ADRO Aduro Biotech Inc

RISK FACTORS

The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained or incorporated by reference in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Aduro common stock. You should also read and consider the other information in this proxy statement/prospectus and additional information about Aduro forth in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which are filed with the Securities and Exchange Commission, or the SEC, and incorporated by reference into this proxy statement/prospectus. Please see the section titled “Where You Can Find More Information” beginning on page 243 of this proxy statement/prospectus for further information regarding the documents incorporated by reference into this proxy statement/prospectus.

Risks Related to the Merger

The exchange ratio will not be adjusted based on the market price of Aduro common stock so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

At the effective time of the merger, outstanding shares of Chinook capital stock will be converted into shares of Aduro common stock. Applying the exchange ratio, the former Chinook securityholders immediately before the merger, excluding shares purchased in the Chinook pre-closing financing, are expected to own approximately 40% of the aggregate number of shares of Aduro common stock following the merger on a fully-diluted basis, shares issued in the Chinook pre-closing financing are expected to be approximately 20% of the outstanding shares of Aduro common stock following the merger on a fully-diluted basis and Aduro securityholders immediately before the merger are expected to own approximately 40% of the aggregate number of shares of Aduro common stock following the merger on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) Aduro’s net cash as of closing being equal to $145 million and (b) Chinook’s cash and cash equivalents as of closing being equal to $10 million, without giving effect to the Chinook pre-closing financing.

Any changes in the market price of Aduro stock before the completion of the merger will not affect the number of shares Chinook stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the merger, the market price of Aduro common stock increases from the market price on the date of the Merger Agreement, then Chinook stockholders could receive merger consideration with substantially more value for their shares of Chinook capital stock than the parties had negotiated when they established the exchange ratio. Similarly, if before the completion of the merger the market price of Aduro common stock declines from the market price on the date of the Merger Agreement, then Chinook stockholders could receive merger consideration with substantially lower value. The Merger Agreement does not include a price-based termination right.

Failure to complete the merger may result in either Aduro or Chinook paying a termination fee to the other party, which could harm the common stock price of Aduro and future business and operations of each company.

If the merger is not completed, Aduro and Chinook are subject to the following risks:

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If the Merger Agreement is terminated and the board of directors of Aduro or Chinook determines to seek another business combination, there can be no assurance that either Aduro or Chinook will be able to find a partner with whom a business combination would yield greater benefits than the benefits to be provided under the Merger Agreement.

If the conditions to the merger are not satisfied or waived, the merger may not occur.

Even if the merger is approved by the stockholders of Chinook and the merger proposal is approved by the Aduro stockholders, specified conditions must be satisfied or waived to complete the merger. These conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement—Conditions to the Completion of the Merger” beginning on page 137 of this proxy statement/prospectus. Aduro and Chinook cannot assure you that all of the conditions to the consummation of the merger will be satisfied or waived. If the conditions are not satisfied or waived, the merger may not occur or the closing may be delayed, and Aduro and Chinook each may lose some or all of the intended benefits of the merger.

The merger may be completed even though a material adverse effect may result from the announcement of the merger, industry-wide changes or other causes.

In general, neither Aduro nor Chinook is obligated to complete the merger if there is a material adverse effect affecting the other party between June 1, 2020, the date of the Merger Agreement, and the closing of the merger. However, certain types of changes are excluded from the concept of a “material adverse effect.” Such exclusions include but are not limited to changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the merger, natural disasters, pandemics (including the COVID-19 pandemic), other public health events and changes in GAAP. Therefore, if any of these events were to occur impacting Aduro or Chinook, the other party would still be obliged to consummate the closing of the merger. If any such adverse changes occur and Aduro and Chinook consummate the closing of the merger, the stock price of the combined company may suffer. This in turn may reduce the value of the merger to the stockholders of Aduro, Chinook or both. For a more complete discussion of what constitutes a material adverse effect on Aduro or Chinook, see the section titled “The Merger Agreement—Representations and Warranties” beginning on page 127 of this proxy statement/prospectus.

If Aduro and Chinook complete the merger, the combined company will need to raise additional capital by issuing equity securities or additional debt or through licensing arrangements, which may cause significant dilution to the combined company’s stockholders or restrict the combined company’s operations.

In August 2020, Chinook entered into Subscription Agreements with certain investors, including existing investors of Chinook, pursuant to which the investors agreed to purchase, in the aggregate, $115 million in shares of common stock of Chinook immediately prior to the closing of the merger, referred to as the Chinook pre-closing financing. The closing of the Chinook pre-closing financing is conditioned upon the satisfaction or waiver of the conditions to the closing of the merger as well as certain other conditions. The shares of Chinook common stock issued in the Chinook pre-closing financing will result in dilution to all securityholders of the combined company (i.e., both the pre-merger Aduro securityholders and former Chinook securityholders). The Chinook pre-closing financing is more fully described under the section titled “Agreements Related to the Merger—Subscription Agreements” beginning on page 153 of this proxy statement/prospectus.

Additional financing may not be available to the combined company when it is needed or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such financing will cause additional dilution to all securityholders of the combined company, including Aduro’s pre-merger securityholders and Chinook’s former securityholders. It is also possible that the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined

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company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.

Some Aduro and Chinook directors and executive officers have interests in the merger that are different from yours and that may influence them to support or approve the merger without regard to your interests.

Directors and executive officers of Aduro and Chinook may have interests in the merger that are different from, or in addition to, the interests of other Aduro stockholders generally. These interests with respect to Aduro’s directors and executive officers may include, among others, acceleration of stock option or restricted stock unit vesting, retention bonus payments, extension of exercisability periods of previously issued stock option grants, severance payments if employment is terminated in a qualifying termination in connection with the merger and rights to continued indemnification, expense advancement and insurance coverage. Certain current members of the Aduro board of directors will continue as directors of the combined company after the effective time of the merger, and, following the closing of the merger, will be eligible to be compensated as non-employee directors of the combined company pursuant to the Aduro non-employee director compensation policy that is expected to remain in place following the effective time of the merger. These interests with respect to Chinook’s directors and executive officers may include, among others, certain of Chinook’s directors and executive officers have options, subject to vesting, to purchase shares of Chinook common stock which, after the effective time of the merger, will be converted into and become options to purchase shares of the common stock of the combined company; Chinook’s executive officers are expected to continue as executive officers of the combined company after the effective time of the merger; and all of Chinook’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. Further, certain current members of the Chinook’s board of directors will continue as directors of the combined company after the effective time of the merger, and, following the closing of the merger, will be eligible to be compensated as non-employee directors of the combined company pursuant to the Aduro non-employee director compensation policy that is expected to remain in place following the effective time of the merger. The directors and executive officers own options and/or RSUs to purchase the shares of their respective companies.

The Aduro and Chinook boards were aware of and considered those interests, among other matters, in reaching their decisions to approve and adopt the Merger Agreement, approve the merger, and recommend the approval of the Merger Agreement to Aduro and Chinook stockholders. These interests, among other factors, may have influenced the directors and executive officers of Aduro and Chinook to support or approve the merger.

For more information regarding the interests of Aduro and Chinook directors and executive officers in the merger, please see the sections titled “The Merger—Interests of Aduro Directors and Executive Officers in the Merger” beginning on page 107 and “The Merger—Interests of Chinook Directors and Executive Officers in the Merger” beginning on page 112 of this proxy statement/prospectus.

Aduro stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger, including the conversion of Chinook common stock issued in the Chinook pre-closing financing.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Aduro stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger. The shares of Chinook common stock issued in the Chinook pre-closing financing will result in dilution to all securityholders of the combined company (i.e., both the pre-merger Aduro securityholders and former Chinook securityholders).

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If the merger is not completed, Aduro’s stock price may decline significantly.

The market price of Aduro common stock is subject to significant fluctuations. During the 12-month period ended August 21, 2020, the closing sales price of Aduro’s common stock on Nasdaq ranged from a high of $4.04 on February 20, 2020 to a low of $0.90 on October 25, 2019. Market prices for securities of pharmaceutical, biotechnology and other life science companies have historically been particularly volatile. In addition, the market price of Aduro common stock will likely be volatile based on whether stockholders and other investors believe that Aduro can complete the merger or otherwise raise additional capital to support Aduro’s operations if the merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of Aduro common stock is exacerbated by low trading volume. Additional factors that may cause the market price of Aduro common stock to fluctuate include:

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of Aduro common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies.

Aduro and Chinook securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the merger, the current stockholders of Aduro and Chinook will own a smaller percentage of the combined company than their ownership of their respective companies prior to the merger. Immediately after the merger, Aduro securityholders as of immediately prior to the merger are expected to own approximately 40% of the outstanding shares of the combined company on a fully-diluted basis, former Chinook securityholders, excluding shares purchased in the Chinook pre-closing financing are expected to own approximately 40% of the outstanding shares of the combined company on a fully-diluted basis and shares issued in the Chinook pre-closing financing are expected to be approximately 20% of the outstanding shares of the combined company on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) Aduro’s net cash as of closing being equal to $145 million and (b) Chinook’s cash and cash equivalents as of closing being equal to $10 million, without giving effect to the Chinook pre-closing financing. The Chief Executive Officer of Chinook will serve as the Chief Executive Officer of the combined company following the completion of the merger.

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During the pendency of the merger, Aduro and Chinook may not be able to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.

