Item 1A. Risk Factors
Risks Related to Our Financial Position
Although we achieved profitability in 2025, we have a history of operating losses, may incur additional operating losses in the future, and may never achieve sustained profitability.
Our prospects must be considered in light of the uncertainties, risks, expenses and difficulties frequently encountered by companies in the early stages of operation. We achieved net income of approximately $163.1 million for the year ended December 31, 2025 and incurred a net loss of approximately $17.9 million for the year ended December 31, 2024. As of December 31, 2025, we had an accumulated deficit of approximately $176.6 million. We may not be able to sustain profitability and could incur net operating losses in future periods as we expect to incur substantial additional operating expenses over the next several years as our research, development, pre-clinical testing, clinical trials and commercialization activities increase as we commercialize our Products and develop our other product lines. As a result, we may experience negative cash flow at times as we fund our operating expenses and capital expenditures. Our ability to generate revenue and maintain profitability will depend on, among other things, the following: continuing to successfully market and sell our Products in the U.S.; obtaining and/or maintaining reimbursement for our Products in appropriate settings of care; obtaining necessary regulatory approvals for our other products from the FDA and, if sought, international regulatory agencies; establishing additional manufacturing, sales, and marketing arrangements, either alone or with third parties; and raising sufficient funds to finance our activities if revenues from the commercialization of our Products in the U.S. are insufficient. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.
Risks Related to the Development and Commercialization of DefenCath
We are highly dependent on the continued successful commercialization of our lead product, DefenCath.
Our ability to generate operating cash flow is dependent upon our continued successful commercialization of DefenCath. In the U.S. DefenCath was approved by FDA on November 15, 2023, and is indicated to reduce the incidence of CRBSIs in adult patients with kidney failure receiving chronic hemodialysis through a CVC. This drug is indicated for use in a limited and specific population of patients. We launched DefenCath commercially in April 2024 in the inpatient setting and in July 2024 in the outpatient hemodialysis setting. The safety and effectiveness of DefenCath have not been established for use in populations other than adult patients with kidney failure receiving chronic hemodialysis through a CVC.
Continued successful commercialization of DefenCath is subject to many risks, including but not limited to:
ongoing maintenance of regulatory approvals;
emergence of superior or equivalent products;
ongoing compliance with a broad range of post-marketing requirements including those related to labeling, promotion and advertising, manufacturing and quality, pharmacovigilance and adverse event reporting, commercial distribution and supply chain requirements, and pediatric post-marketing study requirements; and
failure to achieve significant market adoption.
There is no guarantee that our continued commercialization efforts will be successful, or that we will be able to successfully launch and commercialize any other product lines that receive regulatory approval.
The continued successful commercialization of DefenCath will depend on maintaining coverage and reimbursement for use of DefenCath from third-party payors.
Sales of pharmaceutical products largely depend on the reimbursement of patients’ medical expenses by government health care programs, such as Medicare, Medicaid and/or private health insurers. Further, significant uncertainty exists as to the reimbursement status of newly approved health care products. We currently sell DefenCath directly to hospitals and outpatient dialysis center operators, and are undergoing clinical studies to pursue an expanded use in total parenteral nutrition patients requiring catheters. For any new indication of use, all new potential customers are healthcare providers who depend upon reimbursement by government and commercial insurance payors. Depending on the treatment setting of any new indication for use, we believe that DefenCath would be eligible for coverage under various reimbursement programs, such as the IPPS, including certain temporary payment adjustments (e.g., NTAP); however, payment under these payment systems could later be modified or decreased by future regulations.
Further, CMS, which administers Medicare and works with states to administer Medicaid, has adopted and will continue to adopt and/or amend rules governing reimbursement for specific treatments. We anticipate that insurers may increasingly demand that manufacturers demonstrate the cost effectiveness of their products as part of the reimbursement review and approval process. Healthcare reform proposals and medical cost containment proposals designed to target rising healthcare costs could be introduced in the U.S. Any measures affecting the reimbursement programs of governmental and private insurance payors, including any uncertainty in the medical community regarding their nature and effect on reimbursement programs, could have an adverse effect on purchasing decisions regarding DefenCath, as well as limit the price we may charge for DefenCath. The failure to obtain or maintain reimbursement coverage for DefenCath could materially harm our operations.
In anticipation that payers may increasingly demand that we demonstrate the cost effectiveness of DefenCath as part of the reimbursement review and approval process, we have submitted posters and abstracts to support our health economic analysis and continue to commission and develop health economic evaluations to support this review. We are pursuing opportunities to work with healthcare systems to demonstrate the clinical and economic effectiveness of DefenCath; however, our studies might not be sufficient to support coverage or reimbursement at levels that allow providers to use DefenCath.
We have significant DefenCath customer concentration, with a limited number of customers accounting for a large portion of our revenues.
We derive a large portion of our revenues from a few major customers. Sales to our top three customers accounted for 79% of our total revenue for the year ended December 31, 2025, and we had three customers that accounted for 41%, 23% and 20% of our accounts receivable, respectively, for the year ended December 31, 2025. These customers have no purchase commitments and may cancel, change or delay purchases with little or no notice or penalty. As a result of this customer concentration, our revenue could fluctuate materially and could be materially and disproportionately impacted by product pricing and purchasing decisions of these customers or any other significant customer. These customers may decide to purchase less DefenCath from us than management anticipates, may alter purchasing patterns at any time with limited notice, or may decide not to continue to purchase DefenCath at all, any of which could cause our revenue to decline materially and materially harm our business, financial condition and results of operations. If we are unable to diversify and grow our customer base, we will continue to be susceptible to risks associated with customer concentration.
