in obtaining regulatory approval to commence a clinical trial;

▪	delays in reaching agreement with the FDA or foreign regulatory authorities on final trial design or the scope of the development program;

▪	imposition of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or foreign regulatory authorities;

▪	delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;

▪	delays in obtaining required institutional review board (IRB) approval;

▪	delays in recruiting suitable patients to participate in a clinical trial;

▪	delays as a result of interim analyses, if any, of clinical trials that indicate futility of the trial or necessitate an increase in the number of patients enrolled in trial;

▪	patients' delays or failure to complete participation in a clinical trial or return for post-treatment follow-up;

▪	clinical sites dropping out of a clinical trial;

▪	time required to add new clinical sites; or

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▪	delays by our contract manufacturing organizations (CMOs) to produce and deliver a sufficient supply of clinical trial materials.

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our CMOs, or other third parties we rely on, may encounter difficulties in achieving the volume of production needed to satisfy commercial demand, may experience technical issues that impact quality or compliance with applicable and strictly enforced regulations governing the manufacture of pharmaceutical products, and may experience shortages of qualified personnel to adequately staff production operations;

▪	our wholesalers and distributors could become unable to sell and deliver XHANCE for regulatory, compliance and other reasons;

▪	our CMOs, wholesalers and distributors could default on their agreements with us to meet our requirements for commercial supply of XHANCE;

▪	our CMOs, wholesalers and distributors may not perform as agreed or may not remain in business for the time required to successfully produce, store, sell and distribute our products and we may incur additional cost; and

▪	if our CMOs, wholesalers and distributors were to terminate our arrangements or fail to meet their contractual obligations, we may be forced to delay or cease sales and ongoing development of XHANCE, or find alternatives that may be more expensive than originally anticipated.

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▪	managing the commercialization of XHANCE and any other products for which we obtain marketing approval;

▪	overseeing our preclinical studies and clinical trials effectively;

▪	identifying, recruiting, maintaining, motivating and integrating additional employees, including any sales and marketing personnel engaged in connection with the commercialization of any approved product;

▪	managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; and

▪	improving our managerial, development, operational and financial systems and procedures.

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▪	properly identify and anticipate ENT and allergy physician and patient needs;

▪	develop, obtain necessary regulatory clearances or approvals, and introduce new product candidates or product enhancements in a timely manner;

▪	demonstrate, if required, the safety and efficacy of new product candidates with data from preclinical studies and clinical trials;

▪	avoid infringing upon the intellectual property rights of third parties;

▪	comply with all regulations relating to the marketing of new product candidates, including any new or modified EDS technologies; and

▪	provide adequate training to potential users of our product candidates.

▪	FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA;

▪	manufacturing standards;

▪	federal and state healthcare fraud and abuse laws and regulations; or

▪	laws that require the true, complete and accurate reporting of financial information or data.

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▪	compliance with the laws of the U.S., the United Kingdom, Norway, and other countries that apply to our international operations, including import and export legislation;

▪	compliance with foreign data protection laws and regulations in the United Kingdom, Norway and other countries that apply to our international operations;

▪	the complexities and expenses of administering a business abroad;

▪	complications in compliance with, and unexpected changes in, tariffs, trade barriers, price and exchange controls and other foreign regulatory requirements, including potential trade conflicts, changes to trade agreements/treaties, and the implementation of trade restrictions;

▪	instability in economic or political conditions, including inflation, recession and actual or anticipated military conflicts, social upheaval or political uncertainty;

▪	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

▪	uncertainties of laws and enforcement relating to the protection of intellectual property or secured technology;

▪	litigation in foreign court systems;

▪	language barriers;

▪	changes in tax laws and regulations in the jurisdictions in which we operate;

▪	compliance with tax, employment, immigration and labor laws, regulations and restrictions for employees living or traveling abroad;

▪	difficulties staffing and managing foreign operations; and

▪	workforce uncertainty in countries where labor unrest is more common than in the U.S.;

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▪	a reduction in the corporate tax rate from a top rate of 35% to a flat rate of 21%;

▪	limits on the tax deductibility of interest expense;

▪	limits on the utilization of net operating losses generated after 2017 to 80% of current year taxable income;

▪	elimination of net operating loss carrybacks;

▪	accelerated deduction for certain investments instead of depreciation deductions;

▪	allowing indefinite carry forward of net operating loss carry forwards generated after 2017;

▪	modifying or repealing certain business deductions and credits; and

▪	limits on the deduction for certain compensation in excess of $1 million.

