Item 1A. Risk Factors
This report contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially from those discussed in this report. Factors that could
cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report.
If any of the following risks, or other
risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial
condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our securities
could decline, and stockholders may lose all or part of their investment.
Risks Related to Our Financial Position and
Need for Additional Capital
Our independent registered public accounting
firm’s report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going
concern.
At September 30, 2025, we estimated that we have
sufficient capital to continue our operations through March 2026, after taking into account the $6.0 million raised by us in October
2025 and the $18.0 million raised by Citius Oncology in December 2025. You should not rely on our consolidated balance sheet as an indication
of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to stockholders,
in the event of liquidation.
The Company has generated no operating revenue
to date and has principally raised capital through the issuance of debt and equity instruments to finance its operations. However, the
Company’s continued operations beyond March 2026 including its continued commercialization of LYMPHIR (through Citius Oncology)
and its development plans for Mino-Lok, Halo-Lido and NoveCite, will depend on its ability to successfully launch LYMPHIR and/or obtain
regulatory approval to market Mino-Lok and generate substantial revenue from the sale of LYMPHIR and/or Mino-Lok and on its ability to
raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships, or out-licensing
of its product candidates. However, the Company can provide no assurances on the commercialization, or future sales of LYMPHIR and/or
the approval, commercialization, or future sales of Mino-Lok or that financing or strategic relationships will be available on acceptable
terms, or at all. If the Company is unable to raise sufficient capital, find strategic partners or generate substantial revenue from
the sale of LYMPHIR and/or Mino-Lok (if approved), there would be a material adverse effect on its business. Further, the Company expects
in the future to incur additional expenses as it continues to develop its product candidates, including seeking regulatory approval,
and protecting its intellectual property.
We require substantial additional funding
in the near future to support our operations, complete the commercialization of LYMPHIR, and continue the development of our other product
candidates, which capital may not be available on acceptable terms, or at all.
Our operations have consumed substantial amounts
of cash since inception. We have significantly increased our spending to continue our commercialization efforts for LYMPHIR through Citius
Oncology, advance development of LYMPHIR for other indications, and advance development of our other product candidates. Furthermore,
following the Merger, Citius Oncology has additional costs associated with operating as a public company and requires additional capital
to fund our other operating expenses and capital expenditures. As a result, we continue to evaluate strategic alternatives, including
but not limited to, partnerships, joint ventures, mergers, acquisitions, licensing or other strategic transactions.
As of September 30, 2025, and without giving
effect to subsequent capital raises in October and December 2025, our cash and cash equivalents were approximately $4.3 million and we
had an accumulated deficit of approximately $238.8 million. The amount and timing of our future funding requirements will depend on many
factors, some of which are outside of our control, including but not limited to:
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● the degree of success we experience in commercializing LYMPHIR;
● any product liability or other lawsuits related to our products;
● the expenses needed to attract, hire and retain skilled personnel;
● the costs associated with being a public company;
● the extent and scope of our general and administrative expenses.
Until we are able to generate significant revenue,
if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations or other strategic
transactions. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us, or at all. Any additional
fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and
commercialize our product candidates. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders,
and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs. If we raise additional
funds through collaborations or strategic alliances with third parties, we may have to relinquish valuable rights to our product candidates,
future revenue streams, research programs or technologies, or grant licenses on terms that may not be favorable to us. If we are unsuccessful
in our efforts to raise additional financing on acceptable terms or execute on other strategic alternatives, we may be required to significantly
reduce or cease our operations.
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We have a history of net losses and expect
to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues, achieve profitability.
We were formed in 2007 and since our inception
have incurred a net loss in each of our previous operating years. Our ability to become profitable depends upon our ability to obtain
marketing approval for and generate revenues from sales of our product candidates. We have been focused on product development, have
not received approval for any of our product candidates, and have not generated any revenues to date. Our subsidiary, Citius Oncology,
received approval for LYMPHIR in August 2024 and launched LYMPHIR in December 2025, but has not generated any revenues to date. We have
incurred losses in each period of our operations, and we expect to continue to incur losses for the foreseeable future. These losses
are likely to continue to adversely affect our working capital, total assets, and stockholders’ equity. The process of developing
our product candidates requires significant clinical development, laboratory testing and clinical trials. In addition, commercialization
of our product candidates will require that we obtain necessary regulatory approvals and establish sales, marketing, and manufacturing
capabilities, either through internal hiring or through contractual relationships with others. We expect to incur substantial losses
for the foreseeable future as a result of anticipated increases in our research and development costs, including costs associated with
conducting preclinical testing and clinical trials, and regulatory compliance activities. We expect Citius Oncology to begin generating
revenues following the launch of LYMPHIR, which occurred in December 2025. We incurred net losses of $39,740,269 and $39,425,839 for
the years ended September 30, 2025 and 2024, respectively. At September 30, 2025, we had stockholders’ equity of $77,527,600 and
an accumulated deficit of $238,804,129. Our net cash used in operating activities was $26,552,738 and $28,201,375 for the years ended
September 30, 2025 and 2024, respectively.
As of September 30, 2025, we had outstanding
liabilities of $38.4 million and outstanding commitments of $22.7 million to third parties for LYMPHIR licensing, supply and other costs,
that, if left unpaid, could result in an interruption in the commercialization of LYMPHIR, breach of contract, loss of licensing rights
or other events that would have a material adverse effect on our business and operations.
Our ability to generate revenues and achieve
profitability will depend on numerous factors, including success in:
● Citius Oncology successfully commercializing LYMPHIR;
● developing and testing product candidates;
● receiving regulatory approvals for our other product candidates;
● commercializing our other product candidates that receive regulatory approval;
● obtaining medical insurance coverage for any approved product candidate; and
Many of these factors will depend on circumstances
beyond our control. We cannot assure you that any of our product candidates will be approved by the FDA or any foreign regulatory body
or obtain medical insurance coverage, that we will successfully bring any approved product to market or, if so, that we will ever become
profitable.
