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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.01pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.02pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.05pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+10
delay+9
terminated+5
shutdown+5
negatively+4
Positive rising
exclusivity+3
successfully+2
success+2
leadership+2
innovation+2
Risk Factors (Item 1A)
32,411 words
Item 1A. Risk Factors.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding any statement in this Annual Report or elsewhere. The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes beginning on F-1 of this Annual Report.
You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below. Any one or more of such factors could directly or indirectly cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results of operations and stock price. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.
Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
critical+1
losses+1
threatening+1
dysfunction+1
overcome+1
Positive rising
exclusively+1
MD&A (Item 7)
2,063 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with the audited financial statements and notes thereto for the period ended December 31, 2025 found in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward-looking statements by using words such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. Our actual results could differ materially from those anticipated by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report.
The Company
We are a late-stage biopharmaceutical company advancing novel therapies for life-threatening immune and thrombotic conditions. As a result of our acquisition of a 12-LOX platform of assets in December 2025, we transitioned our primary strategic focus to the development of CAD-1005 for the treatment of immune-mediated and thrombotic disorders. Our lead product candidate, CAD-1005, is a first-in-class selective 12-LOX inhibitor being developed to treat HIT, a deadly immune-mediated thrombotic disorder. CAD-1005 has been evaluated in a blinded, placebo-controlled study Phase 2 clinical trial of 24 patients as well as Phase 1 clinical trials in more than 100 patients. On March 26, 2026, we completed our EOP2 meeting with the FDA and clarified a potential registrational path for our planned Phase 3 pivotal trial of CAD-1005 in patients with HIT. Our Phase 3 trial protocol will still be subject to additional information which may be set forth in the final meeting minutes from the FDA and any further comments we may receive from the FDA upon their review of the protocol. CAD-1005 has an ODD from the FDA for prophylaxis of thrombosis in patients with HIT, as well as an FDA Fast Track designation for the treatment and prevention of HIT, and an orphan designation from the EMA for the treatment of platelet-activating factor 4 disorders.
Our broader pipeline includes two additional clinical-stage assets —tecarfarin and frunexian. Tecarfarin is an oral vitamin K antagonist (“VKA”) (a warfarin replacement for patients with complex needs) designed to prevent heart attacks, strokes, and deaths due to blood clots in patients requiring chronic anticoagulation. Specifically, our focus for tecarfarin is for chronic use in patients with kidney dysfunction or left ventricular assist devices (“LVADs”). Tecarfarin has been specifically designed to overcome metabolic factors that can make warfarin less reliable. Frunexian is a first-in-class, Phase 2-ready intravenous (“IV”) Factor XIa inhibitor designed for acute care settings where contact activation of coagulation by medical devices or artificial surfaces is significant. Frunexian is the only IV FXIa inhibitor in clinical development that targets the acute/critical care hospital setting exclusively.
Recent Developments
Registered Direct Offering
On December 15, 2025, we entered into a securities purchase agreement with certain investors named on the signature pages thereto, pursuant to which we sold to such investors an aggregate of: (i) in a registered direct offering, 207,374 shares of Common Stock and, (ii) in a concurrent private placement, unregistered common warrants to purchase up to 414,748 shares of Common Stock. The offering price per share was $10.85. The registered direct offering and concurrent private placement were consummated on December 16, 2025 and we received gross proceeds therefrom of approximately $2.2 million.
Veralox Asset Purchase
On December 10, 2025, we entered into the Veralox Purchase Agreement, pursuant to which Veralox sold to us all, or substantially all, of its right title and interest in assets owned or otherwise used or held for use by Veralox in connection with the compound known as CAD-1005, and all back-up and follow-on compounds, including the CAD-2000 series (the “Compounds”), including, without limitation, all intellectual property related to the Compounds, all inventory related to the Compounds, certain contracts including a license agreement, all Permits and other Governmental Authorizations and Books and Records (as such terms are defined in the Veralox Purchase Agreement), free and clear of any liens (the Veralox Assets). The transactions contemplated by the Veralox Purchase Agreement were consummated on December 10, 2025.
The purchase price for the Veralox Assets consisted of (i) a cash payment of $200,000, (ii) the assumption by us of certain assumed liabilities; (iii) contingent milestone payments in an amount not to exceed $15 million, and (iv) royalty payments.
ATM Facility
During the year ended December 31, 2025, we sold 307,727 shares of our Common Stock through our at-the-market (ATM) facility with H.C.W., generating gross proceeds of approximately $4.9 million and net proceeds of approximately $4.6 million.
From January 1, 2026 through March 30, 2026, we sold 168,690 shares of our Common Stock through our at-the-market (ATM) facility with H.C.W., generating gross proceeds of approximately $1.4 million and net proceeds of approximately $1.3 million.
Results of Operations
The following table summarizes our results of operations for the fiscal year ended December 31, 2025 and 2024.
Year Ended
December 31,
$ Change
% Change
Operating expenses:
General and administrative expenses
Research and development expenses
Depreciation expense
Total operating expenses
Loss from operations
Other income
Interest and dividend income
Total other income
Net loss and comprehensive loss
General and administrative expenses
General and administrative expenses for the years ended December 31, 2025, and 2024 were $9.4 million and $6.8 million, respectively, representing an increase of approximately $2.6 million, or 39%. The increase is primarily attributable to a $1.6 million increase in expenses related to being a public company, a $0.4 million increase in stock-based compensation, a $0.4 million increase in consulting expenses, and a $0.1 million increase in professional fees.
Research and development expenses
Research and development expenses for the years ended December 31, 2025, and 2024 were $4.1 million and $4.2 million, respectively, representing a decrease of $0.1 million, or 2%. The decrease was primarily attributable to a $0.8 million reduction in consulting expenses, partially offset by a $0.5 million increase in expenses associated with the asset purchase agreements completed in September and December 2025, which were expensed as in-process research and development (IPR&D), a $0.2 million increase in personnel expenses, primarily associated with former Chief Medical Officer’s severance agreement entered into in February 2025, a $0.1 million in clinical trial preparation costs, and a $0.1 million increase in stock-based compensation expense. We anticipate research and development expenses to increase when we commence clinical trials.
Interest and dividend income
Interest and dividend income for the years ended December 31, 2025, and 2024 were $0.2 million and $0.3 million, respectively. This represents the interest and dividend income earned from our investments in money market funds.
Liquidity and Capital Resources
Since inception, we have incurred losses and utilized cash in operations. To date, we have funded our operations from the proceeds of the sale of convertible and promissory notes, our IPO completed in January 2023, our Private Placement completed in July 2023, our Warrant Inducement completed in November 2024, our December 2025 Registered Offering, and the sale of Common Stock through our ATM facility. We recognized a net loss of $13.2 million for the year ended December 31, 2025 which included $1.9 million of non-cash expenses. Cash used in operating activities for the year ended December 31, 2025 totaled $12.6 million.
We expect to continue to incur operating losses and negative cash flows for the foreseeable future as we advance our clinical and regulatory activities. Based on our current operating plan, we believe that our existing cash resources will not be sufficient to fund our operating and capital requirements for the next 12 months. To meet anticipated funding needs, we plan to seek additional capital through strategic partnerships, equity offerings, and/or debt financings. However, there can be no assurance that additional funding will be available on acceptable terms or at all. These factors raise substantial doubt about our ability to continue as a going concern for at least one year following the issuance of the accompanying financial statements. If we are unable to obtain additional financing, we may be required to delay or reduce the scope of our development programs, implement cost-saving measures, or cease operations entirely. The accompanying financial statements do not include any adjustments that might result from this uncertainty.
Cash Flows
The following table summarizes our cash flow for the period presented:
Years Ended December 31,
Cash used in operating activities
Cash used in investing activities
Cash provided by financing activities
Net change in cash
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Operating activities
During the year ended December 31, 2025, cash used in operating activities was $12.6 million. Net loss adjusted for the non-cash items as detailed on the statement of cash flows, used $11.3 million in cash, and the changes in operating assets and liabilities, as detailed on the statement of cash flows, used $1.3 million in cash primarily from a $0.9 million decrease in accounts payable, a $0.2 million decrease in accrued liabilities, and a $0.2 million increase in prepaid expenses.
During the year ended December 31, 2024, cash used in operating activities was $7.4 million. Net loss adjusted for the non-cash items as detailed on the statement of cash flows, used $9.2 million in cash, and the changes in operating assets and liabilities, as detailed on the statement of cash flows, provided $1.9 million in cash primarily from a $1.3 million increase in accounts payable and a $0.5 million increase in accrued liabilities.
Financing activities
Net cash provided by financing activities was $6.6 million for the year ended December 31, 2025. This consisted primarily of net proceeds of $4.6 million from sales of common stock under our at-the-market equity program and net proceeds of $2.0 million from our December 2025 registered direct offering, with additional proceeds from the exercise of stock options.
Net cash provided by financing activities was $9.0 million for the year ended December 31, 2024. This consisted of net proceeds of $4.8 million from sales of common stock under our at-the-market equity program and net proceeds of $4.2 million from our warrant inducement agreement.
Critical Accounting Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Significant estimates and assumptions made in the accompanying financial statements include but are not limited to the fair value of financial instruments, the fair value of stock-based awards, deferred tax assets and valuation allowance, income tax uncertainties, and certain accruals. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimated under different assumption or conditions.
Stock-Based Compensation
We measure our stock-based awards granted to employees, consultants and directors based on the estimated grant-date fair values of the awards and recognize the compensation over the requisite service period. We use the Black-Scholes option-pricing model to estimate the fair value of our stock option awards. Stock-based compensation is recognized using the straight-line method. As the stock compensation expense is based on awards ultimately expected to vest, it is reduced by forfeitures. We account for forfeitures as they occur.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Investors should carefully consider the risks described below before deciding whether to invest in our securities. If any of the following risks actually occur, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our Common Stock could decline and you could lose all or part of your investment. Our actual results could differ materially from those anticipated in the forward-looking statements made throughout this Annual Report a result of different factors, including the risks we face described below.
Risks Related to Our Financial Position and Need for Capital
Our financial statements have been prepared assuming that we will continue as a going concern.
We had an accumulated deficit of approximately $39.0 million as of December 31, 2025 and a net loss of approximately $13.2 million for the fiscal year ended December 31, 2025. We expect to incur significant expenses and continued losses from operations for the foreseeable future. We believe that our existing cash and cash equivalents will not be sufficient to meet our anticipated cash requirements for the next twelve months. We will require additional financing as we continue to execute our business strategy, including the need for additional funds for the commencement of our planned clinical trials. Our audited financial statements for the fiscal year ended December 31, 2025, were prepared under the assumption that we will continue as a going concern; however, we have incurred significant losses from operations to date and we expect our expenses to increase in connection with the commencement of our planned clinical trials. These factors raise substantial doubt about our ability to continue as a going concern for one year after the financial statements are issued. Our auditor’s report on our audited financial statements for the fiscal year ended December 31, 2025 contains an explanatory paragraph with respect to this uncertainty. Our liquidity may be negatively impacted as a result of research and development cost increases in addition to general economic and industry factors. In order to meet our expected obligations, we intend to raise additional funds through partnering and equity and debt financings or a combination of these potential sources of liquidity. There can be no assurance that funding will be available on acceptable terms, on a timely basis, or at all. The various ways that we could raise capital carry potential risks. Any additional financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. If we raise funds through partnering, such as collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or grant licenses on terms that are not favorable to us. If we do not succeed in raising additional funds on acceptable terms or at all, we may be unable to complete the planned clinical trials. As such, we cannot conclude that such plans will be effectively implemented within one year after the date that the financial statements included in this Annual Report are filed with the SEC and there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern.
Any shutdown of the U.S. federal government may adversely affect our business.
A shutdown of the U.S. federal government may adversely affect our business operations and regulatory compliance. During such shutdowns, while the SEC’s EDGAR system remains operational, the unavailability of SEC staff to review filings, issue comments, or declare registration statements effective may delay our ability to complete public offerings, respond to comment letters, or obtain timely regulatory approvals. These delays could impact our access to capital markets, hinder strategic transactions, and create uncertainty around our disclosure obligations. Additionally, the lack of interpretive guidance or exemptive relief during a shutdown may increase legal and compliance risks. We continue to monitor developments and adjust our regulatory strategies accordingly, but there can be no assurance that future shutdowns will not materially affect our operations or financial condition.
We are a clinical development biopharmaceutical company with a limited operating history.
We were formed in January 2022 and have had limited operations to date. We have not yet performed any clinical trials. We have to manufacture product, complete clinical trials and receive regulatory approval of NDAs before commercial sales of our product candidates can commence. The likelihood of success of our business plan must be considered in light of the problems, substantial expenses, difficulties, complications and delays frequently encountered in connection with building and expanding clinical development pharmaceutical businesses and the regulatory and competitive environment in which we operate. Pharmaceutical product development is a highly speculative undertaking, involves a substantial degree of risk and is a capital-intensive business.
Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the later stage of development, especially clinical pharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to:
successfully complete the clinical trials necessary to obtain regulatory approval for the marketing of our product candidates, including our Phase 3 trial for CAD-1005 in patients with HIT;
secure acceptance of our product candidate in the medical community and with third-party payors and consumers;
if approved for commercial sale, launch commercial sales of our product candidate, whether alone or in collaboration with others;
successfully build an internal sales force meeting our requirements for the marketing and sale of our product candidates;
successfully manufacture our clinical product and establish commercial drug supply;
attract and retain an experienced management, board and scientific advisory team;
successfully implement or execute our current business plan, and we cannot assure you that our business plan is sound; and
raise sufficient funds in the capital markets to effectuate our business plan.
If we cannot successfully execute any one of the foregoing, our business may not succeed and your investment will be adversely affected.
We have a limited operating history upon which to evaluate our ability to commercialize our product candidate .
We are a development-stage company and our success is dependent upon our ability to obtain regulatory approval for and commercialize our product candidates and we have not demonstrated an ability to perform the functions necessary for the approval or successful commercialization of any product candidate. We have yet to demonstrate our ability to overcome the risks frequently encountered in our industry and are still subject to many of the risks common to such enterprises, including our ability to implement our business plan, market acceptance of our proposed business and lead product, under-capitalization, cash shortages, limitations with respect to personnel, financing and other resources, competition from better funded and experienced companies, and uncertainty of our ability to generate revenues. In fact, though individual team members have experience running clinical trials, we have yet to prove that we can successfully run a clinical trial and our lead product candidate. There is no assurance that our activities will be successful or will result in any revenues or profit, and the likelihood of our success must be considered in light of the stage of our development. In addition, no assurance can be given that we will be able to consummate our business strategy and plans, or that financial, technological, market, or other limitations may force us to modify, alter, significantly delay, or significantly impede the implementation of such plans. We have insufficient results for investors to use to identify historical trends. Investors should consider our prospects in light of the risk, expenses and difficulties we will encounter as an early-stage company. Our revenue and income potential are unproven and our business model is continually evolving. In fact, we have recently changed our focus from the development of tecarfarin to the development of CAD-1005. We are subject to the risks inherent to the operation of a new business enterprise, and cannot assure you that we will be able to successfully address these risks.
We have a history of operating losses and expect to continue to incur substantial losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.
To date, we have not generated any revenue from operations and we expect to continue to incur significant operating losses in connection with the development and sale of our product candidates. We may continue to incur operating losses until such time, if ever, as we are able to achieve sufficient levels of revenue from operations. Our ability to achieveprofitability will depend on regulatory approval of our product candidates and, if approved, the market acceptance of our product offering and our capacity to develop, introduce and sell our product to our targeted markets. In fact, if the FDA determines that we require larger patients numbers in our planned clinical trial of CAD-1005 in patients with HIT or additional clinical trials our financing needs will increase and our ability to commercialize our product candidate will be delayed beyond our currently planned timeline. There can be no assurance that we will ever generate significant sales or achieveprofitability. Accordingly, the extent of future losses and the time required to achieveprofitability, if ever, cannot be predicted at this point.
Even if we succeed in developing and commercializing one or more product candidates, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:
continue to plan for and commence the clinical trials for our product candidates;
seek regulatory approvals for our product candidate;
implement additional internal systems and infrastructure; and
hire additional personnel.
We may not be able to generate revenue or achieveprofitability in the future. Our failure to achieve or maintain profitability would likely negatively impact the value of our securities and could prevent us from continuing as a going concern.
Even if we can secure such arrangements, we may continue to have obligations and expenses that exceed the revenue generated by these marketed products. In addition, we could incur significant development and other expenses if we were to make alterations to the manufacturing process for any product candidate including CAD-1005, for preparation and submission of a supplemental NDA for such alterations, if required by the FDA, and in connection with the launch of such product, if approved. Further, as we pursue FDA approval for CAD-1005, we expect that our research and development expenses will continue to increase significantly as we advance our product candidates and conduct planned clinical trials.
Our cash and the proceeds from our completed financings will only fund our operations for a limited time, and we will need to raise additional capital to fund our planned clinical trials and to support our development and commercialization efforts for our product candidates.
If we do not succeed in raising additional funds on acceptable terms, we will be unable to commence our planned clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities If the FDA determines that we require larger patients numbers in our clinical trial or additional clinical trials our financing needs will increase and our ability to commercialize our product candidate will be delayed beyond our currently planned timeline. In addition, we could be forced to delay, discontinue or curtail product development, forego sales and marketing efforts, and forego licensing in attractive business opportunities.
We will also need to raise additional capital to expand our business to meet our long-term business objectives.
We believe that our existing cash and cash equivalents will not be sufficient in the aggregate to meet our anticipated cash requirements for at least the next twelve months. We will require additional financing prior to commencing any clinical trial and as we continue to execute our business strategy, including that we will require additional funds for the initiation of enrollment of patients and completion of the planned clinical trials. Our liquidity may be negatively impacted as a result of research and development cost increases in addition to general economic and industry factors. We anticipate that, to the extent that we require additional liquidity, it will be funded through the incurrence of other indebtedness, additional equity financings, or a combination of these potential sources of liquidity. In addition, we may raise additional funds to finance future cash needs through grant funding and/or corporate collaboration and licensing arrangements. If we raise additional funds by issuing equity securities or convertible debt, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquishvaluable rights to our products, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. The covenants under future credit facilities may limit our ability to obtain additional debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. Any failure to raise capital in the future could have a negative impact on our financial condition and our ability to pursue our business strategies.
Our present and future capital requirements will depend on many factors, including:
the outcome, timing, and cost of our planned clinical trials;
the final minutes from our EOP2 meeting with the FDA and any comments we may receive from the FDA after submission of our Phase 3 trial protocol for CAD-1005 in patients with HIT;
obtaining regulatory approval of our product candidates in the United States and Europe;
the costs of manufacturing our clinical products and establishing commercial drug supply;
the degree and rate of market adoption of our products, if approved;
the emergence of new, competing technologies and products;
the costs of R&D activities we undertake to develop new products and indications;
the costs of commercialization activities, including sales, marketing and manufacturing;
the costs of building an internal sales force meeting our requirements for the marketing and sale of our product candidates, if approved;
our ability to collaborate with third parties on the development and commercialization of our product candidates and products;
the level of working capital required to support our growth; and
our need for additional personnel, information technology or other operating infrastructure to support our growth and operations as a public company.
Other than our at-the-market facility with H.C. Wainwright & Co., LLC (“H.C.W.”) we do not currently have any arrangements or credit facilities in place as a source of funds, and there can be no assurance that we will be able to use such facility or even if we can use such facility there can be no assurance that we will raise sufficient additional capital on acceptable terms, or at all. Availability of funding from the at-the-market facility is limited due to certain restrictions. We anticipate that the additional funding we require will be funded through a combination of private and public equity offerings, debt financings and strategic collaborations. Debt financing, if obtained, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including issuing shares of our Common Stock or other securities and incurring additional debt, and could increase our expenses and require that our assets secure such debt. Equity financing, if obtained, could result in dilution to our then existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back or eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected. We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. In addition, if we are unable to secure sufficient capital to fund our operations, we might have to enter into strategic collaborations that could require us to share commercial rights to our products or product candidates with third parties in ways that we currently do not intend or on terms that may not be favorable to us. If we choose to pursue additional indications and/or geographies for any of our products or product candidates or otherwise expand more rapidly than we presently anticipate, we may also need to raise additional capital sooner than expected.
Our need for future financing may result in the issuance of additional securities, which will cause investors to experience dilution.
Our cash requirements may vary from those now planned, depending upon numerous factors, including the results of future research and development activities. We expect our expenses to increase if and when we initiate and conduct clinical trials, and seek marketing approval for our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. There are no other commitments by any person for future financing. Our securities may be offered to other investors at a price lower than the price per share offered to current stockholders, or upon terms which may be deemed more favorable than those offered to current stockholders. In addition, the issuance of securities in any future financing may dilute an investor’s equity ownership and have the effect of depressing the market price for our securities. Moreover, we may issue derivative securities, including options and/or warrants, from time to time, to procure qualified personnel or for other business reasons. The issuance of any such derivative securities, which is at the discretion of our board of directors, may further dilute the equity ownership of our stockholders.
Risks Related to Product Development, Regulatory Approval, Manufacturing, and Commercialization
Our future success depends heavily on FDA review of our Phase 3 trial protocol and commencement of our Phase 3 clinical trial.
We completed our EOP2 meeting with FDA on March 26, 2026. Although we clarified a potential registrational path for our planned Phase 3 pivotal trial of CAD-1005 in patients with HIT, we have not yet received the meeting minutes from the FDA, which may contain additional information not discussed in the meeting. Our Phase 3 trial protocol will still be subject to any further comments we may receive from the FDA upon their review of the protocol. The FDA may also require us to conduct additional studies.
The 12-LOX platform of assets is subject to significant clinical risks that could impede our ability to advance CAD-1005 or our second-generation oral candidates .
Our second-generation oral 12-LOX inhibitors for Type 1 Diabetes and vascular health are in early development; any safety or efficacy failures in these programs could negatively impact the perceived value of the 12-LOX platform of assets as a whole. Since the Phase 2 study of CAD-1005 for patients with HIT was not powered for statistical significance, the observed benefit in thrombotic events could be due to chance rather than the product candidate’s efficacy. In addition, the Phase 2 trial did not complete enrollment, only 24 patients out of a planned 60 were treated in the trial before it was terminated. There can be no assurance that future trials will not have recruitment difficulties given the acute and complex nature of the disease.
Inadequate funding for the FDA, the SEC and other government agencies, including from government shutdowns, or other disruptions to these agencies’ staffing and operations, could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
Our business depends on timely interactions with the FDA, including the review of regulatory submissions, scheduling of formal meetings, and oversight of clinical trials. In fact, we recently attended an EOP2 meeting with the FDA to discuss a registration pathway for our Phase 3 trial. Disruptions at the FDA and other federal agencies, including substantial leadership departures, personnel cuts, policy changes and those related to the federal government shutdown, may result in reduced staffing or suspension of non-essential FDA operations, which could delay or cancel meetings with the FDA, hinder regulatory guidance, delay the implementation or enforcement of regulatory requirements in a timely fashion or at all, and postpone the review of IND applications, New Drug Applications (NDAs), and Biologics License Applications (BLAs). Any delay in our interactions with the FDA or future meetings will result in delay in us commencing future clinical trials of our lead product candidate CAD-1005 in patients with HIT. These disruptions may also affect the initiation, conduct, and monitoring of other clinical trials, particularly those requiring FDA authorization or ongoing regulatory engagement. Interruptions in FDA activities could materially delay our development timelines, increase operational costs, and adversely impact our ability to complete our planned clinical trials and to advance product candidates toward approval and commercialization. Any such delays or uncertainties may have a significant negative effect on our business, financial condition, and results of operations.
In addition, the current U.S. administration is focused on reducing costs of the federal government generally, including significantly reducing the number of government employees. Without appropriation of additional funding to federal agencies, our business operations related to our product development activities for the U.S. market could be impacted. 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, the ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.
If the U.S. federal government should experience another shutdown or if the FDA, National Institutes of Health (“NIH”), SEC or the United States Patent and Trademark Office (“USPTO”) experiences significant decreases in funding or personnel, it could significantly impact the ability of the FDA to issue licenses needed for conduct of our clinical trials, the NIH to conduct research or provide grants, and the abilities of the FDA and the USPTO to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
There is substantial uncertainty as to whether and how the new administration will seek to modify or revise the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our product candidates and any products for which we obtain approval. Additionally, the new administration could also issue or promulgate executive orders, regulations, policies or guidance that adversely affect us or create a more challenging or costly environment to pursue the development of new therapeutic candidates. Complying with any new legislation and regulatory requirements could be time-intensive and expensive.
Our business is dependent upon the success of our lead investigational product candidate, CAD-1005, which require additional clinical testing before we can seek regulatory approval and potentially launch commercial sales.
Our business and future success depends upon our ability to obtain regulatory approval of and then successfully commercialize our product candidates. Our main focus and the investment of a significant portion of our efforts and financial resources is expected to be in the development of CAD-1005, for which we are currently planning a pivotal Phase 3 clinical trial for the treatment of HIT with a primary endpoint of reduction in thrombotic events. Even if the FDA agrees with our planned registration pathway, there are many uncertainties known and unknown that may affect the outcome of the trial. These include adequate patient enrollment, adequate supply of our product candidate, potential changes in the regulatory landscape, the results of the trial being successful, and FDA acceptance of the data to support approval. We will also rely on third parties to conduct the appropriate clinical trials, and their failure to perform in accordance with applicable law would have a negative effect on our regulatory submission.
Our future success depends heavily on our ability to successfully manufacture, develop, obtain regulatory approval, and commercialize our product candidates, which may never occur. We currently generate no revenues from our product candidates, and we may never be able to develop or commercialize a marketable drug.
