adil-20251231
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-38323
ADIAL PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
4870 Sadler Road, Suite 300
Glen Allen, Virginia23060
(Address of principal executive offices) (Zip Code)
(804)487-8196
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share ADIL The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer, “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s common stock on June 30, 2025 (the last business day of the registrant’s mostly recently completed second fiscal quarter) as reported by the Nasdaq Capital Market on such date was $6,483,200. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.
As of March 4, 2026, the issuer had 1,427,970 shares of common stock outstanding.
Documents incorporated by reference: None
FORM 10-K
TABLE OF CONTENTS
Page
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 22
Item 1B. Unresolved Staff Comments 56
Item 1C. Cybersecurity 56
Item 2. Properties 57
Item 3. Legal Proceedings 57
Item 4. Mine Safety Disclosures 57
Item 6. [Reserved] 60
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 68
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 69
Item 9B. Other Information 69
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 69
PART III 70
Item 10. Directors, Executive Officers and Corporate Governance 70
Item 11. Executive Compensation 76
Item 14. Principal Accountant Fees and Services 88
Item 15. Exhibit and Financial Statement Schedules 89
SIGNATURES 94
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in
this Annual Report on Form 10-K, including but not limited to, statements regarding the sufficiency of our cash, our ability to finance
our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position,
business strategy and plan prospects, or costs and objectives of management for future initiatives, are forward-looking statements. These
forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,”
“targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,”
“estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned
that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties,
and assumptions that are difficult to predict, including those identified below, under Part I, Item lA. “Risk Factors” and
elsewhere in this Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed, projected
or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
On February 5, 2026, we effected a one-for-twenty-five
reverse stock split (the “Reverse Stock Split”) of our authorized, issued and outstanding common stock. Unless otherwise noted,
all references to share amounts in this Annual Report reflect the Reverse Stock Split.
ii
NOTE REGARDING COMPANY REFERENCES
Throughout this Annual Report on Form 10-K, “Adial,”
the “Company,” “we,” “us” and “our” refer to Adial Pharmaceuticals, Inc.
Summary Risk Factors
Our business
faces significant risks and uncertainties of which investors should be aware before making a decision to invest in our common stock. If
any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely
affected. The following is a summary of the more significant risks relating to the Company. A more detailed description of our
risk factors set forth under the caption “Risk Factors” in Item 1A in Part I of this Annual Report on Form 10-K.
Risks Relating to Our Company
● There is substantial doubt about our ability to continue as a going concern.
● In the past we have identified weaknesses in our internal controls.
● Our business is dependent upon the success of our product candidate, AD04.
● We have limited experience as a company conducting clinical trials.
● Our product candidate will require extensive clinical and other testing.
● Our success will be dependent upon adoption of our products by physicians.
Risks Relating to Our Business and Industry
● AD04 and any future product candidates may cause undesirable side effects.
iii
● We have limited protection for our intellectual property.
● We are subject to risks associated with marketing AD04 internationally.
Risks Related to Our Securities and Investing
in Our Securities
● Future sales of securities could result in additional dilution.
● As a smaller reporting company we have reduced SEC reporting requirements.
● As a result of being a public company, we incur additional costs.
iv
PART I
Item 1. Business.
Overview
We
are a clinical-stage biopharmaceutical company focused on the development of therapeutics for the treatment or prevention of addiction
and related disorders. Our investigational new drug candidate, AD04, is being developed as a therapeutic agent for the treatment of alcohol
use disorder (“AUD”). AD04 was investigated in a Phase 3 clinical trial, designated the ONWARD trial, for the potential treatment
of AUD in subjects with certain target genotypes, which were identified using our companion diagnostic genetic test. Based on our analysis
of the subgroup data from the ONWARD trial, we are now focused on completing the clinical development program for AD04 in the specified
genetic subgroups to meet regulatory requirements primarily in the US and secondarily in Europe/UK.
We have devoted the vast
majority of our resources to development efforts relating to AD04, including preparation for and conducting clinical trials, providing
general and administrative support for these operations and protecting our intellectual property. We expect these activities to continue
to demand most of our resources for the foreseeable future.
We currently do not have
any products approved for sale and we have not generated any significant revenue since our inception. From our inception through the date
of filing this Annual Report on Form 10-K, we have funded our operations primarily through the private and public placements of debt,
equity securities, and an equity line.
Our current cash and
cash equivalents are not expected to be sufficient to fund operations for the twelve months from the date of filing this Annual Report
on Form 10-K, based on our current commitments and development plans.
We have incurred net
losses in each year since our inception, including net losses of approximately $8.0 million and $13.2 million for the years ended December
31, 2025 and 2024, respectively. We had accumulated deficits of approximately $90.0 million and $82.0 million as of December 31, 2025
and 2024, respectively. All of our operating losses in the year ended December 31, 2025 resulted from costs incurred in continuing operations,
including costs in connection with our continuing research and development programs and from general and administrative costs associated
with our operations.
We will not generate
revenue from product sales unless and until we successfully complete development and obtain marketing approval for AD04, which we expect
will take a number of years and is subject to significant uncertainty. We do not believe our current cash and equivalents will be sufficient
to fund our operations for the next twelve months from the date of this Annual Report on Form 10-K.
