Item 1A. Risk Factors
The risk factors described below, as well as statements described elsewhere in this Annual Report on Form 10-K, including our audited Consolidated Financial Statements and the related notes and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”, or in other SEC filings, describe risks that could materially and adversely affect our business, financial condition, and results of operations, which could also cause the trading price of our equity securities to decline. These risks are not the only risks that we face. Our business, financial condition and results of operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.
Risks Related to our Business
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Currently, our common stock is publicly traded on The Nasdaq Capital Market. On December 31, 2025, we received a delisting determination from Nasdaq because the closing bid price of our common stock was below the $1.00 minimum requirement for 30 consecutive business days. Because we previously effected the 2025 Reverse Stock Split and remain subject to a mandatory panel monitor, we were not eligible for a 180-day grace period. On March 13, 2026, the Company received a written notice from the Hearings Panel notifying the Company that it has been granted until March 20, 2026 to regain compliance with the Minimum Bid Price Requirement.. Additionally, Pursuant to the Hearings Panel's decision, the continued listing of the Company's securities is subject to the condition that the Company must demonstrate compliance with the Minimum Bid Price Requirement on or before March 20, 2026.
On January 17, 2025, Nasdaq notified us that the Merger constitutes a business combination that will result in a “Change of Control” pursuant to Listing Rule 5110(a) in connection with step two of the transaction and, accordingly, we will be required to satisfy all of Nasdaq’s initial listing criteria and to complete Nasdaq’s initial listing process, including the payment of all applicable fees. We must complete the process prior to our stockholder approval for the issuance of 20% or more of our pre-transaction shares in connection with the conversion of the preferred shares issued at the closing of the merger into shares of our common stock.
We may never meet the Nasdaq initial listing standards and we do not intend to submit the initial listing application and call the special meeting of stockholders to approve the conversion of the Preferred Stock into common stock until we expect to be able to meet the initial listing standards. If we fail to regain compliance through the Hearings Panel process or fail to meet the initial listing requirements following the Merger, Nasdaq will delist our securities.
We cannot assure you that we will be able to regain compliance or meet those initial listing requirements. Even if our securities are so listed, we may be unable to maintain the listing of our securities in the future. We are subject to Mandatory Panel Monitor for a period of one year from the date of each respective Hearings Panel letter. As we have been found out of compliance with the Minimum Bid Price Requirement during this monitoring period, we are currently subject to the delisting procedures described above. In order to continue listing our securities on Nasdaq following the Merger, we will be required to maintain certain financial, distribution and stock price levels. If Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange or regain compliance with Nasdaq, our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our common stock is listed on Nasdaq, it is a covered security. Although states are preempted from regulating the sale of covered securities, the federal statute does allow states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then states can regulate or bar the sale of covered securities in a particular case. If we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
Our financial condition raises substantial doubt regarding our ability to continue as a going concern.
Our consolidated financial statements have been prepared assuming that we will continue to operate as a going concern, which contemplates the realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. Based on our current operations and operating plans, however, we believe that our existing cash and cash equivalents will not be sufficient to fund our operating expenses and capital expenditure requirements for the next 12 months. Included in our anticipated future capital needs will be capital for advancing our research and development activities including our goal to begin a Phase 1 clinical trial for DCOY-101 potentially in the first half of 2027. As a result, we have determined that there is substantial doubt regarding our ability to continue as a going concern, and our independent registered public accounting firm has included in its audit opinion for the year ended December 31, 2025, an explanatory paragraph about such substantial doubt regarding our ability to continue as a going concern.
The substantial doubt regarding our ability to continue as a going concern may adversely affect our stock price and our ability to raise capital necessary to execute our current operating plans. If we are unable to obtain additional capital, we may not be able to continue its operations on the scope or scale as currently conducted, and we could be forced to cease operations, in which case you could lose all or most of your investment.
We have never generated revenue from product sales and all of our potential product candidates are currently in the pre-clinical stage, and we may continue to incur significant losses for the foreseeable future and never generate revenue from product sales.
We are a preclinical biopharmaceutical discovery and development company. We plan to bring certain potential product candidates into the early stages of clinical development beginning in the first half of 2027, however, our ability to do so will depend on factors beyond our control, including our ability to raise capital and to effectively navigate the regulatory requirements, particularly those imposed by the FDA which are described elsewhere in these Risk Factors. Because of the need to proceed to and complete clinical trials, establish safety and efficacy and obtain regulatory approval, which is an expensive and time-consuming process, we do not anticipate generating revenue from product sales for at least several years and will continue to sustain considerable losses during that time. We may develop a partnership that could generate income sooner, but there is no guarantee that will be achievable.
Because we have yet to generate revenue from product sales on which to evaluate our potential for future success and to determine if we will be able to execute our business plan, it is difficult to evaluate our prospects and the likelihood of success or failure of our business.