Our revenue and profitability may be adversely affected by DefenCath’s transition from TDAPA to the post-TDAPA add-on adjustment and broader reimbursement dynamics that could have a material adverse impact on our results of operations and business.
While DefenCath has been approved for reimbursement in certain settings, we cannot be sure that reimbursement will continue to be available for DefenCath on favorable terms or will be covered by other payers. For example, on July 1, 2026, DefenCath’s TDAPA reimbursement will transition into a post-TDAPA add-on adjustment, the calculation of which is determined by CMS. As a result of the methodology utilized by CMS, the level of reimbursement provided to institutions treating dialysis patients will significantly decline, and as a result, we anticipate there will be a corresponding reduction to the net pricing for DefenCath for the third and fourth quarters of 2026. The 2027 post-TDAPA add-on adjustment will be effective on January 1, 2027. There can be no assurance that the level of reimbursement determined by CMS in the post-TDAPA add-on period will improve. Further changes in these reimbursement rates could lead to significant fluctuations in our operating income and could have a negative impact on our revenues, earnings and cash flows. Reimbursement uncertainty applies to all of our Products as well as other product lines that we develop. Also, we cannot be sure that the amount of reimbursement that is available will not reduce the demand for, or the price of, our Products. If reimbursement is not available by certain payors or is available only at limited levels, we may not be able to continue to successfully commercialize our Products or any other product lines that we develop.
Reimbursement levels are also subject to periodic CMS rulemaking, sequestration or other across-the-board Medicare payment reductions, audit and overpayment recovery activity, and evolving coverage policies, any of which could occur on short notice and may apply retroactively. If CMS changes the underlying methodologies, revises inputs or assumptions, or otherwise modifies TDAPA eligibility criteria or post-TDAPA add-on adjustments, our realized revenue, earnings and cash flows could fluctuate materially from period to period. Even if coverage remains in place, inadequate payment may limit provider adoption, restrict formulary placement, or result in purchasing constraints by dialysis organizations.
Risks Related to the Development and Commercialization of our other Products
Successful development and commercialization of our Products and new product lines is uncertain.
The development and commercialization of our Products, and future product lines, is subject to the risks of failure and delay inherent in the development of new pharmaceutical products for the Company, our licensor and our partners, including but not limited to the following:
inability to produce positive data in pre-clinical and clinical trials;
delays in product development, pre-clinical and clinical testing, or manufacturing;
unplanned expenditures in product development, clinical testing, or manufacturing;
challenges with securing the supply chain for raw materials;
uncertainties relating to, or changes in FDA view of, the appropriate product approval pathway;
failure to obtain treatment of a drug or application under expedited development and review programs or to obtain marketing exclusivities;
failure to receive or maintain regulatory approvals;
emergence of superior or equivalent products;
inability to manufacture our product lines on a commercial scale on our own, or in collaboration with third parties;
inability to obtain third-party payor coverage or adequate reimbursement;
failure to comply with a broad range of post-marketing requirements including those related to labeling, promotion and advertising, manufacturing and quality, pharmacovigilance and adverse event reporting, commercial distribution and supply chain requirements, and drug sample distribution requirements; and
failure to achieve market acceptance.
Additionally, healthcare institutions, physicians and patients may not accept and use our Products. Acceptance and use of our Products will depend upon a number of factors including the following:
perceptions by members of the health care community, including physicians, about the safety and effectiveness of our drug or device product;
prevalence of the disease to be treated or prevented;
prevalence and severity of any side effects;
cost-effectiveness of our Product relative to current standard of care;
availability of coverage and reimbursement from government and other third-party payers;
timing of market introduction of our drugs and competitive drugs;
effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any;
potential or perceived advantages or disadvantages over alternative treatments;
price of our future products, both in absolute terms and relative to alternative treatments; and
the effect of current and future healthcare laws and regulations on our product lines, as well as post-marketing commitments imposed by regulatory authorities, such as patient registries.
Because of these risks, our development efforts and those of our licensor and our partners may not result in any future commercially viable products.
If a significant portion of our development efforts and those of our licensor and partners are not successfully completed, required regulatory approvals are not obtained or any approved products are not commercialized successfully, our business, financial condition, and results of operations could be materially harmed.
Infective pathogens might develop resistance to our Products or product candidates, which would decrease the efficacy and commercial viability of that product.
Infective pathogens, including fungi and bacteria, develop resistance over time due to genetic mutation. Many current and previous anti-infective therapies have suffered reduced efficacy over time due to the development of resistance to such drugs. It is probable that, over time, such pathogens will also develop resistance to our Products and our drug candidates. If resistance were to develop rapidly to our Products or our drug candidates, this would reduce the commercial potential for our business.
Clinical trials and regulatory approval for our product lines are expensive, time-consuming, and uncertain, and failure or delay in obtaining approval could materially harm our business.
To market a new drug or device product in the United States, we must demonstrate proof of safety and effectiveness in humans through “adequate and well-controlled” clinical trials and obtain FDA approval. The clinical trial and regulatory approval process is lengthy, expensive, and subject to numerous risks and uncertainties at every stage.