Covenants in the Merger Agreement impede the ability of Aduro and Chinook to make acquisitions during the pendency of the merger, subject to specified exceptions. As a result, if the merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, proposing, seeking or knowingly encouraging, facilitating or supporting any inquiries, indications of interest, proposals or offers that constitute or may reasonably be expected to lead to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified exceptions. Any such transactions could be favorable to such party’s stockholders, but the parties may be unable to pursue them. For more information, see the section titled “The Merger Agreement—Non-Solicitation.”

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Aduro and Chinook from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances as described in further detail in the sections titled “The Merger Agreement—Non-Solicitation—Aduro” and “The Merger Agreement—Non-Solicitation—Chinook.” In addition, if Aduro terminates the Merger Agreement under specified circumstances, either Aduro or Chinook would be required to pay the other party a termination fee of $6,400,000 and reimburse up to $2,000,000 of expenses. This termination fee may discourage third parties from submitting competing proposals to Aduro or its stockholders, and may cause the Aduro board of directors to be less inclined to recommend a competing proposal.

Because the lack of a public market for Chinook’s capital stock makes it difficult to evaluate the fair market value of Chinook’s capital stock, Aduro may pay more than the fair market value of Chinook’s capital stock and/or the stockholders of Chinook may receive consideration in the merger that is less than the fair market value of Chinook’s capital stock.

The outstanding capital stock of Chinook is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Chinook’s capital stock. Because the percentage of Aduro equity to be issued to Chinook stockholders was determined based on negotiations between the parties, it is possible that the value of the Aduro common stock to be received by Chinook stockholders will be less than the fair market value of Chinook’s capital stock, or Aduro may pay more than the aggregate fair market value for Chinook’s capital stock.

Aduro stockholders may not receive any payment on the CVRs, and the CVRs may expire valueless.

The right of Aduro stockholders to receive any future payment for or derive any value from the CVRs will be contingent solely upon the occurrence of the CVR Milestones within the time periods specified in the CVR Agreement and the consideration received being greater than the amounts permitted to be withheld or deducted by Aduro under the CVR Agreement. There is no guarantee that Aduro will be able to successfully partner or sell any of the non-renal assets related to the CVR Milestones or establish a viable entity to manage the development of these assets. In the event that no CVR Milestones occur within the time periods specified in the CVR Agreement or the consideration received is not greater than the amounts permitted to be withheld or deducted by Aduro, no payments will be made under the CVR Agreement, and the CVRs will expire valueless.

Following the effective time, subject to ongoing clinical trial obligations and obligations to use commercially reasonable efforts to complete dispositions for which a sale agreement has been entered into, neither Aduro nor Chinook will have any obligation to develop the non-renal assets, or to expend any effort or resources to divest or otherwise monetize the non-renal assets.

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Furthermore, the CVRs will be unsecured obligations of the combined company and all payments under the CVRs, all other obligations under the CVR Agreement and the CVRs and any rights or claims relating thereto may be subordinated in right of payment to the prior payment in full of all current or future senior obligations of the combined company.

The tax treatment of the CVRs is unclear.

The U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the CVRs.

For example, as discussed in the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs of Holders of Aduro Common Stock,” Aduro does not intend to report the issuance of the CVRs as a current distribution of property with respect to its stock, but it is possible that the IRS could assert that Aduro stockholders are treated as having received a distribution of property equal to the fair market value of the CVRs on the date the CVRs are distributed, which could be taxable to Aduro stockholders without the corresponding receipt of cash. In addition, it is possible that the IRS or a court could determine that the issuance of the CVRs (and/or any payments thereon) and the reverse stock split constitute a single “recapitalization” for U.S. federal income tax purposes with the CVRs constituting taxable “boot” received in such recapitalization exchange. In such case, the tax consequences of the CVRs and the reverse stock split would differ from those described in this proxy statement/prospectus, including with respect to the timing and character of income.

Aduro’s ability to utilize its net operating loss carryforwards and tax credit carryforwards may be subject to limitations.

Aduro’s ability to use its federal and state net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon Aduro’s generation of future taxable income before the expiration dates of the net operating losses, and Aduro cannot predict with certainty when, or whether, Aduro will generate sufficient taxable income to use all of its net operating losses. In addition, a corporation that undergoes an “ownership change” under Section 382 of the Code is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income and its ability to utilize tax credit carryforwards. As of December 31, 2019, Aduro reported U.S. federal, state and foreign NOLs of approximately $153.8 million, $107.8 million and $66.5 million, respectively.

Under Section 382 of the Code, Aduro’s ability to utilize NOLs or other tax attributes, such as federal tax credits, in any taxable year may be limited if it experienced an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. Similar rules may apply under state tax laws. Aduro believes that it has experienced an ownership change in the past, and may experience ownership changes in the future and/or subsequent shifts in its stock ownership (some of which are outside of its control). Finally, the merger, if consummated, may constitute an ownership change (within the meaning of Section 382 of the Code) which could eliminate or otherwise substantially limit Aduro’s ability to use its federal and state NOLs. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, Aduro’s existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. As a result, even if Aduro attains profitability, it may be unable to use a material portion of its NOLs and other tax attributes, which could potentially result in increased future tax liability to Aduro.

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Risks Related to the Proposed Reverse Stock Split

The reverse stock split may not increase the combined company’s stock price over the long-term.

The principal purpose of the reverse stock split is to increase the per-share market price of Aduro’s common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of Aduro and the shares of Aduro common stock being issued in the merger on Nasdaq will be approved. It cannot be assured, however, that the reverse stock split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of Aduro’s common stock, it cannot be assured that the reverse stock split will increase the market price of its common stock by a multiple of the reverse stock split ratio mutually agreed by Aduro and Chinook, or result in any permanent or sustained increase in the market price of Aduro’s common stock, which is dependent upon many factors, including Aduro’s business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of Aduro might meet the listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

The reverse stock split may decrease the liquidity of the combined company’s common stock.

Although the Aduro board believes that the anticipated increase in the market price of the combined company’s common stock resulting from the proposed reverse stock split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock. In addition, the reverse stock split may not result in an increase in the combined company’s stock price necessary to satisfy Nasdaq’s initial listing requirements for the combined company.

The reverse stock split may lead to a decrease in the combined company’s overall market capitalization.

Should the market price of the combined company’s common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the reverse stock split.

Risks Related to the Combined Company

In determining whether you should approve the issuance of shares of Aduro common stock, the change of control resulting from the merger and other matters related to the merger, as applicable, you should carefully read the following risk factors in addition to the risks described above.

The market price of the combined company’s common stock is expected to be volatile, and the market price of the common stock may drop following the merger.

The market price of the combined company’s common stock following the merger could be subject to significant fluctuations. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:

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Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 or otherwise could materially and adversely affect the combined company’s business and the value of its common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies. Furthermore, market volatility may lead to increased shareholder activism if the combined company experiences a market valuation that activists believe is not reflective of its intrinsic value. Activist campaigns that contest or conflict with the combined company’s strategic direction or seek changes in the composition of its board of directors could have an adverse effect on its operating results and financial condition.

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Following the merger, the combined company may be unable to integrate successfully the businesses of Aduro and Chinook and realize the anticipated benefits of the merger.

The merger involves the combination of two companies which currently operate as independent companies. Following the merger, the combined company will be required to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounter in the integration process include the following:

In addition, Aduro and Chinook have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process also could result in the diversion of each company’s management’s attention, the disruption or interruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies, any of which could adversely affect the combined company’s ability to maintain relationships with customers, suppliers and employees or the ability to achieve the anticipated benefits of the merger, or could otherwise adversely affect the business and financial results of the combined company.

The combined company may need to raise additional capital in the future, and such funds may not be available on attractive terms, or at all.

The combined company expects to need to raise additional capital in the future to support its operations beyond the Chinook pre-closing financing. The combined company cannot be certain that additional capital will be available as needed or on acceptable terms, or at all. If the combined company requires additional capital at a time when an investment in the combined company, in pharmaceutical and biotechnology companies or the market in general is limited, the combined company may not be able to raise additional funds at the time that it desires, or at all. If the combined company does raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of its stock could be significantly diluted and these newly issued securities may have rights, preferences or privileges senior to those of holders of the common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments.

If the assets subject to the CVR Agreement are not disposed of in a timely manner, the combined company may have to incur time and resources to wind down or dispose of such assets.

In connection with the merger, Aduro will declare a dividend to its common stockholders of record the right to receive one CVR for each outstanding share of Aduro common stock held by such stockholder as of such date,

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each representing the non-transferable contractual right to receive certain contingent payments from Aduro upon the occurrence of certain events within agreed time periods relating to the disposition by the combined company of certain non-renal assets of Aduro. See the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement” beginning on page 146 of this proxy statement/prospectus. Pursuant to the terms of the CVR Agreement, if the committee appointed by the board of directors is unable to sell the assets subject to the CVR Agreement prior to the six-month anniversary of the closing date, the combined company will be responsible for any wind-down costs associated with the termination of such assets. Further, pursuant to the terms of the CVR Agreement, the holders of Aduro common stock prior to the closing, rather than the holders of the combined company’s common stock, are the primary recipients of any net proceeds of the disposition of the assets subject to the CVR Agreement. Absent such CVR Agreement, the combined company could have allocated such funds, time and resources to its core programs and the foregoing could be a distraction to the combined company’s management and employees. As a result, the combined company’s operations and financial condition may be adversely affected.

The combined company will incur additional costs and increased demands upon management as a result of complying with the laws and regulations affecting public companies.

