ITEM 1A. RISK FACTORS
Risk Factor Summary
The following is a summary of the risks and uncertainties
that could cause our business, financial condition or operating results to be harmed. We encourage you to carefully review the full risk
factors contained in this report in their entirety for additional information regarding these risks and uncertainties.
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· The marketing approval process is burdensome and may not be successful;
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In addition to other information in this Annual Report
on Form 10-K, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant
impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual
results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial
condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in
an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.
Risks Related to our Company
We have had a history of losses and no revenue,
which raises a risk regarding our ability to continue as a going concern in the future.
Since inception through September 30, 2025, we have
accumulated a deficit of approximately $382 million. We can offer no assurance that we will ever operate profitably or that we will generate
positive cash flow in the future. To date, we have not generated any revenues from our operations. Our history of losses and no revenues
creates a greater risk of our continued ability to continue as a going concern in the future. As a result, our management expects the
business to continue to experience negative cash flows for the foreseeable future and cannot predict when, if ever, our business might
become profitable. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at
all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities,
or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results
of operations.
We are a clinical stage pharmaceutical research
and development company and may never be able to successfully develop marketable products or generate any revenue. We have a very limited
relevant operating history upon which an evaluation of our future performance and prospects can be made. There is no assurance that our
future operations will result in profits. If we cannot generate sufficient revenues, we may suspend or cease operations.
We are a clinical stage company and have not generated
any revenues to date. Moreover, we cannot be certain that our research and development efforts will be successful or, if successful, that
our potential drug compounds will ever be approved for sale to pharmaceutical companies or generate commercial revenues. We have a very
limited relevant operating history upon which an evaluation of our performance and prospects can be made. We are subject to all of the
business risks associated with a pre-revenue company, including, but not limited to, risks of unforeseen capital requirements, failure
of potential drug compounds either in non-clinical testing or in clinical trials, failure to establish business relationships and competitive
disadvantages against larger and more established companies. If we fail to become profitable, we may suspend or cease operations.
We may be unable to raise additional capital
when needed, which would force us to delay, reduce or eliminate our research and development activities.
To date, we have funded our operations primarily through issuances of shares
at-the-market sales agreements pursuant to which we offer and sell shares of common stock registered under an effective registration statement
from time to time through a sales agent and, historically, also through a Purchase Agreement with Lincoln Park Capital Fund, LLC (“Lincoln
Park”) pursuant to which the Company could direct Lincoln Park to purchase shares of common stock registered under an effective
registration. The Company will need to file a prospectus supplement in order to access funds under the 2023 Purchase Agreement and the
2023 Purchase Agreement will expire on February 3, 2026.
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We will need to raise additional funding, and the
current economic conditions may have a negative impact on our ability to raise additional needed capital on terms that are favorable to
our Company or at all. We may not be able to generate significant revenues for several years, if at all. Until we can generate significant
revenues, if ever, we expect to satisfy our future cash needs through equity or convertible debt financing. We cannot be certain that
additional funding will be available on acceptable terms, or at all. If adequate funds are not available, we may be required to delay,
reduce the scope of, or eliminate one or more of our research and development activities.
A decline in the price of our common stock could
affect our ability to raise further working capital and adversely impact our operations and would severely dilute existing or future investors
if we were to raise funds at lower prices.
A prolonged decline in the price of our common stock
could result in a reduction in our ability to raise capital. Because our operations have been financed through the sale of equity securities,
a decline in the price of our common stock could be especially detrimental to our continued operations. Any reduction in our ability to
raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect
on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock
price declines, we may be forced to sell equity securities at such lower prices resulting in significant dilution to existing investors.
We believe the following factors could cause the market price of our common stock to continue to fluctuate widely and could cause our
common stock to trade lower:
● actual or anticipated variations in our quarterly operating results;
● the outcome of our clinical trials, which are inherently unpredictable;
● changes in accounting treatments or principles;
● general political, economic, regulatory and market conditions.
The market price for our common stock may also be
affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor,
could materially adversely affect the market price of our common stock.
Risks Related to the Discovery and Development
of Our Current and Future Product Candidates
The marketing approval process for pharmaceutical
products is a lengthy, complex and highly regulated process and we cannot predict the outcome of any interactions with the regulatory
authorities or when we will receive marketing approval, if at all.
The regulatory approval processes of the EMA, the FDA, and other comparable
foreign authorities are lengthy, time-consuming and inherently unpredictable, and the approval process can vary significantly depending
on the regulatory authority. Relevant health authorities may, at the time of the filing of the application for a marketing authorization,
or later during their review, impose requirements that can evolve over time, including requiring additional clinical trials, and such
authorities may delay or refuse to grant approval. On November 14, 2025, we announced that the CHMP of the EMA has rendered a negative
trend vote following an oral explanation of our MAA. The CHMP is expected to adopt a formal opinion on the MAA at its December meeting.