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Our and Citius Oncology’s ongoing
explorations of alternative strategic paths may not result in entering into or completing transactions, when necessary, and the process
of reviewing alternative strategic paths or their conclusion could adversely affect our stock price.
We and Citius Oncology continue to evaluate strategic
paths to provide the resources necessary to successfully commercialize LYMPHIR, continue the development of our other product candidates,
and maximize stockholder value. Potential strategic paths may include partnerships, joint ventures, mergers, acquisitions, or licensing
transactions, a combination of these, or other strategic transactions. There can be no assurance, however, that our evaluation will result
in transactions or other alternatives, even when deemed necessary. There is no set timetable for our strategic process, and we do not
intend to provide updates unless or until the Board approves a specific action or otherwise determines that disclosure is appropriate
or necessary.
Any potential transaction would be dependent
on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest
of third parties in a potential transaction with us, obtaining stockholder approval and the availability of financing to third parties
in a potential transaction with us on reasonable terms. The process of reviewing alternative strategic paths may be time consuming and
may involve the dedication of significant resources and may require us to incur significant costs and expenses. It could negatively impact
our ability to attract, retain and motivate employees, and expose us to potential litigation in connection with this process or any resulting
transaction. If we are unable to effectively manage the process, our financial condition and results of operations could be adversely
affected. In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties
related to the future of our Company could cause our stock price to fluctuate significantly. Further, any alternative strategic paths
that may be pursued and completed ultimately may not deliver the anticipated benefits or enhance stockholder value. There can be no guarantee
that the process of evaluating alternative strategic paths will result in our Company or Citius Oncology entering into or completing
potential transactions within the anticipated timing or at all.
In the event we or Citius Oncology do not
successfully complete a strategic transaction, should this be deemed necessary, our Board may decide to pursue a dissolution and liquidation
of our Company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing
of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
There can be no guarantee that the process to
identify strategic transactions will result in successfully completed transactions when necessary. If additional transactions are not
completed that enable us or Citius Oncology to successfully commercialize LYMPHIR and sustain our business operations, our Board may
decide that it is in the best interest of our stockholders to dissolve our Company and liquidate our assets. In that event, the amount
of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation
since the amount of cash available for distribution continues to decrease as we fund our operations and evaluate our strategic alternatives.
In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution of our Company, we would
be required under Nevada corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and
unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion
of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other
claims related to a dissolution and liquidation of our Company. If a dissolution and liquidation were pursued, our Board, in consultation
with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders
of our common stock could lose all or a significant portion of their investment in the event of a dissolution, liquidation or winding
up of our Company.
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Risks Related to Our Business and our Industry
If we are unable
to execute our commercial strategy for LYMPHIR, fail to satisfy the conditions of our marketing approval for LYMPHIR, or if we experience
significant delays in accomplishing such goals, our business will be materially harmed.
We
have invested a significant portion of our efforts and financial resources to bring LYMPHIR to market. Our ability to generate product
revenues will depend heavily on the successful commercialization of LYMPHIR. Further, while we believe we have sufficient funds
on hand for the successful commercialization of LYMPHIR, which began with its launch in December 2025, various factors could increase
the cost to successfully commercialize LYMPHIR, which we expect would require us to obtain additional capital to complete those efforts.
Financing might not be available on acceptable terms or at all.
If we do not receive
new marketing approvals in other jurisdictions for LYMPHIR, our ability to generate additional revenue will be jeopardized and, consequently,
our business will be materially harmed. Additionally, our ability to make LYMPHIR available within the U.S. is largely dependent upon
the maintenance of our marketing approval. The success of LYMPHIR will depend on a number of additional factors, including the following:
● successful identification of eligible patients;
● effectively competing with other therapies;
● global trade policies;
● a continued acceptable safety profile of LYMPHIR;
If we do not achieve
one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to continue to commercialize
our products, either of which would have a material adverse effect on our business, results of operations and financial condition.
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We need to secure additional financing
in the future to complete the development of our other current product candidates and support our operations.
We anticipate that we will incur operating losses
for the foreseeable future as we continue developing our product candidates which have not received regulatory approval. The amount and
timing of our future funding requirements will depend on many factors, including, but not limited to:
● the timing of any regulatory approvals of any of our product candidates;
We expect to need to access the capital markets
in the near future for additional capital for research and development and for operations. Traditionally, pharmaceutical companies have
funded their research and development expenditures through raising capital in the equity markets. Declines and uncertainties in these
markets over the past several years have severely restricted raising new capital and have affected companies’ abilities to continue
to expand or fund existing research and development efforts. If economic conditions continue to be uncertain or become worse, our future
cost of equity or debt capital and access to the capital markets could be adversely affected. If we are not successful in securing additional
financing, we may be required to significantly delay, reduce the scope of or eliminate one or more of our research or development programs,
downsize our general and administrative infrastructure, or seek alternative measures to avoid insolvency, including arrangements with
collaborative partners or others that may require us to relinquish rights to certain of our technologies or product candidates.
We are primarily a commercial and late-stage
development company with an unproven business strategy and may never achieve commercialization of all our therapeutic product candidates
or profitability.
Citius Pharma has no approved products. Our subsidiary,
Citius Oncology, received approval for LYMPHIR in August 2024 and launched LYMPHIR in December 2025, but has not generated any revenues
to date. All other current product candidates of Citius Pharma are in the pre-clinical or clinical stage. We rely on third parties to
conduct the research and development activities for our product candidates and our product commercialization capabilities are unproven.
