Risk Factors
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business
We have incurred significant losses since our inception. We expect to incur losses over the next several years and may never achieve or maintain profitability.
Since inception, we have incurred significant operating losses as we focused on our discovery efforts and developing our product candidates. On July 3, 2025, the FDA approved our NDA for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older. In the fiscal years ended April 30, 2025 and 2024, we used net cash of $152.9 million and $89.2 million respectively, in our operating activities substantially all of which related to research and development activities. As of April 30, 2025, our cash and cash equivalents were $131.6 million. We expect our expenses to continue, particularly as we begin commercializing EKTERLY (sebetralstat), continue existing clinical trials and initiate new research and preclinical development efforts. As we begin to commercialize EKTERLY (sebetralstat) and if we obtain regulatory approval of EKTERLY (sebetralstat) in other jurisdictions or indications or for our other product candidates, we expect we will incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a collaborator. We are devoting substantial resources to the commercial infrastructure for EKTERLY (sebetralstat) and have not yet achieved significant product revenue. We are also devoting substantial resources to the development of our other product candidates. Because of the numerous risks and uncertainties associated with the anticipated commercialization of EKTERLY (sebetralstat) and development of other product candidates, and because the extent to which we may enter into additional with third parties for any of these activities is unknown, we are to estimate the amounts of increased capital outlays and operating expenses associated with the research, development and commercialization. We anticipate that our expenses will increase substantially if and as we:
establish a commercial infrastructure to support the near-term commercialization of EKTERLY (sebetralstat) and any other product candidates for which we receive regulatory approval, including product sales, medical affairs, marketing, manufacturing and distribution;
initiate the commercial launch of EKTERLY (sebetralstat) for the treatment of HAE in adult and pediatric patients aged 12 years and older;
continue clinical development of sebetralstat in other indications as well as our current product candidates in our pipeline;
seek to identify additional product candidates;
acquire or in-license other products and technologies or enter into collaboration arrangements with regards to product discovery;
initiate clinical trials for additional product candidates;
seek regulatory approvals for our product candidates that successfully complete clinical trials;
maintain, expand and protect our intellectual property portfolio;
add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
continue to incur increased costs as a result of operating as a public company.
To become and remain profitable, we must develop and commercialize EKTERLY (sebetralstat) or other products with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling those products for which we may obtain regulatory approval, such as EKTERLY (sebetralstat). Even if we succeed in these activities, we may never generate revenues that are significant or large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of our business and could impair our ability to raise capital, maintain our discovery and preclinical development efforts, expand our business or continue our operations and may require us to raise additional capital that may dilute the ownership interest of common stockholders. A in the value of our business could also cause stockholders to all or part of their investment.
We may need substantial additional funding to support us through clinical development and commercial launch, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
Developing and commercializing pharmaceutical products, including conducting preclinical studies and clinical trials and preparing for and executing a commercial launch, is a very time-consuming, expensive and uncertain process that takes years to complete. We expect our expenses to continue, particularly as we commercialize EKTERLY (sebetralstat), continue existing clinical trials and initiate new research and preclinical development efforts. In addition, as we commercialize EKTERLY (sebetralstat) and if we obtain regulatory approval of EKTERLY (sebetralstat) in other jurisdictions or indications or for our other product candidates, we expect we will incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of a collaborator. Furthermore, we continue to incur significant costs associated with operating as a public company.
We believe that our cash and cash equivalents as of April 30, 2025 and the cash that we anticipate generating from expected sales of EKTERLY (sebetralstat) will be sufficient to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months, as well as our anticipated longer-term cash requirements and obligations. Our expectations regarding our short-term and long-term funding requirements are based on assumptions that may prove to be wrong, and we may need additional capital resources to fund our operating plans and capital expenditure requirements.
If our cash, cash equivalents, and cash generated from expected sales of EKTERLY (sebetralstat) are not sufficient to fund our planned expenditures, we will need to finance our cash needs through external sources of funds, which may include equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements. We currently do not have any committed external sources of funds.
If we are unable to generate sufficient funds from expected sales of EKTERLY (sebetralstat) or raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings and debt financings. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, 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.
We have entered into a sales agreement with TD Securities (USA) LLC, as sales agent, relating to the issuance and sale of shares of our common stock for an aggregate offering price of up to $100 million under an at-the-market offering program (the “ATM”). No shares of our common stock have been sold under the ATM as of April 30, 2025.
Risks Related to the Development and Commercialization of Our Product Candidates
We are heavily dependent on the successful commercialization of EKTERLY (sebetralstat) in the U.S. and other jurisdictions, where we may obtain regulatory approval, and development, regulatory approval, and commercialization of our other product candidates.
We currently have one product approved for commercial sale, EKTERLY (sebetralstat), which was approved by the U.S. FDA on July 3, 2025 for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older. The success of our business, including our ability to generate revenue from product sales in the future, will primarily depend on the successful commercialization of EKTERLY (sebetralstat) in the U.S. as well as in other jurisdictions, if approved, and the successful development, regulatory approval and commercialization of our other product candidates in one or more jurisdictions. Our ability to generate revenue and achieve profitability depends significantly on our ability, or our current and any future collaborator’s ability, to achieve a number of challenging objectives, including:
timely receipt of regulatory approvals from applicable regulatory authorities for our product candidates for which we successfully complete clinical development;
successful and timely completion of preclinical and clinical development of our product candidates;
successfully educating physicians, patients, third party payors and others in the medical community;
successful commercial launch following any regulatory approval, including leveraging our commercial infrastructure in-house or with one or more collaborators;
commercial acceptance of EKTERLY (sebetralstat) upon FDA approval and any of our other product candidates by patients, the medical community and third-party payers;
establishing and maintaining relationships with contract research organizations (“CROs”) and clinical sites for the clinical development, both in the U.S. and internationally, of our product candidates;
making any postmarketing requirements or commitments to applicable regulatory authorities;
establishing and maintaining commercially viable supply and manufacturing relationships with third parties that can provide adequate, in both amount and quality, products and services to support clinical development and meet the market demand for product candidates that we develop, if approved;
a continued acceptable safety and efficacy profile both prior to and following any regulatory approval of EKTERLY (sebetralstat) and our other product candidates;
identifying, assessing and developing new product candidates;
obtaining, maintaining and expanding patent protection, trade secret protection and regulatory exclusivity, both in the U.S. and internationally;
protecting our rights in our intellectual property portfolio;
defending against third-party interference or infringement claims, if any;
obtaining favorable terms in any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our existing or acquired product candidates;
obtaining coverage and adequate reimbursement for customers and patients from government and third-party payers for EKTERLY (sebetralstat) and any other product candidates that we may seek to commercialize;
addressing any competing therapies and technological and market developments; and
attracting, hiring and retaining qualified personnel.
Further, we do not have experience commercializing products. We may never be successful in achieving our objectives and, even if we do, may never generate significant revenue that is large enough to achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis and we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges. Our failure to become and remain profitable would decrease the value of our company and could our ability to maintain or further our research and development efforts, raise additional necessary capital, grow our business, retain key employees and continue our operations.
We obtained regulatory approval from the FDA for EKTERLY (sebetralstat), but have not yet demonstrated an ability to successfully conduct commercial activities.
We received FDA approval for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older on July 3, 2025. Prior to obtaining this approval, our operations were been limited to financing and staffing our company, developing our technology, conducting preclinical research and clinical trials of our product candidates and preparing for a commercial launch. We have not received regulatory approval or commercialized any other product candidates to date and may never do so. We have not yet demonstrated an ability to conduct sales and marketing activities necessary for successful product commercialization. Accordingly, our stockholders should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by biopharmaceutical companies such as ours. Any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives. We will need to continue to transition from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition. We expect our financial condition and operating results to continue to fluctuate significantly from quarter to quarter and year to year.
We may fail to achieve the degree of market acceptance by physicians, patients, third party payors and others in the medical community necessary for commercial success of EKTERLY (sebetralstat).
We received FDA approval for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older in the U.S. on July 3, 2025. Nonetheless, we may fail to gain sufficient market acceptance by physicians, patients, third party payors and others in the medical community necessary for commercial success of EKTERLY (sebetralstat) in the U.S., any other jurisdictions that grant regulatory approval of sebetralstat for the treatment of HAE or any other product candidates. In addition, physicians, patients and third-party payors may prefer other products to ours. If sebetralstat and any other product candidates, if approved, do not achieve an adequate level of acceptance we may not generate significant product revenues and we may not become profitable. The degree of market acceptance of sebetralstat and any other product candidates, if approved for commercial sale, will depend on a number of factors, including:
the efficacy and safety and potential advantages and disadvantages compared to alternative treatments;
the ability to offer our products for sale at competitive prices;
the 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 clinical indications for which the product is approved
changes in the standard of care for the targeted indications for the product;
the strength of our marketing and distribution support;
the price at which the product is offered for sale and the availability of third-party coverage and adequate reimbursement, including patient cost-sharing programs such as copays and deductibles;
the approval of other new products for the same indications;
the timing of market introduction of our approved products as well as competitive products;
adverse publicity about the product or favorable publicity about competitive products;
the ability to develop or partner with third-party collaborators to develop companion diagnostics;
with respect to any future product candidates, FDA-approved labeling which may include restrictive safety and efficacy data, or may not include aspects of safety and efficacy that we believe are important;
the prevalence and severity of any side effects; and
any restrictions on the use of our products together with other medications.
