ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information in this Annual Report on Form 10-K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the value and trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our CC Strategy and Holdings
We are shifting our business strategy from biotechnology operations to a CC treasury strategy, which represents a fundamental change in our risk profile and may not be successful.
Historically, our company’s core operations centered on biotechnological solutions. In late 2025, we began to integrate digital asset management into our business, but this was not our primary focus. In February 2026, we rebranded as Canton Strategic Holdings, Inc. to reflect our new emphasis on acquiring, holding, and managing CC assets as our principal treasury and operational strategy. This pivot presents several material risks:
Loss of Revenue Streams : Management’s prioritization of the CC treasury strategy will require the substantial allocation of executive time, attention, and resources, which will necessarily reduce the level of focus devoted to our biotechnology operations. As a result, management may have limited capacity to pursue commercial initiatives and other revenue-generating opportunities within our biotechnology business. This shift in managerial focus could effectively result in the foregoing or delay of potential revenue streams and strategic opportunities that might otherwise be captured if management were fully dedicated to the biotech segment. Consequently, our operational performance and future revenue growth from biotechnology activities may be adversely affected.
Residual Liabilities : Despite our strategic shift, we remain exposed to potential liabilities from our prior business activities, including contractual obligations, intellectual property disputes, or customer claims. These legacy issues could require significant financial resources and distract management from executing our new strategy.
Investor Uncertainty and Realignment : Investors who initially invested in our company for exposure to our legacy business may choose to divest as a result of our new focus, potentially increasing volatility in our stock price and reducing market support during the transition.
If we are unable to effectively manage these risks and execute our new strategy, our business, financial condition, and the market price of our common stock could be materially and adversely affected.
We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As CC and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of CC. The application of state and federal securities laws and other laws and regulations to CC and other digital assets is unclear in certain respects. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of CC or the ability of individuals or institutions such as us to own or transfer CC.
Since 2018, the SEC has initiated a number of crypto and digital-asset-related enforcement actions. While the SEC has since requested the dismissal of several of these cases, the SEC or other regulatory agencies may initiate similar actions in the future, which could materially impact the price of CC. In January 2025, the SEC launched a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets. Since then, the task force has sought written input and hosted roundtables with market participants to further task force goals of drawing clear regulatory lines, providing paths to registration, crafting disclosure frameworks, and deploying enforcement resources judiciously. We cannot predict the output of the new crypto task force or whether any recommendations will be adopted by the SEC or maintained under future administrations.
It is not possible to predict whether, or when, new laws will be enacted that change the legal framework governing digital assets or provide additional authorities to the SEC or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional laws or authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function, the willingness of financial and other institutions to continue to provide services to the digital assets industry, or how any new laws or regulations, or changes to existing laws or regulations, might impact the value of digital assets generally and CC tokens specifically. The consequences of any new law or regulation relating to digital assets and digital asset activities could adversely affect the market price of CC tokens, as well as our ability to hold or transact in CC tokens, and in turn adversely affect the market price of our listed securities.
If CC is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of CC and in turn adversely affect the market price of our common stock.
Our digital asset treasury exposure to CC involves novel and significant risks, including market volatility, accounting, regulatory, custody, cybersecurity, liquidity and reputational risks, which could have a material adverse effect on our business, results of operations and financial condition.
We have implemented a digital asset treasury strategy by holding our treasury assets in CC, a privately issued digital asset that is not legal tender and is not backed or insured by any government or governmental program. The market for CC may be less mature than markets for traditional assets and can exhibit extreme price volatility driven by factors beyond our control, including market sentiment, macroeconomic conditions, regulatory developments, protocol or governance changes, technological vulnerabilities and the actions of significant market participants. These price movements could result in substantial realized and unrealized gains or losses. Under applicable U.S. GAAP, crypto assets that meet the relevant criteria are measured at fair value each reporting period with changes recognized in earnings, which can produce meaningful volatility in our reported results and adversely affect the market price of our securities.
Our CC activities depend on third-party service providers-such as trading venues, custodians, wallet-infrastructure vendors and banking or payment partners-over which we have limited control. Failures or outages at these providers, trading suspensions or delistings, withdrawal moratoria, insolvencies, hacking, fraud, operational errors, inadequate asset segregation or adverse legal determinations could lead to the partial or total loss of CC, delays or an inability to access or deploy CC, or disputes regarding ownership and control. Safeguarding the private keys necessary to access and transfer CC presents unique cybersecurity and internal-control challenges; loss, theft or compromise of keys-through cyberattack, insider malfeasance, software defects, misconfiguration, phishing or social engineering-may be irreversible.
The legal and regulatory framework for digital assets, including CC, continues to evolve and may be subject to inconsistent interpretation across U.S. federal, state and international jurisdictions. Authorities could determine that CC is a security, commodity or other regulated instrument, which could impose registration, licensing, disclosure, custody, capital or other obligations. Changes in, or differing interpretations of, securities, commodities, money-transmission, sanctions/AML, consumer-protection, tax and data-security laws and regulations could increase our compliance costs, restrict or prohibit aspects of our CC activities, limit access to fiat banking or payment rails, or subject us to examinations, enforcement actions, penalties or private litigation.
Liquidity in markets for CC may be limited or impaired during periods of stress due to exchange outages, extreme volatility, order-book dislocations, widening spreads and slippage, or adverse developments in related market infrastructure (including stablecoins and key service providers). If we seek to sell, transfer or hedge CC during such periods, we may be unable to do so on acceptable terms, or at all. Our holdings may also be concentrated in CC, increasing our exposure to idiosyncratic risks and potentially causing our stock price to correlate with movements in the price of CC.
Allocating cash, offering proceeds or debt financing to acquire or hold CC could affect our capital needs and financing plans, increase dilution or leverage, and subject us to covenant constraints. In addition, certain stakeholders may view digital-asset exposure unfavorably-whether due to environmental, social or governance concerns, perceived risk or other reasons-which could impair our reputation and access to capital, customers and partners. We may modify, suspend or discontinue our CC activities at any time, and there can be no assurance that our digital asset treasury strategy will achieve its objectives or that losses will not occur.
Failure of the Canton Network to achieve broad market acceptance would materially and adversely affect our business, financial condition, and results of operations.
Our business depends on the growth and widespread adoption of the Canton Network by major financial institutions and market infrastructure participants. Any failure of the Canton Network to achieve broad institutional acceptance would materially and adversely affect our business, financial condition, and results of operations.
The Canton Network is a relatively new technology, and its long-term viability and acceptance in the financial services industry remain uncertain. Unlike open, public cryptocurrencies, CC tokens and the Canton Network are designed for permissioned, compliance-oriented institutional usage. Canton Network infrastructure emphasizes configurable privacy, identity-aware access, regulatory controls, and interoperability between applications operated by known financial entities. While these features are attractive to regulated institutions, they also mean that adoption depends on formal onboarding, institutional alignment, and integration with existing financial systems, each of which can slow network growth and increase adoption risk compared to public, permissionless networks.
In addition, because CC tokens differ in design and purpose from established public coins, they do not benefit from the same level of public awareness, liquidity history, or market-driven network effects. Their value proposition is tied more directly to enterprise usage, transaction volume, and institutional trust frameworks. If institutions do not recognize sufficient operational, capital efficiency, or risk-reduction benefits from Canton-based assets compared to existing payment rails, bank money, stablecoins, or public blockchain assets, adoption may be limited.
Our digital treasury strategy is built to operate on, interoperate with, or derive value from activity on the Canton Network. If the Canton Network does not achieve broad adoption among institutional participants, or if adoption occurs more slowly than we anticipate, our profitability and results of operations could be adversely impacted.
Regulatory change reclassifying CC as a security could lead to our classification as an “investment company” under the Investment Company Act of 1940, as amended, or the 1940 Act, and could adversely affect the market price of CC and the market price of our common stock.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in the 1940 Act, and are not registered as an “investment company” under the 1940 Act as of the date hereof.
While senior SEC officials have not stated their view as to whether CC is or is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead to our classification as an “investment company” under the 1940 Act, if the portion of our assets consists of investments in CC exceeds 40% safe harbor limits prescribed in the 1940 Act, which would subject us to significant additional regulatory controls that could have a material adverse effect on our business and operations and may also require us to change the manner in which we conduct our business.