Our business is dependent on the Old Dominion License Agreement, and the termination, non-renewal or failure to maintain that agreement could materially and adversely affect our business, financial condition and prospects.
We do not own the intellectual property rights to our lead product candidate, CAD-1005, and instead license them and rely on the Old Dominion License Agreement for the development, manufacture and commercialization of CAD-1005. As a result, our ability to advance our CAD-1005 clinical program, obtain regulatory approval, and commercialize CAD-1005, if approved, is dependent on our continued rights under such agreement. The Old Dominion License Agreement may be terminated by the Licensor upon the occurrence of certain events, including our failure to meet development or regulatory milestones, to use commercially reasonable efforts, to make required payments (including upfront, milestone or royalty payments), or to comply with other material obligations. In addition, the Licensor may have the right to terminate the agreement for insolvency-related events or, in some circumstances, for convenience. Any termination would result in the loss of our rights to the licensed intellectual property, which would likely force us to discontinue development and commercialization of the CAD-1005. The Old Dominion License Agreement also requires us to make significant payments to the Licensor, including upfront fees, development and regulatory milestone payments, and royalties on future sales. These obligations increase our operating expenses and may reduce our profitability, if achieved, and could require us to raise additional capital.
If we were to lose our rights under the Old Dominion License Agreement, or if the agreement were otherwise terminated or materially modified in a manner adverse to us, we may be unable to continue development or commercialization of CAD-1005 on commercially reasonable terms, if at all. In such event, our business, financial condition, results of operations and prospects would be materially and adversely affected.
All of our current data for our product candidates are the results of clinical trials conducted by third parties and do not necessarily provide sufficient evidence that our products are viable as potential pharmaceutical products or that we can successfully conduct clinical trials.
We possess toxicology, pharmacokinetic, and other preclinical data and clinical data on our product candidates from studies and trials conducted by third parties, some of which were several years ago. There is no guarantee that Phase 1 or Phase 2 results, as applicable, from the clinical trials for our product candidates that were conducted by third-parties can or will be replicated by our planned clinical trials for such product candidates. Further, as the clinical trials were conducted by third parties and were completed prior to our ownership of the technology and data, we cannot be assured that such trials were conducted in compliance with applicable statutes, rules, regulations, and guidelines applicable to such trials.
Previous clinical trials may have had different trial designs, doses, parameters and endpoints than the planned clinical trials. With respect to our planned Phase 3 clinical trial that is expected to serve as a basis for approval of CAD-1005, we intend to design the Phase 3 protocol based on input from our EOP2 meeting with the FDA. Our Phase 3 trial protocol will still be subject to any further comments we may receive from the FDA upon their review of the protocol. However, it is possible that the results seen in the Veralox Phase 2 trial may not be demonstrated sufficiently in our clinical testing.
As all of the clinical trials for our product candidates to date were conducted by third parties, we cannot be assured that such clinical trials were in compliance with applicable laws, rules and regulations.
Since we did not acquire CAD-1005, tecarfarin and frunexian until December 2025, April 2022 and September 2025, respectively, we do not have first-hand knowledge of how the Phase 1 and Phase 2 clinical trials for such product candidates, as applicable, were completed to date. As such, we cannot be assured that such clinical trials were conducted in full compliance with applicable laws, rules and regulations. Additionally, we cannot be assured historical data for such trials are accurate and sufficient for acceptance by the FDA. While we are not aware of any issues in relation to such trials and the performance thereof, we cannot be assured that we may learn in the future that there was a failure to abide by such laws, rules and regulations, which could potentially expose us to issues with regards to our planned clinical trials or otherwise create risks unknown to us with regards to our technology.
Our efforts to develop our product candidate may not generate data sufficient to support an application for regulatory approval.
Despite the global burden of cardiovascular disease, investment in cardiovascular drug development has stagnated over the past two decades, with relative underinvestment compared with other therapeutic areas. The reasons for this trend are multifactorial, but of primary concern is the high cost of conducting cardiovascular outcome trials in the current regulatory environment that demands a direct assessment of risks and benefits, using clinically meaningful cardiovascular endpoints. In addition, clinical trials are difficult to design and implement, can take many years to complete and are uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. There is no guarantee that our clinical trials will reach statistical significance on their endpoints, or that any product candidate including CAD-1005 will demonstrate superiority to current standard of care or any other therapy. A failure of one or more of clinical trials can occur at any stage of testing. Our product candidate may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use with respect to one or all intended indications. In addition, we may experience other numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to continue development. Development stage risks include the following:
the FDA or comparable foreign regulatory authorities or institutional review boards, or IRBs, may disagree with the actual design or implementation of our clinical trial and refuse to let them proceed;
we may not be able to provide acceptable evidence of the safety and efficacy of our product candidates or an acceptable benefit/risk profile for our product candidate especially in light of the fact that Veralox’s Phase 2 trial for CAD-1005 for treatment of patients with HIT did not meet its primary endpoint;
we may not be able to successfully manufacture drug supplies for our clinical trial;
the results of our planned clinical trial may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, the EMA, or other comparable foreign regulatory authorities to demonstrate effectiveness;
we may not be able to determine the optimal dosing of our product candidates; and
patients in our clinical trial may sufferadverse effects that are deemed related to our product candidates, leading us or regulatory authorities to stop clinical trial temporarily or permanently.
If unacceptable safety concerns or other adverse events arise in the development of a product candidate, our clinical trials could be suspended or terminated or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of such product candidate for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Inadequate training in recognizing or managing the potential side effects of a product candidate could result in patient deaths. Any of these occurrences may harm our business, financial condition and prospects significantly.
Even if we successfully complete our clinical trials, we may not receive regulatory approval for our product candidates, and we may not be able to commercialize our product candidates and our ability to generate revenue will be limited.
The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We are not permitted to market our product candidates in the United States until we receive approval of an NDA from the FDA and, in non-U.S. markets, until we receive the requisite approval from comparable regulatory agencies in such countries. Of the large number of drugs in development, only a small number are submitted for approval to the FDA through an NDA and even fewer are eventually approved for commercialization. We may not succeed at gaining regulatory approval, which would materially harm our business.
Receipt of necessary regulatory approval is subject to a number of risks, including the following:
the data collected from pre-clinical and clinical trials may not be accurate or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
the relevant laws, approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
We cannot guarantee that regulators will agree with our assessment of the results of our clinical trials or that such trials will be considered by regulators to have shown safety or efficacy of our product candidates. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional clinical trials, or pre-clinical or other trials. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of a product candidate. Failure to obtain regulatory marketing approval for our product candidates in any indication will prevent us from commercializing the product candidate, and our ability to generate revenue will be materially impaired.
The process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the product candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in regulatory review for a submitted product application may cause delays in approval or rejection of an application. Regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek or gain approval in a different jurisdiction. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our current product candidates or any future product candidates will be harmed.
Orphan drug designation does not translate to approval and, even if we obtain FDA approval, we may not enjoy marketing exclusivity or other expected benefits.
CAD-1005 has ODD from the FDA for prophylaxis of thrombosis in patients with heparin-induced thrombocytopenia (HIT) as well as FDA Fast Track designation for the treatment and prevention of HIT and orphan designation from the EMA for the treatment of platelet-activating factor 4 disorders . Tecarfarin has ODD from the FDA for the prevention of systemic thromboembolism (blood clots) of cardiac origin in patients with ESKD and AFib, as well as for the prevention of thrombosis and thromboembolism in patients with an implanted mechanical circulatory support device, which includes LVADs, a mechanical heart pump. However, these orphan designations do not guarantee that the FDA or the EMA will approve the NDAs (or equivalent in the European Union) for such product candidates. Even if we obtain FDA or EMA approval, we may not be able to obtain or maintain orphan drug exclusivity for such product candidates. We may not be the first to obtain marketing approval of CAD-1005 and/or tecarfarin for their respective orphan-designated indications due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may be approved for the same condition, or the competitive product is otherwise outside the scope of exclusivity. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care or the manufacturer of the product with orphan exclusivity is unable to maintain sufficient product quantity. Orphan 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, nor does it prevent competitors from obtaining approval of the same product candidate for indications other than those in which orphan designation have been granted.
Fast Track designation by the FDA may not actually lead to a faster development or regulatory review or approval process, and does not assure FDA approval of our product candidate.
If a product candidate is intended for the treatment of a serious or life-threatening condition and the product candidate demonstrates the potential to address unmet medical need for this condition, the sponsor may apply for FDA Fast Track designation. However, a Fast Track designation does not ensure that the product candidate will receive marketing approval or that approval will be granted within any particular timeframe. As a result, while CAS-1005 has received Fast Track designation for the treatment and prevention of HIT and tecarfarin for the prevention of systemic thromboembolism of cardiac origin in patients with ESKD and AFib an, we may not experience a faster development process, review or approval compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures and does not assure ultimate approval by the FDA.
Even if we obtain regulatory approval, we will still face ongoing regulatory requirements and our product candidates may face future development and regulatory difficulties.
Even if we receive regulatory approval of our current product candidates or any future product candidates, we will be subject to ongoing regulatory obligations, such as post market surveillance and cGMP requirements, and continued regulatory review, which may result in significant additional expense. We may also be subject to penalties if we fail to comply with regulatory requirements or experience unanticipatedproblems with product candidates. In addition, third parties on whom we rely must comply with regulatory requirements, and any non-compliance on their part may negatively impact our business, assuming we obtain regulatory authorization at all.
Any regulatory approvals that we receive for product candidates will require surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a Risk Evaluation and Mitigation Strategy (“REMS”) program in order to approve product candidates, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA could also require a boxed warning, sometimes referred to as a Black Box Warning on the product label to identify a particular safety risk, which could affect commercial efforts to promote and sell the product. In addition, if the FDA or a comparable foreign regulatory authority approves product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP and current GCP for any clinical trials that we conduct post-approval. We are also subject to certain user fees imposed by the regulatory agencies. Later discovery of previously unknown problems with product candidates, including adverse events of unanticipatedseverity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
import alerts or automatic detentions;
restrictions on the marketing or manufacturing of product candidates, withdrawal of the product from the market, or product recalls;
fines, warning letters or holds on clinical trials;
refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of approvals;
labeling changes;
product seizure or detention, or refusal to permit the import or export of product candidates;
injunctions or the imposition of civil or criminalpenalties; and
inability to obtain government contracts.
The policies of the FDA and other regulatory authorities may change, such as those required by the 21 st Century Cures Act, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our current product candidates or any future product candidates. In addition, it is unclear what changes, if any, the new presidential administration may bring. We 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 we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
Clinical trials are very expensive, time-consuming and difficult to design and implement.
As part of the regulatory process, we must conduct clinical trials for each product candidate to demonstrate safety and efficacy to the satisfaction of the FDA and other regulatory authorities. As we advance CAD-1005 or any future product candidates we expect that our expenses will increase. The number and design of the clinical trials that will be required varies depending upon product candidate, the condition being evaluated, current medical strategies and the trial results themselves. Therefore, it is difficult to accurately estimate the cost of the clinical trials. Clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The clinical trial process is also time consuming. We estimate that clinical trials of each of our product candidates, will take at least several years to complete. Furthermore, failure can occur at any stage of the trials, and we could encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed or prevented by several factors, including:
unforeseen safety issues;
failure to determine appropriate dosing;
greater than anticipated cost of our clinical trials;
failure to demonstrate effectiveness during clinical trials;
slower than expected rates of subject recruitment or difficulty obtaining investigators, particularly during COVID-19;
subject drop-out or discontinuation;
import delays of clinical trial materials;
inability to monitor subjects adequately during or after treatment;
third party contractors, including, without limitation, CROs and manufacturers, failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;
reaching agreements with prospective CROs, and trial sites, both of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
insufficient or inadequate supply or quality of product candidates or other necessary materials to conduct our trials;
potential additional safety monitoring, or other conditions required by FDA or comparable foreign regulatory authorities regarding the scope or design of our clinical trials, or other studies requested by regulatory agencies;
problems engaging Institutional Review Boards (“IRBs”), to oversee trials or in obtaining and maintaining IRB approval of studies;
imposition of clinical hold or suspension of our clinical trials by regulatory authorities; and
inability or unwillingness of medical investigators to follow our clinical protocols.
In addition, we or the FDA may suspend or terminate our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the FDA finds deficiencies in our IND submissions or the conduct of these trials. Therefore, we cannot predict with any certainty when, if ever, future clinical trials will commence or be completed.
Delays or difficulty in the enrollment of patients in any or all of our clinical trials could increase our development costs and delay completion of our clinical trials and associated regulatory submissions.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or other regulatory authorities. The Phase 2 trial of CAD-1005 in patients with HIT enrolled only 24 patients out of a planned 60 and was terminated early. It is unclear whether the trial would have been fully enrolled if it were not terminated early. A pandemic or epidemic would likely make this even more challenging. Even if we are able to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the development costs for our product candidates may increase, and the completion of our trials may be delayed or our trials could become too expensive to complete.
Even if approved, our product candidates may not have labeling that allows us to successfully commercialize it.
