CATALYST BIOSCIENCES, INC.

Our preclinical data has shown that SQ injections of MarzAA given one minute after injury to mirror on-demand therapy significantly reduced bleeding in a mouse model of Hemophilia A. In this setting, reduction of bleeding after SQ administration of MarzAA was as efficient as NovoSeven RT administered IV. Moreover, bleeding was reduced in a dose-dependent manner when MarzAA was given 15 minutes prior to the injury. These data suggest that MarzAA has the potential to be used on-demand for treatment of acute bleeding episodes and supports further clinical testing for on-demand treatment of bleeds in individuals with hemophilia or Factor VII deficiency.

Patients on prophylaxis with Hemlibra or other Factor replacement therapy may experience breakthrough bleeds— bleeding despite preventive treatment—or require additional treatments for certain procedures or surgery. Our preclinical data showed that MarzAA is expected to have a similar safety profile as NovoSeven when used in combination with Hemlibra. Specifically, as tested in vitro by the thrombin-generation assay with Hemophilia A plasma, both MarzAA and NovoSeven were equally effective at triggering blood coagulation at their respective clinically relevant concentrations without overshooting safe levels when combined with Hemlibra. Current therapies used with Hemlibra include FEIBA (a pro-coagulation complex) and NovoSeven. However, the concurrent administration of FEIBA with Hemlibra has been associated with thrombotic events (when a blood clot forms inside a blood vessel), requiring a boxed warning in the package insert. While NovoSeven is safe in patients on Hemlibra prophylaxis, it is administered through an IV infusion to treat a bleed. Ideally, add-on therapy for patients on SQ Hemlibra would be given subcutaneously. We believe MarzAA provides a potential SQ solution to this problem and that MarzAA could be a SQ rescue therapy for hemophilia patients experiencing breakthrough bleeds while on prophylaxis with other agents such as Hemlibra.

The complement system shares many similarities with the hemostatic system. They both function as cascades of enzymes. Whereas the hemostatic system is central to stopping bleeding, the complement system plays a central role in both innate and adaptive immune responses. The resultant process helps to attract certain immune system cells at the site of infection or inflammation, to eliminate pathogens, and to mediate various specific responses to foreign proteins through effects on the immune system. When the complement system is over-reactive, it can cause severe diseases. Thus, drugs that target the complement cascade could potentially be beneficial in a variety of indications, including but not limited to dry AMD, atypical hemolytic uremic syndrome (aHUS), paroxysmal nocturnal hemoglobinuria (PNH), complement 3 glomerulopathy (C3G) as well as neurological disorders, such as myasthenia gravis. Common to these diseases are that they are relatively rare and severely debilitating or life-threatening, for which large unmet medical needs still exist. Many key targets, such as the complement proteins C3 and C5, within the complement cascade circulate in high concentrations such that it can be difficult or impractical to block their action using antibody-based or small molecule approaches. We believe that targeting complement proteins using engineered enzymes is an efficient way to overcome some of the challenges of inhibiting the complement cascade. In contrast to an antibody or small molecule where one therapeutic compound neutralizes one target, a single protease has the potential to neutralize thousands of target complement molecules. Preclinical support for using this design strategy to target the complement pathway was presented at the 2019 Annual Meeting of the Association for Research in Vision and Ophthalmology (ARVO) in the spring of 2019 highlighting our preclinical anti-C3 candidate being developed for the treatment of geographic atrophy (GA) associated dry AMD. We continue to pursue the development of novel proteases that target the complement cascade and are leveraging our proprietary protease engineering platform in this therapeutic space.

Efforts to control prescription drug prices could also have a material adverse effect on our business. For example, in 2018, President Trump and the Secretary of the U.S. Department of Health and Human Services (“HHS”) released the "American Patients First Blueprint" and have begun implementing certain portions. The initiative includes proposals to increase generic drug and biosimilar competition, enable the Medicare program to negotiate drug prices more directly and improve transparency regarding drug prices and ways to lower consumers' out-of-pocket costs. The Trump administration also proposed to establish an “international pricing index” that would be used as a benchmark to determine the costs and potentially limit the reimbursement of drugs under Medicare Part B. Among other pharmaceutical manufacturer industry-related proposals, Congress has proposed bills to change the Medicare Part D benefit to impose an inflation-based rebate in Medicare Part D and to alter the benefit structure to increase manufacturer contributions in the catastrophic phase. The volume of drug pricing-related bills has dramatically increased under the current Congress, and the resulting impact on our business is uncertain and could be material.

In addition, many states have proposed or enacted legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as by requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. For example, in 2017, California’s governor signed a prescription drug price transparency state bill into law, requiring prescription drug manufacturers to provide advance notice and explanation for price increases of certain drugs that exceed a specified threshold. Both Congress and state legislatures are considering various bills that would reform drug purchasing and price negotiations, allow greater use of utilization management tools to limit Medicare Part D coverage, facilitate the import of lower-priced drugs from outside the United States and encourage the use of generic drugs. Such initiatives and legislation may cause added pricing pressures on our products.

Our business could be negatively affected as a result of actions of activist stockholders, and such activism could impact the trading value of our securities.

Two of our stockholders have requested that we add one or more individuals to our board of directors. Although we have entered into a cooperation agreement with one such stockholder and appointed two new members to our board of directors, one or more other stockholders could engage in proxy solicitations or advance stockholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management. Such an activist campaign could conflict with our strategic direction or seek changes in the composition of our board of directors and could have an adverse effect on our operating results and financial condition. A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative and associated costs, and require significant time and attention by our board of directors and management, diverting their attention from the pursuit of our business strategy. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our board of directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about an entity's expected credit losses on financial instruments and other commitments to extend credit at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology currently used today with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to develop credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, for the purpose of clarifying certain aspects of ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief, to provide entities with more flexibility in applying the fair value option on adoption of the credit impairment standard. ASU 2018-19 and ASU 2019-05 have the same effective date and transition requirements as ASU 2016-13. ASU 2016-13 will be effective for all entities except public companies that are not smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, using a modified retrospective approach. Early adoption is permitted. The Company plans to adopt ASU 2016-13 and related updates as of January 1, 2023. The Company will assess the impact of adoption of this standard on its consolidated financial statements.