The development and commercialization of new drug products is highly competitive. We may not be able to successfully convince physicians or patients to switch from existing or new treatments to EKTERLY (sebetralstat) for the treatment of HAE. In treating HAE, we expect to face competition from several FDA-approved therapeutics for both prophylactic and on-demand usage. All current on-demand therapies are delivered either intravenously or by subcutaneous injection. Approved therapies include TAKHZYRO, FIRAZYR; KALBITOR, BERINERT, HAEGARDA, RUCONEST, ORLADEYO, and ANDEMBRY. FIRAZYR became available as a generic drug in 2019 and is sold by multiple companies as generic icatibant for on-demand usage. We are also aware of other companies that are engaged in the clinical development of potential HAE treatments, including Pharvaris GmbH, Intellia Therapeutics, Inc., BioMarin Pharmaceutical Inc., Astria Therapeutics, Inc., ADARx Pharmaceuticals, Inc. and Ionis Pharmaceuticals, Inc. See the risk factor titled “ We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do ” for more information.
In addition, in order to commercialize any product candidates, we must build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If we are unable to enter into such arrangements when needed on acceptable terms or at all, we may not be able to successfully commercialize sebetralstat and any other product candidates that receive regulatory approval or any such commercialization may experience delays or limitations. If we are not successful in commercializing EKTERLY (sebetralstat) and any other product candidates that receive regulatory approval, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses. Our estimates of the potential market opportunities for our products and product candidates are informed by work that is not definitive and future analyses may lead to estimates that are higher or lower than these estimates than those provided at any given time, with respect to addressable patient populations. If our market is lower than anticipated, our business may .
The sales, marketing, and distribution of EKTERLY (sebetralstat) or any other product candidates, if approved, may be unsuccessful or less successful than anticipated. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market EKTERLY (sebetralstat) or any other product candidates, if approved, on acceptable terms, we may be unable to successfully commercialize EKTERLY (sebetralstat) or any other product candidates.
We recently began commercializing our first product, EKTERLY (sebetralstat), in the U.S. following FDA approval in July 2025. The success of our future commercialization efforts for EKTERLY (sebetralstat) and any other product candidates is subject to the effective execution of our business plan, including, among others, the continued development of our internal sales, marketing, and distribution capabilities. For example, we have established an internal infrastructure as well as a focused sales and distribution infrastructure to market EKTERLY (sebetralstat) in the U.S., and have completed hiring in areas to support commercialization, including sales management, sales representatives, marketing, access and reimbursement, sales support and distribution. There are significant risks involved with establishing our own sales, marketing, and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified individuals, provide adequate training to sales and marketing personnel, and effectively manage geographically dispersed sales and marketing teams to generate sufficient demand. Any failure or delay in the development of these capabilities could negatively affect the success of our commercialization efforts and business. For example, the anticipated commercialization of EKTERLY (sebetralstat) may not develop at all, or not as planned or anticipated, which may require us to, among other items, adjust or amend our business plan and incur significant expenses.
Further, because we have chosen to collaborate in certain instances on a territory-by-territory basis, with third parties that have direct sales forces and established distribution systems, to augment our own sales force and distribution systems, we are
required to negotiate and enter into arrangements with such third parties relating to the proposed collaboration. For example, on April 8, 2025, we entered into the Kaken Agreement, pursuant to which we exclusively licensed commercialization rights to sebetralstat in Japan. If we are unable to enter into other such arrangements when needed, on acceptable terms, or at all, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval in additional indications or jurisdictions or any such commercialization may experience delays or limitations. In addition, we may have little or no control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. For example, if Kaken is unable to meet its contractual obligations pursuant to the Kaken Agreement, we may be forced to focus our efforts internally to commercialize sebetralstat in Japan, if approved, without the assistance of a commercialization partner or seek another commercialization partner, either of which would result in us incurring expenses and could cause a in market penetration while we expand our commercial operations or seek an alternative commercialization partner. Such costs may exceed the increased revenues we would receive from direct sebetralstat sales in Japan, at least in the near term. We would also potentially be to declare a of the agreement with Kaken and seek a of the agreement which could result in an extended and uncertain with Kaken, including arbitration or , any of which would be . If we are to commercialize our approved product candidates, either on our own or through with one or more third parties, our future product revenue will and we may incur significant additional .
Further, in order to continue to commercialize EKTERLY (sebetralstat) or commercialize any other product candidates, if approved, we must continue to build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services for each of the territories in which we may have approval to sell and market our product candidates. We may not be successful in accomplishing these required tasks. If our sales, marketing, and distribution capabilities fail, or are otherwise unsuccessful, it would materially adversely impact the commercial launch of EKTERLY (sebetralstat) and impact our ability to generate revenue and harm our business.
We face substantial competition, which may result in others discovering, developing or commercializing competing products before or more successfully than we do.
The development and commercialization of new drug products is highly competitive. We face competition with respect to our current product candidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the disease indications for which we are developing our product candidates. Some of these competitive products and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches.
In treating HAE, we expect to face competition from several FDA-approved therapeutics for both prophylactic and on-demand usage. All current on-demand therapies are delivered either intravenously or by subcutaneous injection. Approved therapies include TAKHZYRO, marketed by Takeda in the U.S. and Europe for the prevention of angioedema attacks in adults and adolescents; FIRAZYR, marketed by Takeda in the U.S., Europe and certain other geographic territories for the on-demand treatment of angioedema attacks in adult patients; KALBITOR, an injectable plasma kallikrein inhibitor marketed by Takeda for the on-demand treatment of attacks in adolescent and adult HAE patients; BERINERT, marketed by CSL Behring for on-demand treatment of abdominal, facial or laryngeal attacks of HAE in adults and adolescents, and HAEGARDA, also marketed by CSL Behring, for prophylaxis; RUCONEST, marketed by Pharming Group for the on-demand treatment of angioedema attacks in adult patients; ORLADEYO, an oral prophylactic treatment marketed by BioCryst Pharmaceuticals, Inc., and ANDEMBRY, marketed by CSL, for prophylaxis. FIRAZYR became available as a generic drug in 2019 and is sold by multiple companies as generic icatibant for on-demand usage. We are also aware of other companies that are engaged in the clinical development of potential HAE treatments, including Pharvaris GmbH, Intellia Therapeutics, Inc., BioMarin Pharmaceutical Inc., and Ionis Pharmaceuticals, Inc.
Ionis Pharmaceuticals, Inc.’s donidalorsen, an antisense inhibitor of prekallikrein synthesis has also completed Phase 3 development for preventative treatment and has a PDUFA date set for August 21, 2025. Pharvaris is developing two oral treatments, deucrictibant IR (immediate release) and deucrictibant XR (extended release). Deucrictibant is a small molecule inhibitor of B2R. Deucrictibant IR is in Phase 3 development for on-demand treatment. Based on a proof-of-concept Phase 2 trial with deucrictibant IR for preventative treatment, Pharvaris has initiated a Phase 3 trial for deucrictibant XR for preventative treatment.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. In addition, our ability to compete may be affected in many cases by insurers or other third party payors seeking to encourage the use of generic products. Generic products are expected to become available over the coming years, potentially creating pricing pressure. If any other product candidates achieve regulatory approval, we expect that they will be priced at a significant premium over competitive generic products.
Many of the companies against which we are competing or we may compete in the future have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties 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 we are unable to achieve and maintain third-party payor coverage and adequate levels of reimbursement for EKTERLY (sebetralstat) or any of our other product candidates for which we receive regulatory approval, or any future products we may seek to commercialize, their commercial success may be severely hindered.
For EKTERLY (sebetralstat) and any of our other product candidates that receive regulatory approval and become available by prescription only, our success will depend on the availability of coverage and adequate reimbursement for our product from third-party payors. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. The availability of coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and private third-party payors is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. If EKTERLY (sebetralstat) or any of our other product candidates that receive regulatory approval fail to demonstrate attractive efficacy and safety profiles to third-party payors, they may not qualify for coverage and reimbursement. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our prescription-only products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. We cannot be sure that coverage and reimbursement will be available for any product candidate that receives regulatory approval, and any reimbursement that may become available may be decreased or eliminated in the future.
In addition, the market for EKTERLY (sebetralstat), and certain of our product candidates, if approved, will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies.
Obtaining and maintaining reimbursement status is time consuming, costly and uncertain, and there is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the U.S., the principal decisions about reimbursement for new medicines are typically made by the CMS, an agency within HHS, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, if approved, as there is no body of established practices and precedents for these products.
Although Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs, no uniform policy for coverage and reimbursement for products exists among third party payors in the U.S. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that will require us to provide scientific and clinical support for the use of our products, if approved, to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.
Reimbursement agencies in Europe may be more conservative than CMS. Outside the U.S., international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the U.S. Other countries allow companies to fix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates, if approved. Accordingly, in markets outside the U.S., the reimbursement for our product candidates, if approved, may be reduced compared with the U.S. and may be insufficient to generate commercially reasonable revenues and profits.
Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions in both the U.S. and in international markets. Third-party coverage and reimbursement for sebetralstat and any of our product candidates for which we may receive regulatory approval may not be available or adequate in either the U.S. or international markets, which could harm our business, financial condition, operating results, and prospects.
Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any products that we may develop and which receive regulatory approval. If we cannot successfully defend against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
decreased demand for any product candidates or products that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants or difficulties in recruiting new clinical trial participants;
initiation of investigations by regulators;
significant costs to defend or settle the related litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the inability to commercialize any products that we may develop.
Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
The historical failure rate in clinical drug development of product candidates in our industry is high. Before obtaining regulatory approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of its product candidates in humans. Clinical testing is expensive, difficult to design and implement and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. Further, the results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain regulatory approval of their products. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval.
We may experience delays in our clinical trials, including our ongoing KONFIDENT-KID and KONFIDENT-S trials of sebetralstat, and we do not know whether future clinical trials will begin or enroll subjects on time, need to be redesigned or be completed on schedule, if at all. There can be no assurance that the FDA, MHRA, the EMA, or the Japanese Pharmaceuticals and Medical Devices Agency (“JPMDA”) will not put any of our product candidates on clinical hold in the future. We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates. Clinical trials may be delayed, suspended or prematurely terminated for a variety of reasons, such as:
delay or failure in reaching agreement with the FDA, MHRA, EMA, JPMDA or a comparable foreign regulatory authority on a trial design that we want to execute;
delay or failure in obtaining authorization to commence a trial or inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical study;
delays in reaching, or failure to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
inability, delay, or failure in identifying and maintaining a sufficient number of trial sites, many of which may already be engaged in other clinical programs;
delay or failure in recruiting and enrolling suitable subjects to participate in a trial;
delay or failure in having subjects complete a trial or return for post-treatment follow-up;
delay or failure in data collections in connection with a clinical trial;
clinical sites and investigators deviating from trial protocol, failing to conduct the trial in accordance with regulatory requirements, or dropping out of a trial;
lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct additional clinical studies and increased expenses associated with the services of its CROs and other third parties;
clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us to conduct additional clinical trials or abandon product development programs;
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate;
we may experience delays or difficulties in the enrollment of patients that our product candidates are designed to target;
our third party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;
we may have difficulty partnering with experienced CROs that can identify patients that our product candidates are designed to target and run our clinical trials effectively;
the cost of clinical trials of our product candidates may be greater than we anticipate;
there may be political factors surrounding the approval process, such as government shutdowns or political instability;
the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate; or
there may be changes in governmental regulations or administrative actions.
If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:
be delayed in obtaining regulatory approval for our product candidates;
not obtain regulatory approval at all;
obtain approval for indications, patient populations or doses that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or safety warnings that would reduce the potential market for our products or inhibit our ability to successfully commercialize our products;
be subject to additional post-marketing restrictions and/or testing requirements; or
have the product removed from the market after obtaining regulatory approval.
Our product development costs will also increase if we experience delays in testing or regulatory approvals. We do not know whether any of our preclinical studies or clinical trials will need to be restructured or will be completed on schedule, or at all. Significant preclinical or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented and expenses for development of our product candidates could increase.
We do not know whether planned or ongoing clinical trials will enroll subjects in a timely fashion, require redesign of essential trial elements or be completed on our projected schedule. In particular, because we are focused on patients with HAE, which is a rare disease, our ability to enroll eligible patients in trials may be limited or may result in slower enrollment than we anticipate. In addition, competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether.
Patient enrollment is affected by many factors including:
the eligibility criteria for the study in question;
the perceived risks and benefits of the product candidate under study;
the efforts to facilitate timely enrollment in clinical trials;
the inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs, including some that may be for the same disease indication;
the patient referral practices of physicians;
the proximity and availability of clinical trial sites for prospective patients;
ambiguous or negative interim results of our clinical trials, or results that are inconsistent with earlier results;
feedback from the FDA, MHRA, EMA, JPMDA, or a comparable foreign regulatory authority or IRBs, data safety monitoring boards or results from earlier stage or concurrent preclinical and clinical studies, that might require modifications to the protocol;
decisions by the FDA, MHRA, EMA, JPMDA, IRBs, a comparable foreign regulatory authority or us, or recommendations by data safety monitoring boards, to suspend or terminate clinical trials at any time for safety issues or for any other reason; and
unacceptable risk-benefit profile or unforeseen safety issues or adverse effects.
Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of the company to decline and limit our ability to obtain additional financing.
If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.
From time to time, we estimate the timing of the anticipated accomplishment of various scientific, clinical, regulatory and other product development goals, which we sometimes refer to as milestones. These milestones may include the commencement or completion of scientific studies and clinical trials and the submission of regulatory filings. From time to time, we may publicly announce the expected timing of some of these milestones. All of these milestones are and will be based on numerous assumptions. The actual timing of these milestones can vary dramatically compared to our estimates, in some cases for reasons beyond our control. For example, prior to FDA approval on July 3, 2025, on June 13, 2025, the FDA notified us that it would not meet the PDUFA goal date of June 17, 2025 for the regulatory approval of sebetralstat but indicated that it expected to deliver a decision within approximately four weeks. If we do not meet these milestones as publicly announced, or at all, the commercialization of our products may be delayed or never achieved and, as a result, our stock price may decline.
If serious adverse events or unacceptable side effects are identified during the development of our product candidates, we may need to abandon or limit the development of some of our product candidates.
We are not permitted to commercialize, market, promote or sell any product candidate in the U.S. without obtaining regulatory approval from the FDA. Foreign regulatory authorities, such as the EMA, impose similar requirements. If our product candidates are associated with undesirable effects in preclinical or clinical trials or have characteristics that are unexpected, we may need to interrupt, delay or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Additional or more severe side effects may be identified for all our programs through further clinical studies or after regulatory approval is received. These or other drug-related side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Any of these occurrences may significantly our business, financial condition and prospects.
Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.
Our product candidates must be approved by the FDA pursuant to an NDA in the U.S. and by the EMA and similar regulatory authorities outside the U.S. prior to commercialization. We received FDA approval for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older on July 3, 2025. We cannot provide assurance that we will receive regulatory approvals for sebetralstat in other jurisdictions or indications or for our other product candidates.
In order to market any products outside of the U.S., including sebetralstat, we will need to comply with additional onerous but varying regulatory requirements of other countries regarding safety and efficacy on a country-by-country basis. For example, in August 2024, we submitted an MAA for sebetralstat to the European Medicines Agency, which currently is being reviewed by the EMA’s Committee for Medicinal Products for Human Use under the centralized licensing procedure for all 27 Member States of the European Union, as well as the EEA countries Norway, Iceland and Liechtenstein. We also have made MAA submissions to the regulatory authorities in the United Kingdom, Switzerland, Australia, and Singapore via the Access Consortium framework for which we have obtained a four-way sharing agreement by the Medicines and Healthcare product Regulatory Agency, Swissmedic, the Therapeutic Goods Administration and Health Sciences Authority. The Access Consortium is designed to maximize regulatory collaboration across countries and support a timely review process. In January 2025, we announced that we submitted a Japanese New Drug Application for sebetralstat to the JPMDA. Approval of EKTERLY (sebetralstat) by the FDA in the U.S. does not ensure approval by comparable regulatory authorities in other countries or jurisdictions nor does it ensure that we will be able to successfully commercialize EKTERLY (sebetralstat) or any other approved products in the U.S. or in other jurisdictions. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. Further, commercialization in the U.S. does not guarantee commercialization in other jurisdictions.
The process of obtaining regulatory approvals, both in the U.S. and abroad, is expensive and takes many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates and therapeutic indications involved. Failure to obtain regulatory approval for a product candidate will prevent us from commercializing the product candidate. Securing regulatory approval requires the submission of extensive chemistry, manufacturing and preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval also usually requires inspection of manufacturing facilities by the regulatory authorities and also audits of the clinical trial sites, data and CROs that have supported KalVista in the clinical development. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining regulatory approval or prevent or limit commercial use. Regulatory authorities have substantial discretion in the approval process and may refuse to accept an application or may decide that our data are for approval and require additional preclinical, clinical or other studies.
Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may also cause delays in or prevent the approval of an application.
For example, the U.K. formally left the E.U. on January 31, 2020, often referred to as Brexit, and the transition period ended on December 31, 2020. Brexit has caused uncertainty in the current regulatory framework in Europe. For instance, Brexit has resulted in the EMA, moving from the U.K. to the Netherlands. The U.K. has now put in place legislation to cover the approval of new medicinal products in the U.K., including designations such as orphan designation, and a pediatric investigational plan. The requirements are similar to those in the E.U. and in many cases have adopted the same requirements. However, there are still adjustments being made to legislation. Any of these adjustments as a result of Brexit could result in significant delays and additional expense to our business. Any of the foregoing factors could have a material adverse effect on our business, results of operations, or financial condition.
Any future regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.
If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.
Our operations and relationships with healthcare providers, healthcare organizations, customers and third- party payors will be subject to applicable anti-bribery, anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to, among other things, enforcement actions, criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
Our current and future arrangements with healthcare providers, healthcare organizations, third-party payors and customers expose us to broadly applicable anti-bribery, fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell and distribute any of our product candidates, if approved. Restrictions under applicable federal and state anti-bribery and healthcare laws and regulations, include the following:
the federal Anti-Kickback Statute, which prohibits, among other things, individuals and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under a federal and state healthcare program such as Medicare and Medicaid. The term remuneration has been broadly interpreted to include anything of value. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
the federal criminal and civil false claims and civil monetary penalties laws, including the federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions against individuals or entities, and the Federal Civil Monetary Penalties Law, which prohibit, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from making a statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, certain marketing practices, including off-label promotion, may also laws. Moreover, the government may assert that a claim including items and services resulting from a of the federal Anti- Statute constitutes a or claim for purposes of the federal Act;
HIPAA and its implementing regulations, which imposes criminal and civil liability, prohibits, among other things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
HIPAA, as amended by HITECH, and their respective implementing regulations, which impose obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services involving the storage, use or disclosure of individually identifiable health information for or on behalf of a covered entity and their covered subcontractors, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;
the federal Physician Payments Sunshine Act, which requires certain manufacturers of covered drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with certain exceptions, to report annually to CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals (such as physician assistants and certain advance practices nurses), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members, with the information made publicly available on a searchable website;
the Foreign Corrupt Practices Act, which prohibits U.S. businesses and their representatives from offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business;
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and
certain state laws that require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing information, and state and local laws that require the registration of biopharmaceutical sales representatives.