The combined company will incur significant legal, accounting and other expenses as a public company that Chinook did not incur as a private company, including costs associated with public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act. The combined company’s management team will consist of the executive officers of Chinook prior to the merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise related to public company reporting requirements and compliance with applicable laws and regulations to ensure that the combined company complies with all of these requirements. Any changes the combined company makes to comply with these obligations may not be sufficient to allow it to satisfy its obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for the combined company to attract and retain qualified persons to serve on the board of directors or on board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

Once the combined company is no longer an emerging growth company, a smaller reporting company or otherwise no longer qualifies for applicable exemptions, the combined company will be subject to additional laws and regulations affecting public companies that will increase the combined company’s costs and the demands on management and could harm the combined company’s operating results.

The combined company will be subject to the reporting requirements of the Exchange Act, which requires, among other things, that the combined company file with the SEC, annual, quarterly and current reports with respect to the combined company’s business and financial condition as well as other disclosure and corporate governance requirements. However, as an emerging growth company the combined company may take advantage of exemptions from various requirements such as an exemption from the requirement to have the combined company’s independent auditors attest to the combined company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 as well as an exemption from the “say on pay” voting requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. After the combined company no longer qualifies as an emerging growth company, the combined company may still qualify as a “smaller reporting company” which may allow the combined company to take advantage of some of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in the combined company’s periodic reports and proxy statements. The combined company will cease being an emerging growth company on December 31, 2020. Even after the combined company no longer qualifies as an emerging growth company, it expects to still qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, in at least the near term, which will

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allow the combined company to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in this proxy statement/prospectus and in the combined company’s periodic reports and proxy statements. Once the combined company is no longer an emerging growth company, a smaller reporting company or otherwise qualifies for these exemptions, the combined company will be required to comply with these additional legal and regulatory requirements applicable to public companies and will incur significant legal, accounting and other expenses to do so. If the combined company is not able to comply with the requirements in a timely manner or at all, the combined company’s financial condition or the market price of the combined company’s common stock may be harmed. For example, if the combined company or its independent auditor identifies deficiencies in the combined company’s internal control over financial reporting that are deemed to be material weaknesses the combined company could face additional costs to remedy those deficiencies, the market price of the combined company’s stock could decline or the combined company could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

The unaudited pro forma condensed combined financial data for Aduro and Chinook included in this proxy statement/prospectus is preliminary, and the combined company’s actual financial position and operations after the merger may differ materially from the unaudited pro forma financial data included in this proxy statement/prospectus.

The unaudited pro forma financial data for Aduro and Chinook included in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of the combined company’s actual financial condition or results of operations of future periods, or the financial condition or results of operations that would have been realized had the entities been combined during the periods presented. The combined company’s actual results and financial position after the merger may differ materially and adversely from the unaudited pro forma financial data included in this proxy statement/prospectus. The purchase price allocation reflected in this proxy statement/prospectus is preliminary, and final allocation of the purchase price will be determined when the combined company has determined the final consideration and completed the detailed valuations and other studies necessary. The final purchase price allocation could differ materially from the preliminary purchase price allocation used to prepare the pro forma adjustments and may include changes in allocations to intangible assets and bargain purchase gain or goodwill based on the results of certain valuations and other studies that have yet to be completed, other changes to assets and liabilities and changes to the ultimate purchase consideration. For more information see the section titled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page F-55.

Provisions in the combined company’s charter documents and under Delaware law could make an acquisition of the combined company more difficult and may discourage any takeover attempts the company stockholders may consider favorable, and may lead to entrenchment of management.

Provisions of the combined company’s amended and restated certificate of incorporation and amended and restated bylaws could delay or prevent changes in control or changes in management without the consent of the board of directors. These provisions will include the following:

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In addition, these provisions would apply even if the combined company were to receive an offer that some stockholders may consider beneficial.

The combined company will also be subject to the anti-takeover provisions contained in Section 203 of the DGCL, or Section 203. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

The certificate of incorporation and bylaws of the combined company will provide that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between the combined company and its stockholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with the combined company or its directors, officers or other employees.

The certificate of incorporation and bylaws of the combined company will provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on the combined company’s behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against it arising pursuant to any provisions of the DGCL, its certificate of incorporation or its bylaws, or any action asserting a claim against it that is governed by the internal affairs doctrine. The exclusive forum provision does not apply to actions arising under the Exchange Act. The amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the combined company or its directors, officers or other employees, which may discourage such lawsuits against the combined company and its directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the certificate of incorporation and bylaws to be inapplicable or unenforceable in an action, the combined company may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect its business, financial condition and results of operations.

Aduro and Chinook do not anticipate that the combined company will pay any cash dividends in the foreseeable future.

The current expectation is that the combined company will retain its future earnings, if any, to fund the growth of the combined company’s business as opposed to paying dividends. As a result, capital appreciation, if any, of the common stock of the combined company will be your sole source of gain, if any, for the foreseeable future.

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An active trading market for the combined company’s common stock may not develop and its stockholders may not be able to resell their shares of common stock for a profit, if at all.

Prior to the merger, there had been no public market for shares of Chinook capital stock. An active trading market for the combined company’s shares of common stock may never develop or be sustained. If an active market for the combined company’s common stock does not develop or is not sustained, it may be difficult for its stockholders to sell their shares at an attractive price or at all.

Future sales of shares by existing stockholders could cause the combined company’s stock price to decline.

If existing securityholders of Aduro and Chinook sell, or indicate an intention to sell, substantial amounts of the combined company’s common stock in the public market after legal restrictions on resale discussed in this proxy statement/prospectus lapse, the trading price of the common stock of the combined company could decline. Based on shares outstanding as of July 31, 2020, the shares to be issued in the Chinook pre-closing financing and shares expected to be issued upon completion of the merger the combined company is expected to have outstanding a total of approximately 211,070,260 shares of common stock immediately following the completion of the merger. Of the shares of common stock, approximately 109,467,500 shares will be available for sale in the public market beginning 180 days after the closing of the merger as a result of the expiration of lock-up agreements between Aduro and Chinook on the one hand and certain securityholders of Aduro and Chinook on the other hand. All other outstanding shares of common stock, other than shares held by affiliates of the combined company, will be freely tradable, without restriction, in the public market. In addition, shares of common stock that are subject to outstanding options of Chinook will become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements and Rules 144 and 701 under the Securities Act. If these shares are sold, the trading price of the combined company’s common stock could decline.

After completion of the merger, the combined company’s executive officers, directors and principal stockholders will have the ability to control or significantly influence all matters submitted to the combined company’s stockholders for approval.

Upon the completion of the merger, and giving effect to the issuance of the shares of common stock of Chinook prior to the closing of the merger pursuant to the Chinook pre-closing financing, it is anticipated that the combined company’s executive officers, directors and principal stockholders will, in the aggregate, beneficially own approximately 50.3% of the combined company’s outstanding shares of common stock, subject to certain assumptions, including, but not limited to, (a) Aduro’s net cash as of closing being equal to $145 million, and (b) Chinook’s cash and cash equivalents as of closing being equal to $10 million, without giving effect to the Chinook pre-closing financing. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to the combined company’s stockholders for approval, as well as the combined company’s management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of the combined company’s assets. This concentration of voting power could delay or prevent an acquisition of the combined company on terms that other stockholders may desire.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about the combined company, its business or its market, its stock price and trading volume could decline.

The trading market for the combined company’s common stock will be influenced by the research and reports that equity research analysts publish about it and its business. Equity research analysts may elect not to provide research coverage of the combined company’s common stock after the completion of the merger, and such lack of research coverage may adversely affect the market price of its common stock. In the event it does have equity research analyst coverage, the combined company will not have any control over the analysts or the content and opinions included in their reports. The price of the combined company’s common stock could decline if one or more equity research analysts downgrade its stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of the combined company or fails to publish reports on it regularly, demand for its common stock could decrease, which in turn could cause its stock price or trading volume to decline.

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The combined company will have broad discretion in the use of the cash and cash equivalents of the combined company and the proceeds from the Chinook pre-closing financing and may invest or spend the proceeds in ways with which you do not agree and in ways that may not increase the value of your investment.

The combined company will have broad discretion over the use of the cash and cash equivalents of the combined company and the proceeds from the Chinook pre-closing financing. You may not agree with the combined company’s decisions, and its use of the proceeds may not yield any return on your investment. The combined company’s failure to apply these resources effectively could compromise its ability to pursue its growth strategy and the combined company might not be able to yield a significant return, if any, on its investment of these net proceeds. You will not have the opportunity to influence its decisions on how to use the combined company’s cash resources.

Risks Related to Aduro’s Business

Aduro is, and following completion of the merger Aduro will continue to be, subject to the risks described in Part I, Item 1A in Aduro’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 9, 2020, as updated by its Quarterly Reports on Form 10-Q and future filings with the SEC, in each case, incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 243 of this proxy statement/prospectus.

Risks Related to Chinook’s Financial Position

Chinook has a history of operating losses, and Chinook may not achieve or sustain profitability. Chinook anticipates that it will continue to incur losses for the foreseeable future. If Chinook fails to obtain additional funding to conduct its planned research and development efforts, Chinook could be forced to delay, reduce or eliminate Chinook’s product development programs or commercial development efforts.

Chinook is a clinical-stage biotechnology company with a limited operating history. Biotechnology product development is a highly speculative undertaking and involves a substantial degree of risk. Chinook’s operations to date have been limited primarily to organizing and staffing Chinook, business planning, raising capital, acquiring and developing product and technology rights, manufacturing, and conducting research and development activities for Chinook’s product candidates. Chinook has never generated any revenue from product sales. Chinook has not obtained regulatory approvals for any of its product candidates, and has funded its operations to date through proceeds from sales of its preferred stock and common stock.