We plan to seek a re-examination of the MAA upon its formal adoption. However, we cannot predict the outcome of any interactions with
the regulatory authorities and when we will receive a marketing approval, if at all.
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In recent years, health authorities have become increasingly
focused on product safety and on the risk/benefit profile of pharmaceutical products, which could lead to more burdensome and costly approval
processes and negatively affect our ability to obtain regulatory approval for products under development. For example, the FDA and the
EMA have been implementing strict requirements for approval, particularly in terms of the volume of data needed to demonstrate a product’s
efficacy and safety.
Obtaining and maintaining regulatory approval
of blarcamesine or any future product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory
approval of those product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of blarcamesine
and any future product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval
in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on
the regulatory approval process in others. Approval procedures vary among jurisdictions and can involve requirements and administrative
review periods different from each other, including additional preclinical studies or clinical trials, as clinical trials conducted in
one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the U.S., including
Canada, and certain jurisdictions in the EU, a product candidate must be approved for reimbursement before it can be approved for sale
in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
Regulatory authorities in jurisdictions outside of
the U.S. have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions and
such regulatory requirements can vary widely from country to country. Obtaining other regulatory approvals and compliance with other regulatory
requirements could result in significant delays, difficulties and costs for us and could require additional preclinical studies or clinical
trials, which could be costly and time-consuming and could delay or prevent the introduction of our products in certain countries. The
foreign regulatory approval process involves all of the risks associated with FDA approval. We do not have experience in obtaining regulatory
approval in international markets or within the United States. If we fail to comply with the regulatory requirements in international
or domestic markets and/or obtain and maintain applicable marketing approvals, our target market will be reduced and our ability to realize
the full market potential of blarcamesine or any future product candidates will be harmed.
Even if we are able to develop our potential
drug compounds, we may not be able to receive regulatory approval, or if approved, we may not be able to generate significant revenues
or successfully commercialize our products, which will adversely affect our financial results and financial condition and we will have
to delay or terminate some or all of our research and development plans which may force us to cease operations.
All of our potential drug compounds are exclusively
focused on SIGMAR1 which has not previously been the subject of any approved drug products and will require extensive additional research
and development, including non-clinical testing and clinical trials, as well as regulatory approvals, before we can market them. In particular,
human therapeutic products are subject to rigorous non-clinical and clinical testing and other approval procedures of the FDA and similar
regulatory authorities in other countries. Various federal statutes and regulations also govern or influence testing, manufacturing, safety,
labeling, storage, and record-keeping related to such products and their marketing. We cannot predict if or when any of the potential
drug compounds we intend to develop will be approved for marketing. There are many reasons that we may fail in our efforts to develop
our potential drug compounds. These include:
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If we fail to develop our potential drug compounds,
our financial results and financial condition will be adversely affected, we will have to delay or terminate some or all of our research
and development plans and may be forced to cease operations.
Our research and development plans will require
substantial additional future funding which could impact our operations and financial condition.
It may take several years before we can develop potentially
marketable products, if at all. Our research and development plans will require substantial additional capital, arising from costs to:
● conduct research, non-clinical testing and human clinical trials;
Our future operating and capital needs will depend
on many factors, including:
● the scope and results of pre-clinical testing and human clinical trials;
● the time and costs involved in obtaining regulatory approvals;
● competing technological and market developments;
● our ability to establish additional collaborations;
● changes in our existing collaborations;
● the cost of manufacturing scale-up; and
● the effectiveness of our commercialization activities.
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We base our outlook regarding the need for funds on
many uncertain variables. Such uncertainties include the success of our research initiatives, regulatory approvals, the timing of events
outside our direct control such as negotiations with potential strategic partners and other factors. Any of these uncertain events can
significantly change our cash requirements as they may involve one-time events such as the receipt or payment of major milestones and
other payments.
Additional funds will be required to support our operations,
including commercialization of our product candidates, and if we are unable to obtain them on favorable terms, we may be required to cease
or reduce certain further research and development and commercialization programs of our drug product platform, sell some or all our intellectual
property, merge with another entity or scale back operations.
If we or any companion diagnostic collaborator
of ours are unable to successfully develop and obtain regulatory approval for companion diagnostic tests for our drug candidates, or experience
significant delays in doing so, we may not realize the commercial potential of our drug candidates.
We analyze genomic data from clinical trials to identify
biomarkers, which we use in the analysis of our clinical trials.
Identification of these patients will require the
use and development of companion diagnostics. According to the FDA’s 2014 guidance document on In Vitro Companion Diagnostic Devices,
for novel therapeutic products that depend on the use of a diagnostic test and where the diagnostic device could be essential for the
safe and effective use of the corresponding therapeutic product, the premarket application for the companion diagnostic device should
be developed and approved or cleared contemporaneously with the therapeutic.