The commercial success of our product candidates will depend in significant measure upon our ability to obtain approval from the FDA and other regulatory authorities of labeling describing a product candidate’s expected features or benefits. Regulatory authorities may approve a product candidate for fewer or more limited indications than we request or may approve a product candidate with labeling that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Failure to achieve approval from the FDA or other regulatory authorities of product labeling containing certain types of information on features or benefits of our products will prevent or substantially limit our advertising and promotion of such features in order to differentiate our product candidates or any future product candidates from those products already existing in the market. This may make it difficult or impossible to achieve commercial success.
If any of our product candidates is approved, our success depends on our commercialization efforts, which may not be achieved. If we are unable to commercialize our product candidate, or experience significant delays in doing so, our business could be materially harmed.
We will invest a significant portion of our efforts and financial resources into the development and commercialization of our product candidates. Product revenues from our product candidates which will not be realized until after regulatory approval, if ever, will depend on the successful development, regulatory approval and eventual commercialization of these product candidates. The success of our product candidate will depend on several factors, including the following:
receipt of marketing approvals for our product candidate from the FDA and similar regulatory authorities outside the United States;
obtaining product indications, other labeling information and product attributes that are acceptable and attractive to the medical community, third-party payors and patients;
our ability to manufacture product commercially at acceptable costs;
establishing and maintaining commercial manufacturing arrangements with third parties;
successfully commercializing our product candidate, if approved, whether alone or in collaboration with others;
a continued acceptable safety profile of the product candidate following approval; and
obtaining, maintaining, enforcing and defending intellectual property rights and claims and available product exclusivities.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidate, which would materially harm our business. In addition, even if we obtain regulatory approvals for any of our product candidates, the timing or scope of any approval may prohibit or reduce our ability to commercialize such product candidate successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Also, any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render such product candidate not commercially viable. For example, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or, outside the U.S., they may not accept or approve the price we intend to charge for a product candidate. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals, such as risk management plans and Risk Evaluation and Mitigation Strategies (“REMS”), to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of such product candidate. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our product candidates.
Our product candidates may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
The commercial success of any of our product candidates for which we may obtain marketing approval from the FDA or other regulatory authorities, will depend upon their acceptance by the medical community and third-party payors as clinically useful, cost-effective and safe. The degree of market acceptance of any drug depends on a number of factors, such as:
effectively competing with other therapies;
the prevalence and severity of any side effects;
success of patients in well-controlled clinical trials compared to real-world success of patients post FDA approval;
our ability to educate and increase physician awareness of the benefits of our products relative to competing drugs;
the willingness of physicians and healthcare organizations to change their current treatment practices, especially with respect to warfarin, a drug that is dominant in the market and with which physicians and healthcare organizations have 60 years of familiarity;
the willingness of hospitals and hospital systems to include our product candidates as treatment options;
efficacy and potential advantages compared to alternative treatments;
the price we charge for our product candidates;
interpretations of the results of our clinical trials;
the status of our products on the formularies of third-party payers;
convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
the willingness of the target patient population to pay for our products, including co-pays under their health coverage plans;
the strength of marketing and distribution support; and
the availability of third-party coverage and adequate reimbursement.
The failure to attain market acceptance among the medical community, patients and third-party payors may have an adverse impact on our operations and profitability.
We have never submitted an NDA to the FDA or comparable applications to other regulatory authorities and we may not be successful in achieving approval of our product candidates.
We have never submitted an NDA to the FDA or comparable applications to other regulatory authorities and expect to rely on consultants and third-party contract research organizations (“CROs”), with expertise in this area to assist us in this process. Securing FDA approval requires the submission of pre-clinical, clinical and/or pharmacokinetic data, information about product manufacturing processes and inspection of facilities and supporting information to the FDA for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication. Regulatory authorities in other jurisdictions impose similar requirements. If we are unable to successfully complete the approval process with the FDA or comparable applications of other regulatory authorities, our business will not be successful.
After approval of a product candidate, it will remain subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional risk and expense.
Drug products remain subject to the jurisdiction of the FDA and non-U.S. regulatory authorities after they have been approved. Even if we obtain regulatory approval of our product candidates, the FDA and other regulatory authorities may impose significant restrictions on their indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval trials, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. Our product candidates, if approved, as well as our marketed products, are subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, sampling, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA and continued compliance with cGMP and current GCP requirements for any clinical trials that we conduct post-approval.
After approval, our products could be subject to labeling and other restrictions and we may be required to withdraw from the market or be subject to penalties if we fail to comply with regulatory requirements.
The product labeling, advertising and promotion of our products and our product candidates, if approved, are subject to regulatory requirements and continuing regulatory review. Government authorities, including the FDA and the Office of the Inspector General of the Department of Health and Human Services (“OIG”), strictly regulate the promotional claims and activities that may be made about prescription products. A drug product may not be promoted for uses that are inconsistent with the product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved labeling. However, if we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The federal government has extracted very large settlements and levied very large civil and criminalfinesagainst companies for allegedimproper promotion, has enjoined companies from engaging in off-label promotion, and made companies agree to onerous multi-year corporate integrity agreements. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.
We are subject, directly or indirectly, to federal and state obligations and regulations applicable to our marketing practices. If we are unable to comply, or have not complied, with such laws, we could face substantial penalties.
Our marketing and sales operations are subject to various federal and state fraud and abuse laws, including, without limitation, the federal and state anti-kickback statutes and falseclaims laws. With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. We also are subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Federal Healthcare Program Anti-Kickback Statute, U.S. FalseClaims Act, and similar state laws, which impact, among other things, most of our interactions with customers, including our proposed sales, marketing, and scientific/educational grant programs. We are also subject to complex laws and regulation regarding reporting and payment obligations as a result of our participation in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, and other government drug programs. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries. If investigated, we could be forced to incur substantial expense responding to the investigation and defending our actions. If unsuccessful in our defense, we could be found to be in violation and subject to substantial fines and penalties,
We currently do not have any long-term supply agreements or commercialization partnerships with third-party manufacturers for the production and distribution of our product candidates and intend to rely upon third parties to produce and distribute them.
We do not have a manufacturing infrastructure and do not intend to develop one. We do not have any long-term supply agreements with any manufacturers of CAD-1005 or frunexian. With respect to the drug candidates we acquired from eXIthera and Veralox, we intend to execute contracts with third-party CDMOs for the supply of drug substance and drug product in accordance with cGMP, but do not yet have such contracts in place.
We have recently completed the manufacturing of tecarfarin drug product in accordance with cGMP. We have executed contracts with third-party pharmaceutical CDMOs for the development of validated processes and the supply of active pharmaceutical ingredients and clinical trial material for tecarfarin in accordance with cGMP requirements. Such CDMOs have the capability to scale-up for commercial production of tecarfarin. However, we have not entered into any long-term supply agreements or commercialization partnerships with these vendors. Certain material suppliers and manufacturing sites for our product candidates are in locations outside of the U.S.
While the materials and substances used in our product candidates are manufactured by more than one supplier, the number of suppliers is limited. In the event it is necessary or advisable to acquire drug materials, substances, and products from alternative suppliers, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time and expense to transfer or redesign our manufacturing processes to work with another company. If approved by the FDA, we anticipate that we will be able to enter into agreements with third parties to manufacture and distribute our product candidates on commercially reasonable terms.
We intend to rely on third-party CDMOs to produce our product candidates for our clinical studies who are expected to purchase materials from third-party vendors and transport the materials necessary to produce them, such as the required reagents and containers. This reliance on CDMOs and third-party vendors that we do not own or operate exposes us to various risks, including:
Supply Disruptions : Our CDMOs may experience difficulties in manufacturing, including shortages of raw materials, equipment failures, capacity constraints, or regulatory enforcement actions, any of which could result in delays or interruptions in supply.
Regulatory Compliance Risks : Our CDMOs must comply with cGMP and other regulatory requirements enforced by the FDA and other regulatory authorities. Any failure to meet these standards could result in delays, batch failures, regulatory sanctions, or product recalls.
Loss of Key Manufacturing Partners : If a CDMO terminates its relationship with us, fails to meet our supply needs, or becomes unable to fulfill its obligations due to financial difficulties, insolvency, or acquisition by a third party, we may not be able to obtain alternative manufacturing sources in a timely or cost-effective manner.
Limited Control Over Operations : Because we do not own or operate these third-party facilities, we have limited control over their manufacturing processes, quality systems, and compliance efforts, which increases our exposure to risks outside of our direct control.
Capacity and Scalability Risks : If our CDMO partners are unable to scale production to meet future clinical or commercial demands, we may experience supply shortages that could delay our development timelines or commercial launch.
If a third-party manufacturer was to experience any prolongeddisruption for our manufacturing, or face enforcement scrutiny by regulatory authorities, we could be forced to seek additional third-party manufacturing contracts, thereby increasing our development costs and negatively impacting our timelines and any commercialization costs. If we change manufacturers at any point during the development process or after approval of a product candidate, we will be required to demonstrate comparability between the product manufactured by the old manufacturer and the product manufactured by the new manufacturer. If we are unable to do so, we may need to conduct additional studies or clinical trials with product manufactured by the new manufacturer, thereby delaying our NDA submission or approval.
If the manufacturer upon which we rely fails to comply with stringent regulations, we may face delays in the development and commercialization of, or be unable to meet demand for, our product candidates and may lose potential revenues.
Any problems or delays our contract manufacturers experience in preparing for commercial-scale manufacturing of a product candidate or component may result in a delay in product development timelines and FDA or comparable foreign regulatory authority approval of the product candidate or may impair our ability to manufacture commercial quantities or such quantities at an acceptable cost and quality, which could result in the delay, prevention, or impairment of clinical development and commercialization of our product candidates and may materially harm our business, financial condition, results of operations, stock price and prospects.
In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents. Although we do not have day-to-day control over our contract manufacturers’ compliance with these requirements, we are responsible for ensuring compliance with such requirements. Our failure, or the failure of our contract manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, revocation of licenses, seizures or recalls of product candidates, operating restrictions and criminalprosecutions, any of which would significantly and adversely affect supplies of our product candidates and our business. If a contract manufacturer’s facilities do not pass a pre-approval inspection or do not have a cGMP compliance status acceptable to the FDA or a comparable foreign regulatory authority, our product candidate will not be approved.
In addition, application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. Moreover, in the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. In addition, our marketed products will have to comply with the Drug Supply Chain Security Act of 2013, which requires drug companies to enable electronic tracking of their products though the U.S. supply chain.
Any deviations from regulatory requirements may also require remedial measures that may be costly and/or time-consuming for us or a third-party to implement and that may include the temporary or permanent suspension of a clinical trial or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business. Any delays in obtaining products or product candidates that comply with the applicable regulatory requirements may result in delays to product approvals, and commercialization. It may also require that we conduct additional trials.
We face substantial competition, which may result in others discovering, developing or commercializing competing products more successfully than we do, or, perhaps obtaining approval before our product and, potentially delaying our approval.
The development and commercialization of new drugs is highly competitive. We face competition with respect to developing our current product candidates, and we will face competition with respect to any products that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. If we succeed in developing our product candidates, we will face substantial competition. Our competitors include major multi-national pharmaceutical companies and biotechnology companies developing both generic and proprietary anticoagulant therapies, which have substantially more resources than we do and substantially more experience developing and marketing pharmaceuticals. Many of our competitors have drugs that have already been commercialized and therefore benefit from being first to market their products. Many of these companies are well-established and possess technical, human, research and development, financial, and sales and marketing resources significantly greater than ours. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization of competing drugs and potentially competing drugs. Our competitors are or may be attempting to develop therapeutics for our target indications. Although we are currently developing the only selective 12-LOX inhibitor at the clinical-stage; other companies may pursue alternative pathways or more effective 12-LOX candidates that could render our platform of assets obsolete.
Factors affecting competition in these markets include the financial, research and development, testing, and marketing strengths of individual competitors, trends in industry consolidation, consumers’ product options, product quality, price and technology, reputation, customer service capabilities and access to market partners and customers. If approved, CAD-1005 would compete with existing non-heparin anticoagulants such as direct thrombin antagonists (bivalirudin and argatroban), fondaparinux (a direct Xa antagonist), and DOACS. Eliquis is manufactured and distributed by Bristol Myers Squibb, Pradaxa is manufactured and distributed by Boehringer Ingelheim, Xarelto is manufactured and distributed by Janssen Pharmaceuticals, and Savaysa is manufactured and distributed by Daiichi Sankyo, each of which is a competitor product of tecarfarin.
We may not be able to successfully compete with these existing products, including their current or future generic equivalents. Each of these organizations has a long operating history, extensive resources, strong brand recognition and large customer bases. As a result, we expect they will be able to devote greater resources than we can to the manufacture, promotion and sale of their products; receive greater resources and support than we will from market partners and independent distributors; initiate and withstand substantial price competition; and take advantage more readily than we could of acquisition and other strategic market opportunities. In addition, these or other organizations could succeed in developing new products that perform better or more cost-effectively than our products and product candidates in their respective markets. Moreover, changes in health trends, diet or other factors could substantially reduce the commercial attractiveness or viability of the markets for anti-anginal, anticoagulant, anti-arrhythmic and anti-platelet products.