Until such time, if ever,
as we can generate substantial revenue from product sales, we expect to finance our operating activities through a combination of equity
offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements and other
collaborations, strategic alliances and licensing arrangements. However, we may be unable to raise additional funds or enter into such
other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and
when needed would have a negative impact on our financial condition and our ability to develop AD04.
Recent Developments
Collaboration
Framework
On March 3, 2026, we entered into a collaboration
framework agreement with a strategic partner, Molteni Farmaceutici (“Molteni”),
for a proposed exclusive partnership covering the commercialization of AD04 in Europe. The collaboration framework, which is subject to
execution of a final definitive agreement, sets forth the strategic and financial parameters of the proposed partnership, covering clinical,
regulatory, manufacturing, and commercial terms. Under the framework, the strategic partner has been granted a period of exclusivity to
evaluate the feasibility of the project, conduct planning, due diligence, and a comprehensive assessment of the requirements for the successful
commercial launch of AD04 across Europe.
The definitive agreement is expected to include an upfront payment,
milestone payments tied to development and commercial progress, and tiered royalties on European AD04 net sales, payable to us. We believe
the total potential aggregate value from royalties and milestones over time will be significant, estimated
at nearly $60 million, assuming AD04 progresses through clinical development and is successfully introduced in the European market.However,
there can be no assurance given that a definitive agreement to implement the terms set forth in the collaboration framework agreement
will be executed to establish the proposed partnership (and Molteni has no obligation to
enter into such definitive agreement), that ADO4 will successfully progress through clinical development and commercialization in Europe
or that we will receive any royalties or milestone payments as a result of the proposed partnership.
Clinical Developments
On September 16, 2025,
we announced the receipt of the final meeting minutes from our End of Phase 2 (EOP2) meeting with the Food and Drug Adminstration (the
“FDA”) held on July 29, 2025. The minutes provide the FDA’s formal input about the AD04 Phase 3 adaptive clinical trial
design and broader clinical development strategy. The objective for the EOP2 meeting was to align with the FDA on the design of the Phase
3 clinical development program for AD04. The discussion included key elements of the planned adaptive study design elements, such as target
population, clinical endpoints, inclusion and exclusion criteria, dosing regimen, and affirmation of the biomarker-positive and biomarker-negative
groups.
1
AD04 Clinical Development Program
Adial’s AD04 clinical development program
began with initiation of a Phase 3 trial, otherwise known as the ONWARDTM trial. Adial believed that the ONWARD trial design provided
the flexibility to meet global regulatory requirements. The trial started in February 2020 in Scandinavia and Central and Eastern Europe.
The ONWARD trial was a 24-week, multicenter, randomized, double-blind, placebo-controlled, parallel group, Phase 3 clinical study to evaluate
the efficacy, safety and tolerability of AD04 in patients with AUD and selected polymorphisms in the serotonin transporter and receptor
genes. Patients were genetically screened prior to enrollment in the ONWARD trial so that only genetically positive patients were enrolled.
ONWARD enrolled 302 patients (a total of 303 patients were recruited and then randomized in the trial, however, one subject never initiated
treatment and has been excluded from enrollment numbers and was not included in the full analysis data set or efficacy analysis for the
trial); and was conducted in 25 clinical sites in six countries in Scandinavia and Central and Eastern Europe (Sweden, Finland, Poland,
Latvia, Bulgaria and Croatia). Approximately one-third of the total screened patients tested positive for the targeted genotypes.
A Phase 2b study (N = 283), conducted by the University
of Virginia for which we have acquired rights to the data, showed that a prospectively identified subgroup of alcohol-dependent individuals
with specific polymorphisms of the serotonin transporter protein responded therapeutically to ondansetron administration (Johnson, BA
et al., 2011). Further analysis of this same data set against 18 additional polymorphisms located on the genes for the A and B subunits
of the serotonin 5-HT3 receptor revealed polymorphisms that were also associated with a therapeutic response to ondansetron. It was this
hypothesis that collectively led Adial to focus the ONWARD trial on genotypes LL/TT, GG, AG, and AC.
The primary efficacy endpoint of the ONWARD trial
was the average percentage change from baseline in the monthly heavy drinking days (PHDD) experienced by each patient in months 5 and
6 combined. Key secondary endpoints included reduction in total alcohol consumed (TAC), and improvement as measured by the Patient Health
Questionnaire-9, a widely accepted tool for assessment of depression. The definition of a heavy drinking day was greater than 40 grams
or 60 grams of ethyl alcohol in a day for a woman or a man, respectively.
ONWARD Phase 3 Clinical Trial Results – Topline Data Analysis
Topline Data Analysis
On July 20, 2022, we announced the following results
from the ONWARDTM Phase 3 trial. Although the trial missed the primary endpoint, it did show statistical significance in a pre-defined
patient group.
Heavy drinkers are defined by NIAAA (National
Institute on Alcohol Abuse and Alcoholism) as men who drink 5 or more drinks on any day or 15 or more per week and women who drink 4 or
more drinks on any day or 8 or more per week. AD04 patients, compared with placebo patients, achieved a statistically significant reduction
from baseline at month six in percentage of heavy drinking days (PHDD) for the pre-specified patient group of heavy drinkers, across all
genotypes combined (avg. <10 drinks per drinking day at baseline; p=0.03), which accounted for approximately two-thirds of the trial
population. A similar trend was seen in the combined month five and six analysis in the reduction from baseline (p =0.07). Notably, in
the last month of the trial, AD04 heavy drinking patients had a mean reduction of approximately 79% in heavy drinking compared with baseline.