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▪	Others may be able to make drug and device components that are the same as or similar to XHANCE and our other product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed;

▪	We or any of our licensors or collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed;

▪	We or any of our licensors or collaborators might not have been the first to file patent applications covering certain of our inventions;

▪	Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;

▪	The prosecution of our pending patent applications may not result in granted patents;

▪	Granted patents that we own or have licensed may not cover our products or may be held not infringed, invalid or unenforceable, as a result of legal challenges by our competitors;

▪	With respect to granted patents that we own or have licensed, especially patents that we either acquire or in-license, if certain information was withheld from or misrepresented to the patent examiner, such patents might be held to be unenforceable;

▪	Patent protection on our product candidates may expire before we are able to develop and commercialize the product, or before we are able to recover our investment in the product;

▪

Our competitors might conduct research and development activities in the U.S. and other countries that provide a safe harbor from patent infringement claims for such activities, as well as in countries in which we do not have patent rights, and may then use the information learned from such activities to develop competitive products for sale in markets where we intend to market our product candidates;

▪	We may not develop additional proprietary technologies that are patentable;

▪	The patents of others may have an adverse effect on our business; and

▪	We may choose not to file a patent application for certain technologies, trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

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▪	our ability to successfully commercialize XHANCE;

▪

any delay in our regulatory approval or filings for XHANCE for a follow-on indication for the treatment of chronic sinusitis or any other product candidate we may develop, and any adverse development or perceived adverse development with respect to the applicable regulatory authority's review of such filings, including without limitation the FDA's issuance of a "refusal to file" letter, a request for additional information, or a CRL;

▪	the success of competitive products or technologies;

▪	adverse regulatory actions with respect to our product candidates, including the failure to receive regulatory approval, or our competitors' products or product candidates;

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▪	actual or anticipated changes in our growth rate relative to our competitors;

▪	announcements by us or our competitors of significant acquisitions or divestitures, strategic collaborations, joint ventures, collaborations or capital commitments;

▪	the commencement, enrollment or results of planned clinical trials of our product candidates or any future clinical trials we may conduct, or any changes generally in the development status of our product candidates or those of our competitors;

▪	regulatory or legal developments in the U.S. and other countries;

▪	the outcome of any investigations or regulatory scrutiny of our operations or litigation that may be brought against us;

▪	developments or disputes concerning patent applications, issued patents or other proprietary rights;

▪	the recruitment or departure of key personnel;

▪	the level of expenses related to any of our product candidates or clinical development programs;

▪	actual or anticipated variations in our quarterly operating results;

▪	the number and characteristics of our efforts to in-license or acquire additional product candidates or products;

▪	introduction of new products or services by us or our competitors;

▪	failure to meet the estimates and projections of the investment community or financial guidance that we may otherwise provide to the public;

▪	actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;

▪	actual or anticipated changes in estimates as to development timelines that we may provide to the public;

▪	variations in our financial results or those of companies that are perceived to be similar to us;

▪	fluctuations in the valuation of companies perceived by investors to be comparable to us;

▪	share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

▪	announcement or expectation of additional financing efforts;

▪	sales of our common stock by us, our insiders or our other stockholders;

▪	significant lawsuits, including patent or stockholder litigation;

▪	changes in the structure of healthcare payment systems;

▪	market conditions in the pharmaceutical and biotechnology sectors;

▪	general political, economic, industry and market conditions;

▪	investors' general perception of our company and our business;

▪	publication of research reports about us, our competitors or our industry, or positive or negative recommendations or withdrawal of research coverage by securities or industry analysts; and

▪	other events or factors, many of which are beyond our control.

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▪	delay, defer or prevent a change in control;

▪	entrench our management and/or the board of directors; or

▪	impede a merger, consolidation, takeover or other business combination involving us that other stockholders may desire.