We do not have experience or capabilities in developing
or commercializing diagnostics. It may be necessary to resolve issues such as selectivity/specificity, analytical validation, reproducibility,
or clinical validation of companion diagnostics during the development and regulatory approval processes. Moreover, even if data from
preclinical studies and early clinical trials appear to support development of a companion diagnostic for a drug candidate, data generated
in later clinical trials may fail to support the analytical and clinical validation of the companion diagnostic. We and our future collaborators
may encounter difficulties in developing, obtaining regulatory approval for, manufacturing and commercializing companion diagnostics similar
to those we face with respect to our drug candidates, including issues with achieving regulatory clearance or approval, production of
sufficient quantities at commercial scale and with appropriate quality standards, and in gaining market acceptance. If we are unable to
successfully develop companion diagnostics for our drug candidates, or experience delays in doing so, the development of these drug candidates
may be adversely affected, these drug candidates may not obtain marketing approval, and we may not realize the full commercial potential
of any of these therapeutics that have or may obtain marketing approval. We may not be able to enter into arrangements with another diagnostic
company to develop and obtain regulatory approval for an alternative diagnostic test for use in connection with the development and commercialization
of our drug candidates or do so on commercially reasonable terms, which could adversely affect and/or delay the development or commercialization
of our therapeutic candidates or therapeutics.
Companion diagnostics are subject to regulation by
the FDA, EMA and comparable foreign regulatory authorities as medical devices and will likely require separate regulatory approval prior
to commercialization. If we or third parties are unable to successfully develop companion diagnostics for our drug candidates, or experience
delays in doing so:
Even if our drug candidates and any associated companion
diagnostics are approved for marketing, the need for companion diagnostics may slow or limit adoption of our drug candidates. Our drug
candidates may be perceived negatively compared to alternative treatments that do not require the use of companion diagnostics, either
due to the additional cost of the companion diagnostic or the need to complete additional [testing?] prior to administering our drug candidates.
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If any of these events were to occur, our business
and growth prospects would be harmed materially.
The regulatory approval processes of the FDA,
EMA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, which could lead to our inability
to generate product revenue.
The time required to obtain approval by the FDA, EMA
and comparable foreign regulatory authorities is unpredictable, typically takes many years following the commencement of clinical trials
and depends upon numerous factors, including the type, complexity and novelty of the product candidates involved. Seeking foreign regulatory
approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical
trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent
the introduction of our product candidates in those countries. In addition, approval policies, regulations or the type and amount of clinical
data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions,
which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion
in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require
additional preclinical, clinical or other data. Satisfying these and other regulatory requirements is costly, time consuming, uncertain
and subject to unanticipated delays. Our failure to obtain regulatory approval in any country may delay or have negative effects on the
process for regulatory approval in other countries. Even if we eventually complete clinical testing and receive approval of any regulatory
filing for our product candidates, the FDA, EMA and comparable foreign regulatory authorities may approve our product candidates for a
more limited indication or a narrower patient population than we originally requested. If we fail to comply with regulatory requirements
in international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to realize the
full market potential of our product candidates will be harmed.
Applications for our product candidates could fail
to receive regulatory approval for many reasons, including but not limited to the following:
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In order to market any product candidates outside
of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety
and efficacy and potency and approval standards. Clinical trials conducted in one country may not be accepted by regulatory authorities
in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country.
The ability of the FDA to review and approve new products
can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and
accept the payment of user fees, government shutdowns, including as a result of budget delays or other circumstances like the COVID-19
pandemic and statutory, regulatory and policy changes. Average review times at the agency have fluctuated in recent years as a result.
This lengthy approval process, as well as the unpredictability of the results of clinical trials, may result in our failing to obtain
regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects.
All but one of our clinical
trials to date have been conducted outside the United States, and the FDA, EMA and other foreign regulatory authorities may not accept
data from such trials.
The acceptance of study
data from clinical trials conducted outside the United States by the FDA may be subject to certain conditions or may not be accepted at
all. In cases where data from foreign clinical trials are intended to serve as the sole basis for regulatory approval in the United States,
the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the United
States population and United States medical practice; (ii) the trials were performed by clinical investigators of recognized competence
and pursuant to good clinical practice regulations; and (iii) the data may be considered valid without the need for an on-site inspection
by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection
or other appropriate means. Many foreign regulatory bodies have similar approval requirements. In addition, such foreign trials would
be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the
FDA, EMA or any other foreign regulatory authority will accept data from trials conducted outside
of the United States or the applicable jurisdiction. If the FDA, EMA or any comparable foreign regulatory
authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay
aspects of our business plan, and which may result in our product candidates not receiving approval or clearance for commercialization
in the applicable jurisdiction.
We have received Fast Track designation for
one of our compounds and may seek such designation or breakthrough therapy and priority review for other compounds in the future. Fast
Track designation or breakthrough therapy designation may not actually lead to a faster FDA review and approval process.