Our ability to generate revenue from product sales and achieve profitability depends on our ability, alone or with partners, to successfully complete the development of, obtain the regulatory approvals for and commercialize pharmaceutical potential product candidates. We have no pharmaceutical potential product candidates that have proceeded to clinical trials or generated any commercial revenue, do not expect to generate revenues from the commercial sale of pharmaceutical products for the foreseeable future, and may never generate revenues from the
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sale of pharmaceutical products. Our ability to generate revenue and achieve profitability will depend on, among other things, the following:
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identifying and validating new therapeutic strategies;
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entering into and maintaining collaborations and relationships with large pharmaceutical or biotechnology companies;
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completing our research and preclinical development of pharmaceutical potential product candidates;
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initiating and completing clinical trials for pharmaceutical potential product candidates;
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seeking and obtaining regulatory marketing approvals for pharmaceutical potential product candidates that successfully complete clinical trials;
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establishing and maintaining supply and manufacturing relationships with third parties;
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launching and commercializing pharmaceutical potential product candidates for which we obtain regulatory marketing approval with a partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure;
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maintaining, protecting, enforcing, defending and expanding our intellectual property portfolio; and
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attracting, hiring and retaining qualified personnel.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we cannot predict the timing or amount of increased expenses and when we will be able to achieve or maintain profitability, if ever. Our expenses could increase beyond expectations if we are required by regulatory agencies to perform additional unanticipated studies and trials.
Even if one or more pharmaceutical potential product candidates we independently develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing any approved pharmaceutical product candidate. Moreover, even if we can generate revenues from the sale of any approved pharmaceutical products, we may not become profitable and may need to obtain additional funding to continue operations.
Because early-stage drug development requires major capital investment, as we continue to incur operating losses, we will need to raise additional capital or form strategic partnerships to support our research and development activities in the future.
We are still in the early stages of development of our potential product candidates, and have no products approved for commercial sale or presently in clinical trials. Our ability to proceed to and conduct clinical trials in a cost-effective manner and within the desired time frames remains subject to uncertainties including the potential for supply chain shortages and difficulties in obtaining adequate participant enrollments which are common challenges faced in conducting clinical trials. Further, developing pharmaceutical products, including conducting preclinical studies and clinical trials, is capital-intensive. As a rule, research and development expenses increase substantially as potential product candidates are advanced toward clinical programs. If we are able to advance our products to and through clinical trials, we may need to raise additional capital to support our operations and/or form partnerships, in addition to our existing collaborative alliances, which may give substantial rights to a partner. Such funding or partnerships may not be available to us on acceptable terms, or at all. Moreover, any future financing may be very dilutive to our existing stockholders.
As we move lead compounds through toxicology and other preclinical studies, also referred to as nonclinical studies, we have and will be required to file an IND or its equivalent in foreign countries, and as we conduct clinical development of potential product candidates, we may have adverse results that may cause us to consume additional capital. Our partners may not elect to pursue the development and commercialization of our potential product candidates subject to our respective agreements with them. These events may increase our development costs more than we expect. We may need to raise additional capital or otherwise obtain funding through strategic alliances if we initiate clinical trials
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for new potential product candidates other than programs currently partnered. We will require additional capital to obtain regulatory approval for, and to commercialize, potential product candidates.
In securing additional financing, such additional fundraising efforts may divert our management’s attention from our day-to-day activities, which may adversely affect our ability to develop and commercialize potential product candidates. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we cannot raise additional capital when required or on acceptable terms, we may be required to:
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accept terms that restrict our ability to issue securities, incur indebtedness, or otherwise raise capital in the future, or restrict our ability to pay dividends or engage in acquisitions;
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significantly delay, scale back or discontinue the development or commercialization of any potential product candidates;
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seek strategic alliances for research and development programs at an earlier stage than otherwise would be desirable or on terms less favorable than might otherwise be available; or
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relinquish or license on unfavorable terms, our rights to technologies or any potential product candidates we otherwise would seek to develop or commercialize ourselves.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects or may render us unable to continue operations.
We may become involved in securities class action litigation that could divert management’s attention and harm our business and insurance coverage may not be sufficient to cover all costs and damages.
In the past, securities class action or shareholder derivative litigation often followed certain significant business transactions, such as the sale of a business division or announcement of a merger. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management’s attention and resources, which could adversely affect our business.
Risks Related to the Discovery, Development and Commercialization of Potential Product Candidates
If any strategic alliances on which we depend are unsuccessful or are terminated, we may be unable to develop or commercialize certain potential product candidates and we may be unable to generate revenues from our development programs.
We will likely need to use third-party alliance partners for financial, scientific, manufacturing, marketing and sales resources for the development and commercialization of our potential product candidates. We also presently rely on a number of third party vendors for a variety of operational functions, including the provision of our technology infrastructure and other elements of our product candidate development programs as well as critical data storage and processing functions. These strategic alliances, if we are able to enter into, foster and maintain them, will likely constrain our control over development and commercialization of our potential product candidates, especially once a candidate has reached the stage of clinical development. Our ability to recognize revenues from successful strategic alliances may be impaired by several factors including a partner shifting its priorities and resources away from us, failing to perform under required standards or contractual terms, terminating the relationship with us, entering into a dispute or litigation with us or third parties or ceasing operations.
For example, we rely and expect to continue to rely on third parties to conduct some aspects of our preclinical testing and on third-party CROs to conduct clinical trials. This reliance can materially delay our research and development efforts, and increase the costs of undertaking them. Further, any disputes that may arise from our arrangements with CROs or contract manufacturing organizations (“CMOs”) may result in additional unexpected expenses and force our management to allocate their limited time to seeking a resolution to the problem, which could materially adversely affect our operations.