We, through Citius Oncology, have developed our sales and marketing capabilities for LYMPHIR and have contracted with Innovation Partners,
a large third-party commercial sales and marketing organization with an existing commercial infrastructure and product launch experience
to assist in our commercial efforts related to LYMPHIR. Citius Oncology also has distribution agreements with three national companies
and an agreement with EVERSANA to support the launch and commercialization of LYMPHIR. Citius Pharma has no sales or marketing capabilities
with respect to our other product candidates. Our success will depend upon the sales and marketing infrastructure developed by Citius
Oncology for LYMPHIR and also on Citius Pharma’s ability to develop such capabilities on its own or to enter into and maintain
collaboration agreements on favorable terms and to select an appropriate commercialization strategy for each product candidate that it
chooses to pursue and that receives approval, whether on its own or in collaboration. If we are not successful in implementing our strategy
to commercialize our product candidates, we may never achieve, maintain, or increase profitability. Our ability to successfully commercialize
any of our other product candidates will depend, among other things, on our ability to:
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There are no guarantees that we will be successful
in completing these tasks. If we are unable to successfully complete these tasks, we may not be able to commercialize any of our product
candidates in a timely manner, or at all, in which case we may be unable to generate sufficient revenues to sustain and grow our business.
If we experience unanticipated delays or problems, our development costs could substantially increase and our business, financial condition
and results of operations will be adversely affected.
We have a limited operating history upon
which to evaluate our ability to successfully commercialize our product candidates.
Citius Oncology has only recently launched its
one product, LYMPHIR. Citius Pharma has one late-stage stage product candidate, Mino-Lok, while our other product candidates are clinical
stage. As a result, our success is dependent upon Citius Oncology’s success in commercializing LYMPHIR and Citius Pharma’s
ability to obtain regulatory approval for and commercialize our product candidates and we, as a company, have not demonstrated an ability
to perform the functions necessary for the successful commercialization of any product candidates, given the recent launch of LYMPHIR.
While various members of our executive management and key employees have significant prior experience in pharmaceutical development,
as a company we have to date successfully completed only one late-stage clinical trial (much of which had been undertaken by Eisai prior
to our in-licensing of the intellectual property of LYMPHIR) and have just launched LYMPHIR (through Citius Oncology). Despite our progress
with LYMPHIR, our operations have been limited primarily to business planning, acquiring our proprietary technology, research and development,
recruiting management and technical staff, and raising capital. These operations provide a limited basis for you to assess our ability
to successfully commercialize our product candidates and the advisability of investing in our securities.
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We may choose not to continue developing
any of our product candidates at any time during development, which would reduce or eliminate our potential return on investment for
those product candidates.
At any time, we may decide to discontinue the
development of any of our product candidates for a variety of reasons, including inadequate financial resources, the appearance of new
technologies that render our product candidates obsolete, competition from a competing product or changes in or failure to comply with
applicable regulatory requirements. If we terminate a program in which we have invested significant resources, we will not receive any
return on our investment and we will have missed the opportunity to allocate those resources to potentially more productive uses.
As an example, on July 1, 2016, we announced
that we were discontinuing the development of Suprenza, which was our first commercial product candidate, for strategic reasons and not
due to safety or regulatory concerns, in order to focus our management and cash resources on the Phase 3 development of Mino-Lok and
the Phase 2b development of Halo-Lido. Further, in December 2023, we terminated development of Mino-Wrap to devote resources to the development
of LYMPHIR. The resources expended on Suprenza and Mino-Wrap therefore did not provide us any benefit.
We face significant risks in our product
candidate development efforts.
Our business depends on the successful development
and commercialization of our product candidates. We are not permitted to market any of our product candidates in the U.S. until we receive
approval from the FDA, or in any foreign jurisdiction until we receive the requisite approvals from such jurisdiction. The process of
developing new drugs and/or therapeutic products is inherently complex, unpredictable, time-consuming, expensive and uncertain. We must
make long-term investments and commit significant resources before knowing whether our development programs will result in products that
will receive regulatory approval and achieve market acceptance. As an example, in response to the submission of our BLA for LYMPHIR,
the FDA issued a complete response letter (“CRL”) on July 28, 2023. The FDA required us to incorporate enhanced product testing
and additional controls agreed to with the FDA during the market application review. There were no concerns relating to the safety and
efficacy clinical data package submitted with the BLA, or the proposed prescribing information. In September 2023, we announced that
the FDA had agreed with our plans to address the requirements outlined in the CRL, which guidance provided us with a path for completing
the necessary activities to support the resubmission of the BLA for LYMPHIR and we received approval from the FDA in August 2024.
Product candidates that appear to be promising
at some or all stages of development may not receive approval or reach the market for a number of reasons that may not be predictable
based on results and data of the clinical program. Product candidates may be found ineffective or may cause harmful side effects during
clinical trials, may take longer to progress through clinical trials than had been anticipated, may not be able to achieve the pre-defined
clinical endpoints due to statistical anomalies even though clinical benefit may have been achieved, may fail to receive necessary regulatory
approvals, may prove impracticable to manufacture in commercial quantities at reasonable cost and with acceptable quality, or may fail
to achieve market acceptance.
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We cannot predict whether or when we will obtain
regulatory approval to commercialize our other product candidates that are under development, notably Mino-Lok. In addition, we expect
that it will take time for LYMPHIR to be accepted in the market, generate revenues and a return on investment. For example, while LYMPHIR
received FDA approval in August 2024, we had incurred significant expenses in its development and planned commercialization prior to
its launch in December 2025; as of September 30, 2025, we had outstanding commitments of approximately $21.1 million to third parties
for LYMPHIR licensing, supply and other costs. We cannot, therefore, predict the timing of any future revenues from LYMPHIR or any other
product candidate.