Compared with placebo patients, AD04 patients
in the heavy drinking group had an overall significant difference in the severity of their AUD diagnosis (p=0.04) under the Diagnostic
and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5). For the group of those who no longer meet AUD criteria (<2 symptoms),
the comparisons were 27.4% vs. 14.9% (i.e., an 84% decrease), of AD04 and placebo patients, respectively. These data underscore the clinical
relevance of the findings that heavy drinking AUD patients that receive AD04 appear more likely to recover from the disease by the end
of the treatment regimen.
Additionally, and consistent with the Phase 2b
trial, AD04 had a safety and tolerability profile that was similar to placebo. No side effects or severe adverse events (SAEs) were determined
to be related to AD04 treatment. In fact, more SAEs were reported in the placebo group compared with the AD04 group (7 on placebo vs.
3 on AD04). There were two cardiac events in placebo group and none in the AD04 group. Comparing overall Adverse Events (AEs), the profiles
between AD04 and placebo were similar. AEs reported with a frequency of 5% or more of patients in either group were: headache (11% on
placebo, 12% on AD04), insomnia (3% on placebo, 7% on AD04), blood magnesium decreased (5% on placebo, 6% on AD04), and fatigue (3% on
placebo, 6% on AD04). All of the AE’s were reported as mild to moderate. Importantly, in the overall category of cardiac disorders,
patients on placebo showed a greater number of adverse events compared to AD04 (7% on placebo, 4% on AD04), in addition to greater number
of cardiac SAEs in the placebo group as reported above.
2
U.S. Clinical Development and Regulatory
Actions Completed
Our regulatory strategy for the US has been clearly
defined as a result of both ongoing discussions with key advisors in US regulatory affairs as well as meetings with the FDA.
We engaged a third party statistical consulting group to rigorously reevaluate
our historical clinical data, the ONWARD datasets, and the signals identified in prior post hoc analyses. Their mandate was
to pressure test all assumptions using deep biostatistical expertise and proprietary analytic platforms that integrate multiple
statistical methodologies, Artificial Intelligence (AI), and machine learning tools. This approach was specifically designed to address
the noise inherent in smaller subgroup analyses by enhancing analytical sensitivity, reducing variance, and isolating the most reliable
data signals. Methods included exploratory Bayesian modeling, Bayesian shrinkage techniques (e.g., horseshoe priors), predictive analytics
and trial simulations, real world data–enabled feasibility modeling, sparse PK modeling, and sensitivity analyses of baseline drinking
and endpoint definitions. Together, these efforts were intended to ensure methodological rigor and clinically meaningful stratification.
SLC6A4 (serotonin transporter) and HTR3A/HTR3B
receptor polymorphisms were included in the ONWARD trial; however, the serotonin transporter does not directly influence receptor sensitivity
or excitability, key determinants of ondansetron’s mechanism of action. The independent statistical review reanalyzed the ONWARD
data using genotype based stratification, confirming and refining our understanding of subgroup specific efficacy signals. These
analyses validated the predictive value of the HTR3A and HTR3B SNPs and reinforced their central role in treatment
stratification. This work confirmed our focus on specific 5HT3A variants within relevant AUD populations and strengthened the receptor
based pharmacogenetic framework used to define biomarker positive and biomarker negative groups. It also increased confidence in endpoint
selection, inclusion and exclusion criteria, and other key design assumptions, while informing strategic decisions related to patient
enrichment, site selection, and regulatory positioning.
These insights directly shaped the U.S. Phase
3 program and informed the design of the first pivotal Phase 3 study discussed with FDA at the EndofPhase2 (EOP2) meeting on July 29,
2025, where FDA aligned on the major elements of the planned adaptive enrichment pivotal study and the overall registration pathway. Taken
together, these activities have reinforced the foundation of our clinical, regulatory, and commercial strategy in the United States, alongside
additional efforts such as submission of the FDA safety update/annual report, a Type D meeting to confirm Phase 3 manufacturing plans,
and ongoing discussions regarding the required initial Pediatric Study Plan (iPSP).
U.S. Clinical Development and Regulatory
Actions Planned
We have assessed the impact of the regulatory
guidance on the future business and operating plan requirements to meet the needs of the FDA for submission and approval of AD04 to treat
genetic subtypes of AUD.
Based on our expectations regarding the
targeted genotypes, our current planning assumption is to conduct one Phase 3 trial with
an adaptive enrichment trial design, one subsequent confirmatory Phase 3 trial and one open label
extension safety study. These assumptions may change based on ongoing discussions with regulatory
authorities, and final trial designs and results. In a recent article, published on February 19, 2026 in The New
England Journal of Medicine, the FDA leadership has outlined a shift in the agency’s default evidentiary posture under which,
where scientifically appropriate, approval may be supported by one adequate and well-controlled clinical investigation plus
confirmatory evidence, rather than the historic expectation of two independent pivotal studies. If AD04 can be advanced under a
one-study framework, the impact could be substantial – significantly lowering Phase 3 costs, improving overall capital
efficiency, and accelerating our path toward NDA submission.