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Additionally, our reliance on third-party manufacturers to develop products and our anticipated reliance on third-party manufacturers to produce products we may develop in the future entail risks to which we would not be subject if we supplied the materials needed to develop and manufacture our potential product candidates ourselves, including supply chain shortages, the inability to meet any product specifications and quality requirements consistently, a delay or inability to procure or expand sufficient manufacturing capacity, and a failure to comply with current “cGMP” and similar foreign standards. These events could lead to clinical study delays or failure to obtain regulatory approval or impact our ability to successfully commercialize future products. Some of these events could be the basis for regulatory actions, including injunction, recall, seizure or total or partial suspension of production.
Termination of or other adverse development with respect to a strategic alliance may require us to seek out and establish alternative strategic alliances with third-party partners. This may not be possible, including due to restrictions under the terms of our collaborations, or we may not be able to do so on terms acceptable to us. If we fail to establish alternative strategic alliances with third-party partners on terms acceptable to us, or at all, we may be required to limit the size or scope of one or more of our programs or decrease our expenditures and seek additional funding by other means. Such events would likely have a material adverse effect on our results of operations and financial condition.
Since we expect to rely on third parties to conduct, supervise and monitor any future clinical trials, if those third parties fail to perform in a satisfactory manner and one that meets applicable regulatory, scientific and safety requirements, it may materially harm our business.
If and when we are able to proceed to clinical trial for a product candidate, we will rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials. We anticipate that we or our partners will have limited influence over their actual performance. Nevertheless, we or our partners will be responsible for ensuring that each of our clinical trials is conducted in accordance with our protocol, and that all legal, regulatory and scientific standards are met. Our reliance on the CROs does not relieve us of our regulatory responsibilities.
We, our partners and our CROs must comply with current Good Clinical Practices (“cGCPs”), as defined by the FDA and the International Conference on Harmonization, for conducting, recording and reporting the results of IND-enabling preclinical studies and clinical trials, to ensure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces these cGCPs through periodic inspections of trial sponsors, principal investigators, and clinical trial sites. If we or our CROs fail to comply with cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other regulators may require us to perform additional clinical trials before approving any marketing applications. Our clinical trials will require a sufficiently large number of test subjects to evaluate the safety and effectiveness of a product candidate. If our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, fail to recruit properly qualified patients or fail to properly record or maintain patient data, we may be required to repeat such clinical trials, which would delay the regulatory approval process.
Our contracted CROs will not be our employees, and we cannot control whether they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to failing to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not obtain regulatory approval for, or successfully commercialize our potential product candidates. Our financial results and the commercial prospects for such products and any potential product candidates we develop would be harmed, our costs could increase, and our ability to generate revenues could be delayed.
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We also expect to rely on other third parties to store and distribute drug products for any clinical trials we may conduct. Any performance failure by our distributors could delay clinical development or marketing approval of our potential product candidates or commercialization of our products, if approved, producing additional losses and depriving us of potential product revenue.
Because the approach we are taking to discover and develop drugs is novel, including the usage of AI, it may never lead to marketable products.
We are concentrating our therapeutic product research and development efforts on using our proprietary technology, and our future success depends on the continued successful development of this technology and the products derived from it. We have never commercialized any products. The scientific discoveries that form the basis for our efforts to discover and develop drug potential product candidates are relatively new and unproven. The scientific evidence to support the feasibility of developing potential product candidates based on our approach is limited. If we do not successfully develop and commercialize drug potential product candidates based upon our technological approach, we may not become profitable and the value of our stock may decline.
Further, our approach to drug development involves the use of artificial intelligence (“AI”) and computing software to identify potential molecules for further research and development processes. The use of AI is relatively novel, and the underlying technology continues to experience substantial changes with the passage of time and as considerable resources continue to be deployed in the market. We are therefore subject to unique risks and uncertainties based on our reliance on and involvement in AI for our operations, including the risk of regulatory developments that may adversely affect or hinder our ability to use this technology or expose us to potential liability arising from such use, the risk that competitors develop or deploy similar or superior systems in their operations that give them an advantage over us, and the risk that the third parties on which we rely for our technology and infrastructure fail to perform as needed or fail to protect our rights, technology, data and interests. Further, we rely on a relatively small number of third parties for services and infrastructure related to our technology, and any loss or diminishment of any of those relationships could significantly harm our business, and we may be unable to find a suitable replacement for those functions in a reasonable amount of time, on favorable terms or at all.
Additionally, government and supranational regulation related to AI is evolving as new laws and regulations are implemented globally and could increase the burden and operational cost of compliance, including through requirements related to transparency, accountability, risk management, human oversight, and data governance. We expect to see increasing regulation related to AI governance, use and ethics, which may also significantly increase the burden and cost of research, development and compliance in this area. The EU’s Artificial Intelligence Act, or the AI Act, entered into force on August 1, 2024, with important sections scheduled to come into effect in August 2026. As currently enacted, the AI Act imposes significant obligations on providers and deployers of high-risk AI systems, and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles when developing and using AI technology. The scope of requirements depends on legal and risk determinations that rely on legal provisions that have not yet been fully interpreted by courts or regulators, and non-compliance can lead to significant fines.