The FDA has substantial discretion in the drug
approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. For example, the FDA:
These same risks are generally applicable to
the regulatory process in foreign countries. Any failure to obtain regulatory approval of our product candidates would significantly
limit our ability to generate revenues, and any failure to obtain such approval for all of the indications and labeling claims we deem
desirable could reduce our potential revenues.
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We, through Citius Oncology, may be required
to make milestone payments to the licensor and former licensee of the LYMPHIR intellectual property in connection with its development
and commercialization of LYMPHIR, which could adversely affect the profitability of LYMPHIR.
Under the terms of the License Agreement with
Eisai, Citius Oncology was required to pay Eisai a $5.9 million development milestone payment upon initial approval by the FDA of LYMPHIR
for the CTCL indication, which occurred in August 2024, and an aggregate of up to $22 million related to the achievement of net product
sales thresholds. Under the terms of the agreement with Dr. Reddy’s, Citius Oncology is obligated to pay up to an aggregate of
$40 million related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones for additional indications,
and up to $300 million for commercial sales milestones. Further, under the agreement with Dr. Reddy’s, Citius Oncology is required
to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma
indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials, (iii) use commercially reasonable
efforts to achieve each of the approval milestones, and (iv) complete each specified immuno-oncology investigator trial on or before
September 1, 2025, the four-year anniversary of the effective date of the definitive agreement. Additionally, Citius Oncology is required
to commercially launch a product in a territory within six months of receiving regulatory approval for such product in each such jurisdiction;
the launch of LYMPHIR in December 2025 satisfied this requirement in the U.S. Citius Pharma is a guarantor of the obligations of Citius
Oncology under the Asset Purchase Agreement.
Pending further discussions with Dr. Reddy’s,
Dr. Reddy’s agreed to a partial deferral without penalty of a milestone payment by Citius Oncology, which was triggered upon regulatory
approval of LYMPHIR by the FDA and due on September 9, 2024, pursuant to the terms of the Asset Purchase Agreement. These development
and milestone obligations impose substantial additional costs on us, and could divert resources from other aspects of our business and
adversely affect the overall profitability of LYMPHIR. We, through Citius Oncology, need to obtain additional financing to satisfy these
milestone payments, and cannot be sure that any additional funding will be available on terms favorable to us, or at all.
On March 28, 2025, Citius
Oncology and Eisai entered into a letter agreement that amended the license agreement to provide for a payment schedule to Eisai for the
milestone payment and certain unpaid invoices. We agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $2,535,318 and
thereafter on the 15th of each of the next four months to pay Eisai $2.35 million and make a final payment of $2,197,892 to Eisai on or
before December 15, 2025, in each case with interest on each obligation from its original due date through the date of actual payment
under the letter agreement at the rate of 2% per annum. During the year ended September 30, 2025, we recorded $218,032 in interest expense
under the agreement. The parties released each other from any and all claims, losses, damages, costs and expenses that arise from or related
to our failure to pay the milestone payment or the other incurred costs under the license agreement except for any claims arising out
of a breach of the letter agreement. All other terms of the license agreement remain in full force and effect. During the year ended September
30, 2025 we paid $3 million of the development milestone and the balance of $2.9 million is included in license fee payable at September
30, 2025. On July 21, 2025, we made a payment to Eisai of $1,616,522 for other invoices and accumulated interest associated with the letter
agreement.
A material breach or default under any
of our license agreements, including failure to make timely payments when due, gives the licensor party to such agreement the right to
terminate the license agreement, which termination would materially harm our business.
Our commercial success will depend in part on
the maintenance of our current and any future license agreements. Our license agreements impose, and we expect that future license agreements
will impose on us, various diligence, milestone payment, royalty and other obligations. For example, under the license agreement and
related purchase agreement for the intellectual property for LYMPHIR, we, through our subsidiary Citius Oncology, are required to use
commercially reasonable diligence to develop and commercialize a product and to satisfy specified payment obligations for various developmental
and regulatory milestones. Specifically, upon the approval of LYMPHIR, we, through Citius Oncology, became subject to the payment of
an aggregate of $33.4 million under the license and asset purchase agreements covering LYMPHIR.
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At the time of the FDA
approval for LYMPHIR, a $27.5 million milestone became payable to Dr. Reddy’s, of which a balance of $19.75 million included in
license fee payable, remained due as of September 30, 2025. After discussions, Dr. Reddy’s agreed to a partial deferral without
penalty of this milestone payment. During the years ended September 30, 2025 and 2024, we paid $2,750,000 and $5,000,000, respectively,
against the outstanding milestone fee.
On March 28, 2025, Citius
Oncology and Eisai entered into a letter agreement that amended the license agreement to provide for a payment schedule to Eisai for
the milestone payment and certain unpaid invoices. We agreed to pay Eisai on or before July 15, 2025, an aggregate amount of $2,535,318
and thereafter on the 15th of each of the next four months to pay Eisai $2.35 million and make a final payment of $2,197,892 to Eisai
on or before December 15, 2025, in each case with interest on each obligation from its original due date through the date of actual payment
under the letter agreement at the rate of 2% per annum. During the year ended September 30, 2025, we recorded $218,032 in interest expense
under the agreement. The parties released each other from any and all claims, losses, damages, costs and expenses that arise from or
related to our failure to pay the milestone payment or the other incurred costs under the license agreement except for any claims arising
out of a breach of the letter agreement. All other terms of the license agreement remain in full force and effect. During the year ended
September 30, 2025 we paid $3 million of the development milestone and the balance of $2.9 million is included in license fee payable
at September 30, 2025. On July 21, 2025, we made a payment to Eisai of $1,616,522 for other invoices and accumulated interest associated
with the letter agreement.