The high level of competition in these markets could result in pricing pressure, reduced margins, the inability of our product candidates to achieve market acceptance and other impediments to commercial success. As a result, there can be no assurance that we will be able to complete the development of competitive products and commercialize them on a competitive basis.
Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
If seriousadverse effects are identified with respect to any of our product candidates or any of our approved products, we may need to modify or abandon our development of that product candidate, discontinue sale of an approved product, or change our labeling to reflect new safety risks.
It is impossible to guarantee when, or if, any of our product candidates will prove safe enough to receive regulatory approval. It is impossible to guarantee that safety issues that may arise during development will not significantly decrease the commercial potential of our product candidates. In addition, there can be no assurance that our clinical trials will identify all relevant safety issues. Known or previously unidentified adverse effects can adversely affect regulatory approvals or marketing of approved products. In such an event, we might need to abandon marketing efforts or development of that product or product candidate or enter into a partnership to continue development.
If a regulatory agency discovers adverse events of unanticipatedseverity or frequency it may impose restrictions on that product or us, including requiring withdrawal of the product from the market. Among other legal and administrative actions, a regulatory agency may:
mandate modifications to product labelling or promotional materials or require us to provide corrective information to healthcare practitioners;
withdraw any regulatory approvals;
place any ongoing clinical trials on clinical hold;
refuse to approve pending applications or supplements to approved applications filed by us, our partners or our potential future partners;
impose restrictions on operations, including costly new manufacturing, licensing or packaging requirements; or
seize or detain products or require a product recall.
In addition, the occurrence of any of the foregoing, even if promptly remedied, could (1) negatively impact the perception of us or the relevant product among the medical community, patients or third-party payors and (2) result in product liability litigation that could result in the company paying substantial amounts of money in settlements or verdicts.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and to commercialize our product candidates and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our product candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our 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 us to more stringent product labeling and post-marketing testing and other requirements.
In the United States, under the Medicare Modernization Act (“MMA”), Medicare Part D provides coverage to the elderly and disabled for outpatient prescription drugs by approving and subsidizing prescription drug plans offered by private insurers. The MMA also authorizes Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. The Part D plans use their formulary leverage to negotiate rebates and other price concessions from drug manufacturers. Also under the MMA, Medicare Part B provides coverage to the elderly and disabled for physician-administered drugs on the basis of the drug’s average sales price, a price that is calculated according to regulatory requirements and that the manufacturer reports to Medicare quarterly.
Both Congress and CMS, the agency that administers the Medicare program, from time to time consider legislation, regulations, or other initiatives to reduce drug costs under Medicare Parts B and D. For example, under the ACA, drug manufacturers are required to provide a 50% discount on prescriptions for branded drugs filled while the beneficiary is in the Medicare Part D coverage gap, also known as the “donut hole.” The Bipartisan Budget Act of 2018 increased the manufacturer’s subsidy under the program from 50% to 70% of the negotiated price, beginning in 2019. There have been legislative proposals to repeal the “non-interference” provision of the MMA to allow CMS to leverage the Medicare market share to negotiate larger Part D rebates. Further cost reduction efforts could decrease the coverage and price that we receive for our product candidates and could seriouslyharm our business. Private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement under the Medicare program may result in a similar reduction in payments from private payors.
In addition, healthcare reform legislation enacted in recent years has materially altered the post-approval commercial landscape for pharmaceutical products. The Inflation Reduction Act of 2022 (“IRA”) grants the U.S. government authority to negotiate prices for certain drugs and biologics reimbursed under Medicare, imposes inflation-based rebate obligations, and modifies reimbursement structures under Medicare Part B and Part D. While these provisions generally apply a number of years after a product’s initial approval, they may reduce long-term pricing flexibility, decrease the commercial value of approved products, influence development and launch strategies, and reduce the anticipated return on investment for one or more of our product candidates.
The ACA itself significantly reshaped the U.S. healthcare and pharmaceutical landscape. Among other things, it expanded access to health insurance coverage, increased utilization of healthcare services and prescription drugs, and imposed new transparency, pricing, and rebate obligations on pharmaceutical manufacturers. The ACA also included the Biologics Price Competition and Innovation Act, which established an abbreviated approval pathway for biosimilar biological products and a statutory exclusivity framework for reference biologics. This framework has materially affected competition dynamics, pricing pressure, and lifecycle management strategies for biologic products and may reduce the duration or magnitude of market exclusivity for any biologic product candidates we may develop or commercialize. The ACA also expanded mandatory manufacturer discounts and rebates under government healthcare programs, including Medicaid and the Medicare Part D coverage gap discount program, and increased reporting and compliance obligations under federal healthcare laws, such as the Physician Payments Sunshine Act. These provisions have increased the complexity and cost of compliance for pharmaceutical manufacturers and reduced net revenues derived from government-reimbursed sales. If any of our products are approved and become eligible for coverage under government healthcare programs, these requirements could materially reduce our realized revenue and profitability.
In addition, the ACA strengthened and expanded the federal 340B drug pricing program, which requires manufacturers to provide significant discounts to certain covered entities. Expansion of the 340B program, as well as continued regulatory and judicial developments affecting its scope and enforcement, may further reduce net pricing and create additional uncertainty regarding distribution channels, contracting arrangements, and compliance exposure.
Beyond the ACA, subsequent legislation has expanded FDA’s authority over the development and approval of drug and biologic products. The Food and Drug Administration Safety and Innovation Act of 2012 (“FDASIA”) created, among other programs, the breakthrough therapy designation and expanded FDA’s expedited development and review tools for products intended to treat serious or life-threatening diseases. While these programs may offer the potential for accelerated development or approval, they also involve greater regulatory uncertainty, enhanced FDA interaction, and increased post-approval obligations, and FDA retains broad discretion in determining eligibility and requirements. The 21st Century Cures Act of 2016 further modified FDA approval standards by permitting the Agency, in appropriate circumstances, to consider real-world evidence, biomarkers, surrogate endpoints, and novel clinical trial designs in support of marketing approval or label expansions. Although these provisions were intended to increase flexibility and efficiency in drug development, they create uncertainty regarding how FDA will apply these evolving evidentiary standards to particular products or development programs, including ours.
More recently, the Food and Drug Omnibus Reform Act of 2022 (“FDORA”), enacted as part of the Consolidated Appropriations Act, 2023, significantly expanded FDA’s authority over products approved under accelerated or other expedited approval pathways. FDORA enhances FDA’s ability to require that confirmatory clinical trials be underway prior to approval, mandates additional post-approval reporting and oversight, and provides FDA with greater authority to expedite withdrawal of approval if required post-approval studies fail to verify clinical benefit, are not conducted with due diligence, or do not meet regulatory expectations. As a result, even if one or more of our product candidates receives accelerated approval, we may be required to conduct additional costly and time-consuming studies, and FDA may ultimately withdraw approval.
Recent legislation has also imposed additional requirements on clinical development programs, including obligations to submit and implement diversity action plans for certain late-stage clinical trials. Compliance with these requirements may increase development costs, extend clinical timelines, complicate patient enrollment, and adversely affect our ability to complete studies, particularly for rare diseases or highly specialized patient populations.
Congress continues to consider additional legislative and regulatory reforms that could further amend the ACA, modify FDA approval pathways, expand government pricing controls, increase compliance and reporting requirements, or otherwise affect exclusivity, reimbursement, and commercialization. We cannot predict whether, when, or in what form such changes may be adopted, nor how FDA and other agencies may interpret or implement them. If we are unable to successfully adapt our development and commercialization strategies to this evolving legislative and regulatory environment, or if future changes under the ACA or other healthcare laws impose more stringent requirements, delay or prevent approvals, increase development or compliance costs, restrict pricing or reimbursement, or result in withdrawal of approval, our business, financial condition, results of operations, and prospects could be materially adversely affected.
If we market any of our products in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject to civil or criminalpenalties.
The FDA and other government authorities enforce laws and regulations that require that the promotion of pharmaceutical products be consistent with the approved prescribing information. While physicians may prescribe an approved product for a so-called “off-label” use under the practice of medicine, it is unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company which engages in such conduct may be subject to significant liability. Similarly, industry codes in the European Union and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include the U.S. Federal Healthcare Program Anti-Kickback Statute, U.S. FalseClaims Act and similar state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws.
The U.S. Federal Healthcare Program Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws. For example, the ACA, among other things, amends the intent requirement of the U.S. Federal Healthcare Program Anti-Kickback Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Federal Healthcare Program Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. FalseClaims Act. Federal falseclaims laws, including the U.S. FalseClaims Act, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government.
Over the past few years, pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; using a charity as an illegal conduit to cover the copays of Medicare patients; and submitting inflated best price information to the Medicaid Drug Rebate Program to reduce liability for Medicaid rebates.
Other restrictions under applicable U.S. federal and state healthcare laws and regulations may include the following:
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes criminal and civil liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health (“HITECH) Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, on certain types of people and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal Physician Payment Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report payments and other transfers of value to physicians and teaching hospitals, as well as certain ownership and investment interests held by physicians and their immediate family, which includes annual data collection and reporting obligations; and
analogous state and foreign laws and regulations, such as state anti-kickback and falseclaims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures to federal and state agencies. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Tracking and reporting may be burdensome and require a significant expenditure to comply with applicable requirements.
Our ability to generate product revenues will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement .
Our ability to commercialize our products, alone or with collaborators, will depend in part on the extent to which reimbursement will be available from:
government and health administration authorities;
private health maintenance organizations and health insurers; and
other healthcare payers.
Patients generally expect that products such as ours are covered and reimbursed by third-party payors for all or part of the costs and fees associated with their use. If such products are not covered and reimbursed then patients may be responsible for the entire cost of the product, which can be substantial. Therefore, health care providers generally do not prescribe products that are not covered and reimbursed by third-party payors in order to avoid subjecting their patients to such financial liability. The existence of adequate coverage and reimbursement for the products by government and private insurance plans is central to the acceptance of our current product candidates and any future products we provide.
During the past several years, third-party payors have undertaken cost-containment initiatives including different payment methods, monitoring health care expenditures, and anti-fraud initiatives. For some governmental programs, such as Medicaid, coverage and reimbursement differ from state to state, and some state Medicaid programs may not pay an adequate amount for our product candidates or any of our other products or may make no payment at all. Furthermore, the health care industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control health care costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain that our services will be reimbursed at a level that is sufficient to meet our costs.
Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Patients are unlikely to use our current product candidates or any future product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our current product candidates or any future product candidates.
We intend to seek approval to market our current product candidates and future product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our current product candidates or any future product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the European Union, the pricing of drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of product candidates will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for product candidates and may be affected by existing and future health care reform measures.
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in the ACA, as amended by the Health Care and Education Affordability Reconciliation Act, among other things, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs, including product candidates, under the Medicaid Drug Rebate Program are calculated, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
The impact of recent healthcare reform legislation, other changes in the healthcare industry, and in healthcare spending is currently unknown and may adversely affect our business model.
Our revenue prospects could be affected by changes in healthcare spending and policy in the U.S. and abroad. We operate in a highly regulated industry, and new laws, regulations, judicial decisions, or new interpretations of existing laws, regulations, or decisions related to healthcare availability, the method of delivery, or payment for healthcare tests, products, and services could negatively impact our business, operations, and financial condition.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal, and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, including proposals aimed at lowering prescription drug prices and increasing competition for prescription drugs, as well as additional regulation on pharmaceutical transparency and reporting requirements, any of which could negatively impact our future profitability and increase our compliance burden. We cannot predict the initiatives that may be adopted in the future, including future challenges or significant revisions to the ACA. The continuing efforts of the government, insurance companies, managed care organizations, and other payors to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
the demand for our therapeutic products, if we or our licensors obtain regulatory approval;
the ability to set a price that we believe is fair for a therapeutic product;
the ability to obtain coverage and reimbursement approval for a therapeutic product;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future, particularly in light of the new presidential administration in the United States, and any proposed changes to healthcare laws that could potentially affect our clinical development or regulatory strategy. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
the demand for our current product candidates, or future product candidates, if we obtain regulatory approval;
our ability to set a price that we believe is fair for our products;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.
Any reduction in reimbursement from Medicare, Medicaid or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.
We will rely on third parties and consultants to conduct all of our clinical trials. If these third parties or consultants do not successfully carry out their contractual duties, comply with regulatory requirements, or meet expected deadlines, we may be unable to obtain regulatory approval for any future product candidates.
We will rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as CROs, to conduct clinical trials on our product candidates. The third parties with whom we may contract for execution of any of our future clinical trials may play a significant role in the conduct of these trials and the subsequent collection and analysis of data. These third parties would not be our employees, and except for contractual duties and obligations, we would have limited ability to control the amount or timing of resources that they devote to any of our future programs. Although we may rely on these third parties to conduct our clinical trials, we would remain responsible for ensuring that each of our preclinical trials and clinical trials is conducted in accordance with applicable legal requirements, the investigational plan and the protocol. Moreover, whether we conduct trials ourselves or hire third parties to do so, the FDA and other similar regulatory authorities require us to comply with GCP when we conduct, monitor, record and report 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 clinical trials.