Efforts to ensure that our current and future business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any such requirements, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, oversight and reporting obligations, or reputational , any of which could affect our financial results. These risks cannot be entirely eliminated. Any action us for an or could cause us to incur significant legal expenses and could our management’s attention from the operation of our business, even if our defense is . In addition, and sustaining compliance with applicable laws and regulations may be to us in terms of money, time and resources.
An orphan drug designation by the FDA, EMA, MHRA or JPMDA does not increase the likelihood that our product candidates will receive marketing exclusivity.
Regulatory authorities in some jurisdictions, including the U.S. and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as a disease with a prevalence of fewer than 200,000 individuals in the U.S., or if it affects more than 200,000 individuals in the U.S., there is no reasonable expectation that the cost of developing, and making the drug available in the U.S. for such disease will be recovered from sales of the drug.
Generally, if a product with an orphan drug designation in a particular jurisdiction subsequently receives the first regulatory approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the authority in that jurisdiction from approving another marketing application for the same drug for the same indication during the period of exclusivity. The applicable period is seven years in the U.S., ten years in Europe, and ten years in Japan. Orphan drug exclusivity may be lost if the FDA, EMA, MHRA or JPMDA determines that the request for designation was materially defective, the criteria on which the orphan designation was originally issued no longer apply or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition. In the E.U. and in Japan, it is necessary to apply for “maintenance” of the orphan drug designation to continue post approval. There is no guarantee that because the product was granted orphan designation during development that this will remain post approval.
The FDA granted orphan drug designation for EKTERLY (sebetralstat) on September 7, 2021. This designation may not effectively protect EKTERLY (sebetralstat) (or other drug products for which we may seek orphan designation) from competition because the designation does not preclude different drugs from being approved for the same condition. Even after an orphan designated drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that it is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
A fast track designation by the FDA may not lead to a faster development or regulatory review or approval process and does not increase the likelihood that our product candidates will receive regulatory approval.
The FDA granted fast track designation for EKTERLY (sebetralstat) for the treatment of HAE and such designation was approved on July 3, 2025. We may also seek fast track designation for other indications of sebetralstat or for some of our other product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for FDA fast track designation. The FDA has broad discretion whether or not to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure that the FDA would decide to grant it. Even though we have received fast track designation for sebetralstat for the treatment of HAE, or even if we receive fast track designation for other indications or for our other product candidates, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program. Many drugs that have received fast track designation have failed to obtain drug approval.
Failure to obtain regulatory approval in international jurisdictions would prevent EKTERLY (sebetralstat) and our other product candidates from being marketed abroad.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction. For example, even though we received FDA approval for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older on July 3, 2025, in order to market and sell our product candidates in the U.K., E.U., Japan and many other jurisdictions outside of the U.S., we or our third-party collaborators must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the U.S., it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We, or our third-party collaborators, may not obtain approvals from regulatory authorities outside the U.S. on a timely basis, if at all. Approval in any one jurisdiction does not ensure approval by regulatory authorities in other countries or jurisdictions, and likewise approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in any other countries or jurisdictions including the U.S. We may not be to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.
Any product candidate for which we obtain regulatory approval, including EKTERLY (sebetralstat) will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
EKTERLY (sebetralstat) and our other product candidates, and the activities associated with their development and commercialization, including their testing, manufacture, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, EMA, MHRA, JPMDA, Swiss and other regulatory authorities. In the U.S., these requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, including periodic inspections by the FDA and other regulatory authority, requirements regarding the distribution of samples to physicians and recordkeeping.
The FDA, or other regulatory authorities, may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products and if we promote our products beyond their approved indications, we may be subject to enforcement action for off-label promotion. Violations of the FDC Act relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
restrictions on the labeling or marketing of a product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials;
warning or untitled letters;
withdrawal of the products from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of products;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of regulatory approvals;
refusal to permit the import or export of our products;
product seizure; or
injunctions or the imposition of civil or criminal penalties.
Non-compliance with U.S., U.K., E.U. and Japanese requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the requirements of the U.S., U.K., E.U. and Japan regarding the protection of personal information can also lead to significant penalties and sanctions.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain regulatory approval of and commercialize our product candidates and affect the prices we may obtain.
In the U.S. there has been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay regulatory approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell EKTERLY (sebetralstat) and any other product candidates for which we obtain regulatory approval.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure 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 regulatory 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 regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In addition, in the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs, including costs of pharmaceuticals. There has been heightened governmental scrutiny over the manner in which sponsors set prices for their products, which has resulted in several presidential executive orders, Congressional inquiries, and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and Medicaid, and reform government program reimbursement methodologies for drug products.
Several healthcare reform initiatives culminated in the enactment of the IRA in August 2022, which, among other things, allows HHS to directly negotiate the selling price of a statutorily specified number of drugs and biologics each year that CMS reimburses under Medicare Part B and Part D. Only high-expenditure single-source drugs that have been approved for at least seven years (11 years for single-source biologics) are eligible to be selected for negotiation by CMS, with the negotiated price taking effect two years after the selection year. CMS selected 10 high-cost Medicare Part D products in 2023, negotiations began in 2024, and the negotiated maximum fair price for each product has been announced. These negotiations resulted in significant price reductions for the products from their 2023 list prices, ranging from 38 to 79 percent, with an average price reduction of 59.4 percent. The price cap for each of these products, which cannot exceed a statutory ceiling price, will take effect in 2026. Negotiations for Medicare Part B products will begin in 2026 with the negotiated price taking effect in 2028. A drug or biological product that has an orphan drug designation for only one rare disease or condition will be excluded from the IRA’s price negotiation requirements, but will lose that exclusion if it receives designations for more than one rare disease or condition, or if is approved for an indication that is not within that single designated rare disease or condition, unless such additional designation or such disqualifying approvals are withdrawn by the time CMS evaluates the drug for selection for negotiation. The negotiated prices have represented, and will continue to represent, a significant discount from average prices to wholesalers and direct purchasers. The IRA also imposes rebates on Medicare Part D and Part B drugs whose prices have increased at a rate than the rate of inflation, and in November 2024, CMS finalized regulations for the Medicare Part B and Part D inflation rebates. In addition, beginning in 2025, the law eliminated the coverage gap under Medicare Part D by significantly lowering the beneficiary maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket limit, and 20% once the out-of-pocket limit has been reached. The IRA also extends subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as to regulation, for the initial years. Manufacturers that to comply with the IRA may be subject to various , including significant civil monetary . These provisions may be subject to legal . For example, the provisions related to the negotiation of selling prices of high-expenditure single-source drugs and biologics have been in multiple lawsuits brought by pharmaceutical manufacturers. Thus, while it is unclear how the IRA will be implemented, it will likely have a significant impact on the pharmaceutical industry and the pricing of EKTERLY (sebetralstat) or any future product candidates, if approved.
On May 12, 2025, an Executive Order was issued that, among other things, required HHS, within 30 days, to establish and communicate to drug manufacturers most-favored-nation (“MFN”) price targets designed to bring drug prices for American patients in line with those in comparably developed nations. If significant progress towards MFN pricing is not achieved, the Executive Order requires HHS to propose a rulemaking to implement MFN pricing. It is uncertain what HHS will consider significant progress toward MFN pricing, or when that determination will be made. If HHS issues and finalizes a rule to implement MFN pricing, the rule is likely to mandate reduced prices in the U.S. of drugs, including our drugs, if approved, if they are also sold in comparator countries. Even if we do not market drugs in such countries, we would be indirectly affected if our drugs competed with drugs that were reduced by MFN pricing.
At the state level, legislatures are increasingly enacting laws and implementing regulations designed to control pharmaceutical and biological product pricing, including restrictions or prohibitions on certain marketing practices, reporting of specified categories of remuneration provided to health care practitioners, and reporting and justification of price increases greater than a specified level. In some cases, states have designed programs to encourage importation from other countries and bulk purchasing For example, the FDA released a final rule in September 2020 providing guidance for states to build and submit plans for importing drugs from Canada, and FDA authorized the first such plan in Florida in January 2024, which has been extended until November 2025. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted proposals that are pending review by the FDA.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for pharmaceuticals and other healthcare products and services, which could result in reduced demand for sebetralstat or any future product candidates, if approved, or additional pricing pressures. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize sebetralstat or any future product candidates, if approved.
Governments outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, particularly the countries of the U.K., E.U. and Japan, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of regulatory approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from its use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed its resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with the storage or disposal of biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our discovery, preclinical development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
As with all companies, we are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing, and distribution arrangements in the healthcare industry are subject to extensive laws and regulations intended 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, sales commission, customer incentive programs and other business arrangements. Employee could also involve the use of information obtained in the course of clinical trials, which could result in regulatory sanctions and to our reputation. It is not always possible to identify and employee , and the precautions we take to detect and prevent this activity may not be in controlling unknown or unmanaged risks or or in protecting us from governmental or other actions or lawsuits stemming from a to be in compliance with such laws or regulations. If any such actions are instituted us, and we are not in ourselves or asserting our rights, those actions could have a material and effect on our business, financial condition, results of operations and prospects, including the imposition of significant civil, and administrative , , , , , the or of our operations, of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, oversight and reporting obligations, or reputational .