If we fail to comply with our obligations under
the current license agreements or any future license agreements with any party, or we are subject to a bankruptcy, the licensor may have
the right to terminate the license, in which event we would not be able to market products covered by the license. Each of our license
agreements provides the licensor with a right to terminate the license agreement for our material breach or default under the agreement,
including the failure to make any required milestone or other payments. Should the licensor under any of the license agreements exercise
such a termination right, we would lose our right to the intellectual property under the respective license agreement, which loss would
materially harm our business.
We rely exclusively on third parties to
formulate and manufacture our product candidates. Our failure to abide by our contractual obligations with these third parties, including
timely payment, could result in a delay or the loss of necessary third-party support.
We do not have and do not intend to establish
our own manufacturing facilities. Consequently, we lack the physical plant to formulate and manufacture our product candidates, which
have to be produced by third-party manufacturers. If we fail to raise additional capital, and as a result are unable to abide by our
contractual obligations with these third-party manufacturers and suppliers, including making timely payment, the necessary third-party
support to commercialize LYMPHIR could be delayed or terminated.
We, through Citius Oncology, have secured supply
agreements for LYMPHIR with two third-party facilities who are in compliance with current good manufacturing practices (“cGMP”)
as generally accepted by the FDA. We rely on these third-party contractors for our manufacturing. Manufacturing of drugs for clinical
and commercial purposes must comply with the FDA’s cGMP and applicable non-U.S. regulatory requirements and before any of our collaborators
can begin to commercially manufacture our product candidates, each must obtain regulatory approval of the manufacturing facility and
process. If, for any reason, we become unable to rely on these sources or any future source or sources to manufacture LYMPHIR or any
future product candidates, either for pre-clinical or clinical trials or for commercial quantities, then we would need to identify and
contract with additional or replacement third-party manufacturers to manufacture compounds for preclinical, clinical, and commercial
purposes. We might not be successful in identifying additional or replacement third-party manufacturers, or in negotiating acceptable
terms with any that we might identify. If we are unable to secure and maintain third-party manufacturing capacity, the commercialization
and sales of LYMPHIR, and any future product candidates, and our financial performance might be materially and adversely affected.
Additionally, if any of our collaborators fails
to comply with the cGMP requirements, we would be subject to possible regulatory action which could limit the jurisdictions in which
we are permitted to sell LYMPHIR, or any future product candidate. As a result, our business, financial condition, and results of operations
might be materially harmed.
Our reliance on a limited number of third-party
manufacturers exposes us to the following risks:
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Each of these risks could delay our clinical
trials or the approval, if any, of our product candidates by the FDA or any foreign regulatory agency or the commercialization of any
approved product candidate and could result in higher costs or deprive us of potential product revenues. As a result, our business, financial
condition, and results of operations might be materially harmed.
While our business strategy generally is
to focus on the development of late-stage product candidates to lessen the development risk, there is still significant risk to successfully
developing a product candidate.
Our goal in generally pursuing late-stage therapeutic
product candidates with what we believe is a promising pre-clinical and early clinical stage track record is to avoid the risk of failure
at the pre-clinical and early clinical stages. However, there is still significant risk to obtaining regulatory approval and successfully
commercializing any late-stage product candidate that we pursue. For example, we acquired LYMHIR in September 2021, received approval
in August 2024 and launched it in December 2025, during which time we expended significant resources on the acquisition, development and
launch of LYMPHIR. All of the risks inherent in drug development of initial stage product candidates also apply to late-stage candidates.
We cannot assure you that our business strategy will be successful.
The results of pre-clinical studies and
completed clinical trials are not necessarily predictive of future results, and our current product candidates may not have favorable
results in later studies or trials.
Pre-clinical studies and Phase 1 and Phase 2
clinical trials are not primarily designed to test the efficacy of a product candidate in the general population, but rather to test
initial safety, to study pharmacokinetics and pharmacodynamics, to study limited efficacy in a small number of study patients in a selected
disease population, and to identify and attempt to understand the product candidate’s side effects at various doses and dosing
schedules. Success in pre-clinical studies or completed clinical trials does not ensure that later studies or trials, including continuing
pre-clinical studies and large-scale clinical trials, will be successful nor does it predict future results. Favorable results in early
studies or trials may not be repeated in later studies or trials, and product candidates in later stage trials may fail to show acceptable
safety and efficacy despite having progressed through earlier trials. In addition, the placebo rate in larger studies may be higher than
expected.
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We may be required to demonstrate through large,
long-term outcome trials that our product candidates are safe and effective for use in a broad population prior to obtaining regulatory
approval. This would increase the duration and cost of any such trial.
There is typically a high rate of attrition from
the failure of product candidates proceeding through clinical trials. In addition, certain subjects in our clinical trials may respond
positively to placebo treatment – these subjects are commonly known as “placebo responders” – making it more
difficult to demonstrate efficacy of the trial drug compared to placebo. This effect is likely to be observed in the treatment of hemorrhoids,
which could negatively impact the development program for Halo-Lido.
If any of our product candidates fail to demonstrate
sufficient safety and efficacy in any clinical trial, we will experience potentially significant delays and cost increases in, or may
decide to abandon development of, that product candidate. If we abandon or are delayed, or experience increased costs, in our development
efforts related to any of our product candidates, we may not have sufficient resources to continue or complete development of that product
candidate or any other product candidates. We may not be able to continue our operations and clinical studies, or generate any revenue
or become profitable. Our reputation in the industry and in the investment community would likely be significantly damaged. Further,
it might not be possible for us to raise funds in the public or private markets, and our stock price would likely decrease significantly.