We monitor our assets and income for compliance under the 1940 Act and seek to conduct our business activities in a manner such that we do not fall within its definitions of “investment company” or that we qualify under one of the exemptions or exclusions provided by the 1940 Act and corresponding SEC regulations. Furthermore, if CC is determined to constitute a security for purposes of the federal securities laws, we would take steps to reduce the percentage of CC that constitute investment assets under the 1940 Act. These steps may include, among others, selling CC that we might otherwise hold for the long term and deploying our cash in non-investment assets, and we may be forced to sell our CC at unattractive prices. We may also seek to acquire additional non-investment assets to maintain compliance with the 1940 Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe harbor. If we were unsuccessful, and if CC is determined to constitute a security for purposes of the federal securities laws, then we would have to register as an investment company, and the additional regulatory restrictions imposed by 1940 Act could adversely affect the market price of CC and in turn adversely affect the market price of our common stock.
Our financial results and the market price of our common stock may be affected by the prices of CC.
As part of our capital allocation strategy for assets that are not required to provide working capital for our ongoing operations, we have invested, and plan to continue to invest, in CC. The price of CC has historically been subject to dramatic price fluctuations and is highly volatile. Moreover, digital assets, such as CC, are relatively novel and the application of securities laws and other regulations to such assets is unclear in many respects. It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of CC.
Any decrease in the fair value of CC below our carrying value for such assets could require us to incur a loss due to the decrease in fair market value, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings. Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our common stock. In addition, the application of generally accepted accounting principles in the United States, with respect to CC, may change in the future and could have a material adverse effect on our financial results and the market price of our common stock.
In addition, if investors view the value of our common stock as dependent upon or linked to the value or change in the value of our CC holdings, the price of CC may significantly influence the market price of our common stock. Additionally, if the price of CC falls, and our common stock price falls as a result, then certain notes may not be converted and we may, in certain situations, need to repay them in cash. To the extent the value of the notes exceeds the value of the CC held as collateral, we may need to obtain additional financing, which might not be available on satisfactory terms, or at all. Any deficiency could substantially exceed the value of our other assets and could be many multiples of our historical earnings.
The concentration of CC ownership could increase the risk of malicious activity, including potential attacks on the Canton Network.
While CC was designed as a digital asset with no pre-allocation to founders or venture capital firms, the initial distribution of CC is intrinsically linked to network utility and participation. Therefore, a significant portion of the outstanding supply of Canton Coin may be held by a limited number of participants, such as founding members, early adopters, consortium participants, or affiliated entities. In addition, the Canton Network is designed as a permissioned or selectively permissioned distributed ledger in which transaction validation and block finalization are performed by approved validator nodes rather than an open mining community. Tokens and control over network validation may be concentrated in a relatively small group of participants.
In addition, because transactions on the CC network are generally measured in fiat terms and converted into CC using exchange rates or pricing quotes generated or approved through system mechanisms, validators, super validators, or other designated participants may have significant influence over the pricing inputs used for transaction settlement and fee calculations. If a malicious actor or group of actors (whether through conflict of interest, error, inadequate controls, or collusive or manipulative conduct) publish or rely on inaccurate, stale, or biased quotes, they may be able to exert control over the conversion rates, which may result in inflated effective transaction costs, inconsistent settlement outcomes, or opportunities for arbitrage that disadvantage network users and token holders.
We face risks relating to the custody of our CC tokens, including the loss or destruction of private keys required to access our CC tokens and cyberattacks or other data loss relating to our CC tokens, including smart contract related losses and vulnerabilities.
We hold our CC tokens with qualified custodians. We custody our CC tokens across multiple custodians to diversify our potential risk exposure to any one custodian. However, multiple custodians may utilize similar wallet infrastructure, cloud service providers or software systems, which could increase systemic technology risk.
If there is a decrease in the availability of digital asset custodians that we believe can safely custody our CC tokens, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, we may need to enter into agreements that are less favorable than our current agreements or take other measures to custody our CC tokens, and our ability to seek a greater degree of diversification in the use of custodial services would be materially adversely affected. While we will conduct due diligence on our custodians and any smart contract platforms we may use, there can be no assurance that such diligence will uncover all risks, including operational deficiencies, hidden vulnerabilities or legal noncompliance.
Currently, the insurance that covers losses of our CC holdings may cover none or only a small fraction of the value of the entirety of our CC holdings, and there can be no guarantee that such insurance will be maintained as part of the custodial services we have or that such coverage will cover losses with respect to our CC. Moreover, our use of custodians exposes us to the risk that the CC our custodians hold on our behalf could be subject to insolvency proceedings and we could be treated as a general unsecured creditor of the custodian, inhibiting our ability to exercise ownership rights with respect to such CC. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage we maintain related to our CC. The legal framework governing digital asset ownership and rights in custodial or insolvency contexts remains uncertain and continues to evolve, which could result in unexpected losses, protracted recovery processes or adverse treatment in insolvency proceedings.
CC tokens are controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the CC is held. While the CC blockchain ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the CC held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither we nor our custodians will be able to access the CC held in the related digital wallet. Furthermore, we cannot provide assurance that our digital wallets, nor the digital wallets of our custodians held on our behalf, will not be compromised as a result of a cyberattack. The CC and blockchain ledger, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities.
As part of our treasury management strategy, we may engage in staking, restaking, or other permitted activities that involve the use of “smart contracts” or decentralized applications. The use of smart contracts or decentralized applications entails certain risks including risks stemming from the existence of an “admin key” or coding flaws that could be exploited, potentially allowing a bad actor to issue or otherwise compromise the smart contract or decentralized application, potentially leading to a loss of our CC tokens. Like all software code, smart contracts are exposed to risk that the code contains a bug or other security vulnerability, which can lead to loss of assets that are held on or transacted through the contract or decentralized application. Smart contracts and decentralized applications may contain bugs, security vulnerabilities or poorly designed permission structures that could result in the irreversible loss of CC tokens or other digital assets. Exploits, including those stemming from admin key misuse, admin key compromise, or protocol flaws, have occurred in the past and may occur in the future.
We will operate in a highly competitive environment and will compete against companies and other entities with similar strategies, including companies with significant CC holdings and spot exchange traded funds and spot ETPs for digital assets.
The market for companies and investment vehicles focused on digital assets is intensely competitive and rapidly evolving. Even though CC is a relatively new digital asset, we will face competition from a variety of sources, including other public companies with significant CC holdings, as well as spot exchange traded funds and spot ETPs that provide investors with exposure to digital assets. Many of these competitors may have greater financial resources, more established operating histories, broader access to capital markets, and more extensive relationships with key market participants. In addition, the entry of new competitors, including large financial institutions and technology companies, could further intensify competition. If we are unable to effectively differentiate our business model, attract and retain investors, or respond to competitive pressures, our business, operating results, and financial condition could be materially and adversely affected. Increased competition may also lead to downward pressure on the market price of our stock and could impair our ability to achieve our strategic objectives.
The availability of spot ETPs for CC and other digital assets may adversely affect the market price of our listed securities.
Given the relative novelty of CC and digital assets, the selective nature of the Canton Network and lack of familiarity with the processes needed to hold CC directly, investors may seek exposure to CC through investment vehicles that hold CC and issue shares representing fractional undivided interests in their underlying CC holdings. These vehicles, which were previously offered only to “accredited investors” on a private placement basis, have in the past traded at substantial premiums to net asset value, possibly due to the relative scarcity of traditional investment vehicles providing investment exposure to CC.
To the extent investors view our common stock as providing exposure to CC, it is possible that the value of our common stock may also have included a premium over the value of our CC due to the prior scarcity of traditional investment vehicles providing investment exposure to CC, and that the value of our common stock may decline due to investors having a greater range of options to gain exposure to CC and investors choosing to gain such exposure through ETPs rather than our common stock. Additionally, on May 23, 2024, the SEC approved rule changes permitting the listing and trading of spot ETPs that invest in ether, the main crypto asset supporting the Ethereum blockchain. The approved spot ETPs commenced trading directly to the public on July 23, 2024. The listing and trading of spot ETPs for ether offers investors another alternative to gain exposure to digital assets, which could result in a decline in the trading price of CC as well as a decline in the value of our common stock relative to the value of our CC.