Clinical trials may be delayed or fail due to many factors, including: inability to manufacture sufficient quantities of qualified materials under cGMP requirements; slower than expected patient recruitment or insufficient enrollment; modifications to trial protocols or changes in regulatory requirements; lack of effectiveness or unforeseen safety issues; suspension or termination by institutional review boards or the FDA; and adverse medical events in patients, which may or may not be related to our products. Results from early trials are not necessarily indicative of later trial outcomes, and clinical results are frequently susceptible to varying interpretations that may delay, limit, or prevent regulatory approvals.
Even after clinical trials are completed, final FDA approval of an NDA, Premarket Approval Application (“PMA”), or De Novo application may be delayed, limited, or denied for numerous reasons, including: the FDA may not find pre-clinical and clinical data sufficient or may disagree with our interpretation of such data; the FDA may require additional studies or manufacturing information; the FDA may not agree with our intended indications, study design, or proposed labeling; or manufacturing processes and facilities may be deemed to have insufficient GMP controls. Regulatory approval policies may also change, and compliance with evolving requirements may consume substantial financial and management resources.
Any failure or significant delay in clinical trials or regulatory approval for our products would delay our ability to commercialize our product lines and generate product revenues, and could cause us to abandon a product line entirely. Such outcomes could materially harm our business, financial condition, and results of operations.
Off-label marketing or use of our Products or future product candidates may expose us to significant fines, penalties, sanctions, or product liability claims, and our reputation could be harmed.
The FDA, United States Department of Justice (the “DOJ”), and comparable foreign authorities strictly regulate the marketing and promotional claims that are made about pharmaceutical products following approval. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or comparable foreign authorities as reflected in the product’s approved labeling and Summary of Product Characteristics. However, physicians can prescribe drugs to their patients in a manner that is inconsistent with the approved label based on the physician’s independent medical judgement. The FDA and other governmental authorities, have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed in order to resolve enforcement actions. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face large civil and criminal fines and be subject to prohibitions and restrictions, which would materially harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged.
Risks Related to Regulatory and Legal Compliance Matters
Our approved Products are, and our pipeline product lines (if approved) will be, subject to extensive post-approval regulation.
Once a product is approved, numerous FDA-mandated post-approval requirements apply in the United States. These include, among other things, requirements related to pharmacovigilance and adverse event and other reporting, supply chain security requirements, suspect and illegitimate product investigations and notifications, limitations on product advertising and promotion and on the distribution of product samples, required post-marketing studies, and ongoing adherence to cGMPs, as well as the need to submit appropriate new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Establishing and maintaining systems and procedures for compliance with these requirements, and training and monitoring personnel relative to their compliance, is expensive, time consuming, and an ongoing effort. Depending on the circumstances, failure to meet post-approval requirements can result in criminal prosecution, fines, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts. In addition, even if we comply with FDA, foreign and other requirements, new information regarding the safety or effectiveness of a product could lead the FDA or other relevant regulatory body to modify or withdraw product approval. Failure to complete a PREA post-marketing study can result in a PREA non-compliance letter, which is publicly posted on FDA’s website, and could result in the product being considered misbranded and subject to additional enforcement actions.
Healthcare policy changes, including reimbursement policies for drugs and medical devices, may have an adverse effect on our business, financial condition and results of operations .
In the U.S. there has been, and we expect there will continue to be, a number of legislative and regulatory changes to the health care system that could affect our ability to profit from our approved products. Our future revenues, profitability and access to capital will be affected by the continuing efforts of governmental and private third-party payors to manage, contain or reduce the costs of health care through various means, such as capping prices, limiting price increases, reducing reimbursement, or requiring rebates. Market acceptance and sales of our Products or any other product lines that we develop, will depend on reimbursement policies and may be affected by health care reform measures in the U.S. and abroad.
Federal and state governments in the U.S. have been, and may in the future consider legislative and regulatory proposals to change the U.S. healthcare system in ways that could affect our ability to commercialize our Products and future marketed products profitably. In addition, the U.S. government, state legislatures, and foreign governments have shown significant interest in implementing cost containment programs as it relates to prescription drugs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs to limit the growth of government paid health care costs. For example, the current administration has pursued and is pursuing policies to reduce regulations and expenditures across government, including at the FDA, CMS, Health and Human Services (“HHS”) and related agencies. Recent actions include (i) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by establishing Most-Favored-Nation pricing for pharmaceutical products; (ii) imposing tariffs on imported pharmaceutical products; and (iii) as part of the MAHA Commission’s recent Strategy Report, working across government agencies to increase enforcement on direct-to-consumer pharmaceutical advertising. These actions and policies may significantly reduce U.S. drug prices, potentially impacting pricing strategies and profitability, while increasing operational costs and compliance risks.
The U.S. government and other governments have shown significant interest in pursuing healthcare reform. Any such government-adopted reform measures may adversely affect the pricing of healthcare products and services in the U.S. and the amount of reimbursement available from governmental agencies or other third-party payors. Any such reduction in reimbursement could negatively affect the pricing of our Products. If we are not able to charge a sufficient amount for our Products, then our margins and our profitability will be adversely affected.
Changes in funding for the FDA and other government agencies or future government shutdowns or disruptions could cause delays in the submission and regulatory review of our product lines, which could negatively impact our business or prospects .
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, ability to hire and retain key personnel, accept submission, applications, and the payment of user fees, and statutory, regulatory, and policy changes. 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. The impact of global events, including terrorism, natural disasters and pandemics, or other health emergencies, may also cause disruptions in the normal functioning of the FDA or other government agencies.
Risks relating to cybersecurity and data privacy could create additional liabilities for us.