In addition, the execution of clinical trials, and the subsequent compilation and analysis of the data produced, requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. Moreover, these third parties may also have relationships with other commercial entities, some of which may compete with us. If the third parties or consultants conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCP, or for any other reason, we may need to conduct additional clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, or may be delayed in obtaining, regulatory approval for and will not be able to, or may be delayed in our efforts to, successfully commercialize any future product candidates being tested in such trials.
We currently do not have any distribution, marketing, support and sales capabilities and plan to rely on third-party distribution partners for the distribution, marketing, support and sales of our products which could delay or limit our ability to generate revenue.
We plan to utilize third-party service providers for the distribution and marketing and sales of our product candidates, if approved. Upon launch, we intend to promote utilizing third party collaborations in addition to building our own commercial infrastructure in anticipation of the approval of our product candidates. Reliance on third-party service providers may prevent our direct control of key aspects of those critical functions including regulatory compliance, import and export operations, supply chain security, warehousing and inventory management, distribution, contract administration, invoicing, sales deductions administration, accounts receivable management and call center management. Any future distribution partners may hold significant control over important aspects of the commercialization of our products, including market identification, regulatory compliance, marketing methods, pricing, composition of sales force and promotional activities.
We may not be able to control the amount and timing of resources that any future third-party distribution partners may devote to our products, or prevent any third-party from pursuing the development of alternative technologies or products that compete with our products, except to the extent our contractual arrangements protect us against such activities. Also, we may not be able to prevent any other third-party from withdrawing its support of our products.
If third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, encounter natural or other disasters at their facilities or otherwise fail to perform their services to us in a satisfactory or predicted manner, or at all, our ability to deliver product to meet commercial demand could be significantly impaired. In addition, we may use third parties to perform various other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market our products could be jeopardized or we could be subject to regulatory sanctions, and any indemnity we may receive from such third-party service providers could be limited by such provider’s ability to pay and otherwise might not be sufficient to cover all losses we may experience.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: (i) comply with the laws of the FDA and other similar foreign regulatory bodies; (ii) provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; (iii) comply with manufacturing standards we have established; (iv) comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulentmisconduct laws; or (v) report financial information or data accurately or to discloseunauthorized activities to us. Any such misconduct or noncompliance could negatively affect the FDA’s review of our regulatory submission, including delaying approval or disallowance of certain information to support the submission, and/or delay a federal or state healthcare programs or a commercial insurer’s determination regarding the availability of future reimbursement for product candidates. If we obtain FDA approval of any product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.
It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
We intend to establish a sales force to market our product candidates. If we are not successful in doing so, our ability to generate sales and profits will be limited.
Although certain of our employees have commercialization experience, as a company we do not have an internal sales force and we currently have only limited commercial capabilities. We intend to establish an internal specialty sales force for the promotion and sale of our product candidates, if approved. Establishing a pharmaceutical sales force is a difficult undertaking. Experienced and competent sales representatives and sales managers must be recruited, hired, trained, assigned appropriate territories, managed and compensated in such a way that they can achievesuccess in selling products to a sophisticated audience of healthcare professionals who frequently have little or no time to spend with sales personnel. In addition, our prospective sales force must compete against the sales forces of some of the largest and most successful pharmaceutical companies in the world, who will be promoting competing products. If we fail to hire and field a high-quality sales force, we may be unable to generate expected revenues and profits.
In addition, there are significant expenses and risks involved with establishing our own sales and marketing capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of our product candidates. For example, if we recruit any sales representatives or establish marketing capabilities prior to commercial launch and the commercial launch is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
In addition to our own internal sales force, we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our product candidates. To the extent we commercialize our product candidates by entering into agreements with third-party collaborators, we may have limited or no control over the sales, marketing and distribution activities of these third parties, in which case our future revenues would depend heavily on the success of the efforts of these third parties. If we are not successful in commercializing our current product candidates or any future product candidates, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we could incur significant additional losses.
We plan to rely on collaborations and license arrangements with third parties to commercialize, market and promote our marketed products which may limit our ability to generate revenue and adversely affect our profitability.
We plan to rely on collaboration and other agreements with third parties with respect to our product candidates and future marketed products. Our current or any future collaborations or license arrangements may not be successful. With respect to the product candidates we have out-licensed, including our rights to tecarfarin and frunexian in China, we depend upon collaborations with third parties to develop these product candidates in the licensed territories and we will depend substantially upon third parties to commercialize these product candidates. If we are unable to maintain current collaborations or enter into additional collaborations with established pharmaceutical or pharmaceutical service companies to provide the services we need, we may not be able to successfully commercialize our products.
Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.
Although our focus as this time is primarily on the U.S. market, our future profitability will depend, in part, on our ability to commercialize our product candidates in foreign markets for which we intend to rely on collaborations with third parties. If we commercialize our product candidates in foreign markets, we would be subject to additional risks and uncertainties, including:
our customers’ ability to obtain reimbursement in foreign markets;
our inability to directly control commercial activities because we are relying on third parties;
the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;
different medical practices and customs in foreign countries affecting acceptance in the marketplace;
import, export and foreign licensing requirements;
different packaging and labeling requirements;
longer accounts receivable collection times;
longer lead times for shipping;
language barriers for technical training;
differing and/or reduced protection of intellectual property rights in some foreign countries;
foreign currency exchange rate fluctuations; and
the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.
Foreign sales of our product candidates could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs, any of which may adversely affect our results of operations.
Global health crises may adversely affect our planned operations.
Our business and the businesses of our third-party pharmaceutical manufacturers could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic or other health crisis. If there is a global health crisis, we could experience delays in patient enrollment and significant disruptions to our clinical development timelines. If we experience delays in patient enrollment or patient dropouts and we deem it necessary or advisable to improve patient recruitment by, among other things, opening additional clinical sites, we could incur increased clinical program expenses. Any such disruptions or delays would, and any such increased clinical program expenses could, adversely affect our business, financial condition, results of operations and growth prospects. We may experience disruptions as a result of a global health crisis, including:
unwillingness of potential study participants to enroll in our planned clinical trials and/or visit healthcare facilities;
postponement of enrollment in our planned clinical trials;
postponement of the initiation of our planned clinical trials;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trial;
interruption of key clinical trial activities, such as clinical site visits by study participants and clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;
limitations in employee resources that would otherwise be focused on the conduct of our planned clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;
delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;
delays in clinical sites receiving the supplies and materials needed to conduct our planned clinical trials;
interruption in global shipping that may affect the manufacture and transport of clinical trial materials, such as investigational drug product used in our clinical trial;
changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our planned clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and
delay in the timing of interactions with the FDA due to absenteeism by federal employees or by the diversion of their efforts and attention to approval of other therapeutics during times of pandemics.
Our business and the business of the suppliers of our clinical product candidate may be materially and adversely affected by a global health crisis, including a resurgence of COVID-19, including the delay or complete or partial closure of clinical trial sites or one or more manufacturing facilities which could impact our supply of our clinical product candidate. In addition, it could impact economies and financial markets, resulting in an economic downturn that could impact our ability to raise capital or slow down potential partnering relationships.
In addition, a global health crisis could disrupt our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in our office, or due to quarantines. A global health crisis could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or committees of directors, and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to conduct meetings for the management of our affairs.
The extent to which a resurgence of COVID-19 or another global health crisis may impact our business and clinical trials is highly uncertain and cannot be predicted with confidence. While the original spread of COVID-19 has been mitigated, the continued emergence of novel virus strains means there is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriouslyharm our business.
Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization of our products.
The Animal Welfare Act (“AWA”), is the federal law that covers the treatment of certain animals used in research. Currently, the AWA imposes a wide variety of specific regulations that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size, and feeding, watering and shipping conditions. Third parties with whom we contract are subject to registration, inspections and reporting requirements under the AWA. Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations, and or obligations exist in many foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.
General Company-Related Risks
If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our current product candidates or any future product candidates, conduct our clinical trials and commercialize our product candidates or any future products we develop.
Our management team has expertise in many different aspects of fundraising, drug development and commercialization. We believe that our future success is highly dependent upon the contributions of our senior management, particularly Quang X. Pham, our Chief Executive Officer. We do not have an insurance policy on the life of our Chief Executive Officer and we do not have “key person” life insurance policies for any of our other officers or advisors. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of our product candidates or any other future products we develop, which could adversely affect our operating results.
We will need to hire additional personnel, including experienced marketing and sales representatives, as we expand our clinical development and commercial activities. We could experience difficulties attracting and retaining qualified employees in the future. For example, competition for qualified personnel in the pharmaceuticals field is intense due to the limited number of individuals who possess the skills and experience required by our industry. Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles, and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. We may not be able to attract and retain quality personnel on acceptable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information or that their former employers own their research output. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can develop and commercialize product candidates could be limited.
We will need to increase the size of our organization, and we may experience difficulties in managing this growth.
We will need to continue to expand our managerial, operational, finance and other resources to manage our operations, commercialize our current product candidates or any other product candidates, if approved, and continue our development activities. Our management and personnel systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:
manage any of our future clinical trials effectively;
identify, recruit, retain, incentivize and integrate additional employees;
manage our internal development efforts effectively while carrying out our contractual obligations to third parties; and
continue to improve our operational, financial and management controls, reporting systems and procedures.
Due to our limited financial resources and our limited experience in managing a company with such anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our development and strategic objectives or disrupt our operations.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit the commercialization of any future products we develop.
We face an inherent risk of product liability as a result of the clinical testing of our current product candidates and any of our future product candidates. We will face further risk if we commercialize any of our product candidates. For example, we may be sued if any product we sell or any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfullydefend ourselves against product liability claims, we may incur substantial losses or be required to limit the commercialization of our products. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
decreased demand for our product candidates or products we develop;
termination of clinical trial sites or entire trial programs;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants or cancellation of clinical trials;
significant costs to defend the related litigation;
a diversion of management’s time and our resources;
substantial monetary awards to trial participants or patients;
regulatory investigations, product recalls, withdrawals or labeling, marketing or promotional restrictions;
loss of revenue;
the inability to commercialize any products we develop; and
a decline in our share price.
Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of our current product candidates or any future products that we develop. We currently carry product liability insurance covering our marketed products and our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us againstlosses. If and when we obtain approval for marketing any of our product candidates, we intend to expand our insurance coverage to include the sale of such product candidates, however, we may be unable to obtain this liability insurance on commercially reasonable terms.
Our business and operations would suffer in the event of computer system failures.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusions, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our current or future product development programs. For example, the loss of clinical trial data from completed or any future ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, damage to our reputation, and the further development of our product candidates could be delayed.
We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
Significant disruptions to our information technology systems or breaches of information security could adversely affect our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information and will continue to do so once we commence clinical trials, and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of our information technology systems, and those of our third-party vendors with whom we contract, make such systems potentially vulnerable to service interruptions and security breaches from inadvertent or intentional actions by our employees, partners or vendors, from attacks by malicious third parties, or from intentional or accidental physical damage to our systems infrastructure maintained by us or by third parties. Maintaining the secrecy of this confidential, proprietary, or trade secret information is important to our competitive business position. While we have taken steps to protect such information and invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertentwrongful use or disclosure of confidential information that could adversely affect our business operations or result in the loss, dissemination, or misuse of critical or sensitive information. A breach of our security measures or the accidentalloss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other reason, could enable others to produce competing products, use our proprietary technology or information, or adversely affect our business or financial condition. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on our business, financial position, results of operations or cash flow.
Any failure to maintain the security of information relating to our patients, customers, employees and suppliers, whether as a result of cybersecurity attacks or otherwise, could expose us to litigation, government enforcement actions and costly response measures, and could disrupt our operations and harm our reputation.
In connection with the pre-clinical and clinical development, sales and marketing of our products and services, we may from time to time transmit confidential information. We also have access to, collect or maintain private or confidential information regarding our clinical trials and the patients enrolled therein, employees, and suppliers, as well as our business. Cyberattacks are rapidly evolving and becoming increasingly sophisticated. It is possible that computer hackers and others might compromise our security measures, or security measures of those parties that we do business with now or in the future, and obtain the personal information of patients in our clinical trials, vendors, employees and suppliers or our business information. A security breach of any kind, including physical or electronic break-ins, computer viruses and attacks by hackers, employees or others, could expose us to risks of data loss, litigation, government enforcement actions, regulatory penalties and costly response measures, and could seriouslydisrupt our operations. Any resulting negative publicity could significantly harm our reputation, which could cause us to lose market share and have an adverse effect on our results of operations.
Use of artificial intelligence in research, development, and commercial activities presents operational, regulatory, ethical, and reputational risks that could adversely affect our business.