Chinook has incurred net losses in each year since its inception. Chinook incurred net losses of $0.7 million, $46.5 million and $12.9 million for the period from November 1, 2018 (inception) through December 31, 2018, the year ended December 31, 2019 and the six months ended June 30, 2020, respectively. As of June 30, 2020, Chinook had an accumulated deficit of $60.1 million. Substantially all of Chinook’s operating losses have resulted from costs incurred in connection with Chinook’s research and development programs and from general and administrative costs associated with Chinook’s operations. Chinook expects to continue to incur significant expenses and operating losses over the next several years and for the foreseeable future as Chinook intends to continue to conduct research and development, clinical testing, regulatory compliance activities, manufacturing activities, and, if any of Chinook’s product candidates is approved, sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in Chinook incurring significant losses for the foreseeable future. Chinook’s prior losses, combined with expected future losses, have had and will continue to have an adverse effect on Chinook’s stockholders’ equity and working capital.

Chinook expects that it will need to raise additional funding before Chinook can expect to become profitable from any potential future sales of atrasentan or Chinook’s other product candidates. This additional financing may not be available on acceptable terms or at all. Failure to obtain this necessary capital when needed may force Chinook to delay, limit or terminate its product development efforts or other operations.

Chinook will require substantial future capital in order to complete planned and future preclinical and clinical development for atrasentan and other product candidates and potentially commercialize these product

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candidates. Based upon Chinook’s current operating plan, Chinook believes that its existing cash and cash equivalents as of June 30, 2020, along with the net cash held by Aduro upon consummation of the transaction, including the expected proceeds from the Chinook pre-closing financing, will enable Chinook to fund its operating expenses and capital expenditure requirements through the first half of 2023. Chinook expects Chinook’s spending levels to increase in connection with Chinook’s preclinical studies and clinical trials of Chinook’s product candidates. In addition, if Chinook obtains marketing approval for any of Chinook’s product candidates, Chinook expects to incur significant expenses related to commercial launch, product sales, medical affairs, marketing, manufacturing and distribution. Furthermore, Chinook expects to incur additional costs associated with operating as a public company. Accordingly, Chinook will need to obtain substantial additional funding in connection with its continuing operations before any commercial revenue may occur.

Additional capital might not be available when Chinook needs it and Chinook’s actual cash requirements might be greater than anticipated. If Chinook requires additional capital at a time when investment in its industry or in the marketplace in general is limited, Chinook might not be able to raise funding on favorable terms, if at all. If Chinook is not able to obtain financing when needed or on terms favorable to Chinook, Chinook may need to delay, reduce or eliminate certain research and development programs or other operations, sell some or all of Chinook’s assets or merge with another entity.

Chinook’s operations have consumed significant amounts of cash since inception. Chinook’s future capital requirements will depend on many factors, including:

Chinook’s product candidates, if approved, may not achieve commercial success. Chinook’s commercial revenues, if any, will be derived from sales of product candidates that Chinook does not expect to be commercially available for many years, if at all. Accordingly, Chinook will need to continue to rely on additional financing to achieve Chinook’s business objectives, which may not be available to Chinook on acceptable terms, or at all.

Chinook has identified material weaknesses in its internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm its business and negatively impact the value of its common stock.

Chinook has identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that

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there is a reasonable possibility that a material misstatement of Chinook’s annual or interim financial statements will not be prevented or detected on a timely basis. In preparing Chinook’s consolidated financial statements as of and for the year ended December 31, 2019, and as of December 31, 2018 and for the period from November 1, 2018 (inception) through December 31, 2018, management of Chinook identified the following material weaknesses in its internal control over financial reporting: (i) Chinook did not design or maintain an effective control environment commensurate with its financial reporting requirements due to lack of sufficient accounting professionals with the appropriate level of skill, experience and training commensurate with its financial reporting requirements. Additionally, the limited personnel resulted in Chinook’s inability to consistently establish appropriate authorities and responsibilities in pursuit of its financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in its finance and accounting functions. This contributed to additional material weaknesses as: (ii) Chinook did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and period end financial reporting; and (iii) Chinook did not design and maintain controls over the operating effectiveness of information technology general controls for information systems that are relevant to the preparation of its financial statements. Specifically, Chinook did not design and maintain effective controls over program change management; user access, including segregation of duties; or computer operations.

These material weaknesses resulted in adjustments to Chinook’s consolidated financial statements. Additionally, these material weaknesses could result in a misstatement of Chinook’s accounts or disclosures that would result in a material misstatement of its annual or interim financial statements that would not be prevented or detected, and accordingly, Chinook determined that these control deficiencies constitute material weaknesses.

Chinook is actively recruiting additional accounting personnel with appropriate experience, certification, education and training as a component of its plans to remediate the material weaknesses. See “Chinook Management’s Discussion and Analysis of Financial Condition and Results of Operations—Remediation of Material Weaknesses in Internal Control over Financial Reporting.” To the extent that Chinook is not able to hire and retain such individuals, the material weaknesses identified may not be remediated and management may be required to record additional adjustments to its financial statements in the future.

The combined company’s internal control over financial reporting may not meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, could have a material adverse effect on the combined company’s business and share price.

As a privately held company, Chinook was not required to evaluate its internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404 of the Sarbanes-Oxley Act, or Section 404. Following the merger, the combined company’s management will be required to report on the effectiveness of the combined company’s internal control over financial reporting. The rules governing the standards that must be met for the combined company’s management to assess the combined company’s internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In preparing Chinook’s consolidated financial statements as of and for the year ended December 31, 2019, and as of December 31, 2018 and for the period from November 1, 2018 (inception) through December 2018, management of Chinook identified material weaknesses in its internal control over financial reporting. See “Chinook has identified material weaknesses in its internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm its business and negatively impact the value of its common stock.” The combined company cannot assure you that the material weaknesses identified at Chinook will be remediated by the combined company on the timelines currently anticipated by Chinook, or at all, and/or that there will not be additional material weaknesses or significant deficiencies in the combined company’s internal control over financial reporting in the future. Any failure to maintain effective internal control over financial reporting could severely inhibit the combined company’s ability to accurately

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report its financial condition, results of operations or cash flows. If the combined company is unable to conclude that its internal control over financial reporting is effective, or if the combined company’s independent registered public accounting firm determines the combined company has a material weakness or significant deficiency in the combined company’s internal control over financial reporting once that firm begins its reporting on internal control over financial reporting, investors may lose confidence in the accuracy and completeness of the combined company’s financial reports, the market price of the combined company’s common stock could decline, and the combined company could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in the combined company’s internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict the combined company’s future access to the capital markets.

Chinook’s limited operating history may make it difficult for you to evaluate the success of Chinook’s business to date and to assess Chinook’s future viability.

Chinook is a clinical-stage biotechnology company formed in late 2018. Chinook’s operations to date have been limited to organizing and staffing Chinook, business planning, raising capital, acquiring Chinook’s technology, identifying potential product candidates, undertaking research and preclinical studies of Chinook’s product candidates, manufacturing, and establishing licensing arrangements. Chinook has not yet demonstrated the ability to complete clinical trials of Chinook’s product candidates, obtain marketing approvals, manufacture a commercial scale product or conduct sales and marketing activities necessary for successful commercialization. Consequently, any predictions you make about Chinook’s future success or viability may not be as accurate as they could be if Chinook had a longer operating history.

In addition, as a new business, Chinook may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. Chinook will need to transition from a company with a licensing and research focus to a company that is also capable of supporting clinical development and commercial activities. Chinook may not be successful in such a transition.

Risks Related to Chinook’s Product Development and Regulatory Approval

If Chinook is unable to develop, obtain regulatory approval for and commercialize atrasentan and its future product candidates, or if Chinook experiences significant delays in doing so, Chinook’s business will be materially harmed.

Chinook plans to invest a substantial amount of its efforts and financial resources in its current lead product candidate, atrasentan, an endothelin receptor antagonist, for the treatment of primary glomerular diseases. Chinook plans to initiate a phase 3 clinical trial of atrasentan, for the treatment of IgAN in early 2021, and a phase 2 clinical trial in certain primary glomerular diseases, in the first half of 2021. In addition, Chinook plans to advance its CHK-336 program in an ultra-orphan kidney disease indication towards an investigational new drug application, or IND, submission in 2021 and is advancing multiple research programs for polycystic kidney diseases and other rare, severe chronic kidney diseases. Chinook’s ability to generate product revenue will depend heavily on the successful development and eventual commercialization of atrasentan and Chinook’s other product candidates, which may never occur. Chinook currently generates no revenue from sales of any product and Chinook may never be able to develop or commercialize a marketable product.

Each of Chinook’s programs and product candidates will require further clinical and/or preclinical development, regulatory approval in multiple jurisdictions, obtaining preclinical, clinical and commercial manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before Chinook generates any revenue from product sales. Atrasentan and Chinook’s other product candidates must be authorized for marketing by the U.S. Food and Drug Administration, or FDA, the Health Products and Food Branch of Health Canada, or HPFB, the European Medicines Agency, or EMA, and certain other foreign regulatory agencies before Chinook may commercialize any of its product candidates.

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The success of atrasentan and Chinook’s other product candidates depends on multiple factors, including:

If Chinook does not succeed in one or more of these factors in a timely manner or at all, Chinook could experience significant delays or an inability to successfully commercialize its product candidates, which would materially harm Chinook’s business. If Chinook does not receive regulatory approvals for Chinook’s product candidates, Chinook may not be able to continue its operations.