For some of our compounds, including ANAVEX®2-73,
we hope to benefit from the FDA’s Fast Track and priority review programs. In February 2020, the FDA granted Fast Track designation
for the ANAVEX®2-73 clinical development program for the treatment of Rett syndrome. Programs with Fast Track designation
may benefit from early and frequent communications with the FDA, potential priority review and the ability to submit a rolling application
for regulatory review. Fast Track designation applies to both the product candidate and the specific indication for which it is being
studied. If any of our compounds receive Fast Track designation but do not continue to meet the criteria for Fast Track designation, or
if our clinical trials are delayed, suspended or terminated, or put on clinical hold due to unexpected adverse events or issues with clinical
supply, we will not receive the benefits associated with the Fast Track program. Furthermore, Fast Track designation does not change the
standards for approval. The receipt of Fast Track designation for a compound may not result in a faster development or regulatory review
or approval process compared to products considered for approval under conventional FDA procedures and does not assure ultimate approval
by the FDA. In addition, even if any product candidate qualifies for Fast Track designation, the FDA may later decide that the product
candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.
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Under FDA policies, a compound is eligible for priority
review, or review within a six-month time frame from the time a complete NDA is accepted for filing, if the compound provides a significant
improvement compared to marketed drugs in the treatment, diagnosis or prevention of a disease. The FDA determines whether a drug qualifies
for Priority Review after an NDA for such drug is submitted to the FDA. Therefore, until NDAs are submitted for our compounds, we cannot
be assured that they will be granted Priority Review. Additionally, even if Priority Review is granted for one of our compounds, the FDA
does not always meet its six-month Prescription Drug User Fee Act (PDUFA) goal date for Priority Review and the review process is often
extended by FDA requests for additional information or clarification.
We may seek Breakthrough Therapy designation for one
or more of our current or future compounds. Designation as a Breakthrough Therapy is largely within the discretion of the FDA. Accordingly,
even if we believe that a compound meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine
not to make such designation. In any event, the receipt of a Breakthrough Therapy designation for a product candidate may not result in
a faster development process, review or approval compared to candidate products considered for approval under non-expedited FDA
review procedures and does not assure ultimate approval by the FDA. In addition, even if one or more compounds qualify as breakthrough
therapies, the FDA may later decide that the product no longer meets the conditions for qualification and revoke the designation.
Fast Track or Breakthrough Therapy designation for
our compounds may not actually lead to a faster review process, and a delay in the review process or in the approval of our compounds
will delay revenue from their potential sales and will increase the capital necessary to fund these compound development programs.
We have received orphan drug designation for several of our compounds,
but we may be unable to maintain any benefits associated with orphan drug designation, including market exclusivity.
Under the Orphan Drug Act, the FDA may grant orphan
designation to a drug intended to treat a rare disease or condition or for which there is no reasonable expectation that the cost of developing
and making available in the United States a drug for a disease or condition will be recovered from sales in the United States for that
drug. If a product that has orphan drug designation subsequently receives the first FDA approval for the indication for which it has such
designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including
a full NDA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing
of clinical superiority to the product with orphan drug exclusivity.
We have received orphan drug designation for several
of our compounds, but we may not be able to obtain or maintain orphan drug exclusivity in the United States for those compounds. We may
not be the first to obtain marketing approval of any compound for which we have obtained orphan drug designation for the orphan-designated
indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the
United States may be limited if we seek FDA marketing approval for an indication broader than the orphan designated indication. Additionally,
any compound with orphan drug designation may lose such designation if the FDA later determines that the request for designation was materially
defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare
disease or condition. Even after an orphan drug is approved, the FDA can subsequently approve the same drug with the same active moiety
for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective
or makes a major contribution to patient care. In addition, others may obtain orphan drug exclusivity for products addressing the
same diseases or conditions as products we are developing, thus limiting our ability to compete in the markets addressing such diseases
or conditions for a significant period of time.Orphan drug designation neither shortens
the development time or regulatory review time of a drug nor gives the product candidate any advantage in the regulatory review or approval
process or entitles the product candidate to priority review.
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If we fail to demonstrate efficacy in our non-clinical
studies and clinical trials our future business prospects, financial condition and operating results will be materially adversely affected.
The success of our research and development efforts
will be greatly dependent upon our ability to demonstrate potential drug compound efficacy in non-clinical studies, as well as in clinical
trials. Non-clinical studies involve testing potential drug compounds in appropriate non-human disease models to demonstrate efficacy
and safety. Regulatory agencies evaluate these data carefully before they will approve clinical testing in humans. If certain non-clinical
data reveals potential safety issues or the results are inconsistent with an expectation of the potential drug compound’s efficacy
in humans, the regulatory agencies may require additional more rigorous testing before allowing human clinical trials. This additional
testing will increase program expenses and extend timelines. We may decide to suspend further testing on our potential drug compounds
if, in the judgment of our management and advisors, the non-clinical test results do not support further development.