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▪	permit our board of directors to issue up to five million shares of preferred stock, with any rights, preferences and privileges as it may designate, which issuance could result in the loss of voting control by other stockholders;

▪	provide that our board of directors will be classified into three classes with staggered, three-year terms and that, subject to the rights of Avista to remove its respective director nominees with or without cause, directors may only be removed for cause by the affirmative vote of the holders of at least a majority of the voting power of outstanding shares of our capital stock;

▪	subject to any director nomination rights afforded Avista, provide that all vacancies on our board of directors, including as a result of newly created directorships, may, except as otherwise required by law, be filled only by the affirmative vote of a majority of directors then in office, even if less than a quorum;

▪	require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

▪

provide that, with the exception of director nominees submitted by Avista pursuant to our Stockholders Agreement, dated October 2, 2017 with Avista, stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder's notice;

▪	require that the amendment of certain provisions of our certificate of incorporation relating to anti-takeover measures may only be approved by a vote of 662/3% of our outstanding common stock;

▪	require that the amendment of our bylaws be approved by the affirmative vote of a majority of directors then in office or 662/3% of our outstanding common stock entitled to vote thereon;

▪	not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election; and

▪	provide that special meetings of our stockholders may be called only by the chairman or vice chairman of our board of directors, our chief executive officer, or a majority of our board of directors.

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▪	a limited availability of market quotations for our securities;

▪	reduced liquidity with respect to our securities;

▪	a determination that our shares are a "penny stock," which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares;

▪	a limited amount of news and analyst coverage for our company; and

▪	a decreased ability to issue additional securities or obtain additional financing in the future.

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•	approximately $70.3 million to support the launch of XHANCE, including investments in marketing and sales, inventory and our commercial infrastructure;

•	approximately $9.7 million to fund further development efforts for XHANCE; and

•	approximately $35.4 million to fund other working capital and general corporate purposes, including costs of operating as a public company.

•	Customer Model. We have defined a sales force footprint of approximately 120 territories targeting approximately 14,000 ENTs, allergists and “specialty-like” primary care physicians and have deployed a hybrid sales model that combines an internal sales leadership team with a fully-dedicated contract sales

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•

XHANCE Patient Affordability Programs. In late August 2018, we implemented our current co-pay savings program. We believe this program, with an indefinite duration, provides an affordability solution for patients that physicians will support. The current program provides patient co-pay assistance including a first prescription at no out-of-pocket cost to patients ($0 co-pay) to commercially insured patients and low subsequent co-pays for refills. Our data suggests these programs are playing a role in building demand for XHANCE, particularly as they become more widely understood in the prescribing community.

•

Market Access.  In meeting with pharmacy benefit managers (PBMs) and health insurers/potential payors, we share what we believe is a compelling economic value proposition. Our analyses suggest that XHANCE will have a comparatively low pharmacy budget impact and our clinical trial data suggest that XHANCE may produce an offsetting benefit by helping reduce other healthcare resource utilization, most notably the rate of endoscopic surgery and, therefore, surgery-related costs. For an insurance plan, this could represent potential for overall cost reduction in the population of patients with nasal polyps, as the overall cost of XHANCE could be less than the offsetting costs related to the reduction in surgeries. During clinical trials, XHANCE was also associated with an improvement in reported work productivity in treated patients, which should be valued by employers and patients. Further, we believe the cost of XHANCE to insurance plans will likely be significantly less than the projected costs of monoclonal antibodies that are currently in development for the treatment of nasal polyps, including dupilumab, for which the submission of an Supplemental Biologics License Application (sBLA) was recently publicly announced.

•

Infrastructure. We continue to develop our internal capabilities in a manner commensurate with having become a fully integrated and publicly traded commercial-stage specialty pharmaceutical company. We have implemented an enterprise resource planning system to expand our operational and commercial finance capabilities. We have also implemented a robust healthcare compliance program to guide our staff’s and our partners' compliance with rules and regulations regarding pharmaceutical sales. In managing our growth, we have remained focused on fostering our One Mission culture.