In the U.S., the regulatory environment is complex and uncertain. Over the past year, states have advanced, and in some cases passed, dozens of laws focusing on AI governance and regulation, including on deployment of AI in healthcare settings. At the federal level, the current administration has endorsed a federal moratorium on the enforcement of state AI laws, including through a December 11, 2025, executive order on “Ensuring a National Policy Framework for Artificial Intelligence.” So far, these efforts have not been successful at curtailing state action on AI regulation, contributing to a complicated legislative patchwork, which may be litigated in state and federal courts. In addition, there is continued uncertainty regarding the application of existing federal and state legal frameworks to uses and development of AI, and legal norms and market standards regarding AI continue to evolve. For example, various federal and state regulators have issued guidance and focused enforcement efforts on the use of AI in regulated sectors. The U.S. Food and Drug Administration, for example, issued guidance on the use of artificial intelligence in medical devices, requiring detailed risk management and review processes to obtain approvals. If we develop or use
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AI systems that are governed by the these laws or regulations, we will need to meet higher standards of data quality, transparency, and human oversight, and we would need to adhere to specific, potentially burdensome and costly ethical, accountability, and administrative requirements. We may also be subject to significant enforcement or litigation in the event of any perceived non-compliance.
The rapid evolution of AI will require the application of significant resources to design, develop, test and maintain our products and services to help ensure that AI is implemented in accordance with applicable law and regulation and to minimize any real or perceived unintended harmful impacts. The use of certain AI technologies can also give rise to intellectual property risks, including by disclosing or otherwise compromising confidential or proprietary intellectual property, or by undermining our ability to assert or defend ownership rights in intellectual property created with the assistance of AI tools. Our vendors may in turn incorporate AI tools into their offerings, and the providers of these AI tools may not meet existing or rapidly evolving regulatory or industry standards, including with respect to privacy, data security and data integrity. Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. In addition, the use of generative AI models in our internal or third-party systems may create new attack surfaces or methods for adversaries, which could impact us and our vendors. Any of these effects could damage our reputation, result in the loss of valuable property and information, cause us to breach applicable laws and regulations, and adversely impact our business.
We are committed to implementing governance and control measures to mitigate these risks, but there can be no assurance that such measures will adequately prevent or mitigate the adverse effects that the integration and use of AI may have on our business, financial conditions and results of operations.
If we do not succeed in our efforts to identify or discover additional potential product candidates, your investment may be lost.
The success of our business depends primarily upon our ability to identify, develop and commercialize drug products, an extremely risky business. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield potential product candidates for clinical development for several reasons, including:
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our research methodology or that of our partners may be unsuccessful in identifying potential product candidates;
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potential product candidates may have harmful side effects or may have other characteristics that make the products unmarketable or unlikely to receive marketing approval; and
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we or our partners may change their development profiles for potential product candidates or abandon a therapeutic area.
Such events may force us to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could cause us to cease operations. Research programs to identify new potential product candidates require substantial technical, financial, and human resources. We may focus our efforts and resources on potential programs or potential product candidates that ultimately prove to be unsuccessful.
Because our future commercial success depends on gaining regulatory approval for our products, we cannot generate revenue without obtaining approvals.
Our long-term success and generation of revenue will depend upon the successful development of new products from our research and development activities, including those licensed or acquired from third parties. Product development is very expensive and involves a high degree of risk. Only a small number of research and development programs result in the commercialization of a product. For example, the FDA indicates that approximately 70% of drugs proceed past Phase 1 studies, 33% proceed past Phase 2, and just 25%-30% proceed past Phase 3 to Phase 4 which is the final phase in the FDA review and approval process for marketing therapeutic potential product candidates. The process for obtaining regulatory approval to market potential product candidates is expensive, usually takes many
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years, and can vary substantially based on the type, complexity, and novelty of the potential product candidates involved. Our ability to generate revenue would be adversely affected if we are delayed or unable to successfully develop our products.
We may also pursue and deploy substantial resources and time towards seeking accelerated or limited approval processes that we may be deemed to not qualify for or may otherwise not be granted, in which case those efforts and resources will have been lost, and a delay or inability to obtain the approval for the applicable product candidate may result.
We cannot guarantee that any marketing application for our potential product candidates will be approved. If we do not obtain regulatory approval of our products or we are significantly delayed or limited in doing so, we cannot generate revenue, and we may need to significantly curtail operations.
If we are unable to successfully complete preclinical testing and clinical trials of our potential product candidates or experience significant delays in doing so, our business will be materially harmed.
We have invested and intend to continue to invest a significant portion of our efforts and financial resources in the identification and preclinical development of potential product candidates that target select diseases, including viral diseases and colon cancer. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our potential product candidates.
The commercial success of our potential product candidates will depend on several factors, including:
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successful completion of preclinical studies and clinical trials;
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receipt of marketing and pricing approvals from regulatory authorities;
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obtaining and maintaining patent and trade secret protection for potential product candidates;
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establishing and maintaining manufacturing relationships with third parties or establishing our own manufacturing capability; and
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commercializing our products, if and when approved, whether alone or in collaboration with others.
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 successfully complete development of, or to successfully commercialize, our potential product candidates, which would materially harm our business. Pharmaceutical products that do overcome the low probability of success in drug development and achieve commercialization often do not recoup their cost of capital. If we are unable to design and develop each drug to meet a commercial need in the future, the approved drug may become a commercial failure and our investment in those development and commercialization efforts will have been commercially unsuccessful.
We may be unable to demonstrate safety and efficacy of our potential product candidates to the satisfaction of regulatory authorities, or we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our potential product candidates.
Before obtaining marketing approval from regulatory authorities for the sale of potential product candidates, we or our partners must conduct extensive preclinical studies and clinical trials to demonstrate the safety and efficacy of the potential product candidates in humans. Clinical trials are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not predict final results. For instance, we have disclosed certain results regarding measles and the Nipah virus based on molecular dynamics modeling. However, similar results from the molecular dynamics model may not be replicable in in vitro studies, in vivo studies and clinical trials. Moreover,
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preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their potential product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for their products.