Moreover, success in non-clinical testing and early
clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical
trials will replicate the results of prior clinical trials and non-clinical testing. The clinical trial process may fail to demonstrate
that our potential drug compounds are safe for humans and effective for indicated uses. This failure would cause us to abandon a drug
candidate and may delay development of other potential drug compounds. Any delay in, or termination of, our non-clinical testing or clinical
trials will delay the filing of an IND and NDA with the FDA or the equivalent applications with pharmaceutical regulatory authorities
outside the United States and, ultimately, our ability to commercialize our potential drug compounds and generate product revenues. In
addition, we expect that our early clinical trials will involve small patient populations. Because of the small sample size, the results
of these early clinical trials may not be indicative of future results. Also, the IND process may be extremely costly and may substantially
delay the development of our potential drug compounds. Moreover, positive results of non-clinical tests will not necessarily indicate
positive results in subsequent clinical trials.
Following successful non-clinical testing, potential
drug compounds will need to be tested in a clinical development program to provide data on safety and efficacy prior to becoming eligible
for product approval and licensure by regulatory agencies. From the first human trial through to regulatory approval can take many years
and 10-12 years is not unusual for certain compounds.
If any of our future clinical development potential drug compounds become
the subject of problems, our ability to sustain our development programs will become critically compromised. For example, efficacy or
safety concerns may arise, whether or not justified, that could lead to the suspension or termination of our clinical programs. Examples
of problems that could arise include, among others:
● manufacturing difficulties or concerns;
● pressure from competitive products; or
● introduction of more effective treatments.
Each clinical phase is designed to test attributes
of the drug and problems that might result in the termination of the entire clinical plan can be revealed at any time throughout the overall
clinical program. The failure to demonstrate efficacy in our clinical trials would have a material adverse effect on our future business
prospects, financial condition and operating results.
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If a particular product candidate causes undesirable
side effects, then we may be unable to receive regulatory approval of or commercialize such product candidate.
We may experience numerous unforeseen events during,
or as a result of, the testing process that could delay or prevent commercialization of any of our product candidates, including the occurrence
of undesirable side effects. Such side effects could lead to clinical trial challenges, such as difficulties in subject recruitment, retention,
and adherence, potential product liability claims, and possible termination by health authorities. These types of clinical trial challenges
could in turn, delay or prevent regulatory approval of our product candidate. Side effects may also lead regulatory authorities to require
stronger product warnings on the product label, costly post-marketing studies, and/or a REMS, among other possible requirements. If the
product candidate has already been approved, such approval may be withdrawn. Any delay in, denial, or withdrawal of marketing approval
for one of our product candidates will adversely affect our business, including our results of operations and financial position. Even
if one or more of our product candidates receives marketing approval, undesirable side effects may limit such product’s commercial
viability. Patients may not wish to use our product, physicians may not prescribe our product, and our reputation may suffer. Any of these
events may significantly harm our business and financial prospects.
Even if we receive regulatory approval for one
or more compounds, we will be subject to continuing regulatory obligations and ongoing regulatory review, which may result in significant
additional expense. Additionally, our compounds, if approved, could be subject to labeling and other restrictions on marketing or withdrawal
from the market, and we may be subject to penalties, if we fail to comply with regulatory requirements or if we experience unanticipated
problems with our compounds, when and if any of them are approved.
Following potential approval of any our compounds,
the FDA may impose significant restrictions on a drug’s indicated uses or marketing or require potentially costly and time-consuming
post-approval studies, post-market surveillance or clinical trials to monitor the safety and efficacy of the drug. The FDA may also require
a Risk Evaluation and Mitigation Strategy (“REMS”) as a condition of approval of one or more of our compounds, which could
include requirements for a medication guide, physician communication plans or additional elements to ensure safe use of the drug. Additional
REMS elements may include restricted distribution methods, patient registries and other risk minimization tools.
In addition, if the FDA, EMA or a comparable foreign
regulatory authority approves one or more of our compounds, the manufacturing processes, labeling, packaging, distribution, adverse event
reporting, storage, advertising, promotion, import, export and recordkeeping for the approved drug will be subject to additional and potentially
extensive ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports,
establishment registration, as well as continued compliance with cGMPs and GCP requirements for any clinical trials that we conduct post-approval.
Later discovery of previously unknown problems with our products, including adverse events of unanticipated severity or frequency, or
with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among
other things:
● injunctions or the imposition of civil or criminal penalties; and
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The occurrence of any event or penalty described above
may limit our ability to commercialize our compounds and generate revenue and could require us to expend significant time and resources
in response or generate negative publicity.