The planned adaptive enrichment trial
derisks early at onset by constraining enrollment and defining the biomarker positive population upfront, it derisks
midtrial through an interim analysis that provides the opportunity to eliminate the biomarker negative group and enrich
the biomarker positive group, and derisks at the end through an analysis that preserves alpha and protects the primary claim. The
timing for these activities will be contingent on the start of the trial and enrollment rates, with the first
interim analysis occurring after approximately 50% of subjects have completed treatment (estimates
for the first interim analysis for the Biomarker negative group are between 2 to 4 months from first patient enrolled).
3
EX US Clinical Development and Regulatory
Actions Completed
In July 2023, we announced results from meetings
held with key country-level regulatory agencies in Europe. The results of these meetings as previously reported are being used for the
development of our future clinical and regulatory strategy.
EX US Clinical Development and Regulatory
Actions Planned
As previously stated, based on positive feedback
received from the relevant global regulatory bodies and overlapping clinical requirements, we made the strategic decision to focus our
efforts on the US. We believe that these clinical endpoints should translate to acceptance in other international markets. We will continue
to look for synergies where they exist in the primary efficacy data variables when planning for study designs to meet global regulatory
requirements. We have a high level of confidence in the US clinical program based on our post hoc analysis and regulatory feedback and
we believe these data results to be useful for Ex US regulators.
However, if these synergies cannot be found, it
is possible that new analysis and/or additional data generation may be required to meet the requirements of global regulators, including
the EU and UK. This is also vital for our ongoing partnering efforts based on discussions with companies active in the EU and UK.
Disease Overview - Alcohol Use Disorder
AUD is characterized by an urge to consume alcohol
and an inability to control the levels of consumption.
In the United States alone, the 2024
National Survey on Drug Use and Health (NSDUH) reported approximately 27.9 million people age 12 and older had AUD. Among those
reporting AUD, 21.4% or 5.97M were classified as moderate and 19.2% or 5.35M were classified as Severe. Among the 27.9 million, only
2.5% or 697,000 people received medication for AUD treatment. AUD results in significant health, social, and financial costs, with excessive alcohol use being the third leading
cause of preventable death and responsible for 31% of driving fatalities (NIAAA Alcohol Facts & Statistics). AUD contributes to
over 200 different diseases and 10% of children live with a person that has an alcohol problem. According to the American Society of
Clinical Oncologists, 5-6% of new cancers and cancer deaths globally are directly attributable to alcohol. The Lancet
published an article that alcohol is the leading risk factor for death and disability in people ages 15-49 globally. The Centers for
Disease Control (the “CDC”) has reported that AUD costs the U.S. economy about $250 billion annually, with heavy
drinking accounting for greater than 75% of the social and health related costs.
According to the WHO (World Health Organization,
2022), the harmful use of alcohol is a causal factor in more than 200 disease and injury conditions. Worldwide, 3 million deaths every
year result from harmful use of alcohol. This represents 5.3% of all deaths. Overall, 5.1% of the global burden of disease and
injury is attributable to alcohol, as measured in disability-adjusted life years (DALY’s). Alcohol consumption causes death and
disability relatively early in life. In people aged 20-39 years, approximately 13.5% of total deaths are attributable to alcohol.
AUD confers complex medical, psychological, social,
and occupational impacts and can be life-limiting. AUD, similar to other addictions is characterized by a cluster of behavioral,
cognitive, and physiological phenomena including a strong desire to take the drug, difficulties in controlling its use, persisting in
its use despite harmful consequences, a higher priority given to drug use than to other activities and obligations, increased tolerance,
and sometimes physical withdrawal. AUD has no single cause and can be triggered by a variety of factors such as genetic predisposition,
psychological trauma, sociological and environmental factors, among others.
The DSM-5-TR (Diagnostic
and Statistical Manual of Mental Disorders, Fifth Edition) defines Alcohol Use Disorder (AUD) based on 11 criteria. The severity mild,
moderate, or severe depends on how many criteria an individual meets within a 12-month period:
● Mild AUD: 2-3 criteria met
● Moderate AUD: 4-5 criteria met
● Severe AUD: 6 or more criteria met
Before the publication of the fifth revision of the
Diagnostic and Statistical Manual of Mental Disorders in 2013 (the “DSM-5”), AUD was separated into two categories, which
can co-occur “alcohol dependence” and “alcohol abuse”. More broadly, overdrinking due to the inability to moderate
drinking is called alcohol addiction and is often called “alcoholism”, sometimes pejoratively.
4
Limitations of Current AUD Therapies
The four FDA-approved medications for Alcohol
Use Disorder (AUD) are built around an abstinence-based treatment model. They require patients to stop drinking before initiating therapy
and typically must be combined with structured psychotherapy and social-support interventions to be effective. For many individuals, these
requirements create substantial barriers to care. Achieving and maintaining abstinence often demands abrupt and disruptive lifestyle
changes, which can carry significant physical, medical, occupational, and social consequences. Patients may feel unable to participate in
family gatherings, work events, or social activities for fear of jeopardizing abstinence, and many experience the added burden of stigma
associated with being labeled an “alcoholic.” These limitations contribute to low treatment uptake and highlight the need
for therapeutic approaches that support harm reduction and meet patients where they are, rather than requiring complete abstinence as
a precondition for care.