We increasingly rely on artificial intelligence (“AI”) and machine-learning systems across our research, development, clinical, manufacturing, and commercial operations. These tools support activities such as target identification, compound screening, biomarker discovery, clinical-trial design and recruitment, pharmacovigilance monitoring, supply-chain optimization, and commercial analytics. Because AI models—particularly those applied to biological and clinical datasets—can behave unpredictably or produce biased or inaccurate outputs, our reliance on such systems may expose us to operational and scientific risks. Any errors or limitations in AI-generated insights could delay discovery efforts, impair the design or execution of our clinical trials, misinform safety or efficacy assessments, or otherwise negatively impact the advancement of our pipeline candidates.
The regulatory environment applicable to AI remains highly uncertain and continues to evolve in the United States and globally. Regulators have begun scrutinizing AI applications in healthcare and life sciences, and we may face new obligations related to transparency, data provenance, model documentation, validation standards, or auditability. In particular, new or forthcoming requirements from U.S. federal agencies and international authorities could impose additional burdens on our R&D workflows or clinical-trial operations, limiting how we design studies, analyze endpoints, select patient populations, or interact with clinical investigators and regulatory bodies. As noted by recent legal and regulatory commentary, public companies must carefully assess and disclose material AI-related risks, and the SEC has emphasized that inaccurate or overstatedclaims about AI capabilities—commonly referred to as “AI-washing”—may give rise to enforcement actions and shareholder litigation. Any failure to provide accurate AI-related disclosures could subject us to reputational damage, regulatory proceedings, or securities claims.
Our use of AI may also introduce data-integrity and cybersecurity risks. AI systems used in drug development frequently involve sensitive clinical, genomic, or proprietary datasets, making them potential targets for data-poisoning attacks, model manipulation, or unauthorized access. Compromised AI tools could corrupt datasets, distort model outputs related to safety or efficacy, or expose confidential patient or trial information. Additionally, reliance on third-party AI vendors, cloud providers, or specialized platforms—some outside traditional pharmaceutical quality-system regulations—may increase our exposure to operational disruptions, confidentiality breaches, or compliance failures.
We also face competitive risks. AI-enabled research continues to transform discovery timelines, trial execution, and manufacturing processes within the biopharmaceutical industry. If competitors adopt more advanced AI systems, access higher-quality proprietary datasets, or integrate AI more efficiently into R&D or commercial processes, we may be placed at a competitive disadvantage. Conversely, over-reliance on emerging AI technologies that ultimately do not perform as expected could divert resources, impair strategic decision-making, or delay program progression.
As AI technologies and regulatory expectations evolve, we may incur significant additional costs to update systems, retrain personnel, validate models, modify documentation, or enhance governance and oversight. If we fail to appropriately manage these risks, our research productivity, clinical development timelines, regulatory interactions, commercial performance, financial condition, or reputation could be materially adversely affected.
We may acquire other businesses or form joint ventures or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
As part of our business strategy, we may pursue acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our technology and industry experience to expand our offerings or other capabilities. Though certain company personnel have business development and corporate transaction experience, including with licensing, mergers and acquisitions, and strategic partnering, as a company we have no experience with acquiring other companies and limited experience with forming strategic alliances and joint ventures. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in significant write-offs or the incurrence of debt and contingent liabilities, any of which could have a material adverse effect on our financial condition, results of operations and cash flows. Integration of an acquired company also may disrupt ongoing operations and require management resources that would otherwise focus on developing our existing business. We may experience losses related to investments in other companies, which could have a material negative effect on our results of operations. We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture.
To finance any acquisitions or joint ventures, we may choose to issue shares of our Common Stock as consideration, which would dilute the ownership of our stockholders. If the price of our Common Stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. Alternatively, it may be necessary for us to raise additional funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us, or at all.
Changes in general economic or business conditions, including tariff and customs regulations, may have a negative impact on our business.
Continuing concerns over U.S. health care reform legislation and energy costs, geopolitical issues, the availability and cost of credit and government stimulus programs in the United States and other countries have contributed to increased volatility and diminished expectations for the global economy. These factors, combined with low business and consumer confidence, could precipitate an economic slowdown and recession. Additionally, political changes in the U.S. and elsewhere in the world have created a level of uncertainty in the markets. If the economic climate does not improve or deteriorate, our business, as well as the financial condition of our suppliers and our third-party payors, could be adversely affected, resulting in a negative impact on our business, financial condition and results of operations.
Inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital. In an inflationary environment, such cost increases may outpace our expectations, causing us to use cash faster than forecasted. In addition, the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.
Changes in U.S. or international social, political, regulatory and economic conditions or in laws and policies governing trade, manufacturing, development and investment in the countries where we currently conduct our business could adversely affect our business, reputation, financial condition and results of operations. Changes or proposed changes in U.S. or other countries’ trade policies may result in restrictions and economic disincentives on international trade. The U.S. government has recently imposed, or is currently considering imposing, tariffs on certain trade partners. Tariffs, economic sanctions and other changes in U.S. trade policy have in the past and could in the future trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing retaliatory measures on certain U.S. goods. Further, any emerging protectionist or nationalist trends (whether regulatory- or consumer-driven) either in the United States or in other countries could affect the trade environment. Our business, like many other corporations, would be impacted by changes to the trade policies of the United States and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, the global economy, and our industry, and as a result, could have a material adverse effect on our business, financial condition and results of operations.
Actual events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems.
In addition, the global macroeconomic environment could be negatively affected by, among other things, pandemics or epidemics, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment as a result of the withdrawal of the United Kingdom from the European Union, the Russian invasion of Ukraine, the war in the Middle East and other political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets.
We are actively monitoring the effects these disruptions and increasing inflation could have on our operations. These conditions make it extremely difficult for us to accurately forecast and plan future business activities.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain sufficient exclusivity and/or patent protection for our product candidates, or if the scope of the exclusivity or patent protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to commercialize our product candidates successfully may be adversely affected.
Our success largely depends on our ability to obtain and maintain exclusivity for our proprietary product candidates through market and data exclusivity granted by regulatory agencies in the United States and other countries with respect to our proprietary product candidates as well as through patent protection. If we do not adequately protect our intellectual property, competitors may be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieveprofitability. To protect our proprietary position, we file patent applications in the United States and abroad related to our novel product candidates that are important to our business. The patent application and approval process are expensive and time-consuming. We may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.
Generally, the patent position of pharmaceutical companies is highly uncertain. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions. In addition, the determination of patent rights with respect to pharmaceutical compounds commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain.
Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. However, prior to March 16, 2013, in the United States, the first to invent was entitled to the patent. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents, or that we were the first to file for patent protection of such inventions.
Moreover, because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, our patents may be challenged in the courts or patent offices in the United States and abroad. For example, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in post-grant review procedures, oppositions, derivations, reexaminations, inter partes review or interference proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such challenge may result in loss of exclusivity or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products or limit the duration of the patent protection of our technology and products. In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.
Our future patent applications may not result in patents being issued which protect our product candidates, in whole or in part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law does.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may also seek approval to market their own products similar to or otherwise competitive with our products. Alternatively, our competitors may seek to market generic versions of any approved products by submitting ANDAs to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable or not infringed. In these circumstances, we may need to defend or assert our patents, or both, including by filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid or unenforceable, or that our competitors are competing in a non-infringing manner. Thus, even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.
Depending upon the timing, duration and conditions of FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for that product will be shortened compared to expectations and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced, possibly materially. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringementclaims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Any claims we assert against perceived infringers could provoke these parties to assert counterclaimsagainst us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention. An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition.
Similarly, if we assert trademark infringementclaims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease the use of such trademarks.
Even if we establish infringement, the court may decide not to grant an injunctionagainst further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our Common Stock. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringementclaims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.
Furthermore, while we have engaged intellectual property counsel to assist in protecting our patent ownership rights, to date, we have not had intellectual property counsel conduct a freedom to operate analysis regarding our product candidates. As a result, we cannot be certain that we will not be exposed to third-party legal claims, liabilities and/or litigation actions when we seek to develop our product candidates, and make and market products using our intellectual property.
If we are sued for infringing the intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our product candidates.
Our commercial success depends, in part, on our ability to develop, manufacture, market and sell our product candidates without infringing the intellectual property and other proprietary rights of third parties. If any third-party patents or patent applications are found to cover our product candidates or their methods of use, we may not be free to manufacture or market our product candidates as planned without obtaining a license, which may not be available on commercially reasonable terms, or at all.
There is a substantial amount of intellectual property litigation in the pharmaceutical industry, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our product candidates, including interference and other administrative proceedings before the USPTO. Third parties may assert infringementclaimsagainst us based on existing or future intellectual property rights. The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance. The pharmaceutical industry has produced a significant number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our product candidates, products, or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. In the United States, proving invalidity (except in proceedings before the USPTO) requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs, and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could significantly harm our business and operating results. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.
If we are found to infringe a third-party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing, or commercializing the infringing product candidate or product. Alternatively, we may be required to obtain a license from such a third party in order to use the infringing technology and continue developing, manufacturing, or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble damages and attorney’’ fees if we are found to have willfullyinfringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act has transformed the U.S. patent system into a “first to file” system. The first-to-file provisions, however, only became effective on March 16, 2013. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could make it more difficult to obtain patent protection for our inventions and increase the uncertainties and costs surrounding the enforcement or defense of our or our collaboration partner’s issued patents, all of which could harm our business, results of operations, and financial condition.
The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Additionally, there have been recent proposals for additional changes to the patent laws of the United States and other countries that, if adopted, could impact our ability to enforce our proprietary technology. Depending on future actions by the U.S. Congress, the U.S. courts, the USPTO, and the relevant law-making bodies in other countries, the laws, and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payments and other similar provisions during the patent application process. While an inadvertentlapse can, in many cases, be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit formal documents. If we fail to maintain the patents and patent applications covering our product candidates, our competitive position would be adversely affected.
We may not be able to enforce our intellectual property rights throughout the world.
Filing, prosecuting, and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive. The requirements for patentability may differ in certain countries, particularly in developing countries. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection, but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents or where any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing with us.
Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the United States and Europe. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, if our ability to enforce our patents to stop infringing activities is inadequate. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in major markets for our products, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate.
All of our issued U.S. and foreign patents with respect to tecarfarin expired in 2024 and, therefore, we no longer have patent protection for tecarfarin.
Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Even if we obtain additional patents covering our product candidates, once the patent life has expired for a product, we may be open to competition from other products. If the lives of our patents are not sufficient to effectively protect our products and business, our business and results of operations will be adversely affected. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.
We have losteffective patent protection in the United States and in key countries outside of the United States. See supra the section entitled “Intellectual Property.” With respect to tecarfarin, we had two issued U.S. patents directed to tecarfarin for composition of matter and method of treatment, both of which expired in 2024, and our foreign patents directed to tecarfarin, for composition of matter and use, expired in April 2025. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, we are no longer able to seek patent extensions for our U.S. patents since they have expired. If we were to be granted U.S. patents in the future, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
For non-biologic products, loss of exclusivity (whether by expiration of legal rights or by termination thereof as a consequence of litigation) typically results in the entry of one or more generic competitors, leading to a rapid and severedecline in revenues, especially in the United States. Historically, outside the United States, the market penetration of generics following loss of exclusivity has not been as rapid or pervasive as in the United States; however, generic market penetration is increasing in many markets outside the United States, including Japan, Europe, and many countries in the emerging markets. Moreover, patents relating to particular products, uses, formulations, or processes do not preclude other manufacturers from employing alternative processes or marketing alternative products or formulations that compete with our patented intellectual property.
We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
We anticipate that many of the people that we expect to hire as employees, including our one current employee, were previously employed at other pharmaceutical companies. Some of these employees may have executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such third-party. Litigation may be necessary to defendagainst such claims. If we fail to defend any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third-party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may 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 we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights. Even if we are successful in prosecuting or defendingagainst such claims, litigation could result in substantial costs and be a distraction to our senior management and scientific personnel.
Risks Related to Ownership of Our Common Stock
An active public trading market for our Common Stock may not be maintained.
Prior to our initial public offering consummated on January 24, 2023, there was no public market or active private market for trading shares of our Common Stock. Our Common Stock is currently traded on the Nasdaq Capital Market, but we can provide no assurance that we will be able to maintain an active trading market. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the price of shares of Common Stock. An inactive market may impair our ability to raise capital by selling shares and our ability to use our capital stock to acquire other companies or technologies. We cannot predict the prices at which our Common Stock will trade.
We cannot be assured that we will be able to maintain our listing on the Nasdaq Capital Market.
Our securities are listed on The Nasdaq Capital Market, a national securities exchange. We cannot be assured that we will continue to comply with the rules, regulations or requirements governing the listing of our Common Stock on Nasdaq Capital Market or that our securities will continue to be listed on Nasdaq Capital Market in the future. If Nasdaq should determine at any time that we fail to meet Nasdaq requirements, we may be subject to a delisting action by Nasdaq.