If any of our compounds are approved, our product
labeling, advertising and promotion will also be subject to regulatory requirements and ongoing regulatory review. The FDA strictly regulates
the promotional claims that may be made about drug products. In particular, a drug may not be promoted for uses that are not approved
by the FDA as reflected in the drug’s approved labeling. If we receive marketing approval for a compound, physicians may nevertheless
lawfully prescribe it to their patients in a manner that is inconsistent with the approved label. While the FDA recently clarified that
mere knowledge that a physician is prescribing an approved drug for off-label use is not sufficient to constitute unlawful off-label promotion,
if we are found to have actively promoted such off-label uses, we may become subject to significant liability under the Federal Food,
Drug, and Cosmetic Act (FDCA). The federal government has levied large civil and criminal fines against companies for alleged improper
promotion and has enjoined several companies from engaging in off-label promotion. Additionally, promotion for off-label uses could result
in significant liability under the False Claims Act. The FDA has also requested that companies enter into consent decrees or permanent
injunctions under which specified promotional conduct is changed or curtailed.
The FDA’s and other regulatory authorities’
policies are subject to change at any time, and additional government regulations may be enacted that could prevent, limit or delay regulatory
approval of our compounds. If we are unable to timely adapt to changes in existing requirements or the adoption of new requirements or
policies, or if we are not able to maintain regulatory compliance post-marketing, we may lose any marketing approval that we may have
obtained, and we may not achieve or sustain profitability.
Finally, we cannot predict the likelihood, nature
or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United
States or abroad. It is difficult to predict how any such legislative, administrative or executive actions will be implemented, and the
extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these legislative or executive actions
impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business
may be negatively impacted.
Material modifications in the methods of product
candidate manufacturing may result in additional costs or delay.
As product candidates progress from preclinical studies
to late-stage clinical trials to marketing approval and commercialization, it is common that various aspects of the development program,
such as manufacturing methods, materials and processes, are altered along the way in an effort to optimize yield, manufacturing batch
size, minimize costs and achieve consistent purity, identity, potency, quality and results. Such changes carry the risk that they will
not achieve these intended objectives. Any of these changes could cause our product candidates to perform differently and could affect
planned or other clinical trials conducted with product candidates produced using the modified manufacturing methods, materials, and processes.
This could delay completion of clinical trials and could require non-clinical or clinical bridging and comparability studies, which could
increase costs, delay approval of our product candidates and jeopardize our ability to commercialize our product candidates, if approved.
We have advanced our research and development
efforts on the treatment of neurodegenerative and central nervous system, or CNS, disorders, a field that has seen very limited success
in product development.
We have advanced our research
and development efforts on addressing neurodegenerative, neurodevelopmental and CNS disorders. Collectively, efforts by pharmaceutical
companies in the field of neurodegenerative, neurodevelopmental and CNS disorders have seen very limited successes in product
development. The development of neurodegenerative and CNS therapies presents unique challenges, including an imperfect understanding of
the biology, the presence of the blood brain barrier that can restrict the flow of drugs to the brain, a frequent lack of translatability
of preclinical study results in subsequent clinical trials and dose selection, and the product candidate having an effect that may be
too small to be detected using the outcome measures selected in clinical trials or if the outcomes measured do not reach statistical significance.
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The use of any of our products in clinical trials
may expose us to liability claims, which may cost us significant amounts of money to defend against or pay out, causing our business to
suffer.
The nature of our business exposes us to potential
liability risks inherent in the testing, manufacturing and marketing of our products. We currently have one drug compound in clinical
trials; however, when any of our products enter clinical trials or become marketed products, they could potentially harm people or allegedly
harm people possibly subjecting us to costly and damaging product liability claims. Some of the patients who participate in clinical trials
are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria. The waivers we obtain
may not be enforceable and may not protect us from liability or the costs of product liability litigation. Although we intend to obtain
product liability insurance, which we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover
such claims. The insurance costs along with the defense or payment of liabilities above the amount of coverage could cost us significant
amounts of money and management distraction from other elements of the business, causing our business to suffer.
Risks Related to our Business
We are highly dependent on our key personnel,
and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our
business strategy.
Our ability to compete in the highly competitive biotechnology
and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel.
We are highly dependent on our management, scientific and medical personnel. The loss of the services of any of our executive officers,
other key employees and other scientific and medical advisors, and an inability to find suitable replacements could result in delays in
product development and harm our business.
Competition for skilled personnel in our market is
intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. Despite our efforts to
retain valuable employees, members of our management, scientific and development teams may terminate their employment or service with
us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment,
which means that any of our employees could leave our employment at any time, with or without notice. Our success also depends on our
ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level
and senior scientific and medical personnel in an extremely competitive market for employees and other service providers.
If we do not obtain the support of qualified
scientific collaborators, our revenue, growth and profitability will likely be limited, which would have a material adverse effect on
our business.