Significant side effects of current pharmacologic
therapies include a broad spectrum of adverse effects such as nausea, vomiting, dizziness, abdominal pain,
and clinically meaningful risks of hepatotoxicity, as well as mood disturbances, anxiety, irritability, and other psychiatric symptoms, These
adverse effects contribute to poor adherence, early discontinuation, and reduced real-world effectiveness. In fact, according to peer
reviewed studies referenced in The Sober Truth: Debunking the Bad Science Behind 12-Step Programs and the Rehab Industry, L. Dodes
and Z. Dodes, 2014 by Dr. Lance Dodes, the former Director of the substance abuse treatment unit of Harvard’s McLean Hospital, 90%
or more of patients that use current therapy solutions, such as Alcoholics Anonymous, do not achieve long-term abstinence.
There are four drugs approved by the FDA and marketed
in the United States for the treatment of alcohol addiction, Antabuse® (disulfram) Vivitrol® (naltrexone),
Revia® (naltrexone) and Campral® (acomprosate) and one drug, Selincro® (nalmefene) is marketed
outside of the United States. All of the approved drugs, other than Selincro®, (which is approved only in Europe)
require abstinence prior to commencing treatment with the drug, and all five drugs are known to have significant side effects.
Antabuse® (disulfiram) was approved
for the treatment of alcohol dependence more than 50 years ago, making it the oldest pharmacologic therapy in this field. Disulfiram
is an aversive therapy: it works by blocking aldehyde dehydrogenase, which prevents the normal metabolism of alcohol. When a patient drinks
while taking Antabuse®, acetaldehyde rapidly accumulates, triggering a severe and highly unpleasant reaction. Symptoms can include
flushing, throbbing headache, nausea, vomiting, chest pain, palpitations, hypotension, dyspnea, and marked anxiety. In some cases, reactions
may be medically serious, with risks including cardiovascular collapse, arrhythmias, respiratory depression, and, rarely, death.
Because its therapeutic effect depends entirely
on provoking this aversive reaction, Antabuse® requires complete abstinence before starting treatment and strict avoidance
of alcohol during therapy. This abstinence-based approach can be difficult for many patients and does not address craving, motivation,
or the underlying neurobiology of Alcohol Use Disorder. As a result, adherence is often poor, and the medication is not suitable for individuals
who cannot maintain abstinence or who are seeking harm-reduction approaches rather than complete cessation.
Naltrexone is available as a once-daily pill (Revia®)
and as a once-monthly injectable form (Vivitrol®) administered by a healthcare professional. Both forms are commonly associated with
gastrointestinal side effects such as nausea and abdominal discomfort, and some patients also experience headaches, dizziness, and fatigue.
In addition, Naltrexone has been linked to dose-related liver toxicity, and the oral formulation carries an FDA boxed warning for the
risk of hepatocellular injury at higher doses. Vivitrol® is marketed by Alkermes for the treatment of AUD.
Campral®, (acamprosate) is
an oral medication taken three times daily and is thought to stabilize chemical signaling in the brain that becomes dysregulated in chronic
alcohol use and reduce post-acute withdrawal symptoms. Campral is not effective unless the patient has already stopped
drinking, so it is also used strictly as an abstinence-maintenance therapy.
Selincro® has not been approved
for sale in the United States.
5
Our Proposed Solution is AD04 and a PGx Companion
Diagnostic
The active pharmaceutical agent in AD04, our lead
investigational new drug product, is ondansetron, which is also the active ingredient in Zofran®, which was granted FDA
approval in 1991 for nausea and vomiting post-operatively and after chemotherapy or radiation treatment and is now commercially available
in generic form. In studies of Zofran®, conducted as part of its FDA review process, ondansetron was given acutely at dosages
up to almost 100 times the dosage expected to be formulated in AD04 with the highest doses of Zofran® given intravenously
(“i.v.”), which results in approximately 160% of the exposure level as oral dosing. Even at high doses given i.v. the studies
found that ondansetron is well-tolerated and results in few adverse side effects at the currently marketed doses, which reach more than
80 times the AD04 dose and are given i.v. The formulation dosage of ondansetron used in our drug candidate (and expected to be used by
us in our Phase 3 clinical trials) has the potential advantage that it contains a much lower concentration of ondansetron than the generic
formulation/dosage that has been used in prior clinical trials, is dosed orally, and is available with use of a companion diagnostic genetic
biomarker. Our development plan for AD04 is designed to demonstrate both the efficacy of AD04 in the genetically targeted population and
the safety of ondansetron when administered chronically at the AD04 dosage. However, to the best of our knowledge, no comprehensive clinical
study has been performed to date that has evaluated the safety profile of ondansetron at any dosage for long-term use as anticipated in
our ongoing and planned clinical trials. Under current US FDA regulations, the approval of the specific dosage of 0.33mg ondansetron in
AD04 for the new indication of AUD in patients with genetic subtypes and data exclusivity will result in a minimum of 3 years of regulatory
and, therefore, commercial exclusivity for AD04 in the US.