Although we are an operating company, and we believe we offer a different value proposition than a CC investment vehicle such as a spot CC ETP, investors may nevertheless view our common stock as an alternative to an investment in an ETP, and choose to purchase shares of a spot CC ETP instead of our common stock. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to CC that is generally not subject to federal income tax at the entity level as we are, or the other risk factors applicable to an operating business, such as ours. Additionally, unlike spot CC ETPs, we (i) do not seek for our shares of common stock to track the value of the underlying CC we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Exchange Act, as amended, including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are a Delaware corporation rather than a statutory trust, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our CC holdings or our daily net asset value. Furthermore, recommendations by broker-dealers to buy, hold, or sell complex products and non-traditional ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to our common stock. Based on how we are viewed in the market relative to ETPs, and other vehicles which offer economic exposure to CC, any premium or discount in our common stock relative to the value of our CC holdings may increase or decrease in different market conditions.
As a result of the foregoing factors, availability of spot ETPs for CC and other digital assets could have a material adverse effect on the market price of our listed securities.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our CC, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our CC and our financial condition and results of operations could be materially adversely affected.
Substantially all of the CC we own is held in custody accounts at U.S.-based institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our CC. CC and other blockchain-based cryptocurrencies and the entities that provide services to participants in the CC ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
a partial or total loss of our CC in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our CC;
improper disclosure of data and violations of applicable data privacy and other laws; or
significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader CC ecosystem or in the use of the CC network to conduct financial transactions, which could negatively impact the market price of CC and in turn negatively impact our financial condition and results of operations and the market price of our common stock.
Attacks upon systems across a variety of industries, including industries related to CC, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with ongoing or future armed conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the CC industry, including third-party services on which we rely, could materially and adversely affect our financial condition and results of operations.
We face other risks related to our CC digital asset treasury reserve business model.
Our CC treasury reserve business model exposes us to various risks, including the following:
CC and other digital assets are subject to significant legal, commercial, regulatory, and technical uncertainty, and our CC strategy subjects us to enhanced regulatory oversight;
regulatory changes could impact our ability to operate validators or receive rewards;
regulatory scrutiny of the Company’s activities may increase, potentially limiting our operations;
potential litigation risks exist related to smart contract vulnerabilities, validator operations, or our business activities;
uncertainty around CC’s regulatory status may impact our ability to list on certain exchanges;
changes in political administration may not guarantee a favorable regulatory environment for CC; and
increased regulatory focus on Layer-1 blockchains beyond Bitcoin and Ethereum could result in new compliance requirements.
The foregoing factors could lead to disruption in the market for CC, which could adversely affect the market price of CC and in turn adversely affect the market price of our common stock.
Negative developments in the cryptocurrency industry — including fraud, cybercrime or platform failures — may result in unfavorable publicity and could impact investor sentiment with respect to us even if we are not directly involved in any of the reported events.
The cryptocurrency industry has been subject to a number of high-profile negative developments, including instances of fraud, theft, cyberattacks, regulatory enforcement actions, and failures or insolvencies of major trading platforms and custodians. Even if we are not directly involved in or affected by such events, negative publicity and heightened scrutiny of the cryptocurrency industry as a whole could adversely impact investor sentiment toward companies with significant exposure to digital assets, including us. For example, reports of security breaches, mismanagement, or criminal activity at other cryptocurrency companies or exchanges may lead to increased concerns about the safety and legitimacy of digital assets generally, which could result in reduced demand for our stock, increased volatility in its share price, and greater difficulty in raising capital or maintaining business relationships. In addition, negative industry developments may prompt regulatory authorities to impose stricter requirements or oversight, which could increase our compliance costs and operational risks. The perception of heightened risk in the cryptocurrency sector, regardless of our actual involvement or risk profile, could therefore have a material adverse effect on our reputation, business, financial condition, and results of operations.
Our CC holdings are and will be less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the crypto market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our CC at favorable prices or at all. For example, a number of digital asset trading venues temporarily halted deposits and withdrawals in 2022, although Coinbase has, to date, not done so. As a result, our CC holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, CC we hold with our custodians and transact with our trade execution partners will not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered CC or otherwise generate funds using our CC holdings, including in particular during times of market instability or when the price of CC tokens has declined significantly. If we are unable to sell our CC, enter into additional capital raising transactions, including capital raising transactions using CC as collateral, or otherwise generate funds using our CC holdings, or if we are forced to sell our CC at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
If we elect to use derivative instruments to hedge the price risk of holding CC, such derivatives are highly volatile and subject to market and liquidity risks, which could negatively impact our digital asset treasury strategy.
We may invest and trade in a variety of derivative instruments to hedge the price risk associated with CC. Derivatives, such as futures and swaps, are financial instruments or arrangements in which the risk and return are related to changes in the value of other assets, reference rates or indices. These instruments are highly volatile and expose investors to a high risk of loss. The low initial margin deposits normally required to establish a position in such instruments permit a high degree of leverage. As a result, depending on the type of instrument, a relatively small movement in the price of a contract may result in a profit or a loss which is high in proportion to the amount of funds actually placed as initial margin and may result in unquantifiable further loss exceeding any margin deposited. Our ability to profit or avoid risk through investment or trading in derivatives will depend on our ability to anticipate changes in the underlying assets, reference rates or indices. Engaging in hedging may result in poorer overall performance for us than we could have achieved had we not engaged in such hedging transactions. In addition, although we may utilize a variety of instruments, including options and other derivatives, for hedging and risk management purposes, we are not obligated to, and may not, hedge against certain risks. Furthermore, our portfolio may be exposed to risks that cannot be hedged. Use of hedging and risk management products may also increase our regulatory burden and costs of compliance.
We will be exposed to the default risk of our clearing broker if we hedge the price risk of CC through the purchase of futures contracts.
If we use a clearing broker to help manage financial transactions — such as buying or selling CC futures contracts to hedge against CC price swings — then we will be exposed to the clearing broker’s credit risk. Under the CEA and CFTC regulations, futures contracts must be cleared through a clearing broker known as a registered futures commission merchant (“FCM”). FCMs hold a certain amount of the customer collateral that customers deposit in connection with their futures trading, and are responsible for posting that collateral to the clearinghouse on the customer’s behalf when the clearinghouse issues a margin call. FCMs are required to maintain such collateral and all customer assets in a segregated account. If the FCM fails to do so, or is unable to satisfy a substantial deficit in a customer account, its customers (including us) may be subject to risk of loss of their funds in the event of the FCM’s insolvency. In such event, under the current U.S. Bankruptcy Code, the FCM’s customers (including us) are entitled to recover only a proportional share of all property available for distribution to all of that FCM’s customers. We may therefore be exposed to material losses in the event of an FCM’s or fellow FCM customer’s default or insolvency.
We face risks relating to the use of third-party exchanges in connection with our CC strategy.
We intend to use third-party exchanges, which we believe are reputable, such as Kraken, Anchorage and Coinbase, to purchase CC tokens for our treasury. As part of our process in determining transactions with third-party exchanges, we search for reputable exchanges that have industry standard policies and procedures in place regarding data security and customer diligence related to anti-money laundering, Office of Foreign Assets Control and know-your customer rules and regulations. If any of these third-party exchanges no longer meet our standards or if there is a decrease in reputable third-party exchanges, we may need to find additional counterparties and enter into additional agreements that could be on less favorable terms, which could have a material adverse effect on our business, financial condition or the results of our operations.
Future developments regarding the treatment of crypto assets for U.S. and foreign tax purposes could adversely impact our business.