While we have established relationships with leading scientists and research
institutions, we will need to continue to establish these relationships. We believe that such relationships are pivotal to establishing
products using our technologies as a standard of care for various indications. Additionally, although in discussion, there is no assurance
that our current research partners will continue to work with us or that we will be able to attract additional research partners. If we
are not able to maintain our existing scientific relationships and establish new scientific relationships to assist in our research and
development, we may not be able to successfully develop our potential drug compounds. If this happens, our business will be adversely
affected.
We may not be able to develop, market or generate
sales of our products to the extent anticipated. Our business may fail and investors could lose all their investment in our Company.
Assuming that we are successful in developing our
potential drug compounds and receiving regulatory clearances to market our products, our ability to successfully penetrate the market
and generate sales of those products may be limited by a number of factors, including the following:
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If this happens, our business will be adversely affected.
None of our potential drug compounds may reach
the commercial market for a number of reasons and our business may fail.
Successful research and development of pharmaceutical
products is high risk. Most products and development candidates fail to reach the market. Our success depends on the discovery of new
drug compounds that we can commercialize. It is possible that our products may never reach the market for a number of reasons. They may
be found ineffective or may cause harmful side effects during non-clinical testing or clinical trials or fail to receive necessary regulatory
approvals. We may find that certain products cannot be manufactured at a commercial scale and, therefore, they may not be economical to
produce. Our potential products could also fail to achieve market acceptance or be precluded from commercialization by proprietary rights
of third parties. Our patents, patent applications, trademarks and other intellectual property may be challenged, and this may delay or
prohibit us from effectively commercializing our products. Furthermore, we do not expect our potential drug compounds to be commercially
available for a number of years, if at all. If none of our potential drug compounds reach the commercial market, our business will likely
fail and investors will lose all of their investment in our Company. If this happens, our business will be adversely affected.
If our competitors succeed in developing products
and technologies faster or that are more effective or with a better profile than our own, or if scientific developments change our understanding
of the potential scope and utility of our potential products, then our technologies and future products may be rendered undesirable or
obsolete.
We face significant competition from industry participants
that are pursuing technologies in similar disease states to those that we are pursuing and are developing pharmaceutical products that
are competitive with our products. Nearly all of our industry competitors have greater capital resources, larger overall research and
development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory approval and pharmaceutical
product manufacturing and marketing than we do. With these additional resources, our competitors may be able to respond to the rapid and
significant technological changes in the biotechnology and pharmaceutical industries faster than we can. Our future success will depend
in large part on our ability to maintain a competitive position with respect to these technologies. Rapid technological development, as
well as new scientific developments, may result in our products becoming obsolete before we can recover any of the expenses incurred to
develop them. For example, changes in our understanding of the appropriate population of patients who should be treated with a targeted
therapy like we are developing may limit the drug’s market potential if it is subsequently demonstrated that only certain subsets
of patients should be treated with the targeted therapy.
Our reliance on third parties, such as university
laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays in completing,
or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them or non-compliance
with regulations.
In the course of product development, we may engage
university laboratories, other biotechnology companies or contract or clinical manufacturing organizations to manufacture drug material
for us to be used in non-clinical and clinical testing and contract research organizations to conduct and manage non-clinical studies
and clinical trials. If we engage these organizations to help us with our non-clinical and clinical programs,
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many important aspects of
this process have been and will be out of our direct control. If any of these organizations we may engage in the future fail to perform
their obligations under our agreements with them or fail to perform non-clinical testing and/or clinical trials in a satisfactory manner,
we may face delays in completing our clinical trials, as well as commercialization of any of our potential drug compounds. Furthermore,
any loss or delay in obtaining contracts with such entities may also delay the completion of our clinical trials, regulatory filings and
the potential market approval of our potential drug compounds.
In addition, any of these third parties may engage
in misconduct or other improper activities, including non-compliance with regulatory standards and requirements. Misconduct by these parties
could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate the regulations
of any regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities;
healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that require the reporting of financial information
or data accurately. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions
we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.
If we fail to compete successfully with respect
to partnering, licensing, mergers, acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability
to research and develop our potential drug compounds.
Our competitors compete with us to attract established
biotechnology and pharmaceutical companies or organizations for partnering, licensing, mergers, acquisitions, joint ventures or other
collaborations. Collaborations include contracting with academic research institutions for the performance of specific scientific testing.
If our competitors successfully enter into partnering arrangements or license agreements with academic research institutions, we will
then be precluded from pursuing those specific opportunities. Since each of these opportunities is unique, we may not be able to find
a substitute. Other companies have already begun many drug development programs, which may target diseases that we are also targeting,
and have already entered into partnering and licensing arrangements with academic research institutions, reducing the pool of available
opportunities.