Our goal with AD04 is to develop a safe effective,
and patient-centered treatment for Alcohol Use Disorder (AUD) that aligns with how people actually seek help. Unlike existing medications
that require complete abstinence and are often associated with significant side effects, AD04 is being developed to support a harm-reduction
approach helping patients meaningfully reduce heavy drinking and alcohol-related risks without mandating that they stop drinking
altogether.
Our product candidate, AD04, is specifically designed
for genotype positive individuals who want to regain control over their drinking but cannot, or do not wish to, pursue full abstinence.
By removing the barriers associated with abstinence-based treatment and avoiding the tolerability issues that limit the use of current
therapies, AD04 has the potential to reach the millions of people with AUD who remain untreated today. Unlike other therapies, our investigational
product, AD04, uses a novel mechanism of action and incorporates a companion diagnostic genetic test to identify patients
most likely to benefit. AD04 is intended to reduce craving and support sustained reductions in alcohol intake, without requiring detoxification
or abstinence prior to or during treatment. It is orally administered, currently twice daily, with a once-daily formulation planned
as part of lifecycle management and has demonstrated a favorable safety and tolerability profile with side effects similar
to placebo.
The companion diagnostic genetic test used to identify patients
most likely to benefit from AD04.
The companion diagnostic genetic test to be used to identify patients that
are most likely to benefit from treatment with AD04 has the potential to meaningfully enhance treatment outcomes. It
gives clinicians a structured, non-threatening way to begin conversations about alcohol use, an area that is often difficult
for both patients and providers to address. For patients, the test would offer an acceptable and objective entry point into care, helping
them determine whether they may be a good candidate for treatment. A positive result would provide a science-based
rationale for their treatment, which can reduce stigma, validate the patient’s experience, and support engagement.
It would also enable treatment to occur discreetly and confidently within the doctor–patient relationship, using a simple oral medication.
Strengths and Competitive Advantages
Large Market Opportunity for an Effective
Solution
In the United States
alone, the 2024 National Survey on Drug Use and Health (NSDUH) reported approximately 27.9 million people age 12 and older had AUD. Among
those reporting AUD, 21.4% or 5.97M were classified as moderate and 19.2% or 5.35M were classified as Severe. Among the 27.9 million, only 2.5% or 697,000 people received medication
for AUD treatment. Based on data from the ONWARD trial and Phase 2b trial of AD04, our initial focus, based on the comprehensive subgroup
analysis will center on patients carrying the HTR3A rs1150226 AG genotype and the combined HTR3A/HTR3B variant pattern
characterized by the presence of both the AG (HTR3A) and AC (HTR3B rs1176744) alleles. These biomarker-positive genotypes represent the
populations most likely to benefit from AD04 based on prior clinical and mechanistic evidence.
6
At this time, we
are not aware of any oral pharmaceutical treatment approved in the U.S. that addresses the needs of patients who desire to better control or
limit their drinking but cannot or do not want to abstain completely from drinking. The current abstinence-based treatments
have limitations, as outlined in the previous section “Limitations of Current AUD Therapies”. The limited side
effects expected for our investigational new drug, based on clinical data so far, are also believed to be an important factor in
the expected rapid uptake of AD04 in the market. Our approach, if approved by FDA, may allow for social drinking to continue and is aimed
at reducing the dangerous, heavy drinking. This would allow patients to live the life they want without the stigma associated with complete
abstention and currently endured by those seeking help for their excessive drinking.
Companion Genetic Bio-Marker Test Aimed
at Identifying Patients Most Likely to Respond To Treatment, Potentially Results in Increased Use of AD04
We believe our AD04 and its companion diagnostic
is unique in that it is designed to reduce heavy drinking in individuals with certain genotypes. We are pursuing a strategy that aims
to integrate pre-treatment screening with the companion diagnostic genetic test into the drug label. This companion diagnostic testing
approach may be a useful genetic screening tool to predict those most likely to respond to the drug.
As noted above, we believe that the companion
diagnostic genetic test enables physicians to more easily have an initial conversation with their patients about alcohol use and, for
the patient, provides a less threatening and obtrusive first step toward treatment because the conversation will include the topic of
genetic testing and not be solely about behavior. Patients that then test positive for one of the targeted variants responsive to AD04
would be expected to be more likely to then receive a prescription for AD04 (based on an external quantitative market study of 156 primary
care physicians and psychiatrists that was conducted by Ipsos-Insight LLC, who we commissioned, and that concluded a majority of genetically
targeted patients currently receiving pharmacologic treatment would be switched to a drug with the characteristics expected for AD04).
Our Substantial Proprietary Intellectual Property Estate and
Protection from Competition
We currently hold a worldwide, exclusive license
to three (3) patent families that provide us with the ability to exclude potential competitors from practicing the claimed inventions,
such as the use of ondansetron to treat any of the four (4) specified genotypes for AUD. Our licensed patent estate is expected to provide
us with patent protection through 2031. Additionally, we have filed a new patent in 2025, which was recently published, and if granted,
would extend the patent protection of AD04 to 2045. This patent is owned by Adial and not part of the licensed families. Ondansetron,
the active ingredient in AD04, has never been approved in a low dosage near the AD04 dose of 0.33mg per tablet, and we believe our licensed
patents will protect AD04 from any competitor that attempts to bring to market an ondansetron dose at or near the AD04 dose for treatment
of patients having one or more of the four target genotypes.