The tax treatment of CC and other digital assets is subject to significant uncertainty and evolving guidance from U.S. federal, state, and local tax authorities, as well as foreign tax authorities. Changes in tax laws, regulations, or interpretations could have a material impact on our business, including our ability to acquire, hold, or dispose of CC tokens in a tax-efficient manner. For example, future legislation or regulatory guidance could result in the imposition of new or increased taxes on the acquisition, holding, or transfer of CC tokens, or could require us to report additional information to tax authorities. In addition, differences in the tax treatment of digital assets across jurisdictions could create compliance challenges and increase our administrative and operational costs. Any adverse developments in the tax treatment of digital assets could reduce the attractiveness of our business model, increase our tax liabilities, and negatively affect our financial results and the value of our stock.
We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors. We are not subject to, and do not otherwise voluntarily comply with, these laws and regulations. This means, among other things, that the execution of or changes to our CC strategy, our use of leverage, the manner in which our CC tokens are custodied, our ability to engage in transactions with affiliated parties and our operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. Our board of directors has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of our CC token holdings or other activities we may pursue, and has the power to change our current policies, including our strategy of acquiring and holding CC tokens.
Risks Related to Our Therapeutic Candidates Developments
We are substantially dependent on the success of our product candidates. If we are unable to complete development of, obtain approval for, or successfully commercialize our product candidates, our business may be harmed.
Our future success depends on our ability to complete clinical trials, obtain marketing approval, and successfully commercialize our product candidates. We currently have no approved products, and may never generate sufficient revenue to achieve profitability. The clinical and commercial success of our product candidates depends on numerous factors beyond our control, which could cause significant delays or prevent regulatory approvals or commercialization.
Our pipeline is based on novel ideas and technologies that are unproven and may not result in marketable products, which exposes us to unforeseen risks and makes it difficult to predict development timelines, costs, and regulatory approval.
We are developing product candidates using novel approaches to treat rare diseases, inflammatory disorders, and cancer. Our technology aims to deliver drug candidates to target receptors and specified cells or tissues at disease sites. However, this approach has had limited testing in humans, and we may spend substantial funds attempting to develop these products without ever succeeding in developing a marketable therapeutic. We cannot assure you that our product candidates will safely and effectively treat the targeted diseases.
Before obtaining marketing approval, we must complete pre-clinical development and conduct extensive clinical trials to demonstrate safety and efficacy in humans. Clinical testing is expensive, can take many years, and outcomes are uncertain. A failure can occur at any stage, and the outcome of early trials may not predict later trial success. Our product development costs will increase if we experience delays, which could also shorten any exclusive commercialization periods, allow competitors to bring products to market before us, and harm our business and results of operations.
Delays, suspension, or termination of clinical trials could limit our ability to commercialize products and affect our business prospects.
Before obtaining marketing approval from the FDA, we must conduct extensive clinical studies to demonstrate safety and efficacy. Clinical testing is expensive, time consuming, and uncertain. We rely in part on pre-clinical, clinical and quality data generated by CROs and other third parties. The FDA may require additional pre-clinical studies before allowing us to initiate clinical trials, which could delay our development programs and increase costs.
We may not be able to initiate or continue clinical trials if we cannot identify and enroll sufficient eligible patients. Patient enrollment is a significant factor in clinical trial timing. Clinical trials may be suspended or terminated by us, by IRBs/ECs, by a Data Safety Monitoring Board, or by the FDA due to factors including: failure to conduct trials in accordance with regulatory requirements; inspection findings resulting in clinical holds; unforeseen safety issues or adverse side effects; failure to demonstrate benefit; changes in governmental regulations; or lack of adequate funding. Changes in regulatory requirements may require us to amend clinical trial protocols and resubmit them to IRBs/ECs for reexamination, impacting costs, timing, or successful completion. Additionally, financial relationships between us and clinical investigators could create perceived conflicts of interest that the FDA may conclude affect interpretation of data, potentially jeopardizing trial utility and resulting in approval delays or denial.
Certain of our scientific advisors or consultants who receive compensation from us are investigators for our clinical trials. We cannot guarantee that the FDA will not deem the financial relationship between us and a principal investigator as creating a conflict of interest or otherwise affecting interpretation of the study. The FDA may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized.
The outcome of pre-clinical testing and early clinical trials may not be predictive of later success.
We must demonstrate through well-controlled clinical trials that our product candidates are safe and effective before seeking marketing approvals. Success in pre-clinical studies and early-stage clinical trials does not guarantee future success. Product candidates in later-stage trials may fail to demonstrate sufficient safety and efficacy to the satisfaction of the FDA, EMA, and other regulatory authorities. There can be significant variability in safety and efficacy results between different clinical trials of the same product candidate due to factors including changes in trial protocols, differences in patient populations, adherence to dosing regimens, and dropout rates. Patients may also be using other treatments that cause side effects unrelated to our product candidates, increasing uncertainty in clinical trial outcomes.
Interim, topline, and preliminary clinical trial data may change as more patient data becomes available and are subject to audit and verification procedures.
From time to time, we may publicly disclose preliminary, interim, or topline data from clinical trials. These are based on preliminary analysis and are subject to change following more comprehensive review. The topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data remain subject to audit and verification procedures that may result in material changes. Adverse changes between interim and final data could significantly harm our business. In addition, we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Information we choose to disclose is typically selected from a more extensive amount of available information. If the data we report differs from final results, or if others disagree with our conclusions, our ability to obtain approval and commercialize our product candidates may be harmed.
Adverse side effects or safety risks could delay or preclude approval, cause us to suspend clinical trials, or result in negative consequences following any marketing approval.
Clinical trials could reveal unacceptable side effects or unexpected characteristics. Undesirable side effects could result in the delay, suspension, or termination of clinical trials. Serious adverse events could hinder market acceptance of our drug candidates. We may elect to abandon or limit development to narrower uses or subpopulations where side effects are less prevalent or more acceptable from a risk-benefit perspective. Many drugs that initially showed promise have later been found to cause side effects that prevented further development. It is possible that as we test our drug candidates in larger, longer, and more extensive clinical trials, adverse events that were not detected in earlier trials will be reported. If such side effects become known later in development or upon approval, such findings may significantly harm our business.
We may not achieve our development milestones on our projected timelines.
The achievement of milestones such as the timing of the accomplishment of various scientific, clinical, manufacturing, regulatory, and other product development objectives may be outside of our control. All of these milestones are based on a variety of assumptions, including assumptions regarding capital resources, constraints and priorities, progress of, and results from development activities and the receipt of key regulatory approvals or actions, any of which may cause the timing of achievement of the milestones to vary considerably from our estimates. If we or our collaborators fail to achieve announced milestones in the expected timeframes, the commercialization of our product candidates may be delayed, our credibility may be undermined, our business and results of operations may be harmed, and the price of our common stock may decline.
Product liability claims could materially harm our business.
The use of our product candidates in clinical trials and the sale of any approved products may expose us to significant product liability claims. We currently do not have product liability insurance coverage but intend to obtain such insurance. Such insurance may not protect us against all claims, and we may not be able to acquire adequate coverage at a commercially reasonable cost. If our product candidates are approved for sale, we may need to substantially increase our coverage. Defending product liability claims could require us to expend significant financial and managerial resources, which could have an adverse effect on our business.
Our current and future products may never achieve significant commercial market acceptance.
Our success depends on the market’s confidence that we can provide therapeutic products that improve clinical outcomes and lower healthcare costs. Failure of our products to perform as expected could impair our operating results and reputation. Patients, clinicians, academic institutions, and biopharmaceutical companies are likely to be particularly sensitive to defects, errors, inaccuracies, delays, and toxicities associated with our products.
We may not succeed in achieving significant commercial market acceptance for our current or future products due to a number of factors, including:
our ability to demonstrate the clinical utility of our pipeline and related products and their potential advantages over existing drug products to academic institutions, biopharmaceutical companies and the medical community;
our ability, and that of our collaborators, to secure and maintain FDA and other regulatory clearance, authorization or approval for our products;
the agreement by third-party payors to reimburse our products, the scope and extent of which will affect patients’ willingness or ability to pay for our products and will likely heavily influence physicians’ decisions to recommend our products;
the rate of adoption of our pipeline and related products by academic institutions, clinicians, key opinion leaders, advocacy groups and biopharmaceutical companies; and
the impact of our investments in product innovation and commercial growth.