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XHANCE Prescriptions. Based on third-party prescription data as well as data from preferred pharmacy network partners, the total estimated number of XHANCE prescriptions in the second quarter, third quarter and fourth quarter 2018 were 8,611, 9,427, and 14,106, respectively, which represents 50% growth for prescriptions when comparing fourth quarter to third quarter. The INS market increased approximately 11% from third quarter to fourth quarter of 2018 based on third-party prescription data. Estimated XHANCE prescriptions in December 2018 and January 2019 were 4,570 and 6,292, respectively, which represents 38% month-over-month growth. The INS market increased approximately 5% from December 2018 to January 2019 based on third-party prescription data. In addition, XHANCE prescriptions for the 4-week periods ended January 25 and February 22, 2019 were 5,156 and 7,186, respectively, which represents period-over-period growth of 39%. The INS market decreased approximately 1% from the 4-week period ended January 25 to the 4-week period ended February 22 based on third-party prescription data.

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▪	personnel expenses, including salaries, benefits and stock-based compensation expense;

▪	costs of funding clinical development performed by third parties, including pursuant to agreements with contract research organizations (CROs), as well as investigative sites and consultants that conduct or support our nonclinical studies and clinical trials;

▪	expenses associated with the continued development of our EDS devices;

▪	expenses related to the continued development of our product sample portfolio;

▪	expenses incurred under agreements with contract manufacturing organizations (CMOs), including manufacturing scale-up expenses prior to regulatory approval of products for commercial sale and the cost of acquiring and manufacturing preclinical study and clinical trial materials;

▪	consultant fees and expenses associated with outsourced professional scientific development services;

▪	expenses for regulatory activities, including filing fees paid to regulatory agencies and costs incurred to compile and respond to filings with the FDA prior to regulatory approval of products for commercial sale;

▪	costs incurred to maintain, expand and protect our patent portfolio as it relates to product candidates in development; and

▪	allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.

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•	Variable Consideration - Accounts Receivable Reductions

◦

Provider Chargebacks and Discounts. Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from us. Customers charge us for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These components of variable consideration are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Reserves for chargebacks consist of credits we expect to issue for units that remain in the distribution channel inventories at each reporting period-end that we expect will be sold to qualified healthcare providers, as well as chargebacks that Customers have claimed but for which we have not yet issued a credit.

◦

Trade Discounts and Allowances. We generally provide Customers with discounts that include incentive fees which are explicitly stated in our contracts. These discounts are recorded as a reduction of revenue and accounts receivable in the period in which the related product revenue is recognized. In addition, we reimburse our Customers (through discounts and allowances) for sales order management, data and distribution services.

•	Variable Consideration - Current Liabilities

◦

Product Returns. Consistent with industry practice, we have a product returns policy that provides Customers a right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The right of return lapses upon shipment of the goods to a patient. We estimate the amount of our products that may be returned and present this amount as a reduction of revenue in the period the related product revenue is recognized in addition to establishing a liability. We consider several factors in the estimation process, including expiration dates of product shipped to preferred pharmacy network partners and wholesalers, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors.

◦	Government Rebates. We are subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. For Medicaid, accruals are

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Payor Rebates. We contract with certain third-party payors, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of our products. These rebates are based on contractual percentages applied to the amount of product prescribed to patients who are covered by the plan or the organization with which we contract. We estimate these rebates and record such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

◦

Other Incentives. Other incentives that we offer include voluntary patient assistance programs, such as co-pay assistance programs, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors, and coupon programs for cash payors. The calculation of the accruals for this assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period.

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Expected Term.  Due to the lack of sufficient company-specific historical data, the expected term of employee options is determined using the "simplified" method, as prescribed in SEC's Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. The expected term of nonemployee options is equal to the contractual term.

•	Expected Volatility.  The expected volatility is based on historical volatilities of similar entities within our industry which were commensurate with the expected term assumption as described in SAB No. 107.

•	Risk-Free Interest Rate.  The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

•	Expected Dividends.  The expected dividend yield is 0% because we have not historically paid, and do not expect for the foreseeable future to pay, a dividend on our common stock.