We believe use of the currently marketed doses
“off-label” will not be significant due to (i) the lack of demonstrated efficacy at currently marketed doses, (ii) potential
safety concerns if the currently marketed doses are used chronically as is expected to be necessary for treating AUD, and (iii) cutting
the smallest currently marketed dose into the 12 pieces that would be necessary to achieve the AD04 dose is deemed by us to be impractical
and likely to result in inaccurate dosing.
Experienced Leadership
Our management, advisors and board of directors
have extensive experience in pharmaceutical development, the clinical trial and regulatory approval processes, drug commercialization,
financing capital-intensive projects, and developing new markets for pharmaceutical agents. Members of our team have previously worked
in senior management and senior officer positions, or led significant research initiatives at Indivior, Shire, Viagene, Collateral Therapeutics,
Krystal Biotech, Sucampo Pharmaceuticals, GlaxoSmithKline, Osiris Therapeutics, Yumanity Therapeutics, Delix Therapeutics, and Aravive
in a broad range of therapeutic areas. Our management and board members have particular expertise in the science and development of addiction
related drugs and bringing new drugs to the market.
Our Strategy for AD04 and Addiction Related
Diseases and Disorders
We are developing pharmaceutical treatments for
addictions, addictive disorders, and related diseases and disorders. Our business strategy is to advance AD04, our lead investigational
drug candidate, toward regulatory approval for alcohol use disorder in the United States, the European Union, and then eventually other
territories. We subsequently plan to develop label expansions into other indications (e.g., opioid use disorder, other drug addictions,
obesity, smoking cessation, eating disorders, and anxiety).
7
Our goals in executing this strategy are to keep
capital requirements to a minimum, expedite product development, gain access to clinical research and manufacturing expertise that will
advance product development, approval and eventual market uptake of our product, and rely on a well-defined and carefully executed intellectual
property strategy in order to position our products with long-term, defensible, competitive advantages. Execution of this strategy may
include seeking grant funding and funding from partners and collaborators when available on terms we believe to be favorable to us.
Near Term
● Advancing the AD04 Clinical Development Program in the US.
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Longer Term
Evidence from the primary qualitative market research
suggests the product profile for AD04 will be received well by physician and payors. We will continue to develop plans to support future
communications with physicians and payors as well as pre market commercialization planning for AD04
License with University of Virginia Patent
Foundation
We have a worldwide, exclusive license from the
University of Virginia Patent Foundation (d/b/a the Licensing & Venture Group) (“UVA LVG”), which is the licensing arm
of the University of Virginia, to commercialize our investigational drug candidate, AD04, subject toFDA approval of the product, based
upon three separate patent application families, with 90 issued patents in over 40 jurisdictions, including eight issued patents in the
U.S. Our investigational agent has been used in several investigator-sponsored trials and we possess or have rights to use toxicology,
pharmacokinetic and other preclinical and clinical data that support our landmark ONWARD Phase 3 clinical trial. Our licensed therapeutic
agent was the product candidate used in the ONWARD Phase 3 clinical trial of 302 patients as well as a University of Virginia investigator
sponsored Phase 2b clinical trial of 283 patients.
9
In January 2011, we entered into an exclusive,
worldwide license agreement with UVA LVG for rights to make, use or sell licensed products in the United States based upon the patents
and patent applications made and held by UVA LVG (the “UVA LVG License”). Three patent and patent application families are
included in the UVA LVG License, with patents issued in over 40 countries, including, without limitation, in the U.S., Europe and Eurasia.
The licensed patents and patent applications currently include the below listed U.S. patents and patent application and any divisional
patents, continuation patents and foreign equivalents.
“Serotonin Transporter Gene and Treatment of Alcoholism”
“Serotonin Transporter Gene and Treatment of Alcoholism”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Serotonin Transporter Gene and Treatment of Substance Use Disorder
including Opioid Use Disorder”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
“Serotonin transporter gene and treatment of opioid-related disorders”
“Serotonin transporter gene and treatment of opioid-related
disorders”
“Serotonin transporter gene and treatment of opioid-related
disorders”
“Molecular genetic approach to treatment and diagnosis of alcohol
and drug dependence”
Additionally, the UVA LVG License grants rights
to data and know-how developed by the University of Virginia related to AD04, including, without limitation, to the data from the Phase
2b study described above.