Disruptions at the FDA, the SEC and other government agencies or comparable regulatory authorities caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, otherwise prevent new products and services from being developed, approved or commercialized in a timely manner or at all, 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. In addition, there is substantial uncertainty regarding new initiatives under the new Administration and how these might impact the FDA, its implementation of laws, regulations, policies and guidance and its personnel. Similar initiatives may also be directed toward other government agencies. These initiatives could prevent, limit or delay development and regulatory approval of our product candidates, which would adversely affect our business.
The ability of the FDA or other regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, statutory, regulatory and policy changes, and other events that may otherwise affect the FDA’s or comparable foreign regulatory authorities’ ability to perform routine functions. In addition, government funding of the SEC and other government agencies or comparable foreign regulatory authorities on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA or other regulatory authorities may slow the time necessary for new drugs to be reviewed and/or approved, which would adversely affect our business. Changes in FDA staffing could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, if any legislation, executive orders, or lapses in agency funding impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
Similar consequences would also result in the event of another significant shutdown of the federal government. For example, in 2024, the U.S. government was on the verge of a shutdown and has previously shut down several times, and certain regulatory agencies, such as the FDA and the SEC, had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, or if geopolitical or global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns or delays could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
FDA-regulated industries, such as ours, face uncertainty with regard to the regulatory environment we face as we proceed with research and development and potential future commercialization. Some of these efforts have manifested to date as efforts to reduce the size of the federal government, including large-scale reductions in force at FDA. The loss of key personnel at the FDA, including those in leadership positions, is likely to impact operations at the FDA, which could result in, among other things, delays or limitations on our ability to obtain guidance from the FDA on our product candidates in development, longer review times, and delays in obtaining regulatory approvals for our product candidates. For example, even though we received FDA approval for EKTERLY (sebetralstat) for the treatment of acute attacks of HAE in adult and pediatric patients aged 12 years and older on July 3, 2025, on June 13, 2025, the FDA communicated that it would not meet the PDUFA goal date of June 17, 2025 for our sebetralstat NDA. Moreover, the current administration has recently proposed action to freeze or reduce the budget of the National Institutes of Health (“NIH”) as related to its funding for medical research, which could decrease the ability of facilities that rely on NIH funding to enroll and conduct clinical trials or increase the costs to us of conducting clinical trials. There remains general uncertainty regarding future activities. New executive orders, regulations, policies or guidance could be issued or promulgated that affects us or creates a more or environment to pursue the development of new therapeutic products. Alternatively, state governments may attempt to address or react to changes at the federal level with changes to their own regulatory frameworks in a manner that is to our operations. If we become impacted by future governmental orders, regulations, policies or guidance, there could be a material effect on us and our business.
Risks Related to Our Dependence on Third Parties
We contract with third parties for the manufacture of EKTERLY (sebetralstat) and our other product candidates for preclinical and clinical testing and we expect to continue to do so for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products at an acceptable cost and quality, which could delay, prevent or impair our development or commercialization efforts.
We do not own or operate facilities for the manufacture of EKTERLY (sebetralstat) or our other product candidates, and we do not have any direct manufacturing personnel. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing and commercial supply of EKTERLY (sebetralstat) and we do not have backup sources of supply established for our product or product candidates. We review the manufacturing process for sebetralstat and each of our product candidates and assess the risk to supply and, as appropriate, establish multiple manufacturers and/or establish stock levels to support future activities and do not believe we are currently substantially dependent on any one third party. Despite the drug substance and product risk management, this reliance on third parties presents a risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts by us or our collaborators.
Any performance failure on the part of our existing or future manufacturers of drug substance or drug products could delay clinical development or regulatory approval. If current suppliers cannot supply us with our clinical trial or commercial requirements as agreed, we may be required to identify alternative manufacturers, which would lead us to incur added costs and delays in identifying and qualifying any such replacement.
Even if we choose to self-manufacture, the formulation used in early studies frequently is not a final formulation for commercialization. Additional changes may be required by the FDA or other regulatory authorities on specifications and storage conditions. These may require additional studies and may delay our clinical trials, including our ongoing KONFIDENT-KID and KONFIDENT-S trials.
We expect to rely on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of EKTERLY (sebetralstat) and any other product candidates for which our collaborators or we obtain regulatory approval.
We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or regulatory approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.
We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreements with third party manufacturers, reliance on third party manufacturers entails additional risks, including:
reliance on the third party for regulatory compliance and quality assurance;
the possible breach of the manufacturing agreement by the third party;
the possible misappropriation of our proprietary information, including trade secrets and know-how; and
the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.
Third party manufacturers may not be able to comply with cGMP, regulations or similar regulatory requirements outside the U.S. If the FDA determines that our third-party manufacturers are not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may not approve an NDA until the deficiencies are corrected or we replace the manufacturer in our application with a manufacturer that is in compliance. Moreover, our failure, or the failure of our third-party 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, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal , any of which could significantly and affect supplies of our products. In addition, approved products and the facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, our third-party manufacturers are subject to continual review and periodic inspections to assess compliance with cGMPs. Furthermore, although we do not have day-to-day control over the operations of our third-party manufacturers, we are responsible for ensuring compliance with applicable laws and regulations, including cGMPs.
In addition, certain Chinese biotechnology companies may become subject to trade restrictions, sanctions, other regulatory requirements, or proposed legislation by the U.S. government, which could restrict or even prohibit our ability to work with such entities, thereby potentially disrupting the supply of material to us. For example, there have been legislative proposals that target U.S. government contracts, grants and loans for entities that use equipment and services from certain named Chinese biotechnology companies, and would authorize the U.S. government to name additional Chinese biotechnology companies of concern. If these bills become law, or similar laws are passed, they would have the potential to severely restrict our ability to work with Chinese biotechnology manufacturing companies without losing the ability to contract with, or otherwise receive funding from, the U.S. government. We cannot predict what actions may ultimately be taken with respect to trade relations between the U.S. and China or other countries, what products and services may be subject to such actions or what actions may be taken by China or the other countries in retaliation.
If we are required to change third-party manufacturers for any reason, we will be required to verify that the new third party manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations. We will also need to verify, such as through a manufacturing comparability study, that any new manufacturing process will produce our product candidate or product according to the specifications previously submitted to the FDA or another regulatory authority. The delays associated with the verification of any new third party manufacturer could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget.
Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.
Our current and anticipated future dependence upon others for the manufacture of EKTERLY (sebetralstat) and our other product candidates or products may adversely affect our future profit margins and our ability to commercialize EKTERLY (sebetralstat) and any other products that receive regulatory approval on a timely and competitive basis.
We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize product candidates, impact our cash position, increase our expenses and present significant distractions to our management. The terms of any collaborations may also have impacts on other aspects of our business.
From time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases and out- or in-licensing of product candidates or technologies that we believe will complement or augment our existing business. In particular, we will evaluate and, if strategically attractive, seek to enter into additional collaborations, including with major biotechnology or biopharmaceutical companies. The competition for collaborators is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may not be able to maintain any new collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meet expectations or a collaborator terminates the collaboration. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future strategic partners. Our ability to reach a definitive agreement for a will depend, among other things, upon our assessment of the strategic partner’s resources and expertise, the terms and conditions of the proposed and the proposed strategic partner’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the U.S., the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a to such ownership without regard to the merits of the , and industry and market conditions generally. Moreover, even if we acquire assets with promising markets or technologies, we may not be to realize the of acquiring such assets due to an to integrate them with our existing technologies and we may encounter numerous in developing, manufacturing and marketing any new products resulting from a strategic acquisition that or prevent us from realizing their expected benefits or our business.
We cannot assure you that following any such collaboration, or other strategic transaction, we will achieve the expected synergies to justify the transaction. For example, such transactions may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the or combining the operations and personnel of any acquired business, of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the to retain key employees of any acquired business. Also, such strategic , joint venture or acquisition may be prohibited. may also have potential impact on other aspects of our business.
Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks that would have a material and adverse effect on our business, financial condition, results of operations and prospects.
We have entered, and may in the future seek to enter, into collaborations with third parties for the development and commercialization of sebetralstat or our other product candidates. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able to capitalize on the market potential of sebetralstat or our other product candidates that obtain regulatory approval.
In April 2025, we entered into the Kaken Agreement, pursuant to which we have licensed commercialization rights of sebetralstat in Japan, and we may enter into similar agreements in the future for additional geographies. In these and any future collaboration agreements, we expect to have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of sebetralstat or any other product candidates. Moreover, our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements. We may not realize the full potential value of the Kaken Agreement or any future agreement.
We face significant competition in seeking appropriate collaborators. Our ability to reach a definitive agreement for any collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product candidate, reduce or delay our development program or one or more of our other development programs, delay our potential development schedule or reduce the scope of research activities, or increase our expenditures and undertake discovery or preclinical development activities at our own expense. If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development activities, we may not be to further develop our product candidates or continue to develop our product candidates and our business may be materially and affected.