If we are unable to file for approval of
Mino-Lok or Halo-Lido under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or if we are required to generate additional
data related to safety and efficacy in order to obtain approval of Mino-Lok or Halo-Lido under Section 505(b)(2), we may be unable to
meet our anticipated development and commercialization timelines.
Our current plans for filing NDAs or BLAs for
our product candidates include efforts to minimize the data we will be required to generate in order to obtain marketing approval for
certain of our product candidates and therefore possibly reduce the time and cost of development of a product candidate and obtain a
shortened review period for the application. The timeline for filing and review of our planned NDA for each of Mino-Lok and Halo-Lido
is based upon our plan to submit each such NDA under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, wherein we will rely
in part on data generated by third parties and that is in the public domain or elsewhere. Depending on the data that may be required
by the FDA for approval, some of the data may be related to products already approved by the FDA. If the data relied upon is related
to products already approved by the FDA and covered by third-party patents, we would be required to certify that we do not infringe the
listed patents or that such patents are invalid or unenforceable. As a result of the certification, the third party would have 45 days
from notification of our certification to initiate an action against us. In the event that an action is brought in response to such a
certification, the approval of our NDA could be subject to a stay of up to 30 months or more while we defend against such a suit. Approval
of any product candidate under Section 505(b)(2) may therefore be delayed until patent exclusivity expires or until we successfully challenge
the applicability of those patents applicable to our product candidates. Alternatively, we may elect to generate sufficient additional
clinical data so that we no longer rely on data which triggers a potential stay of the approval of any product candidate. Even if no
exclusivity periods apply to an application under Section 505(b)(2), the FDA has broad discretion to require us to generate additional
data on the safety and efficacy of our product candidates to supplement third-party data on which we may be permitted to rely. In either
event, we could be required, before obtaining marketing approval for such product candidate, to conduct substantial new research and
development activities beyond those in which we currently plan to engage in order to obtain approval of that product candidate. Such
additional new research and development activities would be costly and time consuming.
We may not be able to obtain shortened review
of our applications where available, and in any event the FDA may not agree that any of our product candidates qualify for marketing
approval. If we are required to generate additional data to support approval, we may be unable to meet our anticipated development and
commercialization timelines, may be unable to generate the additional data at a reasonable cost, or at all, and may be unable to obtain
marketing approval of that product candidate. In addition, notwithstanding the approval of many products by the FDA pursuant to Section
505(b)(2), over the last few years, some pharmaceutical companies and others have objected to the FDA’s interpretation of Section
505(b)(2). If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged
in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) application that we submit.
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Two of our product candidates, Mino-Lok
and Halo-Lido, are combination products consisting of components that have each been separately approved by the FDA for other indications
and which are commercially available and marketed by other companies. Our approval under Section 505(b)(2), if received, would not preclude
physicians, pharmacists, and patients from obtaining individual drug products and titrating the dosage of these drug products as close
to our approved dose as possible.
Our Mino-Lok solution contains minocycline, disodium
ethylenediaminetetraacetic acid (edetate), and ethyl alcohol, all of which have been separately approved by the FDA for other indications
or are used as excipients in other parenteral products. Assuming FDA approval as a branded pharmaceutical product, we would need to obtain
hospital formulary acceptance to generate sales of Mino-Lok. Additionally, we may encounter reluctance by the infectious disease physician
community to vary from the existing standard of care to remove and replace an infected catheter. Currently, hospitals are reimbursed
for the treatment of CRBSIs CMS through a Diagnosis Related Group (“DRG”) classification or code. Commercial insurance plans
reimburse for CRBSIs in a similar manner. With Mino-Lok being priced as a branded FDA-approved pharmaceutical product, this could result
in the participating hospital retaining a lower share of CMS or commercial reimbursement which may impact the acceptance and use of Mino-Lok
by these institutions.
Our Halo-Lido product candidate for the treatment
of hemorrhoids is a combination product consisting of two drugs, halobetasol propionate, a corticosteroid, and lidocaine, that have each
been separately approved by the FDA for other indications and which are commercially available and marketed by other companies. Halobetasol
propionate cream is available in a 0.05% strength, and lidocaine creams are also available in strengths up to 5%. From our market analysis
and discussions with a limited number of physicians, we know that patients sometimes obtain two separate cream products and co-administer
them as prescribed, giving them a combination treatment that could be very similar to what we intend to continue to study and seek approval
for. As a branded, FDA-approved product with safety and efficacy data, we intend to price our product substantially higher than the generically
available individual creams. We will then have to convince third-party payers and pharmacy benefit managers of the advantages of our
product and justify our premium pricing. We may encounter resistance from these entities and will then be dependent on patients’
willingness to pay the premium and not seek alternatives. In addition, pharmacists often suggest lower cost prescription treatment alternatives
to both physicians and patients. If approved, our Section 505(b)(2) approval and the market exclusivity we may receive will not guarantee
that such alternatives will not exist, that substitution will not occur, or that there will be immediate or any acceptance to our pricing
by payer formularies.
Any fast track designation or grant of
priority review status by the FDA may not actually lead to a faster development or regulatory review or approval process, nor will it
assure FDA approval of our product candidates. Additionally, our product candidates may treat indications that do not qualify for priority
review vouchers.
We have received fast track designation for Mino-Lok
to treat and salvage infected central venous catheters in patients with CRBSIs. We may seek fast track designation for some of our other
product candidates or priority review of applications for approval of our product candidates for certain indications. If a drug is intended
for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for
this condition, the drug sponsor may apply for the FDA fast track designation. If a product candidate offers major advances in treatment,
the FDA may designate it eligible for priority review. The FDA has broad discretion whether or not to grant these designations, so even
if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA would decide to grant
them. Even with the fast track designation for Mino-Lok and if we do receive fast track designation or priority review for any other
product candidate, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The
FDA may withdraw fast track designation from Mino-Lok or any other product candidate to be so designated if it believes that the designation
is no longer supported by data from our clinical development program.