Customers and collaborators may decrease or discontinue use of our products due to changes in their plans, financial constraints, the regulatory environment, negative publicity, competing products, or reimbursement landscape. Failure to achieve widespread market acceptance would materially harm our business, financial condition, and results of operations.
We face significant competition from companies that may develop more effective, safer, or less expensive products.
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition, and strong emphasis on proprietary products. Our competitors have developed, are developing, or may develop products competitive with ours. Any product candidates we successfully commercialize will compete with existing and new therapies. We may need to compete with drugs physicians use off-label to treat our targeted indications, making it difficult to replace existing therapies.
There is intense competition in rare diseases, inflammatory conditions, and oncology. We have competitors including major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, and research institutions. We also compete with these organizations to recruit management and scientific personnel and to establish clinical trial sites and enroll subjects.
Our commercial opportunity could be reduced or eliminated if competitors develop safer, more effective, more convenient, or less expensive products, or if they obtain marketing approval before us. Technological advances by our competitors may render our technologies or product candidates obsolete or not economical.
We are subject to healthcare laws and regulations.
Sales of our product candidates, if approved, will be subject to healthcare regulation and enforcement by federal, state, and foreign governments. Applicable laws include the federal Anti-Kickback Statute, federal false claims and false statement laws, HIPAA, and the federal Physician Payments Sunshine Act. Many states have similar laws that may be broader in scope and apply regardless of payor, including laws requiring drug manufacturers to report payments to healthcare providers, to comply with voluntary compliance guidelines, and to register sales representatives.
The laws and regulations applicable to our business are complex, changing, and often subject to varying interpretations. Any violation could result in substantial financial penalties, termination of business relationships, mandated refunds, required changes to business practices, exclusion from healthcare programs, and possible criminal penalties. If found in violation, we could suffer severe consequences that would materially adversely affect our business, results of operations, financial condition, and stock price.
Federal, state, and local legislative bodies frequently pass legislation relating to healthcare reform. We anticipate continued government oversight and regulation of the healthcare industry. We cannot predict the content, timing, or effect of new healthcare legislation or regulations, nor their impact on our business.
We may not be able to obtain or maintain Fast Track designation or accelerated approval for our drug candidates.
If a drug is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for this condition, a drug sponsor may apply for FDA Fast Track designation. If there are therapies already available for the condition, a fast track drug must show an advantage over the available therapy including superior efficacy, lessening or avoidance of side effects, improving the diagnosis of a serious condition, decreasing a clinical significant toxicity of an available therapy or ability to address an emerging or anticipated public health need. If we seek Fast Track designation for a drug candidate, we may not receive it from the FDA. However, even if we receive Fast Track designation, Fast Track designation does not ensure that we will receive marketing approval or that approval will be granted within any particular time frame. We may not experience a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.
We may not be able to obtain or maintain orphan drug designation or exclusivity for our drug candidates.
Under the Orphan Drug Act, the FDA may designate a drug candidate as an orphan drug if intended to treat a rare disease or condition (generally defined as a patient population of fewer than 200,000 in the United States). Orphan drug designation provides financial incentives including grant funding opportunities, tax advantages, and user-fee waivers. If a product with orphan designation receives the first FDA approval for that indication, it is entitled to seven years of exclusivity during which the FDA may not approve competing applications for the same drug and indication, except in certain circumstances.
Competitors may receive approval of different products for the same indication or the same product for different indications. Exclusive marketing rights may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines the designation request was materially defective.
Breakthrough Therapy designation may not lead to faster development, review, or approval.
Designation as a breakthrough therapy is within the discretion of the FDA. Even if we believe our drug candidates meet the criteria, the FDA may disagree. Receipt of Breakthrough Therapy designation may not result in faster development, review, or approval compared to conventional procedures and does not assure ultimate approval. The FDA may later decide that drugs no longer meet qualification conditions. A breakthrough therapy is defined as a drug intended to treat a serious or life-threatening condition for which preliminary clinical evidence indicates substantial improvement over existing therapies. Drugs designated as breakthrough therapies are eligible for accelerated approval and enhanced FDA interaction during development.
We rely on third parties to conduct our pre-clinical studies and clinical trials, and their failure to perform could substantially harm our business.
We rely on third-party medical institutions, clinical investigators, contract laboratories, and CROs to conduct and manage our pre-clinical and clinical programs. We control only certain aspects of their activities but remain responsible for ensuring studies comply with applicable protocols, legal, regulatory, and scientific standards. We and our CROs must comply with current Good Clinical Practice (GCP) regulations enforced by the FDA, EMA, and comparable foreign regulatory authorities.
Regulatory authorities enforce GCP through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or our CROs fail to comply with applicable GCPs, clinical data may be deemed unreliable by relevant authorities and additional trials may be required. Our clinical trials must also be conducted with products produced under cGMP. If our relationships with CROs terminate, we may not be able to enter into alternative arrangements on commercially reasonable terms. In addition, CROs are not our employees, and we cannot control their operations-including their conduct of our clinical, nonclinical and pre-clinical or clinical programs. If CROs do not successfully carry out their duties, meet deadlines, or if data quality is compromised, our clinical trials may be extended, delayed, or terminated, harming our commercial prospects and ability to generate revenues.
Many third parties with whom we contract may also have relationships with our competitors. If they do not perform their duties, experience work stoppages, or need to be replaced, we may need to enter into new arrangements with alternative third parties. Switching CROs involves additional cost and management time, and transition periods can materially impact our clinical development timelines.
We rely on third-party manufacturers for our drug candidates and expect to continue doing so for commercialization.
We rely entirely on third-party manufacturers for the production of our drug candidates for pre-clinical and clinical testing and any potential commercial supply, as we do not own or operate manufacturing facilities. This dependence exposes us to risks related to insufficient supply, inadequate quality, and unfavorable cost structures, which could delay development timelines or impair commercialization efforts. We may be unable to secure or maintain manufacturing agreements on acceptable terms, and our limited supply arrangements generally do not extend to commercial-scale production. Many key materials are sourced on a purchase order basis without long-term commitments, increasing the risk of supply interruptions.
Third-party manufacturing arrangements subject us to additional operational and compliance risks beyond our direct control, including regulatory noncompliance, quality failures, contract breaches, operational disruptions, logistics delays, improper storage or transport, and potential misappropriation of proprietary information. Manufacturers may fail to comply with cGMP or other regulatory standards, which could result in clinical holds, fines, product recalls, approval delays, or other enforcement actions that disrupt supply. These manufacturers are also subject to environmental, health, and safety laws, and regulatory actions against them could lead to facility shutdowns or restricted operations, adversely affecting our access to necessary manufacturing and packaging services.
Manufacturing capacity is limited among qualified cGMP-compliant providers, and our drug candidates may compete with other products for facility access, reducing our ability to secure priority production slots. As we scale production for later-stage trials or commercialization, manufacturing complexity increases and even minor process deviations or contamination events could lead to reduced yields, batch failures, or facility closures. We currently lack redundant suppliers for bulk drug substance, and replacing underperforming manufacturers could involve significant time and cost. Any manufacturing failure or transition to alternative suppliers may delay development or approval and could negatively affect our margins and ability to commercialize approved products on a timely and competitive basis.
We currently depend on a sole source supplier and manufacturer for the active ingredient in our product candidates and the inability to obtain the active ingredient for our product candidates as required could harm our business.
We currently source the active ingredient for HS1940, HS3215 and HS0059 from sole suppliers/manufacturers. In addition, we anticipate that we will also source the active ingredient in GV104 from a sole supplier/manufacturer. Although we believe that we can obtain the active ingredient for HS1940, HS3215, HS0059 and GV104 from other suppliers, supply shortages for these particular raw materials may delay our clinical trials. If we are unable to procure the active ingredient for our product candidates as needed, our business may be harmed.
Our failure to find third party collaborators to assist or share in the costs of drug development could materially harm our business, financial condition and results of operations.
Our strategy for the development and commercialization of our proprietary drug candidates may include the execution of collaborative arrangements with third parties. Existing and future collaborators have significant discretion in determining the efforts and resources they apply and may not perform their obligations as expected. Potential third-party collaborators include biopharmaceutical, pharmaceutical and biotechnology companies, academic institutions and other entities. Third-party collaborators may assist us in funding research and development activities, clinical trials and manufacturing, obtaining regulatory approvals, and commercializing any future drug candidates.