Events that may cause a delay or unsuccessful completion of clinical development include, among other things:
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delays in agreeing with the FDA or other regulatory authorities on final clinical trial design;
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imposition of a clinical hold following an inspection of a clinical trial operations or trial sites by the FDA or other regulatory authorities;
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delays in agreeing on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites;
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delays in obtaining required institutional review board approval at each clinical trial site;
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delays in recruiting suitable patients to participate in a trial;
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delays in the testing, validation, manufacturing and delivery of the potential product candidates to the clinical sites;
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delays in having patients complete participation in a trial or return for post-treatment follow-up;
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delays caused by patients dropping out of a trial due to product side effects or disease progression;
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clinical sites dropping out of a trial to the detriment of enrollment;
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negative or inconclusive results of clinical trials of potential product candidates;
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time and expenses required to add new clinical sites; or
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delays by contract manufacturers in producing and delivering sufficient supply of clinical trial materials.
If we or our partners must conduct additional clinical trials or other testing of any potential product candidates beyond those that are contemplated, or are unable to successfully complete clinical trials or other testing of any of our potential product candidates, or if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we or our partners may be subject to delays in or restriction from obtaining marketing approval for our potential product candidates, negative labeling and marketing requirements, additional post-marketing testing requirements, or actions by regulatory agencies to remove the product from a target market after obtaining marketing approval.
Our product development costs will also increase if we experience delays in testing or in obtaining marketing approvals. We do not know whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our potential product candidates or allow our competitors to bring products to market before we do, which would impair our ability to successfully commercialize our potential product candidates and may harm our business and results of operations. Any inability to successfully complete preclinical and clinical development, whether independently or with our partners, could cause additional costs to us or impair our ability to generate revenues from our potential product candidates, including product sales, milestone payments, profit sharing or royalties.
Even if the FDA grants breakthrough therapy designation for one or more of our potential product candidates, the designation may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our potential product candidates will receive marketing approval, and FDA may rescind the designation if it determines the product candidate no longer meets the qualifying criteria for breakthrough therapy.
We may seek a breakthrough therapy designation from the FDA for some of our potential product candidates that reach the regulatory review process. A breakthrough therapy is defined as a drug or biological product that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug or biological product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed
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early in clinical development. For drugs or biological products that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA could also be eligible for accelerated approval.
Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our potential product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation.
The receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our potential product candidates qualify and are designated as breakthrough therapies, the FDA may later decide that the drugs or biological products no longer meet the conditions for designation and the designation may be rescinded.
Our potential product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.
Adverse events (“AEs”) or serious adverse events (“SAEs”), that may be observed during clinical trials of our potential product candidates could cause us, other reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt such trials and could cause denial of regulatory approval. If AEs or SAEs are observed in any clinical trials of our potential product candidates, including those our partners may develop under alliance agreements, we or our partners’ ability to obtain regulatory approval for potential product candidates may be negatively impacted.
Serious or unexpected side effects caused by an approved product could result in significant negative consequences, including the following:
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regulatory authorities may withdraw prior approval of the product or impose restrictions on our distribution in the form of a modified risk evaluation and mitigation strategy (“REMS”) which may restrict the manner in which the product can be distributed or administered;
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we may be required to add labeling statements, such as warnings or contraindications;
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we may be required to change the way the product is administered or conduct additional clinical trials;
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we may decide or be forced to temporarily or permanently remove the affected product from one or more target markets or from the marketplace in general;
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we could be sued and held liable for harm caused to patients; and
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our reputation may suffer.
These events could prevent us or our partners from achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our products and impair our ability to generate revenues from the commercialization of these products either by us or by our partners.
Following regulatory approval for a product candidate, we will still face extensive regulatory requirements, and the approved product may face future development and regulatory difficulties.
Even if we obtain regulatory approval in the United States or elsewhere, the applicable regulators may still impose significant restrictions on the indicated uses or marketing of our potential product candidates or impose ongoing requirements for potentially costly post-approval studies or post-market surveillance. The following discussion is based on United States law. Similar types of regulatory provision apply outside of the United States.
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The holder of an approved new drug application (“NDA”) must monitor and report AEs and SAEs and any failure of a product to meet the specifications in the NDA. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and other applicable federal and state laws and are subject to FDA review.
Drug product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMPs, and adherence to commitments made in the NDA. If we or a regulatory agency discovers previously unknown problems with a product such as AEs or SAEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product or the manufacturing facility, including requiring recall or withdrawal of the product from the market or suspension of manufacturing.
If we or our partners fail to comply with regulatory requirements following approval of our potential product candidates, a regulatory agency may:
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issue a warning letter asserting we are in violation of the law;
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impose a REMS, or other restrictions on the manufacturing, marketing or use of the product;
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seek an injunction or impose civil or criminal penalties or monetary fines;
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suspend or withdraw regulatory approval;
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suspend any clinical trials we may commence in the future;
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refuse to approve a pending NDA or supplements to an NDA submitted by us;
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seize product; or
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refuse to allow us to enter into supply contracts, including government contracts.