Our collaboration with Kaken and any future collaborations we may enter into may involve the following risks:
collaborators may have significant discretion in determining the efforts and resources that they will apply to these collaborations;
collaborators may not perform their obligations as expected;
changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, may divert resources or create competing priorities;
collaborators may delay discovery and preclinical development, provide insufficient funding for product development of targets selected by us, stop or abandon discovery and preclinical development for a product candidate, repeat or conduct new discovery and preclinical development for a product candidate;
collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed than our products;
product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the development of its product candidates;
collaborators may not properly maintain or defend their intellectual property rights or intellectual property rights licensed to us or may use their proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and
collaborations may be terminated for the convenience of the collaborator and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Additionally, subject to its contractual obligations to us, if a collaborator is involved in a business combination, the collaborator might deemphasize or terminate the development of any of our product candidates. If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and the perception of us in the business and financial communities could be adversely affected.
If our collaborations do not result in the successful development of products or product candidates, product candidates could be delayed and we may need additional resources to develop product candidates. All of the risks relating to product development, regulatory approval and commercialization described in this proxy statement also apply to the activities of our collaborators.
We rely, and intend to continue to rely, on third parties to support or conduct our clinical trials and perform some of our research and preclinical studies. If these third parties do not satisfactorily carry out their contractual duties, fail to comply with applicable regulatory requirements or do not meet expected deadlines, our development programs may be delayed or subject to increased costs or we may be unable to obtain regulatory approval, each of which may have an adverse effect on our business, financial condition, results of operations and prospects.
We do not have the ability to independently conduct all aspects of our clinical trials ourselves. As a result, we are dependent on third parties to conduct our ongoing and planned clinical trials of sebetralstat, including our ongoing KONFIDENT-KID and KONFIDENT-S clinical trials of sebetralstat in patients with HAE, and any future product candidates, as well as potentially preclinical studies of future product candidates. The timing of the initiation and completion of these trials will therefore be partially controlled by such third parties and may result in delays to our development programs. For example, we expect CROs, independent clinical investigators and consultants to play a significant role in the conduct of these trials and the subsequent collection and analysis of data. However, these investigators, CROs and other third parties are not our employees, and we will not be able to control all aspects of their activities. Nevertheless, we are responsible for ensuring that each clinical trial is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on the investigators, CROs and other third parties does not relieve us of our regulatory responsibilities. We and our CROs and other third parties are required to comply with GCP requirements, which are regulations and guidelines enforced by the FDA for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical trial investigators and clinical trial sites. If we or any of our CROs or clinical trial sites to comply with applicable GCP requirements, the data generated in our clinical trials may be deemed , and the FDA or other regulators may require us to perform additional clinical trials before approving our marketing applications. We cannot you that, upon inspection, the FDA or other regulators will determine that our clinical trials comply with GCPs. In addition, our clinical trials must be conducted with product manufactured under cGMP regulations. Our or the of third parties on whom we rely to comply with these regulations may require us to stop and/or repeat clinical trials, which would the regulatory approval process.
There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required. In addition, these third parties may be subject to supply chain or inflationary pressures that limit their ability to achieve anticipated timelines or result in a greater cost to us. For example, we are aware of recurrent shortages of non-human primates available for preclinical studies and although that is not expected to impact our current business, if we begin new product development programs we could be subject to longer development times or difficulty completing necessary research. If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise perform in a substandard manner, or terminate their engagements with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated. If a clinical trial site for any reason, we may experience the of follow-up information on subjects enrolled in such clinical trial site unless we are to transfer those subjects to another qualified clinical trial site, which may be or .
In addition, with respect to investigator-sponsored trials that may be conducted, we would not control the design or conduct of these trials, and it is possible that the FDA will not view these investigator-sponsored trials as providing adequate support for future clinical trials or market approval, whether controlled by us or third parties, for any one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results. We expect that such arrangements will provide us certain information rights with respect to the investigator-sponsored trials, including access to and the ability to use and reference the data, including for our own regulatory submissions, resulting from the investigator-sponsored trials. However, we would not have control over the timing and reporting of the data from investigator-sponsored trials, nor would we own the data from the investigator-sponsored trials. If we are unable to confirm or replicate the results from the investigator-sponsored trials or if negative results are obtained, we would likely be further delayed or prevented from advancing further clinical development. Further, if investigators or institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves to be compared to the firsthand knowledge we might have had the investigator-sponsored trials been sponsored and conducted by us, then our ability to design and conduct any future clinical trials
ourselves may be adversely affected. The investigators may design clinical trials with clinical endpoints that are more difficult to achieve, or in other ways that increase the risk of negative clinical trial results compared to clinical trials that we may design on our own. Negative results in investigator-sponsored clinical trials could have a material adverse effect on our efforts to obtain regulatory approval for our product candidates and the public perception of our product candidates. Additionally, the FDA or other regulators may disagree with the sufficiency of our right of reference to the preclinical, manufacturing or clinical data generated by these investigator-sponsored trials, or our interpretation of preclinical, manufacturing or clinical data from these investigator-sponsored trials. If so, the FDA or other regulators may require us to obtain and submit additional preclinical, manufacturing, or clinical data.
Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors for whom they may also be conducting clinical trials or other pharmaceutical product development activities that could harm our competitive position. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approval for EKTERLY (sebetralstat) and any future product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our products.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain intellectual property protection for our technology and products or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends in large part on our ability to obtain and maintain patent protection in the U.S., the E.U., and other countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent applications in the U.S. and abroad related to our novel technologies and product candidates, including EKTERLY (sebetralstat). This patent portfolio includes issued patents and pending patent applications covering compositions of matter and methods of use.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope. It is also possible that we will fail to identify patentable aspects of our discovery and preclinical development output before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the interests of our business.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the U.S. For example, India and China do not allow patents for methods of treating the human body. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. If a third party has also filed a U.S. patent application prior to the effective date of the relevant provisions of the America Invents Act (i.e. before March 16, 2013) covering our products and product candidates, including EKTERLY (sebetralstat), or a similar invention, we may have to participate in an proceeding, known as an , declared by the USPTO to determine priority of in the U.S. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the E.U., the U.S. and other countries may the value of our patents or narrow the scope of our patent protection.
Moreover, we may be subject to a third party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize EKTERLY (sebetralstat) and other current or future product candidates.
Even if our owned and licensed 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 owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or freedom to operate 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. 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. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
The risks described elsewhere pertaining to our patents and other intellectual property rights also apply to the intellectual property rights that we license, and any failure to obtain, maintain and enforce these rights could have a material adverse effect on our business. In some cases we may not have control over the prosecution, maintenance or enforcement of the patents that we license, and our licensors may fail to take the steps that we believe are necessary or desirable in order to obtain, maintain and enforce the licensed patents. Any inability on our part to protect adequately our intellectual property may have a material adverse effect on our business, operating results and financial position.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the U.S. in several stages over the lifetime of the patents and/or applications. We employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance 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. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Because competition in our industry is intense, competitors may infringe or otherwise violate our issued patents, patents of our licensors or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringed their patents. In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in . An result in any proceeding could put one or more of our patents at risk of being or interpreted narrowly. We may also elect to enter into license agreements in order to settle patent or to prior to , and any such license agreements may require us to pay royalties and other fees that could be significant. Furthermore, because of the substantial amount of discovery required in connection with intellectual property , there is a risk that some of our confidential information could be compromised by disclosure.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.
Our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell EKTERLY (sebetralstat) and our other product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference or derivation proceedings before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.
If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology. 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. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our products or product candidates or us to some of our business operations, which could materially our business. that we have the confidential information or trade secrets of third parties could have a similar impact on our business.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patents for some of our technology, EKTERLY (sebetralstat) and other product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We seek to protect our confidential proprietary information, in part, by entering into confidentiality and invention or patent assignment agreements with our employees and consultants, however, we cannot be certain that such agreements have been entered into with all relevant parties. Moreover, to the extent we enter into such agreements, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or a trade secret is , expensive and time-consuming, and the outcome is . In addition, some courts inside and outside the U.S. are less willing or to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate them, from using that technology or information to compete with us. If any of our trade secrets were to be to or independently developed by a competitor, our competitive position would be .
Risks Related to Employee Matters, Facilities, Managing Growth and Macroeconomic Conditions
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on the research and development, clinical and business development expertise of the principal members of our management, scientific and clinical team. Although we have entered into employment letter agreements with our
executive officers, each of them may terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. The loss of the services of any of our management team, other key employees and other scientific and medical advisors, and our inability to find suitable replacements, could result in a failure to successfully commercialize EKTERLY (sebetralstat), delays in product development and harm our business.
Recruiting and retaining qualified scientific, clinical, manufacturing, sales and marketing personnel will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize products. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our discovery and preclinical development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to provide services to us. If we are to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.
We expect to continue to increase the size of our organization, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
We have grown from 150 employees as of April 30, 2024 to 270 employees as of April 30, 2025, and anticipate continuing to add headcount as we further develop our general and administrative capabilities. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our limited financial resources and the limited experience of our management team 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 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 business plans or disrupt our operations.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CROs and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, health epidemics and pandemics, and other natural or man-made disasters or business interruptions, for which we may not have insurance coverage. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process EKTERLY (sebetralstat) and our other product candidates. Our ability to obtain supplies of EKTERLY (sebetralstat) and our other product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Our operations and financial condition could suffer in the event of a natural or man-made near our headquarters in Cambridge, Massachusetts or our office space in Framingham, Massachusetts and research facilities in Cambridge, Massachusetts; Porton Down, United Kingdom; Salt Lake City, Utah; Zug, Switzerland; Tokyo, Japan; and Dublin, Ireland.