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As consideration for the rights granted in
the license agreement, we are obligated to pay UVA LVG yearly license fees and milestone payments, and a royalty based on net sales
of products covered by the patent-related rights set forth above. More specifically, upon commencement of the license we issued to
UVA LVG Class A Units (which was equal to four percent (4%) of our equity on the date of issuance and was later converted into
shares of common stock) as a license issue. We are obligated to pay UVA LVG (i) annual minimum royalties of $40,000 commencing in
2017; (ii)a $20,000 milestone payments that was originally due upon dosing the first patient under a Phase 3 human clinical trial of
a licensed product but has been paid in full, $155,000 upon the earlier of the completion of a Phase 3 trial of a licensed product
or the partnering of the licensed or sale of our company, which was paid in 2022 with completion of the ONWARD trial, $275,000 upon
acceptance of an NDA by the FDA, and $1,000,000 upon approval for sale of AD04 in the U.S., Europe or Japan; and (iii) royalties
equal to a 2% and 1% of net sales of licensed products in countries in which a valid patent exists or does not exist, respectively,
with royalties paid quarterly. In the event of a sublicense to a third party, we are obligated to pay royalties to UVA LVG equal to
a percentage of what we would have been required to pay to UVA LVG had we sold the products under sublicense ourselves. In addition,
we are required to pay to UVA LVG 15% of any sublicensing income. The license agreement, as amended on October 21, 2013, and further
amended on May 18, 2016, March 27, 2017, August 15, 2017, December 14, 2017, December 18, 2018, December 31, 2019, and October 21,
2024 sets forth specific diligence milestones completion deadlines including using commercially reasonable efforts to submit an NDA
with the FDA for a Licensed Product by March 31, 2028 and commence commercialization of an FDA approved Licensed Product by March
31, 2029. As a result of our ongoing business and clinical development planning for AD04, we are approaching UVA LVG to extend the
milestones referenced in our license agreement with UVA. The license agreement may be terminated by UVA LVG upon sixty (60) days
written notice if we breach our material obligations thereunder, including failing to make any milestone, or failing to use
commercially reasonable efforts to submit an NDA or commence commercialization within the date specified above, failing to make
other required payments, or the failure to exercise diligence to bring licensed products to market. In the event of a termination,
we will be obligated to pay all amounts that accrued prior to such termination. The license agreement also contains other customary
clauses and terms as are common in similar agreements between industry and academia, including agreements to indemnify UVA LVG for
any liabilities arising out of or related to the licensee’s exercise of its rights under the license agreement, making the
license grant subject to the Bayh-Dole Act (35 U.S.C. 200 et seq.), the reservation of the licensor of the right to use the licensed
intellectual property rights for its internal, non-commercial purposes, limitations/disclaimers of various warranties and
representations, reporting and record-keeping requirements, and licensee liability insurance requirements.
The term of the license continues until the expiration,
abandonment or invalidation of the licensed patents, and following any such expiration, abandonment or invalidation will continue in perpetuity
on a royalty-free, fully paid basis.
The UVA LVG currently has a policy under which
up to 35% of the payments made to the UVA LVG under a license may be distributed to inventor of the licensed technology, therefor our
former Chief Medical Officer in his capacity as inventor of the patents licensed by us from the UVA LVG may be eligible to receive such
payments from the UVA LVG.
Adial Owned Published Patent Applications
In July of 2025, Adial, through its company
represented patent counsel filed an update to the provisional new patent application which was filed in July
2024. The PCT patent application is a wholly owned patent of Adial Pharmaceuticals. The
new patent application and its expected approval will extend protection of the core assets of Adial to at least
2045 once granted. The implications of this patent greatly enhance the value of AD04 by extending the commercial
exclusivity of AD04’s revenue far into the future once approved.
Protection from Generic Competition
Since our inception, we have focused on taking
action primarily through the filing of patents geared toward ensuring AD04 will have market exclusivity for several years after it is
launched with particular focus on the U.S. and Europe. Ondansetron, the active pharmaceutical ingredient (“API”) of AD04 was
granted FDA approval as Zofran® for the treatment of post-operative and post-chemotherapy nausea and emesis in January
1991 and is now commercially available in generic form at doses from more than 12 times the AD04 dose to over 70 times the AD04 dose with
the highest doses being administered intravenously (“i.v.”), which provides almost twice the drug exposure levels as oral
dosing. With generic ondansetron available, the following threats have been addressed: (i) the potential use of currently available ondansetron
products (i.e., Zofran®) “off-label”, and (ii) the potential manufacturing and launching of a generic version
AD04 by a competitor.
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Limited Threat of “Off-label” Use
of Zofran®
The lowest doses of Zofran® tablets
(and its generic equivalents) on the market are a 4 mg and 8 mg tablet as compared to AD04, which is currently formulated as a 0.33 mg
tablet (12.2 times less than the 4 mg tablet). Thus, in order for a patient to use tablets already on the market and get the AD04 dose,
a patient would have to cut the 4 mg tablet into 12 parts (or the 8 mg tablet into 24 parts), which we do not believe is reasonably possible;
and, even with precise sectioning into 12 pieces, the dose may still not be accurate because tablets at the Zofran® dose
have not been manufactured to ensure uniformity of distribution of the active ingredient across the tablet. Therefore, we believe that
the risk of a large number of patients attempting to cut the currently marketed tablet to achieve the AD04 dose to be extremely low.
Since we do not believe that Zofran®
tablets can be used as a substitute for AD04, the main question related to the potential for off-label use of the current products for
treating addictions then becomes whether doctors and patients will believe it is possible to use the currently available, higher doses
of ondansetron to treat addictions, including AUD. We believe doctors are extremely unlikely to prescribe currently available high dose
versions of ondansetron and that any such prescribing that dose will likely be limited and immaterial to the sales of AD04 for two reasons
— (1) we believe the high doses are unlikely to be efficacious as a treatment for AUD, and (2) we believe the high doses would likely