We rely on the proper functioning of information technology systems, networks, and cloud services across our operations, and any failure, interruption, or other incident affecting the confidentiality, integrity or availability such systems or the data stored thereon, including incidents which may result from a cyber-attack (e.g., ransomware, malware, phishing, denial-of-service, or vendor compromise), could disrupt our business, result in loss or corruption of data, theft or misuse of confidential or personal information, and require significant remediation costs. Failure to comply with applicable privacy and data security laws and regulations could result in enforcement actions against us, including possible fines, imprisonment of company officials and public censure, claims for damages by affected individuals or class of individuals, or damage to our reputation and loss of goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations or prospects.
We also depend on third-party service providers (including cloud, SaaS, Contract Research Organizations, CMOs, logistics and analytics vendors), and incidents at these third parties—or their subcontractors—can compromise our data or disrupt operations even if our own systems are not implicated. We maintain processes to assess, identify, and manage material cybersecurity risks, which are integrated into our broader enterprise risk management program, including with respect to incident response planning and employee training, and involve oversight of third-party risks. However, no controls can eliminate all threats, and our board and management oversee, but cannot guarantee the effectiveness of, these efforts. For more information, please see “Item 1C (Cybersecurity).” A significant cyber incident—or a series of smaller incidents—could also interrupt manufacturing and supply coordination with third parties, impair quality or safety reporting, delay clinical or commercial activities, increase insurance and cybersecurity costs, and negatively affect our results of operations and reputation.
The legislative and regulatory landscape for privacy and data protection continues to evolve in jurisdictions worldwide. Certain laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, which increases costs and complicates compliance efforts.
Clinical trials required for our Products and any future product lines may be expensive, time consuming and their outcome is uncertain.
In order to obtain FDA approval to market a new drug or device product, we must demonstrate proof of safety and effectiveness in humans. To meet FDA requirements, we are obligated to conduct “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming, and expensive process. The length of time may vary substantially according to the type, complexity, novelty, and intended use of the product line, and often can be several years or more per trial. Delays associated with the development plans for our product lines may cause us to incur additional operating expenses. The commencement and rate of completion of clinical trials may be delayed by many factors, including, for example:
inability to manufacture sufficient quantities of qualified materials under the FDA’s cGMP requirements for use in clinical trials;
slower than expected rates of patient recruitment;
failure to recruit a sufficient number of patients;
modification of clinical trial protocols;
changes in regulatory requirements for clinical trials;
lack of effectiveness during clinical trials;
emergence of unforeseen safety issues;
delays, suspension, or termination of clinical trials due to the IRB responsible for overseeing the study at a particular study site; and
government or regulatory delays or “clinical holds” requiring suspension or termination of the trials.
From time to time, we may publicly disclose interim, topline, or preliminary data from clinical trials involving our Products, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial as well as the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, the interim, topline, or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data has been received and fully evaluated. Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability, or commercialization of the particular product candidate or product and our company in general. If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain regulatory approval for, and commercialize, our product candidates and any future product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.
Moreover, comparisons of results across different studies should be viewed with caution as such comparisons are limited by a number of factors, including differences in study designs and populations. Such comparisons also will not provide a sufficient basis for any comparative claims following product approval. Clinical results are frequently susceptible to varying interpretations that may delay, limit or prevent regulatory approvals or commercialization. Negative or inconclusive results or adverse medical events during a clinical trial could cause a clinical trial to be delayed, repeated or terminated, or a clinical program to be abandoned.
Clinical trials may not demonstrate statistically significant safety and effectiveness to obtain the requisite regulatory approvals for product lines. The failure of clinical trials to demonstrate safety and effectiveness for the desired indications could harm the development of our product lines. Such a failure could cause us to abandon a product line and could delay development of other product lines. Any delay in, or termination of, our clinical trials would delay the filing of any NDA, any PMA, or De Novo application, with the FDA and, ultimately, our ability to commercialize our product lines and generate product revenues. Any change in, or termination of, our clinical trials could materially harm our business, financial condition, and results of operations.
Our BARDA development contract requires ongoing funding decisions by the U.S. Government. Any reduction or discontinuation of funding of this contract could cause our business, financial condition, operating results and cash flows to suffer materially.
In July 2023, Melinta signed a development contract with BARDA to advance two antibiotics currently FDA-approved for adults, BAXDELA® (delafloxacin) and VABOMERE® (meropenem and vaborbactam), for use in pediatrics and to advance BAXDELA for use in biodefense indications. The performance period for our BARDA contract, including all optional funding, is estimated to be 12 years. Under this contract, BARDA has committed funding of $47.5 million to date, with the potential of additional funding of $97.1 million, amounting to total funding up to $144.6 million if all options are exercised.
The primary source of funds for these development programs is provided by the U.S. government and is subject to Congressional appropriations, which are generally made on a fiscal year basis, even for programs designed to continue for several years. These appropriations can be subject to a number of uncertainties, including political considerations, changes in priorities due to global pandemics, the results of elections and stringent budgetary constraints. If levels of government expenditures and authorizations for public health countermeasure preparedness decrease or shift to programs in areas where we do not offer products or are not developing product candidates, or if the federal government otherwise declines to exercise its options under this contract or our other existing contracts, there could be a material adverse impact to our results of operations, financial condition, and our business.
Risks Related to Our Business and Industry
We may not successfully manage the growth of our Products.