Actual or perceived failure to comply with privacy and data security laws, regulations and standards may cause our business to be materially adversely affected.
We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. Personal privacy and data security have become significant issues in the U.S., Europe and in many other jurisdictions. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. We maintain a large quantity of sensitive information, including confidential business information and patient health information in connection with our clinical development regarding the patients enrolled in our clinical trials. Any violations of these rules by us could subject us to civil and criminal penalties and adverse publicity and could harm our ability to initiate and complete clinical trials. We cannot provide assurance that current or future legislation will not prevent us from generating or maintaining personal data or that patients will consent to the use of their personal data (as necessary); either of these circumstances may prevent us from undertaking or publishing essential research and development, manufacturing, and commercialization, which could have a material adverse effect on our business, results of operations, financial condition, and prospects.
The myriad international and U.S. privacy and data breach laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. In many jurisdictions, enforcement actions and consequences for noncompliance are also rising. For instance, companies that violate the European Union’s General Data Protection Regulation, including as implemented in the United Kingdom (collectively, the “GDPR”), can face fines of up to the greater of 20 million Euros under the E.U. GDPR / 17.5 million pounds under the U.K. GDPR, or 4% of their worldwide annual revenue, whichever is higher. In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. If there is no lawful manner for us to transfer personal data from the E.U., the U.K., or other jurisdictions to the U.S., or if the requirements for a legally-compliant transfer are too , we could face significant consequences, including the or of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as the E.U. and/or U.K.) at significant expense, increased exposure to regulatory actions, substantial and , the to transfer data and work with partners, vendors and other third parties, and our processing or transferring of personal data necessary to operate our business.
In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually applies to us. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, and adversely affect our business. Additionally, all of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase. Any failure or perceived failure by us (or the third parties with whom we have contracted to process such information) to comply with applicable privacy and data security laws, policies or related contractual obligations, or any compromise of security that results in unauthorized access, use or transmission of, personal user information, could result in a variety of claims against us, including governmental enforcement actions and investigations, class action privacy litigation in certain jurisdictions and proceedings by data protection authorities, potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. When such events occur, our reputation may be , we may current and potential users and the competitive positions of our brand might be , any or all of which could materially affect our business, operating results, and financial condition. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, including changes in laws, regulations and standards or new interpretations or applications of existing laws, regulations and standards, we may become subject to audits, inquiries, whistleblower , media coverage, , of export privileges, or or civil sanctions, all of which may have a material effect on our business, operating results, reputation, and financial condition.
Our business and operations would suffer in the event of system failures, cyberattacks or a deficiency in our cybersecurity.
Our internal computer systems and those of our CROs, third-party manufacturers, collaborators and other third parties on whom we rely are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Furthermore, we have little or no control over the security measures and computer systems of our third party collaborators. The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, 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. In addition, the prevalent use of mobile devices that access confidential information increases the risk of data security breaches, which could lead to the of confidential information or other intellectual property. The costs to us or our CROs or other contractors or consultants we may utilize to mitigate network security , bugs, viruses, worms, , phishing attempts, software programs and security could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these may not be , and these could result in , , cessation of service and other to our business and our competitive position. For example, the of research data could development of our product candidates and the of clinical trial data from completed or ongoing or planned clinical trials, including our ongoing KONFIDENT-KID and KONFIDENT-S trials, could result in in our regulatory approval efforts and we may incur substantial costs to attempt to recover or reproduce the data. If any or security resulted in a of or to our data or applications, or disclosure of confidential or proprietary information, we could incur liability and/or the further development of our product candidates could be or .
In addition, such a breach may require notification to governmental agencies, the media or individuals pursuant to various federal and state privacy and security laws, if applicable, including HIPAA, as amended by HITECH, and its implementing rules and regulations, as well as regulations promulgated by the Federal Trade Commission and state breach notification laws. We would also be exposed to a risk of loss or litigation and potential liability under laws, regulations and contracts that protect the privacy and security of personal information. We would also be exposed to a risk of loss or litigation and potential liability, which could materially adversely affect our business, reputation, results of operations, financial condition and prospects. Activities outside of the U.S. implicate local and national data protection standards, impose additional compliance requirements and generate additional risks of enforcement for non-compliance. The GDPR and other data protection, privacy and similar national, state/provincial and local laws may restrict the access, use, storage, disclosure and other processing activities concerning patient health information abroad. Compliance efforts will likely be an increasing and substantial cost in the future.
In July 2023, the SEC adopted cybersecurity disclosure rules for public companies that require disclosure regarding cybersecurity risk management (including the board’s role in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks and processes for assessing, identifying and managing cybersecurity risks) in annual reports on Form 10-K. These cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents by Form 8-K, within four business days of determining an incident is material.
We also depend on our information technology infrastructure for communications among our personnel, contractors, consultants and vendors. System failures or outages could also compromise our ability to perform these functions in a timely manner, which could harm our ability to conduct business or delay our financial reporting.
Risks Related to Ownership of Our Common Stock
Our stock price is volatile and our stockholders may not be able to resell shares of our common stock at or above the price they paid.
The trading price of our common stock is highly volatile and could be subject to wide fluctuations in response to various factors, many of which are beyond our control. Factors affecting the market price of our common stock include those discussed in this “Risk Factors” section of this Annual Report on Form 10-K and others such as:
announcement of a strategic transaction or other significant events for us or our competitors;
our decision to initiate a clinical trial or not to initiate a clinical trial;
announcements of significant changes in our business or operations, including the decision not to pursue drug development programs;
additions or departures of key personnel;
adverse results or delays in clinical trials;
changes in reimbursement or third party coverage of treatments, or changes to treatment recommendations or guidelines applicable to treatment;
announcements relating to collaboration partnerships or other strategic transactions undertaken by us;
announcements of therapeutic innovations or new products by us or our competitors;
adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;
changes or developments in laws or regulations applicable to EKTERLY (sebetralstat) or any of our other product candidates;
any adverse changes to our relationship with any manufacturers or suppliers;
the success of our testing and clinical trials;
the success of our efforts to acquire or license or discover additional product candidates;
any intellectual property infringement actions in which we may become involved;
announcements concerning our competitors or the pharmaceutical industry in general;
achievement of expected product sales and profitability;
manufacture, supply or distribution shortages;
actual or anticipated fluctuations in our operating results;
FDA or other regulatory actions affecting us or our industry or other healthcare reform measures in the U.S., the U.K. or the E.U.;
changes in financial estimates or recommendations by securities analysts;
trading volume of our common stock;
sales of our common stock by us, our executive officers and directors or our stockholders in the future;
general economic and market conditions and overall fluctuations in the U.S. equity markets, including due to rising inflation and interest rates, labor shortages, supply chain issues, and global conflicts such as the war in Ukraine; and
other events or factors, many of which are beyond our control.
In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.
We incur significant costs as a result of operating as a public company, and our management devotes substantial time to compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could result in sanctions or other penalties that would harm our business.
We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Exchange Act, and regulations regarding corporate governance practices. The listing requirements of The Nasdaq Global Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel have devoted, and will continue to need to devote, a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations increase our legal and financial compliance costs and 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.
We are subject to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), and the related rules of the SEC which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. Effective April 27, 2020, the SEC adopted amendments to the “accelerated filer” and “large accelerated filer” definitions in Rule 12b-2 under the Securities and Exchange Act of 1934. The amendments exclude from the “accelerated filer” and “large accelerated filer” definitions an issuer that is eligible to be a smaller reporting company and that had annual revenues of less than $100 million in the most recent fiscal year for which audited financial statements are available. We determined that our Company does not meet the accelerated or large accelerated filer definitions as of April 30, 2025. For so long as we remain a smaller reporting company and a non-accelerated filer, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies, including, but not limited to, not being required as a non-accelerated filer to comply with the auditor attestation requirements of Section 404(b). An independent assessment by our independent registered public accounting firm of the effectiveness of internal control over financial reporting could detect problems that our management’s assessment might not. material in our internal control over financial reporting could lead to financial statement and require us to incur the expense of remediation.
During the course of the review and testing of our internal control for the purpose of providing the reports required by these rules, we may identify deficiencies and be unable to remediate them before we must provide the required reports. Furthermore, if we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. We or our independent registered public accounting firm may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting, which could harm our operating results, cause investors to lose confidence in our reported financial information and cause the trading price of our stock to fall. 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, of our shares from The Nasdaq Global Market or other consequences that would materially our business.
In addition, if we lose our status as a “non-accelerated filer,” we will be required to have our independent registered public accounting firm attest to the effectiveness of internal control over financial reporting. If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are an accelerated filer or a large accelerated filer, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock could be negatively affected.
Shareholder Activism Could Cause Material Disruption to Our Business.
Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as actions related to environment, social and governance matters, financial restructuring, increased borrowing, dividends, share repurchases or even sales of assets or the entire company. Responding to proxy contests and other actions by such activist investors or others in the future could be costly and time-consuming, disrupt our operations and divert the attention of our board of directors and senior management from the pursuit of our business strategies, which could adversely affect our results of operations and financial condition.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could significantly reduce the value of our shares to a potential acquirer or delay or prevent changes in control or changes in our management without the consent of our board of directors. The provisions in our charter documents include the following:
a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
the required approval of at least 66 2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause;
the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
the ability of our board of directors to alter our bylaws without obtaining stockholder approval;
the required approval of at least 66 2/3% of the shares entitled to vote at an election of directors to adopt, amend or repeal certain provisions of our bylaws and our amended and restated certificate of incorporation regarding the election and removal of directors;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
the requirement that a special meeting of stockholders may be called only by or at the direction of our board of directors pursuant to a resolution adopted by a majority of the total number of directors that our board of directors would have if there were no vacancies, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.