If we are not able to establish collaboration, we may be required to undertake drug development and commercialization at our own expense. Such an undertaking may limit the number of drug candidates that we will be able to develop, significantly increase our capital requirements and place additional strain on our internal resources. Our failure to enter into additional collaborations could materially harm our business, financial condition and results of operations.
Our dependence on licensing and collaboration with third parties may subject us to additional risks. We may not be able to secure such relationships on terms that prove favorable to us. Our agreements with such partners may contain exclusivity terms that limit other collaboration opportunities. Lengthy negotiations with potential new collaborators may lead to delays in the research, development or commercialization of drug candidates. Our collaborators may decide to pursue other technologies or fail to develop or commercialize our drug candidates, which could materially harm our business, financial condition and results of operations.
We may not be successful in commercializing one or more of our drug candidates.
We have not submitted an application for or received marketing approval for any of our drug candidates in the United States or in any other jurisdiction. The marketing approval process is expensive, time-consuming and uncertain, which may prevent us from obtaining approvals for the commercialization of some or all of our drug candidates. 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 drug candidates, and our ability to generate revenue will be materially impaired.
Our drug candidates and the activities associated with the development and commercialization are subject to comprehensive regulation by the FDA and other regulatory agencies.
We have only limited experience in filing and supporting the applications for marketing approvals, and we expect to rely on third-party clinical research organizations or other third-party consultants or vendors to assist us in this process. Securing marketing approval requires the submission of extensive pre-clinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
The process of obtaining marketing approvals, both in the United States and abroad, is lengthy and expensive. Changes in marketing approval policies during the development period, adoption of new statutes or regulations, or changes in regulatory review process, may cause delays in the approval or rejection of an application. Regulatory authorities have broad discretion in the approval process. They may interpret our study and trial data differently, which may also delay, limit, or prevent approval. Any approval obtained may be subject to restrictions or post-approval obligations that could adversely affect commercial viability.
If we are unable to develop satisfactory sales and marketing capabilities, we may not succeed in commercializing our drug candidates.
We have no experience in marketing and selling drug products. We have not entered into arrangements for the sale and marketing of any of our drug candidates.
There are risks involved with establishing our own sales and marketing capabilities. For example, recruiting and training a sales force is expensive and time-consuming and could delay any product launch. If the commercial launch of a drug candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. These efforts are expected to be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
We may seek to collaborate with a third party to market our drugs or may seek to market and sell our drugs by ourselves. If we seek to collaborate with a third party, we cannot be sure that a collaborative agreement can be reached on terms acceptable to us.
We cannot be sure that we will be able to acquire, or establish third party relationships to provide, any or all of these marketing and sales capabilities. The establishment of a direct sales force or a contract sales force or a combination direct and contract sales force to market our drugs will be expensive and time-consuming and could delay any drug launch. Further, we can give no assurances that we may be able to maintain a direct and/or contract sales force for any period of time or that our sales efforts will be sufficient to generate or to grow our revenues or that our sales efforts will ever lead to profits.
The development and commercialization of pharmaceutical products are subject to extensive regulation, and we may not obtain regulatory approvals for our drug candidates on a timely basis, or at all.
The time required to obtain FDA approval is unpredictable and typically takes many years following the commencement of clinical trials. Approval depends upon numerous factors, including the substantial discretion of regulatory authorities, and approval policies, regulations, and the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development. We have not obtained regulatory approval for any product candidate, and it is possible that we may never obtain regulatory approval for any product candidates we may seek to develop in the future.
Prior to obtaining approval to commercialize any drug product candidate in the United States, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA, that such product candidates are safe, pure and effective for their intended uses. Even if we believe pre-clinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA, and the FDA may require us to conduct additional pre-clinical studies or clinical trials either prior to or after approval.
Our product candidates could fail to receive regulatory approval for many reasons, including: the FDA may disagree with the design or implementation of our clinical trials; we may be unable to demonstrate that a product candidate is safe and effective for its proposed indication; the results of clinical trials may not meet the level of statistical significance required for approval; we may be unable to demonstrate that a product candidate’s clinical benefits outweigh its safety risks; the FDA may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract; and the approval policies or regulations of the FDA may significantly change in a manner rendering our clinical data insufficient for approval.
Of the large number of products in development, only a small percentage successfully complete the FDA approval processes and are commercialized. Even if we complete clinical testing and receive approval, the FDA may grant approval contingent on costly additional post-marketing clinical trials, or may approve a product candidate for a more limited indication or patient population than originally requested. The FDA may also change its policies, issue additional regulations, or take other actions that could impose additional requirements, delay our ability to obtain approvals, increase compliance costs, or restrict our ability to maintain any marketing authorizations we may have obtained.
Failure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed abroad.
In order to market and sell our drugs in the European Union and many other foreign jurisdictions, we or our potential third-party collaborators must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA marketing approval. The regulatory approval process outside of the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside of the United States, it is required that the drug be approved for reimbursement before the drug can be approved for sale in that country. We or our potential third-party collaborators may not obtain approvals from regulatory authorities outside of the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside of the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our drugs in any market.
Any approved drug candidates may be subject to post-marketing requirements, restrictions, or withdrawal, and noncompliance could result in penalties.
The FDA may require a companion diagnostic for certain product candidates. When a diagnostic is essential to the safe and effective use of a therapeutic, the FDA generally expects the diagnostic to be authorized contemporaneously. Companion diagnostics are regulated as medical devices and often require Premarket Approval (PMA), an uncertain and time-consuming process. If we must obtain approval of a companion diagnostic and are delayed or unable to do so, commercialization of the related therapeutic could be delayed or prevented.
Any product approved for marketing, and its manufacturing, labeling, advertising, promotion, and post-approval studies, will be subject to ongoing FDA and other regulatory oversight, including safety reporting, registration and listing, cGMP, recordkeeping, and, where applicable, Risk Evaluation and Mitigation Strategies (REMS). Approvals may include limitations on use or other conditions that could restrict commercialization.
Regulators, including the FDA and the Department of Justice, closely monitor post-approval promotion. Promotion outside the approved labeling can trigger enforcement under the FDCA and other laws, including the False Claims Act, and may result in civil or criminal liability.
If previously unknown safety issues or compliance problems arise, regulators may require labeling changes or warnings; restrict distribution or use; mandate additional post-marketing studies or clinical trials; issue warning or untitled letters; require recalls or withdrawals; refuse to approve supplements; suspend or withdraw approvals; impose fines, disgorgement, injunctions, seizures, or import/export restrictions; or pursue other remedies. These actions, as well as related litigation, reputational harm, and impacts on collaborations, could materially adversely affect our business.
Healthcare reform initiatives in the United States may impact our business and results of operations.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the Patient Protection and Affordable Care Act (the ACA) was passed, which substantially changed the way healthcare is financed by both government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. In June 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In March 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory cap on the Medicaid drug rebate beginning January 1, 2024. The rebate was previously capped at 100% of a drug’s average manufacturer price.
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 healthcare products and services, which could result in reduced demand for our product candidates, complementary diagnostics or companion diagnostics, or impose additional pricing pressures.
Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.
In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business. Any new regulations or guidance, or revisions or reinterpretations of existing regulations or guidance, may impose additional costs or lengthen FDA review times for our product candidates. We cannot determine how changes in regulations, statutes, policies or interpretations when and if issued, enacted or adopted may affect our business in the future.
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 and radioactive 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 our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
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 our storage or disposal of biological, hazardous or radioactive materials.
If we do not obtain patent term extension for any drug candidates we may develop, our business may be materially harmed.
In the United States, depending upon the timing, duration, and specifics of any FDA marketing approval of a drug candidate, the patent term of a patent that covers an FDA-approved drug may be eligible for limited patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of drug approval, and only one patent applicable to an approved drug may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and other non-United States jurisdictions to extend the term of a patent that covers an approved drug. While, in the future, if and when our drug candidates receive FDA approval, we expect to apply for patent term extensions on patents covering those drug candidates, there is no guarantee that the applicable authorities will agree with our assessment of whether such extensions should be granted, and even if granted, the length of such extensions. We may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of the relevant patents, or otherwise failing to satisfy applicable requirements. If we are unable to obtain any patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing drugs following the expiration of our patent rights, and our business, financial condition, results of operations, and prospects could be materially harmed.