Our success may depend upon the expansion of our operations to continue to commercialize our Products and the effective management of any growth, which could place a significant strain on our management and our administrative, operational and financial resources. To manage this growth, we may need to augment our operational, financial and management systems and hire and train additional qualified personnel. Additionally, if market demand exceeds our third-party manufacturer’s ability to produce our Products, we may not be able to fulfill our customers’ orders in a timely manner or at all, which may have an adverse impact on our results of operations and reputation. If we are unable to manage our growth effectively, our business may be materially harmed.
We have pursued and may continue to pursue acquisitions. Acquisitions could be difficult to integrate, divert the attention of key personnel, disrupt our business, dilute stockholder value and impair our financial results.
As part of our business strategy, we have pursued and may continue to pursue acquisitions of complementary businesses, products, services, technologies or strategic transactions that we believe could accelerate our ability to compete in our existing markets or allow us to enter new markets. Any of these transactions could be material to our financial condition and results of operations. The failure to successfully evaluate, execute and integrate acquisitions or otherwise adequately address these risks, we may not achieve the anticipated benefits of any such acquisition, we may incur costs in excess of what we anticipate, which could have a material adverse impact on our business and financial results.
Any potential acquisition or strategic collaboration may entail numerous risks, including but not limited to: assimilation of operations, intellectual property and drugs of an acquired company, including challenges associated with integrating new personnel; the diversion of our management’s attention; retention of key employees and uncertainties in our ability to maintain key business relationships; risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; and our inability to generate revenue from acquired technology and drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
If we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate, execute and integrate acquisitions or investments or otherwise adequately address these risks could materially harm our business and financial results.
Competition and technological change may make our Products, product lines or indications, less attractive or obsolete .
We compete with established pharmaceutical and medical device companies that are pursuing other forms of prevention or treatment for the same or similar indications we are pursuing, and that have greater financial and other resources. Other companies may succeed in developing products earlier than we do, may develop products that are more effective than our product lines. Research and development by others may render our technology or product lines obsolete or noncompetitive, or result in processes, treatments or cures superior to any therapy we develop. We face competition from companies that develop competing technology internally, or acquire competing technology through acquisitions of other companies, or from universities and other research institutions. As these competitors develop their technologies, they may develop competitive positions that may prevent, make futile, or limit our product commercialization efforts, which would result in a decrease in the revenue we would be able to derive from the sale of our Products or our product lines if any of such other product lines receive marketing approval.
If we lose key management, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in compensation costs, our business may materially suffer .
We are highly dependent on the principal members of our management. Our future success will depend in part on our ability to identify, hire, and retain current and additional personnel. We experience intense competition for qualified personnel and may be unable to attract and retain the personnel necessary for the development of our business. Because of this competition, our compensation costs may increase significantly. In addition, we have only limited ability to prevent former employees from competing with us.
We face the risk of product liability claims and the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities we might incur.
Our business exposes us to the risk of product liability claims that are inherent in the development of drugs. If the use of one or more of our or our collaborators’ drugs or devices harms people, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, pharmaceutical companies or others selling or utilizing our Products.
We currently carry product liability insurance. We cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold may not be adequate to cover all liabilities we might incur. Our insurance covers bodily injury and property damage arising from our clinical trials, subject to industry-standard terms, conditions and exclusions. Our coverage also includes the sale of commercial products.
If we are unable to protect against potential product liability claims, we may be exposed to significant liabilities, which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our collaborators’ products and do not have sufficient insurance coverage, our liability could exceed our total assets and our ability to pay the liability. A successful product liability claim or series of claims brought against us would decrease our cash and could cause the value of our capital stock to decrease.
Risks Related to Our Intellectual Property
If we and our licensors do not obtain protection for and successfully defend our respective intellectual property rights, competitors may be able to take advantage of our research and development efforts to develop competing products.
Our commercial success will depend in part on obtaining further patent protection for our Products, product lines and other technologies and successfully defending any patents that we currently have or will obtain against third-party challenges.
We may seek further patent protection for our compounds and methods of treating diseases. However, the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our Products by obtaining and defending patents. These risks and uncertainties include the following:
patents that may be issued or licensed may be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage;
our competitors, many of which have substantially greater resources than we have and many of which have made significant investments in competing technologies, may seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential products either in the United States or in international markets;
there may be significant pressure on the United States government and other international governmental bodies to limit the scope of patent protection both inside and outside the United States for treatments that prove successful as a matter of public policy regarding worldwide health concerns; and
countries other than the United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products.
In addition, the USPTO and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents may be substantially narrower than anticipated. Additionally, the breadth of claims allowed in biotechnology and pharmaceutical patents or their enforceability cannot be predicted. We cannot be sure that, should any patents be issued, we will be provided with adequate protection against potentially competitive products. Furthermore, we cannot be sure that should patents issue, they will be of commercial value to us, or that private parties, including competitors, will not successfully challenge our patents or circumvent our patent position in the U.S. or abroad.