Universities and public and private research institutions
also compete with us. While these organizations primarily have educational or basic research objectives, they may develop proprietary
technology and acquire patent applications and patents that we may need for the development of our potential drug compounds. In some instances,
we will attempt to license this proprietary technology, if available. These licenses may not be available to us on acceptable terms, if
at all. If we are unable to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we
may be limited in our ability to develop new products.
If our information systems or data, or those
of third parties upon whom we rely, are or were compromised, our business may be adversely affected.
In the course of our business, we, or third parties
upon whom we rely, may gather, collect, receive, use, transmit, store/retain or dispose of data and confidential information (such as
confidential employee information or health-related data), sensitive data, intellectual property and trade secrets.
Cyberattacks, malicious internet-based
activity, online and offline fraud and other similar activities threaten the confidentiality, integrity, and availability of our sensitive
information and information technology systems, and those of the third parties upon whom we rely. We, and the third parties upon whom
we may rely, may be subject to a variety of these evolving threats.
Although we endeavor to protect
confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual
or group could defeat security measures and access sensitive information about our business and employees. The existence of a remote workforce
also poses increased risks to our information technology systems and data, as more of our employees work from home, utilizing network
connections outside our premises.
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Any misappropriation, loss or other unauthorized disclosure
of confidential information gathered, stored or used by us or by third parties on our behalf, could have a material impact on the operation
of our business, including damaging our reputation with our employees, third parties and investors. We could also incur significant costs
implementing additional security measures and organizational changes, implementing additional protection technologies, training employees
or engaging consultants.
Our contracts with third
parties upon whom we may rely, may not contain limitations of liability, and even where they do, there can be no assurance that limitations
of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security
obligations. In addition, we could incur increased litigation as a result of any potential cyber-security breach and our insurance coverage
may not be adequate or sufficient in type or amount to protect us from or to mitigate liabilities arising out of our privacy and security
practices.
We are not aware that we have experienced any material
misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security
breach or other act; however, a cyber-security breach or other act and/or disruption to our information technology systems could have
a material adverse effect on our business, prospects, financial condition or results of operations.
Changes in funding for the FDA, the SEC and
other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services
from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which
the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products
can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and
accept payment of user fees, statutory, regulatory and policy changes, and business disruptions, such as those caused by the COVID-19
pandemic. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and
other government agencies on which our operations may rely, including those that fund research and development activities is subject to
the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may
also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely
affect our business. For example, over the last several years, the U.S. government has shut down several times, including the
longest government shutdown that began on October 1, 2025 and ended November 13, 2025, and certain regulatory agencies, such as the
FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged
government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory
submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our
ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Our business could be affected by litigation,
government investigations and enforcement actions.
We currently operate in a number of jurisdictions
in a highly regulated industry and we could be subject to litigation, government investigation and enforcement actions on a variety of
matters in the United States or foreign jurisdictions, including, without limitation, intellectual property, regulatory, product liability,
environmental, whistleblower, false claims, privacy, anti-kickback, anti-bribery, securities, commercial, employment and other claims
and legal proceedings which may arise from conducting our business. In the ordinary course as a public company, the SEC and other U.S.
and foreign regulatory and governmental agencies have initiated and may in the future initiate requests, comments and/or investigations
regarding legal, regulatory and compliance matters of the Company. We have cooperated, and will in the future cooperate, on any such matters
with such regulatory and governmental agencies, and such matters could require us to expend significant time, attention and resources.
Any determination that our operations or activities are not in compliance with existing laws or regulations could result in the imposition
of fines, civil and criminal penalties, equitable remedies, including disgorgement, injunctive relief and/or other sanctions against us,
and remediation of any such findings could have an adverse effect on our business operations.
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Legal proceedings, government investigations and enforcement
actions can be expensive and time-consuming. An adverse outcome resulting from any such proceedings, investigations or enforcement actions
could result in significant damages, awards, fines, penalties, exclusion from the federal healthcare programs, healthcare debarment, injunctive
relief, product recalls, reputational damage and modifications of our business practices, which could have a material adverse effect on
our business and results of operations. Even if such a proceeding, investigation or enforcement action is ultimately decided in our favor,
the investigation and defense thereof could require substantial financial and management resources.
Changes in U.S. and international trade policies
may adversely impact our business and operating results.
The U.S. government has made statements and taken
actions that have led to certain changes and may lead to additional changes to U.S. and international trade policies. For example, President
Trump has imposed or signaled to impose a series of tariffs on certain products manufactured outside the United States, including
pharmaceutical products and raw materials and components for pharmaceutical products, and it is unknown whether and to what extent additional tariffs (or
other new laws or regulations) will be adopted, or the effect that any such actions would have on us or our industry. Such unfavorable
government policies on international trade, such as export controls, capital controls or tariffs, may affect the import and export
of materials and products used in our drug development. For example, we have already faced increased costs associated with our imports
of drug products due to newly imposed tariffs on Canada. These policies may also affect the demand for our product candidates, the competitive