Success in preclinical studies and earlier clinical trials for Chinook’s product candidates may not be indicative of the results that may be obtained in later clinical trials, including Chinook’s phase 3 clinical trial for atrasentan, which may delay or prevent obtaining regulatory approval.

Clinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Success in preclinical studies and early

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clinical trials may not be predictive of results in later-stage clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome in later-stage or larger clinical trials, even if successful. Chinook will be required to demonstrate through adequate and well-controlled clinical trials that Chinook’s product candidates are safe and effective for their intended uses before Chinook can seek regulatory approvals for their commercial sale. The conduct of phase 3 trials and the submission of an NDA is a complicated process. Chinook has not previously conducted any clinical trials, has limited experience in preparing, submitting and supporting regulatory filings, and has not previously submitted an NDA. Consequently, Chinook may be unable to successfully and efficiently execute and complete necessary clinical trials and other requirements in a way that leads to NDA submission and approval of any product candidate Chinook is developing.

Chinook in-licensed atrasentan from AbbVie. Atrasentan was previously investigated in a phase 3 clinical trial evaluating the effects of atrasentan on progression of kidney disease in patients with stage 2 to 4 chronic kidney diseases and type 2 diabetes, referred to as the SONAR trial. While patients receiving atrasentan in the SONAR trial had a lower rate of primary composite renal events than patients receiving placebo, the trial accrued measurable primary endpoints at a slower rate than expected, and AbbVie decided to close the study early for corporate strategic reasons. Chinook believes the results of the SONAR trial support further evaluation of atrasentan. Although the SONAR trial was not terminated due to safety concerns, further safety issues could be discovered in Chinook’s planned phase 2 and phase 3 trials. Based on the data from the SONAR trial, Chinook believes that atrasentan, combined with current standard of care, may have benefits compared to treatment with current standard of care. However, Chinook cannot assure you that any potential advantages that Chinook believes atrasentan may have for treatment of patients with primary glomerular diseases will be substantiated by Chinook’s planned clinical trials or included in the product’s labeling should Chinook obtain approval. Without head-to-head data, Chinook will not be able to make comparative claims with respect to any other treatments. In addition, the patient populations under investigation with atrasentan have many co-morbidities that may cause severe illness or death, which may be attributed to atrasentan in a manner that negatively affects its safety profile. If the results of Chinook’s clinical trials for atrasentan are inconclusive with respect to efficacy, if Chinook does not meet its clinical endpoints with statistical significance, or if there are unanticipated safety concerns or adverse events that emerge during clinical trials, Chinook may have to conduct further preclinical studies and/or clinical trials before obtaining marketing approval, or Chinook may be prevented from or delayed in obtaining marketing approval.

Though atrasentan has been evaluated by AbbVie in clinical trials, Chinook’s other product candidates, such as CHK-336, have not been evaluated in human clinical trials, and Chinook may experience unexpected or negative results in the future if and when CHK-336 or Chinook’s other product candidates are evaluated in clinical trials. Any positive results Chinook has observed for CHK-336 in preclinical animal models may not be predictive of Chinook’s future clinical trials in humans, as animal models carry inherent limitations relevant to all preclinical studies. Chinook’s product candidates, including CHK-336, may also fail to show the desired safety and efficacy in later stages of clinical development even if they successfully advance through initial clinical trials. Even if Chinook’s clinical trials demonstrate acceptable safety and efficacy of atrasentan or CHK-336 or any other product candidates and such product candidates receive regulatory approval, the labeling Chinook obtains through negotiations with the FDA or foreign regulatory authorities may not include data on secondary endpoints and may not provide Chinook with a competitive advantage over other products approved for the same or similar indications.

Many companies in the biotechnology industry have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and there is a high failure rate for product candidates proceeding through clinical trials. In addition, different methodologies, assumptions and applications Chinook utilizes to assess particular safety or efficacy parameters may yield different statistical results. Even if Chinook believes the data collected from clinical trials of Chinook’s product candidates are promising, these data may not be sufficient to support approval by the FDA or foreign regulatory authorities. Preclinical and clinical data can be interpreted in different ways. Accordingly, the FDA or foreign regulatory authorities could interpret these data in

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different ways from Chinook or Chinook’s partners, which could delay, limit or prevent regulatory approval. If Chinook’s study data do not consistently or sufficiently demonstrate the safety or efficacy of any of Chinook’s product candidates, including atrasentan, to the satisfaction of the FDA or foreign regulatory authorities, then the regulatory approvals for such product candidates could be significantly delayed as Chinook works to meet approval requirements, or, if Chinook is not able to meet these requirements, such approvals could be withheld or withdrawn.

Even if Chinook completes the necessary preclinical studies and clinical trials, Chinook cannot predict when, or if, Chinook will obtain regulatory approval to commercialize a product candidate and the approval may be for a narrower indication than Chinook seeks.

Prior to commercialization, atrasentan and Chinook’s other product candidates must be approved by the FDA pursuant to an NDA in the United States and pursuant to similar marketing applications by the HPFB, EMA and similar regulatory authorities outside the United States. The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent Chinook from commercializing the product candidate. Chinook has not received approval to market atrasentan or any of Chinook’s other product candidates from regulatory authorities in any jurisdiction. Chinook has no experience in submitting and supporting the applications necessary to gain marketing approvals, and, in the event regulatory authorities indicate that Chinook may submit such applications, Chinook may be unable to do so as quickly and efficiently as desired. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Chinook’s product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude Chinook’s obtaining marketing approval or prevent or limit commercial use. Regulatory authorities have substantial discretion in the approval process and may refuse to accept or file any application or may decide that Chinook’s data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.

Approval of atrasentan and Chinook’s other product candidates may be delayed or refused for many reasons, including:

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Even if Chinook’s product candidates meet their pre-specified safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in a timely manner and may not consider such the clinical trial results sufficient to grant, or Chinook may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, Chinook may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.

Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of narrow indications, warnings, contraindications or Risk Evaluation and Mitigation Strategies, or REMS. These regulatory authorities may also grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of Chinook’s product candidates. Any of the foregoing scenarios could materially harm the commercial prospects for Chinook’s product candidates and adversely affect Chinook’s business, financial condition, results of operations and prospects.

The outbreak of COVID-19, or similar public health crises, could have a material adverse impact on Chinook’s business, financial condition and results of operations, including the execution of Chinook’s planned clinical trials.

In December 2019, a novel strain of the coronavirus SARS-CoV-2, was identified in Wuhan, China. This virus spread globally, including within the United States and in March 2020 the World Health Organization declared the disease caused by SARS-CoV-2, COVID-19, a pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The extent to which COVID-19 impacts Chinook’s business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain the virus or treat its impact.

For instance, Chinook’s planned phase 3 clinical trial for atrasentan has been and may continue to be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis for Chinook’s planned clinical trials may be delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. Additionally, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and Chinook may be unable to conduct its planned clinical trials. If the global effort to control the spread of COVID-19 and treat COVID-19 patients continues on the current trajectory for an extended period of time, Chinook risks a delay in activating sites and enrolling subjects as previously projected. Any such delays to Chinook’s planned phase 3 clinical trial for atrasentan and the planned clinical trials for its other product candidates could impact the use and sufficiency of its existing cash reserves, and it may be required to raise additional capital earlier than it had previously planned. Chinook may be unable to raise additional capital if and when needed, which may result in further delays or suspension of its development plans.

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Further, infections and deaths related to COVID-19 are disrupting certain healthcare and healthcare regulatory systems globally. Such disruptions could divert healthcare resources away from, or materially delay review by, the FDA and comparable foreign regulatory agencies. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of Chinook’s clinical trials or delay in regulatory review resulting from such disruptions could materially adversely affect the development and study of its product candidates.

Chinook currently utilizes third parties to, among other things, manufacture raw materials and its product candidates, components, parts, and consumables, and to perform quality testing. If either Chinook or any third-party in the supply chain for materials used in the production of its product candidates are adversely impacted by restrictions resulting from the COVID-19 pandemic, its supply chain may be disrupted, limiting Chinook’s ability to manufacture product candidates for its clinical trials.

In response to the COVID-19 pandemic, Chinook has closed its offices with its employees continuing their work outside of Chinook’s offices. Due to shelter-in-place orders or other mandated local travel restrictions, third parties conducting clinical or manufacturing activities may not be able to access laboratory or manufacturing space, and Chinook’s core activities may be significantly limited or curtailed, possibly for an extended period of time.

The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material adverse effect on Chinook’s business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets and the trading prices of biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic, which may reduce Chinook’s ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the global effort to control COVID-19 infections could materially and adversely affect Chinook’s business.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. Chinook does not yet know the full extent of potential delays or impacts on its business, its planned clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material adverse impact on Chinook’s business, financial condition and results of operations.

Atrasentan and Chinook’s other product candidates may cause undesirable and/or unforeseen side effects or be perceived by the public as unsafe, which could delay or prevent their advancement into clinical trials or regulatory approval, limit the commercial potential or result in significant negative consequences.