Our defense of any government investigation of alleged violations of law, or any lawsuit alleging such violations, could require us to expend significant time and resources and could generate negative publicity. Further, the FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our potential product candidates or increase the cost of compliance. The occurrence of any event or penalty described above may prevent or inhibit our ability to commercialize our products and generate revenues.
We may not succeed in obtaining or maintaining necessary rights to drug compounds and processes for our development pipeline through acquisitions and in-licenses.
We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and more established companies are also pursuing strategies to license or acquire third-party intellectual property rights we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
Companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition, and prospects for growth could suffer.
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Our product development programs are in the preclinical stage and we face significant competition from major companies who have developed or are developing vaccines or treatments for the diseases we are targeting, and if we fail to gain market share because our competitors develop and successfully commercialize vaccines or treatments, our business and future prospects could be materially and adversely affected.
We may be unable to develop or proceed with the onerous regulatory requirements for clinical programs necessary to produce an effective therapy in a timely manner or at all. Additionally, we are committing substantial financial and other resources to our drug development programs, which may occur at the expense of other potential drug candidate programs we could have otherwise and thereby negatively impact such other programs. Even if we do obtain FDA authorization for a therapeutic product, the FDA may subsequently rescind or limit such authorization as more information about the product, including its efficacy and side effects, become available. Further, a virus we target, such as COVID-19 which is highly mutative and for which a number of variants have already arisen, will render any potential product candidates we develop subject to the risk that a mutation will occur that produces a strain or strains of the virus to which such treatment has a diminished effect or is ineffective. If we do develop a treatment that is effective against a current version of a disease, a later variant may arise that reduces or eliminates the product’s efficacy before we are able to commercialize it. Further, if this occurs, one or more competitors’ products may be more effective against new variants than ours, resulting in a diminished market for our products. If we are unable to timely advance our programs, or if we fail to gain or maintain a market share as a result of our competitors developing and successfully commercializing effective vaccines and therapies more quickly than we do, our business and future prospects could be materially and adversely affected.
Further, because third parties may be developing competitive products without our knowledge, we may later learn that competitive products are superior to our potential product candidates which may force us to terminate our research efforts of one or more potential product candidates. If in the future, we learn of the existence of one or more competitive products, we may be required to cease our development efforts for a product candidate. Any of these events may occur after we have spent substantial sums in connection with the clinical research of one or more potential product candidates.
We have limited experience in conducting and managing the preclinical development activities and clinical trials necessary to obtain approvals for marketing our potential product candidates, including approval by the FDA.
Our efforts to develop our potential product candidates are limited to a small number of potential product candidates aimed at treating a small number of viral diseases and colon cancer. To date, we have not advanced any potential product candidates to clinical trials, and we may be unable to progress our potential product candidates through the preclinical stage and into clinical trials. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will succeed, and favorable initial results from a clinical trial do not determine outcomes in subsequent clinical trials. The indications of use for which we are pursuing development may have clinical effectiveness endpoints not previously reviewed or validated by the FDA or foreign regulatory authorities, which may complicate or delay our effort to obtain marketing approval. We cannot guarantee that we will be able to proceed to clinical trials or that any future clinical trials will succeed. In fact, most compounds fail in clinical trials, even at companies far larger and more experienced than us. If any preclinical or clinical trials yield adverse results, this could delay the development of the product candidate, force us to cease pursuing the product candidate, or render it impossible or impracticable to proceed towards commercialization.
We have not obtained marketing approval or commercialized any of our potential product candidates. We may not successfully design or implement clinical trials required for marketing approval to market our potential product candidates. If we are unsuccessful in conducting and managing our preclinical development activities or clinical trials or obtaining marketing approvals, we might not be able to commercialize our potential product candidates, or might be significantly delayed in doing so, which will materially harm our business.
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Risks Related to Our Operations and Industry
If we cannot obtain or protect intellectual property rights related to our future products and potential product candidates, we may not be able to compete effectively in our markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our future products and potential product candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications we own or in-license may fail to result in patents with claims that cover the products in the United States or in other countries. There is no assurance that all potentially relevant prior art relating to our patents and patent applications has been found; such prior art can invalidate a patent or prevent issuance of a patent based on a pending patent application. Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may cause such patents to be narrowed or invalidated. Even if unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims.
If the patent applications we hold or have in-licensed regarding our programs or potential product candidates fail to issue or if their breadth or strength of protection is threatened, this could dissuade companies from collaborating with us to develop potential product candidates and threaten our ability to commercialize products. Patents may not be issued and issued patents may be found invalid and unenforceable or challenged by third parties. Since patent applications in the United States and most other countries are confidential for a period after filing, and some remain so until issued, we cannot be certain that we were the first to invent a patent application related to a product candidate. In certain situations, if we and one or more third parties have filed patent applications in the United States and claiming the same subject matter, an administrative proceeding can be initiated to determine which applicant is entitled to the patent on that subject matter. Patents have a limited lifespan. In the United States, the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of a patent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competition from generic medications attempting to replicate that product. Further, if we encounter delays in regulatory approvals, the time during which we will be able to market and commercialize a product candidate under patent protection could be reduced.
In addition to patent protection, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug discovery and development processes that involve proprietary know-how, information or technology not covered by patents. Each of our employees agrees to assign their inventions to us through an employee inventions agreement. In addition, as a general practice, our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology enter into confidentiality agreements. Nonetheless, our trade secrets and other confidential proprietary information may be disclosed, and competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
The laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. We may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. Further, governments may in the future alter intellectual property rights in a manner adverse to us or to our third-party collaborators, including actions taken at the international level.