We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third party claims against us and may reduce the amount of money available to us.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:
we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation 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 the best interests of the registrant 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 are 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.
we will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.
the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.
we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.
Our ability to use our net operating losses to offset future taxable income, if any, may be subject to certain limitations.
Under the Tax Cuts and Jobs Act of 2017, (“TCJA”), net operating loss carryforwards (“NOLs”) generated in taxable years beginning before January 1, 2018 may be carried forward up to twenty taxable years, and NOLs generated in taxable years beginning after December 31, 2017 will not expire, but will only be available to offset up to 80% of our taxable income in the taxable year (before taking into certain deductions). In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change” (generally defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs, to offset future taxable income. We have experienced ownership changes in the past that substantially limited our use of the NOLs available to us for U.S. federal income tax purposes and as a result we currently expect that approximately $76.7 million of our NOLs will go unutilized. If we undergo additional ownership changes (some of which changes may be outside our control), our ability to utilize our NOLs could be further limited by Section 382 of the Code. Our NOLs may also be impaired under state law and there may be periods in which certain states suspend our ability to use our NOLs. Accordingly, we may not be to utilize a material portion of our NOLs future taxable income. Furthermore, our ability to utilize our NOLs is conditioned upon our and generating U.S. federal taxable income. We have incurred net since our inception and anticipate that we will continue to incur significant for the foreseeable future; thus, we do not know whether or when we will generate the U.S. federal taxable income necessary to utilize our NOLs.
General Risk Factors
Unstable or unfavorable global market and economic conditions may have adverse consequences on our business, financial condition and stock price.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. Challenging or uncertain economic conditions including those related to global epidemics, pandemic, or contagious diseases, regional geopolitical conflicts, inflation, fluctuation in interest rates and foreign exchange rates, uncertainty with respect to the federal debt ceiling and budget and government shutdowns related thereto, actual or perceived instability in the global banking system, disruptions in supply chains may adversely affect our general business strategy and stock price. In addition, a recession, depression or other sustained adverse market event could materially and adversely affect our business and the value of our common stock.
If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon development plans. There is also a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget. In addition, regarding the ongoing conflicts in Ukraine and the Middle East, we do not have any clinical trial sites or operations in the respective conflict zones. However, if the current in the region continues, there is the potential for trial sites in other eastern European countries to or stop enrollment, or to be to administer our clinical trials.
Changes in tax laws or tax rulings could materially affect our financial position, results of operations and cash flows.
The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change. Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially affect our financial position and results of operations. For example, the TCJA made broad and complex changes to the Code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both positive and negative changes to the utilization of NOL carryforwards, allowing for the expensing of certain capital expenditures, and putting into effect the migration from a “worldwide” system of taxation to a more territorial system. Under the TCJA, research expenditures incurred by us in taxable years beginning after January 1, 2022 currently are subject to capitalization and amortization over five years in the case of domestic research and fifteen years in the case of foreign research. Future guidance from the IRS with respect to the Tax Act may affect us, and certain aspects of the TCJA could be repealed or modified in future
legislation. The IRA, enacted on August 16, 2022, further amended the U.S. tax code, imposing a 15% minimum tax on “adjusted financial statement income” of certain corporations as well as an 1% excise tax on the repurchase or redemption of stock by certain publicly held corporations, beginning in 2023. In addition, it is uncertain if and to what extent various states will conform to the TCJA, the IRA or any newly enacted federal tax legislation.
As we continue to expand internationally, we will be subject to other jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have an adverse impact on our liquidity and results of operations. In addition, the authorities in several jurisdictions could review our tax returns and impose additional tax, interest and penalties, which could have an impact on us and on our results of operations. In addition, many countries in Europe and a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in the countries where we do or intend to do business or require us to change the manner in which we operate our business.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse opinion regarding our 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 securities analysts publish about us or our business. If any analysts who cover us issue an adverse regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price may decline. If any of these analysts cease coverage of us 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.
We do not currently intend to pay dividends on our common stock, and, consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.
We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, our stockholders are not likely to receive any dividends on their common stock for the foreseeable future. Since we do not intend to pay dividends, our stockholders’ ability to receive a return on their investment will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.
Item 1B. Unresolve d Staff Comments.
None.
Item 1C. Cybersecurity.
Risk Management & Strategy:
We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information with the aim to continually improve security to keep pace with the evolving cyber threat landscape.
Our strategy toward managing cybersecurity risk in our business is informed by and aligned with the core principles and methods outlined within the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework, while including elements of the International Organization for Standardization’s ISO/IEC 27001 publication and industry best practices. This does not mean that we seek to meet any particular technical standards, specifications, or requirements, only that we intend to use the NIST CSF or ISO 27001, and other resources as guides to help us identify, assess, and manage cybersecurity risks relevant to our business. Inclusive in these frameworks and our program are components for continuous improvement through feedback, self-review and external testing.
Our cybersecurity program leverages people, processes and technology to identify and respond to cybersecurity threats in a timely manner. As part of our cybersecurity program, we maintain various protections designed to safeguard against cyberattacks, including but not limited to firewalls, endpoint detection and response, anti-malware, immutable backups, multi-factor
authentication schemes, data encryption, and security system information event monitoring to detect and respond quickly to any emergent threats. In addition, we periodically conduct intrusion and penetration testing through third parties to evaluate our cybersecurity response capability.
We also maintain a security awareness program with mandatory semi-annual training content and perform automated e-mail based phishing tests. Results of testing help to inform and provide continuous improvement of our security awareness training materials, approaches and strategies. We routinely communicate with employees about the potential for cybersecurity threats, including the latest adversary trends and social engineering techniques, and how to avoid them, and the best use of our established communications channels.
We perform a formal cybersecurity risk assessment each year. As part of our risk assessment, we consider the potential for cybersecurity threats, including but not limited to interruptions, outages and breaches to our operational and financial systems. We have policies, processes, internal controls and tools to assess, identify, and manage material risks from potential cybersecurity threats. We engage third-party service providers, with significant information technology and cybersecurity experience, to assist with designing, implementing and managing our information technology infrastructure and cybersecurity program.
In addition, we engage external third-party information security consultants to periodically conduct information security testing and assessments designed to identify, assess, and manage cybersecurity risks, and to evaluate our overarching information security program and specific incident response procedures. We perform diligence on our vendors and prospective vendors regarding their cybersecurity posture. Although we continue to invest in this diligence regarding our critical vendors, our control over the security posture of our vendors is limited, and there can be no assurance that we can prevent or significantly mitigate the risk of any compromise or failure in the information assets owned or controlled by such vendors.
Governance:
The Vice President of IT is responsible for implementing and maintaining the information security program. The Vice President of IT role is currently held by an individual who has over 20 years of experience in enterprise-level IT operations and management, cybersecurity operations and management and IT/Cyber architecture and strategy. The Vice President of IT reports to our CFO , who together are responsible for coordinating information security risk assessments and overseeing periodic testing of our cybersecurity controls. Our CFO meets with the Audit Committee of our board of directors periodically for the audit committee to provide guidance on the prioritization of risk remediation and ongoing implementation of cybersecurity improvements across our organization.
The Vice President of IT engages with our managed service providers to proactively address emerging threats based on industry reports and respond to any threats and incidents. Our managed service providers also provide continuous support and coverage of our environment. We utilize threat intelligence services from multiple organizations, allowing us to proactively respond to emerging cybersecurity threats.
Our board of directors considers cybersecurity risk part of its risk oversight function and has delegated to the Audit Committee of our board of directors’ oversight of cybersecurity and other information technology risks. The Audit Committee oversees management’s implementation of our cybersecurity risk management program. The relevant members of management regularly update the Audit Committee with respect to cybersecurity risk, also on an ad-hoc basis as necessary, regarding any material cybersecurity incidents and any incidents with lesser impact potential. The Audit Committee periodically reports to the full board of directors regarding its activities, including those related to cybersecurity.
As of the date of this report, we are not aware of any material risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including our business strategy, results of operations, or financial condition. However, we are subject to various cybersecurity risks that may adversely affect our business, financial condition and results of operations. See Item 1A. Risk Factors, “ Our business and operations would suffer in the event of system failures, cyberattacks or a deficiency in our cybersecurity ” for further discussion.
Item 2. Pr operties.
Details of our principal properties as of April 30, 2025, are provided below:
Location
Function
Square footage
Owned or Leased
Initial Lease
Term End Date
Lease
Extension Options
Cambridge, MA
Corporate Headquarters
Leased
None
Framingham, MA
Office Space
Leased
None
Salt Lake City, Utah
Office Space
Leased
None
Cambridge, MA
Laboratory facility
Leased
Option to renew annually
Porton Down, UK
Laboratory and office space facility
Leased
None
Dublin, Ireland
Office Space
Leased
None
Tokyo, Japan
Office Space
Leased
None
Zug, Switzerland
Office Space
Leased
Option to renew annually
Berlin, Germany
Office Space
Leased
None
The Company believes that our current and future facilities will be adequate for the foreseeable future. Refer to Note 10, Leases , in the Notes to the Consolidated Financial Statements for further details on the Company's leases.