As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with Chinook’s product candidates’ use. Results of Chinook’s clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. For example, in the phase 3 SONAR trial, adverse events included fluid retention, anemia and reduced spermatogenesis. ERAs as a class are known to have potential effects on spermatogenesis. If any such adverse events occur, Chinook’s clinical trials could be suspended or terminated and the FDA, the HPFB, the European Commission, the EMA or other regulatory authorities could order Chinook to cease further development of, or deny approval of, Chinook’s product candidates for any or all targeted indications. Even if Chinook can demonstrate that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if Chinook elects, or is required, to not initiate, delay, suspend or terminate any future clinical trial of any of Chinook’s product candidates, the commercial prospects of such product candidates may be harmed and Chinook’s ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harm Chinook’s ability to develop other product candidates, and may adversely affect Chinook’s business, financial condition, results of operations and prospects significantly. Other treatments for kidney diseases that utilize an ETA receptor antagonist or similar

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mechanism of action could also generate data that could adversely affect the clinical, regulatory or commercial perception of atrasentan and Chinook’s other product candidates.

Additionally, if any of Chinook’s product candidates receives marketing approval, the FDA could require Chinook to adopt a REMS to ensure that the benefits of the product outweigh its risks, which may include, for example, a Medication Guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners, or other elements to assure safe use of the product. For example, other approved ERAs have been required to include a REMS regarding the risk of embryo-fetal toxicity. Furthermore, if Chinook or others later identify undesirable side effects caused by Chinook’s product candidates, several potentially significant negative consequences could result, including:

Any of these occurrences may harm Chinook’s business, financial condition, results of operations and prospects significantly.

Certain of the diseases Chinook seeks to treat have low prevalence, and it may be difficult to identify patients with these diseases, which may lead to delays in enrollment for Chinook’s trials or slower commercial revenue growth if atrasentan or Chinook’s other product candidates are approved.

While chronic kidney diseases represent a large market, primary glomerular kidney diseases, including IgAN, to which Chinook’s lead product candidate is targeted, have relatively low incidence and prevalence. Chinook estimates that IgAN affects approximately 140,000 patients in the United States, approximately 200,000 people in Europe and several million people in Asia. Chinook is also developing CHK-336 for the treatment of an ultra-orphan kidney disease. These small populations could pose obstacles to the timely recruitment and enrollment of a sufficient number of eligible patients into Chinook’s trials, or limit a product candidate’s commercial potential. Patient enrollment may be affected by other factors including:

Chinook’s inability to enroll a sufficient number of patients with these diseases for Chinook’s planned clinical trials would result in significant delays and could cause Chinook to not initiate or abandon one or more clinical trials altogether. Enrollment delays in Chinook’s clinical trials may result in increased time to potential approval and development costs for Chinook’s product candidates, which would cause the value of Chinook to decline and limit Chinook’s ability to obtain additional financing.

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Additionally, Chinook’s projections of both the number of people who have IgAN and other primary glomerular diseases, as well as the people with these diseases who have the potential to benefit from treatment with Chinook’s product candidates, are based on estimates derived from a commissioned market research study, which may not accurately identify the size of the market for Chinook’s product candidates. The total addressable market opportunity for atrasentan and Chinook’s other product candidates will ultimately depend upon, among other things, the final labeling for Chinook’s product candidates, if Chinook’s product candidates are approved for sale in Chinook’s target indications, acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients globally may turn out to be lower than expected, patients may not be otherwise amenable to treatment with Chinook’s product candidates, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect Chinook’s results of operations and Chinook’s business.

Moreover, in light of the limited number of potential patients impacted by primary glomerular diseases, Chinook’s per-patient therapy pricing of atrasentan, if approved, may need to be high in order to recover Chinook’s development and manufacturing costs, fund additional research and achieve profitability. Chinook may also need to fund patient support programs upon the marketing of a product candidate, which would negatively affect Chinook’s product revenue. Chinook may be unable to maintain or obtain sufficient therapy sales volumes at a price high enough to justify Chinook’s development efforts and Chinook’s sales, marketing and manufacturing expenses.

Chinook may not be successful in its efforts to expand its pipeline of product candidates and develop marketable products.

Because Chinook has limited financial and managerial resources, Chinook focuses on research programs and product candidates that Chinook identifies for specific indications. Chinook’s business depends on its successful development and commercialization of the limited number of internal product candidates Chinook is researching or has in preclinical development. Even if Chinook is successful in continuing to build its pipeline, development of the potential product candidates that Chinook identifies will require substantial investment in additional clinical development, management of clinical, preclinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply capability, building a commercial organization, and significant marketing efforts before Chinook generates any revenue from product sales. Furthermore, such product candidates may not be suitable for clinical development, including as a result of their harmful side effects, limited efficacy or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If Chinook cannot develop further product candidates, Chinook may not be able to obtain product revenue in future periods, which would adversely affect Chinook’s business, prospects, financial condition and results of operations.

Although Chinook’s pipeline includes multiple programs, Chinook is primarily focused on its lead product candidates, atrasentan and CHK-336, and Chinook may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Chinook’s resource allocation decisions may cause Chinook to fail to capitalize on viable commercial products or profitable market opportunities. Chinook’s spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. Chinook’s understanding and evaluation of biological targets for the discovery and development of new product candidates may fail to identify challenges encountered in subsequent preclinical and clinical development. If Chinook does not accurately evaluate the commercial potential or target market for a particular product candidate, Chinook may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for Chinook to retain sole development and commercialization rights.

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Any product candidate for which Chinook obtains marketing approval will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and Chinook may be subject to penalties if it fails to comply with regulatory requirements or if it experiences unanticipated problems with its product candidates, when and if any of them are approved.

Chinook’s product candidates and the activities associated with their development and potential commercialization, including their testing, manufacturing, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and other U.S. and international regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to manufacturing, including current Good Manufacturing Practices, or cGMPs, quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by the FDA and other regulatory authorities and requirements regarding the distribution of samples to providers and recordkeeping. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities for compliance with cGMPs.

The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of any approved product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that they are marketed in a manner consistent with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products. If Chinook promotes its product candidates in a manner inconsistent with FDA-approved labeling or otherwise not in compliance with FDA regulations, Chinook may be subject to enforcement action. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws and similar laws in international jurisdictions.

In addition, later discovery of previously unknown adverse events or other problems with Chinook’s product candidates, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

The occurrence of any event or penalty described above may inhibit Chinook’s ability to commercialize its product candidates and generate revenue and could require Chinook to expend significant time and resources in

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response and could generate negative publicity. The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of Chinook’s product candidates. If Chinook is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Chinook is not able to maintain regulatory compliance, it may lose any marketing approval that it has obtained, and Chinook may not achieve or sustain profitability.

Non-compliance with Canadian and European requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with Canada’s or Europe’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Chinook’s failure to obtain regulatory approval in international jurisdictions would prevent Chinook from marketing its product candidates outside the United States.

To market and sell atrasentan and Chinook’s other product candidates in other jurisdictions, Chinook must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time and data required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, Chinook must secure product reimbursement approvals before regulatory authorities will approve the product for sale in that country. Failure to obtain foreign regulatory approvals or non-compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for Chinook and could delay or prevent the introduction of Chinook’s product candidates in certain countries.

If Chinook fails to comply with the regulatory requirements in international markets and receive applicable marketing approvals, Chinook’s target market will be reduced and its ability to realize the full market potential of its product candidates will be harmed and its business will be adversely affected. Chinook may not obtain foreign regulatory approvals on a timely basis, if at all. Chinook’s failure to obtain approval of any of its product candidates by regulatory authorities in another country may significantly diminish the commercial prospects of that product candidate and Chinook’s business prospects could decline.

Risks Related to Commercialization and Manufacturing

The commercial success of Chinook’s product candidates, including atrasentan, will depend upon their degree of market acceptance by providers, patients, patient advocacy groups, third-party payors and the general medical community.

Even with the requisite approvals from the FDA, the HPFB, the EMA and other regulatory authorities internationally, the commercial success of Chinook’s product candidates will depend, in part, on the acceptance of providers, patients and third-party payors of drugs designed to act as a selective blocker of the ETA receptor in general, and Chinook’s product candidates in particular, as medically necessary, cost-effective and safe. In addition, Chinook may face challenges in seeking to establish and grow sales of atrasentan or its other product candidates. Any product that Chinook commercializes may not gain acceptance by providers, patients, patient advocacy groups, third-party payors and the general medical community. If these products do not achieve an adequate level of acceptance, Chinook may not generate significant product revenue and may not become profitable. The degree of market acceptance of atrasentan and Chinook’s other product candidates, if approved for commercial sale, will depend on several factors, including:

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Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched.

The pricing, insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for Chinook’s product candidates, if approved, could limit Chinook’s ability to market those products and decrease Chinook’s ability to generate product revenue.

Chinook’s target indications, including IgAN and other primary glomerular diseases, are indications with small patient populations. For product candidates that are designed to treat smaller patient populations to be commercially viable, the reimbursement for such product candidates must be higher, on a relative basis, to account for the lack of volume. Accordingly, Chinook will need to implement a coverage and reimbursement strategy for any approved product candidate that accounts for the smaller potential market size. If Chinook is unable to establish or sustain coverage and adequate reimbursement for its product candidates from third-party payors, the adoption of those product candidates and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved.