If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
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If third-party intellectual property infringement claims are asserted against us, it may prevent or delay our development and commercialization efforts and have a material adverse effect on our business and future prospects.
Our commercial success depends in part on us avoiding infringement on the patents and proprietary rights of third parties. There is substantial litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, and reexaminations and other post-grant proceedings before the U.S. Patent and Trademark Office, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our partners are pursuing potential product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our potential product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties may assert that we are employing their proprietary technology or rights without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our potential product candidates. Because patent applications can take many years to issue, there may be patent applications currently pending that may later result in patents that our potential product candidates may infringe upon. Third parties may obtain patents in the future and claim that use of our technologies infringes on these patents. If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of any of our potential product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were to be held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more of our potential product candidates. Defense of these claims, regardless of their merit, involves substantial litigation expense and diversion of our management’s attention from our business. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. Because of the costs involved in defending patent litigation, we may in the future lack the capital to defend our intellectual property rights.
We may in the future be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe on our patents or the patents of our licensors. To counter such infringement or unauthorized use, we may be required to file infringement claims, or we may be required to defend the validity or enforceability of such patents, which can be expensive and time-consuming. In an infringement proceeding, a court may decide that either one or more of our patents or our licensors’ patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue because our patents do not cover that technology. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not being issued.
Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions regarding our patents or patent applications or those of our partners or licensors. An unfavorable outcome could require us to cease using the related technology or to license rights to it from the prevailing party. Our business
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could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense or pursuit of litigation or interference proceedings may fail and, even if successful, may cause us to incur substantial costs and distract the attention of our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
We may need to obtain additional licenses to intellectual property rights from third parties.
We may need to obtain additional licenses from third parties to advance our research or allow commercialization of our potential product candidates. We may fail to obtain these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our potential product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist that might be enforced against our products, resulting in either an injunction prohibiting our sales, or, with respect to our sales and other activities, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
The licensing and acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to develop and commercialize our potential product candidates. More established companies may have a competitive advantage over us due to their larger size and cash resources or greater clinical development and commercialization capabilities.
We may not be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding potential product candidates that we may seek to acquire, in which case our business could be harmed.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
We employ individuals previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims asserting that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. We may also be subject to claims that former employers or other third parties have an ownership interest in our patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if we succeed, litigation could cause substantial cost and be a distraction to our management and other employees.
Because we face significant competition from other biotechnology and pharmaceutical companies, our operating results will suffer if we fail to compete effectively.
The biotechnology and pharmaceutical industries are intensely competitive. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. This enables them, among other things, to make greater research and development investments and efficiently utilize their research and development costs. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may cause even more resources to be concentrated in our competitors. Additionally, smaller
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or early-stage companies of which we may not be aware could also prove to be material competitors, particularly through collaborative arrangements with larger, more well-established companies or by competing with us for limited resources and strategic alliances with our current or prospective partners. Competition may increase further because of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may develop, acquire or license drug products that are more effective or less costly than any product candidate we may develop.
The programs we are focusing on are in a preclinical stage and are targeted toward indications for which there are approved products on the market or potential product candidates in clinical development. We will face competition from other drugs that are or will be approved for the same therapeutic indications. Our ability to compete successfully will depend largely on our ability to leverage our experience in drug discovery and development to discover and develop therapeutics superior to other products in the market, attract and retain qualified scientific, product development and commercial personnel, obtain and maintain patent and/or other proprietary protection for our technology platform and potential product candidates, obtain required regulatory approvals faster than competitors, and successfully collaborate with third parties with respect to these endeavors.
The availability of our competitors’ products could limit the demand, and the price we can charge, for any products we may develop and commercialize. We will not achieve our business plan if the acceptance of our products is inhibited by price competition or the reluctance of physicians to switch from existing drug products to our products, or if physicians switch to other new drug products or reserve our products for use in limited circumstances. Additionally, the biopharmaceutical industry is characterized by rapid technological and scientific change, and we may not be able to adapt to these rapid changes to the extent necessary to keep up with competitors or at all. The inability to compete with existing or subsequently introduced drug products would have a material adverse impact on our business, financial condition and prospects.
Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our potential product candidates less competitive. Any new product that competes with an approved product must typically demonstrate advantages, such as in efficacy, convenience, tolerability or safety, to overcome price competition and to succeed. Our competitors may obtain patent protection, receive approval by the FDA and/or foreign regulatory authorities or discover, develop and commercialize potential product candidates before we do, which would have a material adverse impact on our business.
Our business could be negatively impacted by cybersecurity threats and other security threats and disruptions.
Because our business relies on proprietary data and related technology and computer systems, it faces certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary or confidential information, threats to physical security, and domestic terrorism events. Our information technology networks and related systems are critical to the operation of our business and our research and development efforts. We are also reliant on information technology systems operated by certain third parties, which generally face similar security threats and which third parties, and their activities are beyond our control. Cybersecurity threats in particular, are persistent, evolve quickly and include, but are not limited to, computer viruses, attempts to access information, denial of service and other electronic security breaches. We believe that we have implemented appropriate measures and controls and invested in skilled information technology resources to appropriately identify threats and mitigate potential risks, but there can be no assurance that such actions will be sufficient to prevent disruptions to critical systems, the unauthorized release of confidential information or corruption of data. A security breach or other significant disruption involving these types of information and information technology networks and related systems could:
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disrupt the proper functioning of these networks and systems and therefore our operations and/or those of third parties on which we rely;
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result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, our proprietary, confidential, sensitive or otherwise valuable information, or that of third parties with which we collaborate or otherwise depend, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
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delay or compromise preclinical or clinical studies or the analysis and use of data collected in our efforts to develop potential product candidates;
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require significant attention and resources of management and key personnel to remedy any damages or other adverse consequences that result;
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subject us to claims for breach of contract, damages, credits, penalties or termination with respect to our relationships with third parties, or regulatory actions by governmental agencies; and
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damage our reputation with industry participants, existing or prospective strategic alliances, and the public generally.