To support our patent strategy, we have engaged in a review of patentability and certain freedom to operate issues, including performing certain searches. However, patentability and certain freedom to operate issues are inherently complex, and we cannot provide assurances that a relevant patent office or court would agree with our conclusions regarding patentability issues or with our conclusions regarding freedom to operate issues, which can involve subtle issues of claim interpretation and claim liability. Furthermore, we may not be aware of all patents, published applications or published literature that may affect our business either by blocking our ability to commercialize our product lines, preventing the patentability of our product lines to us or our licensors, or covering the same or similar technologies that may invalidate our patents, limit the scope of our future patent claims or adversely affect our ability to market our product lines. Additionally, it is also possible that prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, may, nonetheless, ultimately be found by a court of law or an administration panel to affect the validity or enforceability of a claim. If a third-party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on the applicable product lines. Such loss of patent protection could have a material adverse impact on our business. Additionally, since patent applications in the United States are maintained in secrecy until published or issued and as publication of discoveries in the scientific or patent literature often lag behind the actual discoveries, we cannot be certain that we were the first to make the inventions covered by the pending patent applications or issued patents or that we were the first to file patent applications for such inventions.
In addition to patents, we also rely on trade secrets and proprietary know-how. Although we take measures to protect this information by entering into confidentiality and inventions agreements with our employees, and some but not all of our scientific advisors, consultants, and collaborators, we cannot provide any assurances that these agreements will not be breached, that we will be able to protect ourselves from the harmful effects of disclosure or dispute ownership if they are breached, or that our trade secrets will not otherwise become known or be independently discovered by competitors. We may also be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If any of these events occurs, or we otherwise lose protection for our trade secrets or proprietary know-how, the value of our intellectual property may be greatly reduced. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.
Intellectual property disputes require us to spend time and money to address such disputes could limit our intellectual property rights and if generic entrants of our Products are approved, it could have a material adverse impact on our results of operations and financial condition.
The biotechnology and pharmaceutical industries have been characterized by extensive litigation regarding patents and other intellectual property rights, and companies have employed intellectual property litigation to gain a competitive advantage. In addition to our pending litigation discussed below, we may initiate or become subject to infringement claims or litigation arising out of our patents and pending applications and those of our competitors, or we may become subject to proceedings initiated by our competitors or other third parties or the PTO or applicable foreign bodies to reexamine the patentability of our licensed or owned patents.
For example, generic manufacturers have sought, and may continue to seek, FDA approval to market generic versions of our Products through an abbreviated new drug application (“ANDA”). ANDA litigation and related settlement and license agreements, in some cases, may result in a loss of exclusivity for our patents prior to their expiration. The entry of generic versions of our Products may lead to market share and price erosion, which could have a material adverse impact on our results of operations and revenue. As discussed below, we are currently party to patent litigation for Minocin (minocycline) for Injection against Nexus Pharmaceuticals and Gland Pharma in which an adverse outcome could allow generic entry, which could materially harm our business, results of operations and stock price. Introduction of a generic minocycline for injection product, or a generic of any of our commercialized products, could result in increased competition, decreased sales and could have a material adverse impact on our revenue and results of operations. Please refer to “ Note 9, Commitments and Contingencies ” for a discussion of our ongoing litigation.
In addition, litigation may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability, scope, and validity of the proprietary rights of others. If we are required to defend patent infringement actions brought by third parties, or if we sue to protect our own patent rights, we may be required to pay substantial litigation costs and managerial attention may be diverted from business operations even if the outcome is not adverse to us. In addition, any legal action that seeks damages or an injunction to stop us from carrying on our commercial activities relating to the affected technologies could subject us to monetary liability and require us or any third-party licensors to obtain a license to continue to use the affected technologies. We cannot predict whether we would prevail in any of these types of actions or that any required license would be made available on commercially acceptable terms or at all. Furthermore, to the extent that we or our consultants or research collaborators use intellectual property owned by others in work performed for us, disputes may also arise as to the rights in such intellectual property or in resulting know-how and inventions. An adverse claim could subject us to significant liabilities to such other parties and/or require disputed rights to be licensed from such other parties. See “ Note 9, Commitments and Contingencies ” for additional detail on the Company’s legal proceedings.
Our business, financial condition, and results of operations could be materially and adversely affected by an adverse outcome in the ongoing litigation.
We are regularly involved in pending and threatened litigation, investigations, and other legal proceedings, including intellectual property, commercial, employment, securities, regulatory, and product-related claims. Litigation is inherently uncertain, can be costly and time-consuming, may divert management attention, and could result in injunctions, damages, settlements, fines, penalties, or other remedies. Insurance coverage may be unavailable or insufficient to cover losses. Any of these outcomes, or the announcement of allegations alone, could adversely affect our reputation, cash flows, financial condition, and results of operations. Please refer to “ Note 9, Commitments and Contingencies ” for a discussion of our ongoing litigation.
Risks Related to Dependence on Third Parties
Our ability to pursue the development and commercialization of certain of our Products depends upon the continuation of certain licenses and actions taken by our licensors.
We rely on certain licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of our technology and Products. We have an exclusive license to develop and sell REZZAYO in the United States. Our license agreement also grants us nonexclusive rights to manufacture REZZAYO anywhere in the world. We are required to make payments upon reaching specified regulatory and sales milestones and to pay royalties based on net sales of products containing REZZAYO or the other compounds in a valid patent licensed under the license agreement. We are obligated to use commercially reasonable efforts to maintain regulatory approval for REZZAYO in the United States and to commercialize REZZAYO in the United States within the timeframes required by the license agreement. If we do not use commercially reasonable efforts to achieve the development and commercialization milestones for REZZAYO within the timeframes, or if we are unable to make any of the required payments, the licensor may terminate the license agreement if not cured within 60 days (or 30 days with respect to any payment breach). If our license agreement is terminated, we would lose our rights to develop and commercialize REZZAYO. Loss of our license agreement would materially and adversely affect our business, results of operations and future prospects.