Chinook expects that coverage and reimbursement by third-party payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of atrasentan and Chinook’s other product candidates will depend substantially, both domestically and internationally, on the extent to which the costs of Chinook’s product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow Chinook to establish or maintain pricing sufficient to realize a sufficient return on Chinook’s investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered and reimbursed. The Medicare program covers certain individuals aged 65 or older, disabled or suffering from end-stage renal disease. The Medicaid program, which varies from state-to-state, covers certain individuals and families who have limited financial means. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement

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policies for drugs. One payor’s determination to provide coverage for a drug product, however, does not assure that other payors will also provide coverage for the drug product. Further, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

In addition to government and private payors, professional organizations such as the American Medical Association, or the AMA, can influence decisions about coverage and reimbursement for new products by determining standards for care. In addition, many private payors contract with commercial vendors who sell software that provide guidelines that attempt to limit utilization of, and therefore reimbursement for, certain products deemed to provide limited benefit to existing alternatives. Such organizations may set guidelines that limit reimbursement or utilization of Chinook’s product candidates. Even if favorable coverage and reimbursement status is attained for one or more product candidates for which Chinook’s collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and Chinook believes the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of therapeutics such as Chinook’s product candidates. In many countries, particularly the countries of the EU, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, Chinook may be required to conduct a clinical trial that compares the cost-effectiveness of Chinook’s product candidate to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that Chinook is able to charge for its product candidates. Accordingly, in markets outside the United States, the reimbursement for Chinook’s product candidates may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for Chinook’s product candidates. Chinook expects to experience pricing pressures in connection with the sale of any of Chinook’s product candidates due to the trend toward managed healthcare, the increasing influence of certain third-party payors, such as health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market. Recently there have been instances in which third-party payors have refused to reimburse treatments for patients for whom the treatment is indicated in the FDA-approved product labeling. Even if Chinook is successful in obtaining FDA approvals to commercialize Chinook’s product candidates, Chinook cannot guarantee that Chinook will be able to secure reimbursement for all patients for whom treatment with Chinook’s product candidates is indicated.

If third parties on which Chinook depends to conduct its planned preclinical studies or clinical trials, do not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, Chinook’s development program could be delayed with adverse effects on Chinook’s business, financial condition, results of operations and prospects.

Chinook relies on third party CROs, CMOs, consultants and others to design, conduct, supervise and monitor key activities relating to, discovery, manufacturing, preclinical studies and clinical trials of Chinook’s product candidates, and Chinook intends to do the same for future activities relating to existing and future programs. Because Chinook relies on third parties and does not have the ability to conduct all required testing, discovery, manufacturing, preclinical studies or clinical trials independently, Chinook has less control over the

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timing, quality and other aspects of discovery, manufacturing, preclinical studies and clinical trials than Chinook would if Chinook conducted them on its own. These investigators, CROs, CMOs and consultants are not Chinook’s employees, and Chinook has limited control over the amount of time and resources that they dedicate to Chinook’s programs. These third parties may have contractual relationships with other entities, some of which may be Chinook’s competitors, which may draw time and resources from Chinook’s programs. The third parties Chinook contracts with might not be diligent, careful or timely in conducting Chinook’s discovery, manufacturing, preclinical studies or clinical trials, resulting in testing, discovery, manufacturing, preclinical studies or clinical trials being delayed or unsuccessful, in whole or in part.

If Chinook cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, Chinook’s clinical development programs could be delayed and otherwise adversely affected. In all events, Chinook is responsible for ensuring that each of Chinook’s preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial, as well as in accordance with GLP, GCP and other applicable laws, regulations and standards. Chinook’s reliance on third parties that it does not control does not relieve Chinook of these responsibilities and requirements. The FDA and other regulatory authorities enforce GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If Chinook or any of these third parties fails to comply with applicable GCPs, the clinical data generated in its clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require Chinook to perform additional clinical trials before approving its marketing applications. Chinook cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of Chinook’s clinical trials have complied with GCPs. In addition, Chinook’s clinical trials must be conducted with product produced in accordance with cGMPs. Chinook’s failure to comply with these regulations may require it to repeat clinical trials, which could delay or prevent the receipt of regulatory approvals. Any such event could have an adverse effect on Chinook’s business, financial condition, results of operations and prospects.

Chinook faces significant competition in an environment of rapid technological change and it is possible that Chinook’s competitors may achieve regulatory approval before Chinook or develop therapies that are more advanced or effective than Chinook’s, which may harm Chinook’s business, financial condition and Chinook’s ability to successfully market or commercialize atrasentan, CHK-336 and Chinook’s other product candidates.

The biotechnology and pharmaceutical industries are characterized by rapidly changing technologies, competition and a strong emphasis on intellectual property. Chinook is aware of several companies focused on developing primary glomerular disease treatments in various indications as well as several companies addressing other treatments for rare, severe chronic kidney diseases. Chinook may also face competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing and commercialization.

Although several companies are focused on developing treatments on primary glomerular diseases, including IgAN, there are currently limited treatment options for primary glomerular diseases. To Chinook’s knowledge, there are no approved drugs for IgAN, but there are a variety of treatments utilized that include renin angiotensin inhibitors, steroids, chemotherapy drugs and immunomodulatory approaches. In addition, there are a number of competitors in clinical development for the treatment of IgAN, at a similar stage of development or more advanced than Chinook, including Calliditas Therapeutics AB, Omeros Corporation and Retrophin, Inc.

Many of Chinook’s potential competitors, alone or with their strategic partners, may have substantially greater financial, technical and other resources than Chinook does, such as larger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of

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competitors. Chinook’s commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidates that Chinook may develop. Competitors also may obtain FDA or other regulatory approval for their products more rapidly than Chinook may obtain approval for its products, which could result in Chinook’s competitors establishing a strong market position before Chinook is able to enter the market, if ever. Additionally, new or advanced technologies developed by Chinook’s competitors may render Chinook’s current or future product candidates uneconomical or obsolete, and Chinook may not be successful in marketing its product candidates against competitors.

To become and remain profitable, Chinook must develop and eventually commercialize product candidates with significant market potential, which will require Chinook to be successful in a range of challenging activities. These activities include, among other things, completing preclinical studies and initiating and completing clinical trials of Chinook’s product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products that are approved and satisfying any post marketing requirements. Chinook may never succeed in any or all of these activities and, even if Chinook does, Chinook may never generate revenues that are significant or large enough to achieve profitability. If Chinook does achieve profitability, Chinook may not be able to sustain or increase profitability on a quarterly or annual basis. Chinook’s failure to become and remain profitable would decrease the value of the company and could impair Chinook’s ability to raise capital, maintain Chinook’s research and development efforts, expand Chinook’s business or continue operations. A decline in the value of Chinook also could cause you to lose all or part of your investment.

The manufacture of drugs is complex, and Chinook’s third-party manufacturers may encounter difficulties in production. If any of Chinook’s third-party manufacturers encounter such difficulties, Chinook’s ability to provide supply of atrasentan, CHK-336 or Chinook’s other product candidates for clinical trials, Chinook’s ability to obtain marketing approval, or Chinook’s ability to provide supply of Chinook’s product candidates for patients, if approved, could be delayed or stopped.

Chinook intends to establish manufacturing relationships with a limited number of suppliers to manufacture raw materials, the drug substance and finished product of any product candidate for which Chinook is responsible for preclinical or clinical development. Pursuant to its license agreement with AbbVie, Chinook received a substantial amount of drug product and drug substance to support initiation of its planned clinical trials of atrasentan; however, Chinook does not have an ongoing manufacturing agreement for atrasentan with AbbVie or any other CMO. Chinook will need to establish manufacturing relationships for the production of sufficient atrasentan in order to complete its planned clinical trials and for any potential commercialization. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain. As part of any marketing approval, a manufacturer and its processes are required to be qualified by the FDA prior to regulatory approval. If supply from the approved vendor is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through an NDA supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in Chinook’s desired clinical and commercial timelines.

The process of manufacturing drugs is complex, highly-regulated and subject to multiple risks. Manufacturing drugs is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered at the facilities of Chinook’s manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm Chinook’s business. Moreover, if the FDA determines that Chinook’s CMOs are not in compliance with FDA laws and regulations, including those governing cGMPs, the

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FDA may deny NDA approval until the deficiencies are corrected or Chinook replaces the manufacturer in Chinook’s NDA with a manufacturer that is in compliance. In addition, approved products and the facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, Chinook’s CMOs are subject to continual review and periodic inspections to assess compliance with cGMPs. Furthermore, although Chinook does not have day-to-day control over the operations of its CMOs, it is responsible for ensuring compliance with applicable laws and regulations, including cGMPs.

In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely availability of raw materials. Even if Chinook’s collaborators obtain regulatory approval for any of Chinook’s product candidates, there is no assurance that manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand. If Chinook’s manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on Chinook’s business, financial condition, results of operations and prospects.

Chinook believes that it will rely upon on a limited number of manufacturers for its product candidates, including atrasentan, for which it has identified single-source suppliers for the various steps of manufacture. This reliance on a limited number of manufacturers and the complexity of drug manufacturing and the difficulty of scaling up a manufacturing process could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of Chinook’s product candidates, cause Chinook to incur higher costs and prevent Chinook from commercializing Chinook’s product candidates successfully. Furthermore, if Chinook’s suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and Chinook is unable to secure one or more replacement suppliers capable of production in a timely manner at a substantially equivalent cost, Chinook’s clinical trials may be delayed or Chinook could lose potential revenue.

If Chinook is unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell atrasentan, CHK-336 and Chinook’s other product candidates, Chinook may be unable to generate any revenues.

Chinook currently does not have an organization for the sales, marketing and distribution of atrasentan, CHK-336 and Chinook’s other product candidates, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. To market any products that may be approved, Chinook must build its sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. With respect to certain of Chinook’s current programs as well as future programs, Chinook may rely completely on an alliance partner for sales and marketing. In addition, although Chinook intends to establish a sales organization if Chinook is able to obtain approval to market any product candidates, Chinook may enter into strategic alliances with third parties to develop and commercialize atrasentan and other product candidates, including in markets outside of the United States or for other large markets that are beyond Chinook’s resources. This will reduce the revenue generated from the sales of these products.