On September 6, 2023, we received a letter from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Rule”), requiring listed securities to maintain a minimum bid price of $1.00 per share because our closing bid price for the last 30 consecutive business days was below $1.00 per share. On August 20, 2024 we effected a reverse stock split and on September 5, 2024 we were notified by Nasdaq that we had regained compliance with the Rule. However, there can be no assurance that we will continue to comply with the Rule or the other Nasdaq continued listing requirements.
The Nasdaq has recently proposed a new rule change to (i) adopt Listing Rule 5550(a)(6) to require issuers listed on the Nasdaq Capital Market to maintain a minimum Market Value of Listed Securities (as defined in Nasdaq Listing Rule 5005(a)(23)) of at least $5 million for a period of thirty (30) consecutive business days, and (ii) amend Rule 5810 to suspend trading and immediately delist from Nasdaq securities of issuers that do not satisfy the proposed new requirements, and Rule 5815 to set forth the procedures for requesting a hearing before a Hearings Panel and the scope of the Panel’s discretion.
If Nasdaq delists our securities from trading on its exchange at some future date, we would take actions to restore our compliance with The Nasdaq Capital Market’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below The Nasdaq Capital Market, minimum bid price requirement or prevent future non-compliance with The Nasdaq Capital Market’s listing requirements. In the event of a delisting, we could face significant material adverse consequences, including:
a limited availability of market quotations for our securities;
reduced liquidity with respect to our securities;
a determination that our Common Stock is a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares;
a limited amount of news and analyst coverage for our company; and
a decreased ability to issue additional securities or obtain additional financing in the future.
Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our Common Stock could incur substantial losses.
Investors should consider an investment in our Common Stock risky and invest only if they can withstand a significant loss and wide fluctuations in the market value of their investment. Investors who purchase our Common Stock may not be able to sell their shares at or above the purchase price. Our stock price has been volatile and may be volatile in the future. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our Common Stock. Some of the factors that may cause the market price of our Common Stock to fluctuate include:
adverse results or delays in our clinical trials;
the timing or delay of achievement of our clinical, regulatory, partnering and other milestones, such as the commencement of clinical development, the completion of a clinical trial, the receipt of regulatory approval or the establishment or termination of a commercial partnership for one or more of our product candidates;
announcement of FDA approval or non-approval of our product candidates or delays in the FDA review process;
actions taken by regulatory agencies with respect to our product candidates, our clinical trials or our sales and marketing activities;
the commercial success of any product approved by the FDA or its foreign counterparts;
regulatory developments in the United States and foreign countries;
changes in the structure of healthcare payment systems;
any intellectual property infringement lawsuit involving us;
announcements of technological innovations or new products by us or our competitors;
announcements related to any device used in our clinical trials;
market conditions for the biotechnology or pharmaceutical industries in general;
changes in financial estimates or recommendations by securities analysts;
sales of large blocks of our Common Stock;
sales of our Common Stock by our executive officers, directors and significant stockholders;
direct sales of our Common Stock through financing arrangements;
restatements of our financial results and/or material weaknesses in our internal controls;
the loss of any of our key scientific or management personnel; and
announcements regarding the ongoing exploration of the strategic options available to us.
These broad market and industry factors may seriouslyharm the market price of our Common Stock, regardless of our operating performance. In the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Any such litigation brought against us could result in substantial costs, which would hurt our financial condition and results of operations, divert management’s attention and resources, and possibly delay our clinical trials or commercialization efforts.
Even if our product candidates receive FDA approval, there is no guarantee that the trading price of our Common Stock will increase following approval, and in the past, some companies have not necessarily experienced such an increase.
The market price of our Common Stock may not increase following the approval of one or more of our product candidates by the FDA or other regulatory authorities and may instead remain flat or decline. Although FDA approval may be viewed as an important development milestone, historical experience in the biopharmaceutical industry demonstrates that regulatory approval does not necessarily result in an increase in a company’s stock price, and in some cases has been followed by a decrease in market value.
Any stock price reaction to FDA approval may be negatively affected by a variety of factors, including investor expectations that exceeded the actual scope or conditions of approval, limitations or restrictions in the approved labeling, safety warnings or post-approval study requirements, lack of perceived differentiation from existing therapies, uncertainty regarding reimbursement or pricing, or concerns regarding market adoption and commercial execution. In addition, investors may shift their focus following approval from regulatory milestones to commercialization risks, including manufacturing scale-up, marketing capabilities, and competitive dynamics.
Moreover, approval of a product candidate does not guarantee commercial success or meaningful revenue generation. Our ability to generate value following approval will depend on numerous factors, including physician and patient acceptance, coverage and reimbursement decisions by third-party payors, the competitive landscape (including the availability of alternative or lower-cost therapies), our ability to effectively market and distribute any approved product, and our compliance with ongoing regulatory obligations. If our actual commercial performance or post-approval development plans fail to meet investor expectations, the market price of our Common Stock may decline.
In addition, broader factors unrelated to the regulatory status or underlying performance of our product candidates may adversely affect our stock price. These factors may include general volatility in the equity markets, changes in macroeconomic or geopolitical conditions, shifts in investor sentiment toward biotechnology or small-capitalization companies, analyst coverage or forecasts, and the trading behavior of institutional investors or other significant stockholders.
If financial or industry analysts do not publish research or reports about our business or if they issue inaccurate or unfavorable commentary or downgrade our Common Stock, our stock price and trading volume could decline.
The trading market for our Common Stock will be influenced by the research and reports that industry or financial analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. As a new public company, we may be slow to attract research coverage, and the analysts who publish information about our Common Stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. In the event any of the industry or financial analysts who cover us issue an inaccurate or unfavorable opinion regarding our stock price, our stock price would likely decline. In addition, the stock prices of many companies in the biopharmaceutical industry have declined significantly after those companies have failed to meet, or often times failed to exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or significantly exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our Common Stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Our officers and directors exercise significant control over our Company and may be able to control our management and operations, acting in their best interests and not necessarily those of other stockholders.
Our executive officers and directors, in the aggregate, beneficially own shares representing approximately 23% of our outstanding capital stock. Quang X. Pham, our Chief Executive Officer, beneficially owns approximately 17% of our outstanding capital stock. As a result, Mr. Pham alone and together with these other stockholders, acting together, may be able to significantly influence any matters requiring approval by our stockholders, including the election of directors, the approval of mergers or other business combination transactions. The interests of this group of stockholders may not always coincide with our interests or the interests of other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our Common Stock due to the perception that conflicts of interest may exist or arise. Therefore, you should not invest in reliance on your ability to have any control over our company.
Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans and outstanding warrants, could result in additional dilution of the percentage ownership of our stockholders and could depress the market price of our Common Stock.
We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our Common Stock.
Pursuant to our 2022 Successor Equity Incentive Plan, our management is authorized to grant equity awards to our employees, officers, directors and consultants. Increases in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock price to decline. Further, the issuance of the shares of Common Stock underlying outstanding stock options and warrants will have a dilutive effect on the percentage ownership held by holders of our Common Stock.
Anti-takeover provisions in our charter documents, and under Delaware law, could make an acquisition of our company, which may be beneficial to our stockholders, more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our Common Stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our Common Stock, thereby depressing the market price of our Common Stock. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Common Stock;
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our Chief Executive Officer;
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
prohibit cumulative voting in the election of directors;
establish that our board of directors is divided into three classes — Class I, Class II, and Class III — with each class serving staggered three-year terms;
provide that, so long as our board of directors is classified, directors may only be removed for cause;
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and
require the approval of our board of directors or the holders of two-thirds of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Common Stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our Common Stock in an acquisition.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware or the federal district court for the District of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could result in increased costs for our stockholders to bring a claim and could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) is the exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty owed by, any director, officer, employee or agent of the Company to the Company or our stockholders; (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim against us or any director, officer of employee that is governed by the internal affairs doctrine of the law of the State of Delaware; provided that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, or the Company consents in writing to the selection of an alternative forum, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation and amended and restated bylaws also provide that the federal district courts of the United States of America is the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision will not apply to claims brought to enforce any liability or duty created by the Exchange Act. Nothing in our amended and restated certificate of incorporation or amended and restated bylaws preclude stockholders that assert claims under the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, this choice of forum provision could result in increased costs for our stockholders to bring a claim and could may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find the choice of forum provision that is contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Claims for indemnification by our directors and officers may reduce our available funds to satisfysuccessful third-party claimsagainst us and may reduce the amount of money available to us.
Our amended and restated bylaws, provide that we will indemnify our directors and executive officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and the indemnification agreements that we have entered into with each of our current executive officers and intend to enter into with our directors and certain other officers, among other things provide that:
We will indemnify our directors and executive officers for serving us in those capacities, or for serving as a director, officer, employee or agent of other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that we may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interest and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.
We will be required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
The rights conferred in our bylaws will not be exclusive. We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
As a result, claims for indemnification by our directors and officers may reduce our available funds to satisfysuccessful third-party claimsagainst us and may reduce the amount of money available to us.
We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Stock.
We have never declared or paid any cash dividends on our Common Stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our Common Stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our Common Stock appreciates and you sell your shares at a profit. There is no guarantee that the price of our Common Stock that will prevail in the market will ever exceed the price that you pay. For additional information about our dividend policy, see the “Dividend Policy” in Part II, Item 5 of this Annual Report.
Certain members of our management team have limited experience managing a public company.
Some of the members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and operating results.
We have incurred significant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.
As a public company, we have incurred and will continue to incur legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Securities Exchange Act, and are required to comply with the applicable requirements of SOX, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The listing requirements of the Nasdaq Stock Market, and the rules of the SEC require that we satisfy certain corporate governance requirements. Our management and other personnel are required to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations have increased our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our 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 us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation.
To date, we have not identified any material weaknesses in our review of our internal controls for the purpose of providing the reports required by these rules. In the future, if we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of SOX in a timely manner, or if we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Common Stock could decline, and we could also become subject to investigations by the stock exchange on which our Common Stock is listed, the SEC or other regulatory authorities, which could require additional financial and management resources. In addition, as a public company we are required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from Nasdaq or other adverse consequences that would materially harm our business and reputation.
For so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (i) following the fifth anniversary of the completion of our initial public offering, (ii) in which we have total annual gross revenue of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30 th , and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We are an emerging growth company and we cannot be certain if (i) the reduced disclosure requirements or (ii) extended transition periods for complying with new or revised accounting standards applicable to emerging growth companies will make our Common Stock less attractive to investors. In addition, as a smaller reporting company we will also have reduced disclosure requirements.
We qualify as an emerging growth company. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company, or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
In addition, for as long as we continue to be an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our Common Stock less attractive because we will rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
We are also a “smaller reporting company” as defined in the Securities Exchange Act, and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller reporting company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an “emerging growth company” may continue to be available to us as a “smaller reporting company,” including exemption from compliance with the auditor attestation requirements pursuant to SOX and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller reporting company” until we have $250 million or more in public float (based on our Common Stock) measured as of the last business day of our most recently completed second fiscal quarter or, in the event we have no public float (based on our Common Stock) or a public float (based on our Common Stock) that is less than $700 million, annual revenues of $100 million or more during the most recently completed fiscal year.
We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our Common Stock.
Our Amended and Restated Certificate of Incorporation, as amended, authorizes the issuance of 75,000,000 shares of our Common Stock and 7,500,000 shares of preferred stock. As of December 31, 2025, we had 2,338,127 shares of Common Stock outstanding, options exercisable to purchase 403,000 shares of Common Stock, and 1,044,167 warrants exercisable to purchase shares of Common Stock. In certain circumstances, the Common Stock, as well as the awards available for issuance under our equity incentive plans and shares of preferred stock, can be issued by our board of directors, without stockholder approval. Any future issuances of such stock would further dilute the percentage ownership of us held by holders of preferred stock and Common Stock. In addition, the issuance of certain securities, including pursuant to the terms of our stockholder rights plan, may be used as an “anti-takeover” device without further action on the part of our stockholders, and may adversely affect the holders of the Common Stock.
Future sales of our Common Stock could cause the market price for our Common Stock to decline.
We cannot predict the effect, if any, that market sales of shares of our Common Stock or the availability of shares of our Common Stock for sale will have on the market price of our Common Stock prevailing from time to time. Sales of substantial amounts of shares of our Common Stock in the public market, or the perception that those sales will occur, could cause the market price of our Common Stock to decline or be depressed.
There is no public market for the outstanding warrants.
There is no established public trading market for any outstanding warrants and we do not expect a market to develop. None of our warrants are listed on a national securities exchange or other nationally recognized trading system. Without an active market, the liquidity of the warrants will be limited.
Holders of the outstanding warrants will have no rights as common stockholders with respect to the shares our Common Stock underlying the warrants until such holders exercise their warrants and acquire our Common Stock, except as otherwise provided in the warrants.
Until holders of the outstanding warrants acquire shares of our Common Stock upon exercise thereof, such holders will have no rights with respect to the shares of our Common Stock underlying such warrants, except to the extent stated in the warrant. Upon exercise of the warrants, the holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise date.