We do not own Citius Oncology or NoveCite,
Inc. outright and will share any benefits from the commercialization of LYMPHIR and the development of the NoveCite product candidate
with the other stockholders.
As of December 17, 2025, we owned approximately
77.9% of the outstanding common stock of Citius Oncology (excluding pre-funded warrants to purchase up to 15,229,358 shares of Citius
Oncology common stock in a transaction that closed on December 10, 2025) and 75% of the outstanding common stock of NoveCite. As a result,
we will only be entitled to a portion of any benefits that flow from the commercialization by Citius Oncology of LYMPHIR and the development
by NoveCite of its NoveCite product candidate or any other product candidates that either company might develop. In the event that Citius
Oncology or NoveCite were to issue additional equity securities in the future this would likely reduce our percentage ownership, which
would further reduce the portion of any benefit that might be derived from that company’s successful development and/or commercialization
of its approved drugs and drug candidates, unless we were to increase our investment.
46
Additionally, as previously announced by the
Company, Citius Pharma intends to distribute Citius Oncology shares to its stockholders at a yet-to-be-determined date in the future,
following the expiration of the six-month lockup period, in accordance with terms of the amended and restated registration rights agreement
entered into in connection with the Merger. Following the distribution of the Citius Oncology shares, Citius Pharmaceuticals will not
be entitled to any benefits that flow to those shares from the commercialization by Citius Oncology of LYMPHIR or would otherwise be
derived from Citius Oncology, based on its ownership as of December 17, 2025.
Because our NoveCite product candidate
is based on novel technologies, it is difficult to predict the regulatory approval process and the time, the cost and our ability to
successfully initiate, conduct and complete clinical development, and obtain the necessary regulatory and reimbursement approvals, required
for commercialization of our NoveCite product candidate.
NoveCite’s cell programming technology
and platform for generating cell therapy products using allogenic mesenchymal stem cells derived from iPSCs represent novel therapeutic
approaches, and to our knowledge there are currently no iPSC-derived cell products approved anywhere in the world for commercial sale.
As such, it is difficult to accurately predict the type and scope of challenges that NoveCite may incur during development of its NoveCite
product candidate, and it faces uncertainties associated with the preclinical and clinical development, manufacture and regulatory requirements
for the initiation and conduct of clinical trials, regulatory approval, and reimbursement required for successful commercialization of
its NoveCite product candidate. In addition, because NoveCite’s iPSC-derived cell product candidate is in the pre-clinical stage,
NoveCite is currently assessing safety in humans and has not yet been able to assess the long-term effects of treatment. Animal models
and assays may not accurately predict the safety and efficacy of our product candidate in our target patient populations, and appropriate
models and assays may not exist for demonstrating the safety and purity of the NoveCite product candidate, as required by the FDA and
other regulatory authorities for ongoing clinical development and regulatory approval.
The pre-clinical and clinical development, manufacture,
and regulatory requirements for approval of the NoveCite product candidate may be more expensive and take longer than for other more
well-known or extensively studied pharmaceutical or biopharmaceutical product candidates due to a lack of prior experiences on the side
of both developers and regulatory agencies. Additionally, due to the uncertainties associated with the pre-clinical and clinical development,
manufacture, and regulatory requirements for approval of the NoveCite product candidate, NoveCite may be required to modify or change
its pre-clinical and clinical development plans or its manufacturing activities and plans or be required to meet stricter regulatory
requirements for approval. Any such modifications or changes could delay or prevent NoveCite’s ability to develop, manufacture,
obtain regulatory approval for or commercialize its NoveCite product candidate, which would adversely affect NoveCite’s and our
business, financial condition and results of operations.
Cellular immunotherapies, and stem cell therapies
and iPSC-derived cell therapies in particular, represent relatively new therapeutic areas, and the FDA has cautioned consumers about
potential safety risks associated with cell therapies. To date, there are relatively few approved cell therapies. As a result, the regulatory
approval process for a product candidate such as NoveCite is uncertain and may be more expensive and take longer than the approval process
for product candidates based on other, better known or more extensively studied technologies and therapeutic approaches. For example,
there are currently no FDA approved products with a label designation that supports the use of a product to treat and reduce the severity
of ARDS in patients with COVID-19, which makes it difficult to determine the clinical endpoints and data required to support an application
or regulatory approval, and the time and cost required to obtain regulatory approval in the U.S. for our product candidate.
Regulatory requirements in the U.S. governing
cell therapy products have changed frequently and the FDA or other regulatory bodies may change the requirements, or identify different
regulatory pathways, for approval of the NoveCite product candidate. For example, within the FDA, the Center for Biologics Evaluation
and Research (“CBER”) restructured and created a new Office of Tissues and Advanced Therapies to better align its oversight
activities with FDA Centers for Drugs and Medical Devices. It is possible that over time new or different divisions may be established
or be granted the responsibility for regulating cell and/or gene therapy products, including iPSC-derived cell products, such as the
NoveCite product candidate. As a result, NoveCite may be required to change its regulatory strategy or to modify its applications for
regulatory approval, which could delay and impair its ability to complete the pre-clinical and clinical development and manufacture of,
and obtain regulatory approval for, its NoveCite product candidate. Changes in regulatory authorities and advisory groups, or any new
requirements or guidelines they promulgate, may lengthen the regulatory review process, require NoveCite to perform additional studies,
increase its development and manufacturing costs, lead to changes in regulatory pathways, positions and interpretations, delay or prevent
approval and commercialization of the NoveCite product candidate or lead to significant post-approval limitations or restrictions. As
NoveCite advances its NoveCite product candidate, NoveCite will be required to consult with the FDA and other regulatory authorities,
and its NoveCite product candidate will likely be reviewed by an FDA advisory committee. NoveCite also must comply with applicable requirements,
and if it fails to do so, it may be required to delay or discontinue development of its NoveCite product candidate. Delays or unexpected
costs in obtaining, or the failure to obtain, the regulatory approval necessary to bring the NoveCite product candidate to market could
impair NoveCite’s and our ability to generate sufficient product revenues to maintain our respective businesses.