Any future strategic alliance partners may not dedicate sufficient resources to the commercialization of Chinook’s product candidates or may otherwise fail in their commercialization due to factors beyond Chinook’s control. If Chinook is unable to establish effective alliances to enable the sale of Chinook’s product candidates to healthcare professionals and in geographical regions, including the United States, that will not be covered by Chinook’s marketing and sales force, or if Chinook’s potential future strategic alliance partners do not

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successfully commercialize the product candidates, Chinook’s ability to generate revenues from product sales will be adversely affected.

If Chinook is unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, Chinook may not be able to generate sufficient product revenue and may not become profitable. Chinook will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, Chinook may be unable to compete successfully against these more established companies.

Chinook may not be successful in finding strategic collaborators for continuing development of certain of Chinook’s future product candidates or successfully commercializing or competing in the market for certain indications.

In the future, Chinook may decide to collaborate with non-profit organizations, universities and pharmaceutical and biotechnology companies for the development and potential commercialization of existing and new product candidates. Chinook faces significant competition in seeking appropriate collaborators. Whether Chinook reaches a definitive agreement for a collaboration will depend, among other things, upon Chinook’s assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to Chinook’s ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with Chinook for Chinook’s product candidate. The terms of any additional collaborations or other arrangements that Chinook may establish may not be favorable to Chinook. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

Chinook may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If Chinook is unable to do so, Chinook may have to curtail the development of the product candidate for which Chinook is seeking to collaborate, reduce or delay its development program or one or more of Chinook’s other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase Chinook’s expenditures and undertake development or commercialization activities at Chinook’s expense. If Chinook elects to increase Chinook’s expenditures to fund development or commercialization activities on Chinook’s product candidates, Chinook may need to obtain additional capital, which may not be available to Chinook on acceptable terms or at all. If Chinook does not have sufficient funds, Chinook may not be able to further develop Chinook’s product candidates or bring them to market and generate product revenue.

The success of any potential collaboration arrangements will depend heavily on the efforts and activities of Chinook’s collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of such collaboration arrangements. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect Chinook financially and could harm Chinook’s business reputation.

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Risks Related to Government Regulation

A Fast Track Designation by the FDA, even if granted for atrasentan or any of Chinook’s other product candidates, may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that Chinook’s product candidates will receive marketing approval.

While Chinook does not intend to seek Fast Track Designation for atrasentan, it may seek such designation for its other product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply to the FDA for Fast Track Designation. The FDA has broad discretion whether to grant this designation. Even if Chinook believes a particular product candidate is eligible for this designation, Chinook cannot assure you that the FDA would decide to grant it. The FDA may also withdraw Fast Track Designation if it believes that the designation is no longer supported by data from Chinook’s clinical development program. Even if Chinook does receive Fast Track Designation for any of its product candidates, such product candidates may not experience faster development, review or approval processes compared to conventional FDA procedures. Many drugs that have received Fast Track Designation have failed to obtain approval.

Chinook may attempt to secure FDA approval of atrasentan and its other product candidates through the accelerated approval pathway. If Chinook is unable to obtain accelerated approval, Chinook may be required to conduct additional preclinical studies or clinical trials beyond those that Chinook currently contemplates, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals.

Chinook is developing certain product candidates for the treatment of serious conditions, and therefore may decide to seek approval of such product candidates under the FDA’s accelerated approval pathway. A product may be eligible for accelerated approval if it is designed to treat a serious or life-threatening disease or condition and provides a meaningful therapeutic benefit over existing treatments based upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability of or lack of alternative treatments. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit.

The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verity and describe the drug’s anticipated effect on irreversible morbidity or mortality or other clinical benefit. In some cases, the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval. If the sponsor fails to conduct such studies in a timely manner, or if such post-approval studies fail to verify the drug’s predicted clinical benefit, or if other evidence demonstrates that Chinook’s product candidate is not shown to be safe and effective under the conditions of use, the FDA may withdraw its approval of the drug on an expedited basis.

Chinook intends to use reduction in proteinuria as a surrogate endpoint in its planned phase 3 trial of atrasentan. However, there is no guarantee that atrasentan will show a sufficient treatment benefit on the expected surrogate endpoint to satisfy the FDA that the anticipated benefit on loss of renal function will be confirmed in the planned postmarketing phase of the trial. If Chinook decides to submit an NDA seeking accelerated approval or receives an expedited regulatory designation for atrasentan or any of its other product candidates, there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. If any of Chinook’s competitors were to receive full approval on the basis of a confirmatory trial for an indication for which Chinook is seeking accelerated approval before Chinook receives accelerated approval, the indication Chinook is seeking may no

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longer qualify as a condition for which there is an unmet medical need and accelerated approval of its product candidate would be more difficult or may not occur.

Failure to obtain accelerated approval or any other form of expedited development, review or approval for Chinook’s product candidates would result in a longer time period to commercialization of such product candidate, if any, and could increase the cost of development of such product candidate harm Chinook’s competitive position in the marketplace.

Chinook may be unsuccessful in obtaining Orphan Drug Designation for its product candidates or transfer of designations obtained by others for future product candidates, and, even if Chinook obtains such designation, Chinook may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity, for atrasentan or Chinook’s other product candidates.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs intended to treat relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug in the United States will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for tax credits for qualified clinical research costs and exemption from prescription drug user fees. Similarly, in the EU, the European Commission grants Orphan Drug Designation after receiving the opinion of the EMA’s Committee for Orphan Medicinal Products on an Orphan Drug Designation application. In the EU, Orphan Drug Designation is intended to promote the development of drugs that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU and for which no satisfactory method of diagnosis, prevention or treatment has been authorized (or the product would be a significant benefit to those affected). In the EU, Orphan Drug Designation entitles a party to financial incentives such as reduction of fees or fee waivers.

Generally, if a drug with an Orphan Drug Designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or EMA from approving another marketing application for the same drug and indication for that time period, except in limited circumstances. If a competitor is able to obtain orphan drug exclusivity prior to Chinook for a product that constitutes the same active moiety and treats the same indications as Chinook’s product candidates, Chinook may not be able to obtain approval of its drug by the applicable regulatory authority for a significant period of time unless Chinook is able to show that its drug is clinically superior to the approved drug. The applicable period is seven years in the United States and ten years in the EU. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for Orphan Drug Designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.

As part of Chinook’s business strategy, Chinook may seek Orphan Drug Designation for atrasentan in the United States, Europe and other countries. However, Orphan Drug Designation does not guarantee future orphan drug marketing exclusivity.

Even after an orphan drug is approved, the FDA can also subsequently approve a later application for the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer in a substantial portion of the target populations, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if Chinook is unable to manufacture sufficient quantities of the product to meet the needs

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of patients with the rare disease or condition. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

Enacted and future legislation may increase the difficulty and cost for Chinook to commercialize and obtain marketing approval of Chinook’s product candidates and may affect the prices Chinook may set.

Existing regulatory policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of Chinook’s product candidates. Chinook cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If Chinook is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Chinook is not able to maintain regulatory compliance, Chinook may lose any marketing approval that Chinook may have obtained, and Chinook may not achieve or sustain profitability.

For example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the Affordable Care Act, or ACA, was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. As implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase Chinook’s regulatory burdens and operating costs.

The current U.S. presidential administration and U.S. Congress have sought and may continue to seek to, modify, repeal or otherwise replace certain aspects of the ACA. By way of example, the Tax Cuts and Jobs Act, or the TCJA, was enacted, effective January 1, 2019, and included, among other things, a provision repealing the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” There have been subsequent challenges to the constitutionality of the ACA following the repeal of the individual mandate. A case is currently pending before the U.S. Supreme Court, although it is unclear when a decision will be made or how the Supreme Court will rule. In addition, there may be other efforts to challenge, repeal or replace the ACA. Chinook is continuing to monitor any changes to the ACA that, in turn, may potentially impact its business in the future.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2020 implemented under the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which was signed into law on March 27, 2020, unless additional Congressional action is taken. In addition, in January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for Chinook’s drugs, if approved, and accordingly, Chinook’s financial operations.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn and Matthew Bellina Right to Try Act of 2017 was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program; however, manufacturers are not obligated to provide investigational new drug

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products under the current federal right to try law. Chinook may choose to seek an expanded access program for Chinook’s product candidates, or to utilize comparable rules in other countries that allow the use of a drug, on a named patient basis or under a compassionate use program.

Chinook expects that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that Chinook receives for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent Chinook from being able to generate revenue, attain profitability, or commercialize Chinook’s product candidates.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. Chinook cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of Chinook’s product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject Chinook to more stringent product labeling and post-marketing testing and other requirements.

The FDA’s ability to review and approve new products may be hindered by a variety of factors, including budget and funding levels, ability to hire and retain key personnel, statutory, regulatory and policy changes and global health concerns.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect Chinook’s business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

The ability of the FDA and other government agencies to properly administer their functions is highly dependent on the levels of government funding and the ability to fill key leadership appointments, among various factors. Delays in filling or replacing key positions could significantly impact the ability of the FDA and other agencies to fulfill their functions, and could greatly impact healthcare and the pharmaceutical industry.

Separately, in response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and, subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process Chinook’s regulatory submissions, which could have a material adverse effect on Chinook’s business.