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▪	a $6.5 million decrease in regulatory and medical affairs expenses, including payroll and administrative expenses, as a result of a shift in departmental focus from research and development to commercialization activities as a result of the FDA approval of XHANCE in September 2017; and

▪	a $3.0 million decrease related to the substantial completion of the preparation of contract manufacturing capabilities prior to the receipt of FDA approval of XHANCE in September of 2017 in anticipation of the expected commercial launch of XHANCE in the U.S. in 2018.

▪	a $3.0 million increase in clinical expenses related to the preparation for and initiation of our clinical trials of XHANCE for a follow-on indication for the treatment of chronic sinusitis and FDA-mandated pediatric studies.

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▪	a $37.3 million increase in sales and marketing expenses related to our preparation for and support of the commercial launch of XHANCE in the U.S. for the treatment of nasal polyps, of which:

◦	$22.2 million related to the deployment of our contract sales force and our nurse educator team;

◦	$15.1 million related primarily to marketing expenses for XHANCE;

▪	a $12.4 million increase in payroll-related expenses due to increases in headcount;

▪	a $6.5 million increase in regulatory and medical affairs expenses, including payroll-related and administrative expenses, as a result of a shift in departmental focus from research and development to commercialization activities as a result of the FDA approval of XHANCE in September 2017;

▪	a $1.6 million increase in facilities expense, professional fees and consultancy expenses to support our expanding infrastructure to prepare for and support the commercial launch of XHANCE and operate as a public company; and

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▪	internalize and expand our commercial infrastructure to support the sales and marketing for XHANCE;

▪	maintain and expand our sales force;

▪	continue advertising and other promotional activities to support the commercialization of XHANCE;

▪	continue to provide co-pay and other patient affordability programs;

▪	continue clinical development activities for XHANCE, including FDA-mandated pediatric studies and clinical trials for a follow-on indication for the treatment of chronic sinusitis;

▪	hire additional staff and add operational, financial and information systems to execute our business plan;

▪	maintain, expand and protect our patent portfolio;

▪	continue to contract to manufacture XHANCE and our other product candidates;

▪	service our debt obligations under the Notes issued in December 2017;

▪	continue research and development activities for additional product candidates; and

▪	maintain infrastructure necessary to operate as a publicly traded commercial-stage company.

▪	the success of our commercialization of XHANCE for the treatment of nasal polyps including, among other things, patient and physician acceptance of XHANCE and our ability to obtain adequate insurance coverage and reimbursement for XHANCE;

▪	the cost of commercialization activities for XHANCE, including product manufacturing, distribution, marketing and sales;

▪	net product revenues received from sales of XHANCE;

▪	the costs and timing of internalizing and expanding our sales force;

▪	the level of co-pay assistance and other patient affordability programs offered for XHANCE;

▪	our clinical development plans for XHANCE, including FDA-mandated pediatric studies and clinical trials for the supplemental indication for the treatment of chronic sinusitis;

▪	the outcome, timing and cost of the regulatory approval process of XHANCE for chronic sinusitis by the FDA, including the potential for the FDA to require that we perform more studies and clinical trials than those that we currently expect;

▪	the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights;

▪	the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;

▪	fluctuations in the three-month LIBOR-based floating interest rate of our Notes;

▪	the initiation, progress, timing, costs and results of clinical trials and other research and development related to additional product candidates; and

▪	the extent to which we in-license, acquire or otherwise partner in development of other products, product candidates or technologies.

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•	Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

•	Level 2 — Valuations based on observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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•	Level 3 — Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement.

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•	Variable Consideration - Accounts Receivable Reductions

◦

Provider Chargebacks and Discounts. Chargebacks for fees and discounts to providers represent the estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than the list prices charged to Customers who directly purchase the product from the Company. Customers charge the Company for the difference between what they pay for the product and the ultimate selling price to the qualified healthcare providers. These components of variable consideration are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue and accounts receivable. Reserves for chargebacks consist of credits the Company expects to issue for units that remain in the distribution channel inventories at each reporting period-end that the Company expects will be sold to qualified healthcare providers, as well as chargebacks that Customers have claimed, but for which the Company has not yet issued a credit.

◦

Trade Discounts and Allowances. The Company generally provides Customers with discounts that include incentive fees which are explicitly stated in the Company’s contracts. These discounts are recorded as a reduction of revenue and accounts receivable in the period in which the related product revenue is recognized. In addition, the Company reimburses (through discounts and allowances) its Customers for sales order management, data and distribution services.