Risks Related to Our Operations and Financial Conditions
We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.
We have never been profitable and have incurred significant losses in each year since inception. For the years ended December 31, 2025 and 2024, we reported a net loss of $35.9 million and $12.2 million, respectively. As of December 31, 2025, we had an accumulated deficit of $72.8 million. We have funded our operations primarily with proceeds from the sale of our equity and debt securities.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our working capital, our ability to achieve and maintain profitability and the performance of our stock.
Due to our limited operating history and the concentration of our CC token holdings, it will be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period.
We have a limited operating history, particularly with respect to our current business model, which is highly concentrated in the acquisition and holding of CC. As a result, there is limited historical information available to evaluate our business, our management’s ability to execute our strategy, or our prospects for future growth and profitability. The lack of a diversified operating history increases the difficulty for investors and analysts to assess our performance, business model viability, and the likelihood of achieving or maintaining profitability. Furthermore, our financial results and prospects are highly dependent on the value and performance of our CC token holdings, which are subject to significant volatility and risk. If we are unable to effectively manage our CC token portfolio, respond to market changes, or adapt our business strategy as necessary, we may not be able to achieve or sustain profitability in any given period. This uncertainty may adversely affect the market price of our stock and the value of an investment in us.
We will need additional financing in the future, which may not be available when needed or may be costly and dilutive.
We will require additional financing to support our working capital needs in the future. The amount of additional capital we may require, the timing of our capital needs and the availability of financing to fund those needs will depend on a number of factors, including our strategic initiatives and operating plans, the performance of our business and the market conditions for debt or equity financing. Additionally, the amount of capital required will depend on our ability to meet our sales goals and otherwise successfully execute our operating plan. We believe it is imperative that we meet these sales objectives in order to lessen our reliance on external financing in the future. We intend to continually monitor and adjust our operating plan as necessary to respond to developments in our business, our markets and the broader economy. Although we believe various debt and equity financing alternatives will be available to us to support our working capital needs, financing arrangements on acceptable terms may not be available to us when needed.
Our senior management team has limited experience managing and operating a U.S. public company.
Certain members of our management team have limited experience managing and operating a U.S. publicly traded company, interacting with U.S. public company investors, and complying with the increasingly complex laws pertaining to U.S. public companies. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business. To support our operations as a U.S. public company, we may need to recruit additional qualified employees or external consultants with relevant experience, which will increase our operating costs in future periods. Should any of these factors materialize, the Company’s business, financial condition and results of operations could be adversely affected.
Unrealized fair value gains on the Company’s CC holdings may cause the Company to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022.
The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022. Unless an exemption applies, the IRA imposes a 15% corporate alternative minimum tax (“CAMT”) on a corporation with respect to an initial tax year and subsequent tax years if the average annual adjusted financial statement income for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of Treasury and the IRS issued proposed regulations with respect to the application of CAMT.
Additionally, the Company has adopted ASU 2023-08, under which the Company’s CC holdings must be measured at fair value in the Company’s statement of financial position, with gains and losses from changes in the fair value of our CC tokens recognized in net income each reporting period. When determining whether the Company is subject to CAMT and when calculating any related tax liability for an applicable tax year, the proposed regulations provide that, among other adjustments, the Company’s adjusted financial statement income must include any unrealized gains or losses reported in the applicable tax year.
Accordingly, as a result of the enactment of the IRA and the Company’s adoption of ASU 2023-08, the Company may be subject to CAMT in the 2026 taxable year and beyond. If the Company becomes subject to CAMT, it could result in a material tax obligation that the Company would need to satisfy in cash, which could materially affect the Company’s financial results, including its earnings and cash flow, and its financial condition.
Risks Related to Cybersecurity, Information Technology, and Intellectual Property
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our CC tokens, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our CC tokens and our financial condition and results of operations could be materially adversely affected.
Substantially all of the CC tokens we own will be held in custody accounts at institutional-grade digital asset custodians. Security breaches and cyberattacks are of particular concern with respect to our CC tokens. Cryptocurrencies and the entities that provide services to participants in the ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. A successful security breach or cyberattack could result in:
a partial or total loss of our CC tokens in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold our CC tokens;
harm to our reputation and brand;
improper disclosure of data and violations of applicable data privacy and other laws; or
significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader CC ecosystem or in the use of the Canton Network to conduct financial transactions, which could negatively impact us.
Our business and operations would be adversely impacted in the event of a failure or interruption of our information technology infrastructure or as a result of a cybersecurity attack.
The proper functioning of our own information technology (IT) infrastructure is critical to the efficient operation and management of our business. We may not have the necessary financial resources to update and maintain our IT infrastructure, and any failure or interruption of our IT system could adversely impact our operations. Breaches with respect to protected health information could result in violations of HIPAA and analogous state laws and risk the imposition of significant fines and penalties. In addition, our IT is vulnerable to cyberattacks, computer viruses, worms and other malicious software programs, physical and electronic break-ins, sabotage and similar disruptions from unauthorized tampering with our computer systems. Failure of our information technology systems could delay billing and otherwise disrupt or adversely affect our business, profitability and financial condition. We believe that we have adopted appropriate measures to mitigate potential risks to our technology infrastructure and our operations from these IT-related and other potential disruptions. However, given the unpredictability of the timing, nature and scope of any such IT failures or disruptions, we could potentially be subject to downtimes, transactional errors, processing inefficiencies, operational delays, other detrimental impacts on our operations or ability to provide products to our customers, the compromising of confidential or personal information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.
Changes to patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our drugs.
Obtaining and enforcing patents involves both technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (the “Leahy-Smith Act”) signed into law in September 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. For example, the Leahy-Smith Act allows third-party submission of prior art to the U.S. Patent and Trademark Office (“USPTO”) during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter parties review, and derivation proceedings. In addition, the Leahy-Smith Act has transformed the U.S. patent system from a “first-to-invent” system to a “first-to-file” system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
In addition, the patent positions of companies in the development and commercialization of biologics and pharmaceuticals are particularly uncertain. Recent U.S. Supreme Court and Federal Circuit rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could have a material adverse effect on our patent rights and our ability to protect, defend and enforce our patent rights in the future.
We or our licensors may become involved in lawsuits to protect or enforce our patent or other intellectual property rights, which could be expensive, time-consuming and unsuccessful.
Competitors and other third parties may infringe, misappropriate or otherwise violate our or our future licensors’ issued patents or other intellectual property. As a result, we or our licensors may need to file infringement, misappropriation or other intellectual property related claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke such parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property. In addition, in a patent infringement proceeding, such parties could counterclaim that the patents we or our licensors have asserted are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may institute such claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter parties review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
An adverse result in any such proceeding could put one or more of our owned or in-licensed patents at risk of being invalidated or interpreted narrowly, and could put any of our owned or in-licensed patent applications at risk of not yielding an issued patent. A court may also refuse to stop the third party from using the technology at issue in a proceeding on the grounds that our owned or in-licensed patents do not cover such technology. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information or trade secrets could be compromised by disclosure during this type of litigation. Any of the foregoing could allow such third parties to develop and commercialize competing technologies and products and have a material adverse impact on our business, financial condition, results of operations, and prospects.
Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating 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 may depend in part upon our ability to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property and other proprietary rights of third parties. There is considerable intellectual property litigation in the pharmaceutical industry.
We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates and their manufacture and our other technology, including re-examination, interference, post-grant review, inter partes review or derivation proceedings before the USPTO or an equivalent foreign body. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our product candidates. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future, regardless of their merit.
Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions of infringement, validity, enforceability or priority. A court of competent jurisdiction could hold that third-party patents asserted against us are valid, enforceable and infringed, which could materially and adversely affect our ability to commercialize any of our product candidates and any other product candidates or technologies covered by the asserted third-party patents. In order to successfully challenge the validity of a U.S. patent in federal court, we would need to overcome a presumption of validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of a U.S. patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found to infringe, misappropriate or otherwise violate a third party’s intellectual property rights, and we are unsuccessful in demonstrating that these rights are invalid or unenforceable, we could be required to obtain a license from such a third party in order 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. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties and other fees, redesign our infringing product candidate or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.
Intellectual property litigation or other legal proceedings relating to intellectual property could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and may also have an advantage in such proceedings due to their more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of intellectual property litigation or other proceedings could compromise our ability to compete in the marketplace.
If we fail to comply with our obligations in license arrangements with third parties, we could lose rights that are important to our business.
We are and may continue to be party to license agreements. If we fail to comply with such obligations, our counterparties may have the right to terminate our agreements or seek other remedies, which could materially adversely affect our operations. We may lose our rights under such agreements or may need to renew these agreements with less favorable terms, which would have a material adverse effect on our business, financial condition, results of operations, and prospects.
Additionally, these and other license agreements may not provide exclusive rights to use the licensed intellectual property and technology in all relevant fields of use and in all territories. As a result, we may not be able to prevent competitors from developing and commercializing competitive products and technology in fields of use and territories not included in such agreements. In addition, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement, and defense of patents and patent applications covering the technology that we may license from third parties. Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, and defended in a manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our drugs that are the subject of such licensed rights could be adversely affected.
In addition, any agreements under which we license intellectual property or technology from third parties may be complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected technology and drug candidates, which could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
If we are unable to obtain licenses from third parties on commercially reasonable terms or at all, our business could be harmed.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our products, in which case we would be required to obtain a license from these third parties. The licensing of third-party intellectual property rights is a competitive area, and more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. More established companies may have a competitive advantage over us due to their size, capital resources and greater development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to obtain a necessary license, we may be unable to develop or commercialize the affected product candidates, and the third parties owning such intellectual property rights could seek either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of compensation. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. If we are unable to license needed technology, or if we are forced to license this technology on unfavorable terms, our business could be materially harmed.
We may not be able to protect our intellectual property and proprietary rights.
Filing, prosecuting, and defending patents on drug candidates in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection or licenses but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly those relating to pharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
Risks Related to Our Securities and Being a Public Company
The price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:
actual or anticipated variations in our periodic operating results;
increases in market interest rates that lead investors of our common stock to demand a higher investment return;
changes in earnings estimates;
changes in market valuations of similar companies;
actions or announcements by our competitors;
adverse market reaction to any increased indebtedness we may incur in the future;
additions or departures of key personnel;
actions by shareholders;
speculation in the media, online forums, or investment community; and
our ability to maintain the listing of our common stock on the Nasdaq.
This volatility may affect the price at which you could sell the shares of our common stock, and the sale of substantial amounts of our common stock could adversely affect the price of our common stock. Our stock price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and other factors.
Sales of our common stock, or the perception that such sales may occur, could cause the market price of our common stock to fall.
We expect that we may need additional capital in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
On March 3, 2026, we entered into an amended and restated sales agreement (the “Sales Agreement”) pursuant to which we may offer and sell common stock from time to time (the “ATM Program”). Investors who purchase common stock at different times will likely pay different prices and may experience different outcomes in their investment results. We will have discretion, subject to the effect of market conditions, to vary the timing, prices and numbers of shares of our common stock sold pursuant to the Sales Agreement. Investors may experience a decline in the value of their shares of common stock.
Continued sales of common stock, if any, under the ATM Program will depend upon market conditions and other factors to be determined by us and may be made in negotiated transactions or transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act. Future sales of our common stock are not guaranteed, and there are no firm commitments to receive funding under the ATM Program. The issuance from time to time of these new shares of common stock, or the perception that such sales may occur, could have the effect of depressing the market price of our common stock.
We have issued warrants exercisable for our securities, which if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of March 26, 2026, we had (i) 169,184,318 prefunded warrants outstanding, and (ii) 2,921,618 non-tradable warrants outstanding (the “Warrants”). Each of these securities are exercisable for shares of common stock at various exercises prices. If the Warrants are exercised, it will result in dilution to the then existing holders of common stock and increase the number of shares of common stock eligible for resale in the public market. Sales of substantial numbers of such shares of common stock could adversely affect the market price of our common stock.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Furthermore, future debt or other financing arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any return to stockholders will therefore be limited to the appreciation of their stock.
Our Certificate of Incorporation, as amended (“Certificate of Incorporation”) provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between the Company and its stockholders, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers or employees.
Our Certificate of Incorporation provides that unless we consent in writing to the selection of an alternative forum, the State of Delaware is the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of our Company to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or our Certificate of Incorporation or Bylaws, or (iv) any action governed by the internal affairs doctrine. This exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, our Certificate of Incorporation contains a federal forum provision which provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may result in increased costs to our stockholders, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find our choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.
Our Certificate of Incorporation, Bylaws and Delaware law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause our stock price to decline.
Our Certificate of Incorporation, our Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized to issue up to 10 million shares of preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions of our Certificate of Incorporation, our Bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our Certificate of Incorporation, our Bylaws and Delaware law, as applicable, among other things:
provide the board of directors with the ability to alter the Bylaws without stockholder approval;
establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; and
provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum.
Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes, increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the United States and other countries in response to such conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. More recently, the closures of Silicon Valley Bank (“SVB”) and Signature Bank and their placement into receivership with the Federal Deposit Insurance Corporation (“FDIC”) created bank-specific and broader financial institution liquidity risk and concerns. Although the Department of the Treasury, the Federal Reserve, and the FDIC jointly confirmed that depositors at SVB and Signature Bank would continue to have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty. There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also 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 our business plans. In addition, there is a risk that one or more of our counterparties, financial institutions or other third parties with whom we do business may be adversely affected by the foregoing risks, which may have an adverse effect on our business.
Market and economic conditions may negatively impact our business, financial condition and share price.
Concerns over inflation, energy costs, geopolitical issues, the U.S. mortgage market and the real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, 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 share price and could require us to delay or abandon development or commercialization plans.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years following the year in which we completed our initial public offering, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion or (c) in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700.0 million as of the prior June 30th and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We may choose to take advantage of some, but not all, of the available exemptions. We cannot predict whether investors will find our common stock less attractive if we rely on certain or all of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies, which may make our financial statements less comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.
Financial reporting obligations of being a public company in the U.S. are expensive and time-consuming, and our management will be required to devote substantial time to compliance matters.
As a publicly traded company we incur significant additional legal, accounting and other expenses. The obligations of being a public company in the U.S. require significant expenditures and place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and The Nasdaq Capital Market. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are no longer an “emerging growth company” or a “smaller reporting company.” Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements and to keep pace with new regulations, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could harm our business and the value of our common stock.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) requires us establish and maintain an adequate internal control structure and procedures for financial reporting and to evaluate and report on such controls.
Our internal controls and financial reporting are not subject to attestation by our independent registered public accounting firm pursuant to the exemption provided to issuers that are not “large accelerated filers” or “accelerated filers” under the Dodd-Frank Act of 2010. However, our Annual Reports on Form 10-K must contain an annual assessment by management of the effectiveness of our internal control over financial reporting and must include disclosure of any material weaknesses in internal control over financial reporting that we have identified.
We cannot be certain that we will be successful maintaining adequate internal controls over our financial reporting and financial processes in the future or remediating any material weaknesses that we identify. We may in the future discover areas of our internal controls that need improvement. Additionally, the existence of any material weakness or significant deficiency requires management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. Furthermore, to the extent our business grows, our internal controls may become more complex, and we would require significantly more resources to ensure our internal controls remain effective.
Therefore, we cannot assure you that material weaknesses or significant deficiencies will not exist or otherwise be discovered in the future. If material weaknesses or other significant deficiencies continue to occur, such weaknesses or deficiencies could result in misstatements of our results of operations, restatements of our financial statements, a decline in the market value of our common stock, or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business, our stock price and trading volume may decline.
The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
You should carefully consider the risks described herein and in other public filings which could materially affect our business, financial condition or future results. The risks described herein and therein are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