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
Licenses or similar arrangements involving our research programs or any product candidates currently pose, and will continue to pose, numerous risks to us, such as our third party partners (i) have significant discretion in determining the efforts and resources that they will apply to these arrangements; (ii) may delay programs, preclinical studies or clinical trials, provide insufficient funding for programs, preclinical studies or clinical trials, stop a preclinical study or clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; and (iii) may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in such third party’s strategic focus or available funding or external factors such as an acquisition that diverts resources or creates competing priorities.
In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligation under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
We depend on third-party suppliers and contract manufacturers for the supply and manufacture of our product lines, as well as our APIs, which subjects us to potential cost increases and manufacturing delays that are not within our control.
We do not manufacture our product lines or any of their raw materials or components ourselves, and we rely on third parties for our drug supplies both for clinical trials and for commercial quantities. All of our manufacturing processes currently are, and we expect them to continue to be, outsourced to third parties, some of which are single-source suppliers. We have made the strategic decision not to manufacture APIs for our product lines, as these can be more economically supplied by third parties with particular expertise in this area. We have engaged contract facilities that are registered with the FDA, have a track record of large-scale API manufacture, and have already invested in capital and equipment.
We have no direct control over the manufacturing of our product lines. If the contract manufacturers are unable to produce sufficient quantities of our Products, as a result of a lack of available materials, supply chain delays or otherwise, then we would need to identify and contract with additional or replacement third-party manufacturers. Additionally, if the manufacturers are not able to quickly scale production to align with rapid changes in demand, our results of operations may be negatively impacted. If we are unable to identify suitable additional or replacement third-party manufacturers on favorable terms or at all, our ability to commercialize our Products, our profitability and results of operations may be adversely affected. Our reliance on foreign suppliers poses risks due to possible shipping delays, import restrictions, trade policies and tariffs as well as foreign regulatory regimes.
We are subject to the risks associated with technology transfers, which are often required when moving manufacturing processes to new facilities or contract manufacturers. These include the potential for delays, loss of process knowledge, difficulties in replicating processes at a new site, and challenges in meeting regulatory requirements, all of which could disrupt supply or impact product quality.
In addition, we have no direct control over manufacturing costs of our product lines. If the cost of manufacturing increases, or if the cost of the materials used increases, these costs will be passed on to us, making the cost of clinical trials and commercializing our product lines more expensive. Increases in manufacturing costs could adversely affect our future profitability if we are unable to pass all of the increased costs along to our customers.
Our continuing reliance on third parties for manufacturing entails a number of additional risks, including reliance on third parties for legal and regulatory compliance and quality assurance, the possible breach of the manufacturing or supply agreement by such third parties, and the possible termination or nonrenewal of the agreement by such third parties at a time that is costly or inconvenient for the Company. Further, we, along with our contract manufacturers, are required to comply with FDA requirements for cGMPs, related to product testing, quality assurance, manufacturing and documentation. Our contract manufacturers may fail to comply with the applicable FDA regulatory requirements, which could result in delays to our product development programs, result in adverse regulatory actions against them or us, and prevent us from ultimately receiving product marketing approval. They also generally must pass an FDA preapproval inspection for conformity with cGMPs before we can obtain approval to manufacture our product lines and will be subject to ongoing, periodic, unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other applicable government regulations and corresponding foreign standards. Not complying with FDA requirements could result in a product recall or prevent commercialization of our product lines and delay our business development activities. In addition, such failure could be the basis for the FDA to issue a warning or untitled letter or take other regulatory or legal enforcement action, including recall or seizure, total or partial suspension of production, suspension of ongoing clinical trials, refusal to approve pending applications or supplemental applications, and potentially civil and criminal penalties, depending on the matter. Similarly, we, along with our contract manufacturers, are required to comply with all applicable healthcare laws and regulations, such as, without limitation, the federal Anti-Kickback Statute , the civil False Claims Act, and civil monetary penalty laws, as well as similar state laws. Violation of any such laws by a contract manufacturer could materially impact our operations.
We rely on third parties to conduct our clinical trials and pre-clinical studies. If those parties do not successfully carry out their contractual duties or meet expected deadlines, our product lines may not advance in a timely manner or at all.
In the course of our pre-clinical and clinical trials, we may rely on third parties, including contract research organizations, laboratories, investigators, and manufacturers, to perform critical services for us, many of which are required to be conducted consistent with regulations on Good Laboratory Practice (“GLP”). Study sites are responsible for many aspects of the trials, including finding and enrolling subjects for testing and administering the trials. Although we may rely on these third parties to conduct our pre-clinical and clinical trials, we are responsible for ensuring that each of our trials is conducted in accordance with its investigational plan and protocol and that the integrity of the studies and resulting data is protected. Moreover, the FDA and foreign regulatory authorities require us to comply with regulations and standards, commonly referred to as Good Clinical Practices (“GCPs”), for conducting, monitoring, recording, and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of the potential risks of participating in such trials. Our reliance on third parties does not relieve us of these responsibilities and requirements. These third parties may not be available when we need them or, if they are available, may not comply with all regulatory and contractual requirements or may not otherwise perform their services in a timely or acceptable manner, and we may need to enter into new arrangements with alternative third parties and our clinical trials may be extended, delayed or terminated. These independent third parties may also have relationships with other commercial entities, some of which may compete with us. In addition, if such third parties fail to perform their obligations in compliance with our protocols or the applicable regulatory requirements, our trials may not meet regulatory requirements or may need to be repeated, we may not receive marketing approvals, or we or such third parties may face regulatory enforcement. As a result of our dependence on third parties, we may face delays, failures or cost increases outside of our direct control. These risks also apply to the development activities of collaborators, and we do not control their research and development, clinical trial or regulatory activities.