•	Variable Consideration - Current Liabilities

◦

Product Returns. Consistent with industry practice, the Company has a product returns policy that provides Customers a right of return for product purchased within a specified period prior to and subsequent to the product’s expiration date. The right of return lapses upon shipment of the goods to a patient. The Company estimates the amount of its products that may be returned and presents this amount as a reduction of revenue in the period the related product revenue is recognized, in addition to establishing a liability. The Company considers several factors in the estimation process, including expiration dates of product shipped to preferred pharmacy network partners and wholesalers, inventory levels within the distribution channel, product shelf life, prescription trends and other relevant factors.

◦

Government Rebates. The Company is subject to discount obligations under state Medicaid programs and Medicare. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. For Medicaid, accruals are based on estimates of future Medicaid beneficiary utilization applied to the Medicaid unit rebate formula established by the Center for Medicaid and Medicare Services. The Medicare Part D prescription drug benefit mandates manufacturers to fund approximately 50% of the Medicare Part D insurance coverage gap for prescription drugs sold to eligible patients. To estimate the cost to the Company of this Medicare coverage gap responsibility, the Company estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional liability under the Medicare Part D program. The Company’s liability for these rebates consists of estimates of claims for the current quarter and estimated future claims that will be made for product that has been recognized as revenue but remains in the distribution channel inventories at the end of the reporting period.

◦

Payor Rebates. The Company contracts with certain third-party payors, primarily health insurance companies and pharmacy benefit managers, for the payment of rebates with respect to utilization of its products. These rebates are based on contractual percentages applied to the amount of product prescribed to patients who are covered by the plan or the organization with which it contracts. The Company estimates these rebates and records such estimates in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability.

◦

Other Incentives. Other incentives that the Company offers include voluntary patient assistance programs, such as co-pay assistance programs, which are intended to provide financial assistance to qualified commercially insured patients with prescription drug co-payments required by payors and coupon programs for cash payors. The calculation of the accruals for this assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product

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•	Elected the optional modified retrospective transition method as of January 1, 2019; therefore prior period amounts will not be restated;

•	Established and implemented key implementation controls to ensure the Company meets the new reporting and disclosure requirements;

•	Elected the following transition practical expedients:

◦	to not reassess lease identification, lease classification and initial indirect costs related to those leases entered into prior to the adoption of ASC 842;

◦	to not separate lease and non-lease components for our office lease portfolio;

•	Made policy elections as of January 1, 2019:

◦	to not apply the recognition and measurement requirements to leases with an initial term of one year or less;

◦	to apply the portfolio approach for the development of the discount rate related to leases with similar characteristics;

◦	to keep leases with an immaterial right-of-use asset at inception, off the balance sheet and recognize this expense on a straight-line basis in the consolidated statements of operations;

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•	January 1 through June 30, and

•	July 1 through December 31.

•	The expected term of employee options is determined using the "simplified" method, as prescribed in SEC's Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the

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•	The expected volatility is based on historical volatilities of similar entities within the Company's industry which were commensurate with the expected term assumption as described in SAB No. 107.

•	The risk-free interest rate is based on the interest rate payable on US Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term.

•	The expected dividend yield is 0% because the Company has not historically paid, and does not expect for the foreseeable future to pay, a dividend on its common stock.

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◦	[***] days after receiving a shipment of DSAs if it determines that such shipment contains a Quantitative Defect,

◦	[***] days after receiving a shipment of DSAs if it determines that such shipment contains a Patent Defect, and

◦	[***] days after OptiNose becomes aware of a Latent Defect.

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(1)	Registration Statement (Form S-8 No. 333-221047) pertaining to the Amended and Restated 2010 Stock Incentive Plan and the 2017 Employee Stock Purchase Plan of OptiNose, Inc.

(2)	Registration Statement (Form S-8 No. 333-223617) pertaining to the Amended and Restated 2010 Stock Incentive Plan and the 2017 Employee Stock Purchase Plan of OptiNose, Inc.

(3)	Registration Statement (Form S-3 No. 333-228122) of OptiNose, Inc.