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NoveCite has assumed that the biological
capabilities of iPSCs and adult-donor derived cells are likely to be comparable. If it is discovered that this assumption is incorrect,
the NoveCite product candidate research and development activities could be harmed.
NoveCite anticipates that its research and development
for its NoveCite product candidate will involve iPSCs, rather than adult-donor derived cells. With respect to iPSCs, NoveCite believes
that scientists are still somewhat uncertain about the clinical utility, life span, and safety of such cells, and whether such cells
differ in any clinically significant ways from adult-donor derived cells. If NoveCite discovers that iPSCs will not be useful for whatever
reason for its NoveCite product candidate program, this would negatively affect NoveCite’s ability to develop a marketable product
and it and we may never become profitable, which would have an adverse effect on our respective businesses, prospects, financial condition
and results of operations.
Any FDA programs related to the development
and approval of treatments for COVID-19 and its symptoms may not be available to us or actually lead to a faster development or regulatory
review or approval process for NoveCite, our proposed treatment for ARDS, nor will it assure FDA approval of such a treatment.
In late April 2020, we made a pre-IND submission
to the FDA for NoveCite as a treatment for ARDS. The submission was made under the FDA’s Coronavirus Treatment Acceleration Program
(“CTAP”) and we requested the FDA’s feedback to support the most expeditious pathway for clinical development of the
therapy. The CTAP program is relatively new and the FDA has broad discretion in administering the CTAP program and therefore we cannot
assure you what the FDA might decide and whether there would be a faster development process.
Even if we receive regulatory approval
to commercialize a product candidate, that product may not gain market acceptance among physicians, patients, healthcare payers or the
medical community and may not generate significant revenue.
Even if one of our product candidates obtains
regulatory approval, that product may not gain market acceptance among physicians, patients, healthcare payers or the medical community.
The indication may be limited to a subset of the population or we may implement a distribution system and patient access program that
is limited. Coverage and reimbursement of our product candidates by third-party payers, including government payers, generally is also
necessary for commercial success. While LYMPHIR’s approval was not so restricted, its acceptance in the marketplace as an effective
treatment will depend on various factors as discussed herein. We believe that the degree of market acceptance and our ability to generate
revenues from any approved product candidate, such as LYMPHIR, or acquired approved product will depend on a number of factors, including:
● strength of sales, marketing and distribution support;
48
● the relative convenience and ease of administration and dosing schedule;
● prevalence and severity of any side effects;
● the effect of current and future healthcare laws on any approved products;
● results of any post-approval studies of the product;
Even if approved, any product candidate may fail
to achieve market acceptance or generate significant revenue to achieve or sustain profitability, which would harm the Company’s
business. In addition, our efforts to educate the medical community and third-party payers on the benefits of any product candidate may
require significant resources and may never be successful.
Even if approved for marketing by applicable
regulatory bodies, we will not be able to create a market for any of our product candidates if we fail to establish marketing, sales,
and distribution capabilities, either on our own or through arrangements with third parties.
Our strategy with LYMPHIR (through Citius Oncology)
and for our unapproved product candidates is to outsource to third parties all or most aspects of the product development process, as
well as much of our marketing, sales, and distribution activities. In order to generate sales of any product candidate that receives
regulatory approval, we must either acquire or develop an internal marketing and sales force with technical expertise and with supporting
distribution capabilities or make arrangements with third parties to perform these services for us. Currently, we, through Citius Oncology,
have developed our sales, marketing and distribution capabilities for LYMPHIR and have contracted with Innovation Partners, a large third-party
commercial sales and marketing organization with an existing commercial infrastructure and product launch experience, to assist in our
commercialization efforts. In addition, Citius Oncology has entered into distribution agreements with Cardinal Health, Cencora and McKesson
Corporation and has contracted with EVERSANA to support the launch and commercialization of LYMPHIR. We do not have any sales, marketing
or distribution capabilities with respect to our other product candidates. The acquisition or development of a sales and distribution
infrastructure requires substantial resources, which may divert the attention of our management and key personnel and defer our product
development efforts. To the extent that we enter into marketing and sales arrangements with other companies for any product candidates,
our revenues will depend on the efforts of others. These efforts may not be successful. If we fail to develop and maintain sales, marketing,
and distribution channels, or fail to enter into arrangements with third parties or the collaboration is terminated or is otherwise unsuccessful,
we will experience delays in product launch and sales and incur increased costs.
Our projections regarding the market opportunity for our LYMPHIR
may not be accurate, and the actual market for LYMPHIR may be smaller than we estimate.
Our projections of incidence rate of MF/SS and the people living with
CTCL and who have the potential to benefit from treatment with LYMPHIR are based on our beliefs and estimates. These estimates have been
derived from a variety of sources, including SEER data from 2001 to 2007, and may prove to be incorrect. The number of patients may turn
out to be lower than expected. Additionally, the potentially addressable patient population for LYMPHIR may be limited or may not be
amenable to treatment with LYMPHIR and may also be limited by the cost of our treatments for patients, any future increase to such costs,
and the reimbursement of those treatment costs by third-party payors. Even if we obtain significant market share for LYMPHIR, because