The timing of the milestone and royalty payments we are required to make to third parties is uncertain and could adversely affect our cash flows and results of operations.
We are party to various agreements pursuant to which we are obligated to make milestone payments or pay royalties in connection with the development and commercialization of our product candidates or sales of our marketed products. The timing of our achievement of these milestones and the corresponding milestone payments, or the amount of our royalty payments, is subject to factors which are difficult to predict and of which many are beyond our control. We may become obligated to make a milestone or other payment at a time when we do not have sufficient funds to make such payment, or at a time that would otherwise require us to use funds needed to continue to operate our business, which could delay our clinical trials, curtail our operations, necessitate a scaling back of our sales and marketing efforts or cause us to seek funds to meet these obligations on terms unfavorable to us. If we are unable to make any payment when due or if we fail to use commercially reasonable efforts to achieve certain development and commercialization milestones within the timeframes required by certain of these agreements, the other party may have the right to terminate the agreement and all of our rights to develop and commercialize product candidates using the applicable technology.
Risks Related to our Common Stock
Our common stock price has fluctuated considerably and is likely to remain volatile, in part due to the limited market for our common stock and you could lose all or a part of your investment.
From December 31, 2024, through December 31, 2025, the high and low sales prices for our common stock were $17.43 and $5.60, respectively. The market price of our common stock has fluctuated considerably and may continue to fluctuate significantly in response to a number of factors, some of which are beyond our control.
In addition, the stock markets in general, and the stock of pharmaceutical and medical device companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In addition, changes in economic conditions in the U.S., the European Union or globally, particularly in the context of current global events, could impact upon our ability to grow profitably. Adverse economic changes are outside our control and may result in material adverse impacts on our business and our results of operations. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. We have been, and currently are subject to securities class-actions. Such litigation, has caused, and if instituted against us in the future could cause, us to incur substantial costs and divert management’s attention and resources. For these reasons and others, an investment in our securities is risky and you should invest only if you can withstand wide fluctuations in and a significant or complete loss of the value of your investment.
General Risk Factors
Our business may be adversely affected by tariffs, trade sanctions or similar government actions.
The imposition and ongoing discussions regarding certain trade restrictions, sanctions and tariffs on goods exported from the U.S. or imported into the U.S., as well as retaliatory measures enacted in response to such actions and related market volatility, could have a material adverse impact on our business, financial condition, results of operations and cash flows. In light of these events, there continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors could depress economic activity, lower product demand and restrict our access to potential partners, suppliers or other third parties we seek to do business with and, in turn, have a material adverse effect on the business and financial condition of such third parties, which in turn would negatively impact us.
We have identified a material weakness in our internal control over financial reporting, which could, if not effectively remediated, result in material misstatements in our financial statements, and a failure to meet our reporting and financial obligations.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports, prevent fraud and errors in our financial statements and operate successfully as a public company. As discussed in “Item 9A. Controls and Procedures,” our management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2025. We are actively engaged in remediating the underlying material weakness as promptly as possible. However, we cannot be certain that the current material weakness in internal control will be remediated and our internal control over financial reporting will be considered effective going forward. Because of its inherent limitations, our system of internal control over financial reporting may not prevent or detect every misstatement.
If we are unable to remediate the existing material weakness in our internal controls over financial reporting and achieve effective internal control, or if we identify additional material weaknesses in our internal control over financial reporting, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. If this occurs, we also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting for the year ending December 31, 2026 or annual periods thereafter, investors could lose confidence in the reliability of our consolidated financial statements. This could result in a decrease in the value of our common stock.
We also face risks associated with the cost of establishing effective internal control over financial reporting, insofar as we expect to continue to incur increased costs related to our internal control over financial reporting to remediate the above-described material weaknesses and improve further our internal control environment.
Our internal control over financial reporting and our disclosure controls and procedures may not prevent all possible errors that could occur.
Failure on our part to have effective internal financial and accounting controls could cause our financial reporting to be unreliable, could have a material adverse effect on our business, operating results, and financial condition, and could have a material adverse impact on the trading price of our common stock. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be satisfied. Internal control over financial reporting and disclosure controls and procedures are designed to give a reasonable assurance that they are effective to achieve their objectives. We cannot provide absolute assurance that all of our possible future control issues will be detected. These inherent limitations include the possibility that judgments in our decision making can be faulty, and that isolated breakdowns can occur because of simple human error or mistake. The design of our system of controls is based in part upon assumptions about the likelihood of future events, and there can be no assurance that any design will succeed absolutely in achieving our stated goals under all potential future or unforeseeable conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error could occur and not be detected. This and any future failures could cause investors to lose confidence in our reported financial information, which could have a negative impact on our financial condition and stock price.
In future periods, if any material weaknesses or significant deficiencies are identified, the correction could require remedial measures, which could be costly and time-consuming. In addition, we may be unable to produce accurate financial statements on a timely basis. Any associated accounting restatement could create a significant strain on our internal resources and cause delays in our release of quarterly or annual financial results and the filing of related reports, increase our costs and cause management distraction. Any of the foregoing could cause investors to lose confidence in the reliability of our financial statements, which could cause the trading price of our common stock to decline and make it more difficult for us to finance our operations and growth.