Certain of our operations may have bearing on pandemic preparedness, national security and homeland defense, which increases the threat of cybersecurity attacks or incidents and the potential for losses, liability and other adverse consequences we could incur or experience as a result. Companies are increasingly suffering damage from attacks by hackers and there is a general risk that adversaries in geopolitical conflicts such as those taking place in Ukraine and in the Middle East adopt widespread Internet hacking as a weapon, which hacking may ultimately affect us. In the ordinary course of business, we store sensitive information, such as our intellectual property, including trade secrets and results of our research, and that of our suppliers and business partners, using online systems, and such information is sometimes transmitted via email correspondence. The secure maintenance and processing of this information is critical to our research and development activities and future operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. Any such unauthorized access, disclosure, misappropriation or other loss of information could result in disruption of our operations, including our existing and future research collaborations, and damage our reputation, which in turn could harm our business and future results of operations. The data and software on which our technology depends, as well as other information used in our operations, are trade secrets which are critical to our business, and any loss or unauthorized access or use thereof could materially harm our business.
Further, we are or may become subject to data privacy laws and regulations that could be implicated in our operations, including due to the issues described above. The interpretation and application of consumer and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. Among other things, federal, state and foreign privacy laws impose significant obligations on U.S. companies to protect the personal information of foreign and domestic citizens. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices, which could have a material adverse effect on our business. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Any of the foregoing events could have a material negative impact on our business, financial condition and prospects.
Failure of our information technology infrastructure to operate effectively could adversely affect our business.
We depend on information technology infrastructure to pursue our business objectives and development efforts with respect to our potential product candidates. If a problem occurs that impairs this infrastructure, including as a result of an outage or malfunctioning of the hardware and software comprising or contributing to the information technology, the resulting disruption could impede our ability to proceed with research objectives in a timely manner, or otherwise carry on business in the normal course. Any such events could cause us to lose opportunities or progress with respect to potential product candidates or strategic alliances, and could require us to incur significant expense to remediate.
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The commercial success of our potential product candidates will depend upon the acceptance of these potential product candidates by the medical community, including physicians, patients and healthcare payors.
Assuming one or more potential product candidates achieve regulatory approval and we commences marketing such products, the market acceptance of any potential product candidates will depend on several factors, including:
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demonstration of clinical safety and efficacy compared to other products;
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the relative convenience, ease of administration and acceptance by physicians, patients and healthcare payors;
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the prevalence and severity of any adverse effects or serious adverse effects;
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limitations on marketing or warnings in the label approved by FDA and/or foreign regulatory authorities for such products;
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the timing of market introduction of our products relative to competitive products and the availability of alternative treatments;
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pricing and cost-effectiveness;
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the execution and effectiveness of our or any partners’ sales and marketing strategies;
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our ability to obtain hospital formulary approval; and
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our ability to obtain and maintain sufficient third-party payor coverage or reimbursement.
In addition, healthcare reform measures such as the ACA and future government initiatives could have the effect of reducing prices for products we seek to commercialize in the future, thereby reducing our prospects for revenue and profitability with respect to any such products.
If we obtain regulatory approval for one product candidate, we expect sales to generate substantially all of our product revenues, and as such, the failure of such product to find market acceptance would adversely affect our results of operations.
Disruptions at the FDA, the SEC and other U.S. government agencies or comparable foreign regulatory authorities 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 business functions, which could negatively impact our business and our timelines.
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, shifting policy priorities as a result of changes in the Presidential administration and political appointees tasked to oversee the agency, the availability of personnel and other resources, and statutory, regulatory, and policy changes and other events that may otherwise affect the FDA’s ability to perform routine transactions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC, and other U.S. government agencies or comparable foreign regulatory authorities on which our operations may rely is subject to the impacts of political events, including executive and congressional priorities, which are inherently fluid and unpredictable.
Disruptions and personnel turnover, as a result of leadership changes, staff reductions or otherwise, at the FDA and other agencies may slow the time necessary for product applications to be reviewed and/or approved by necessary government agencies, which could adversely affect our business. Changes and cuts in FDA staffing have been reported by some in the pharmaceutical industry as creating instances of delays in the FDA’s responsiveness or in its ability to review investigational new drug applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. For example, over the last several years, the U.S. government has shut down several times 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. Specifically, in 2025, the U.S.
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government issued executive orders and implemented reductions in force that have adversely impacted FDA staffing and resources. If a prolonged government shutdown occurs or if staffing changes prevent the FDA, the SEC or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, including formal and informal interactions with product developers, it could significantly impact the ability of the FDA and the SEC to timely review and process our submissions, which could have a material adverse effect on our business and our timelines. Further, future government shutdown or other substantial disruption at other government agencies, such as the SEC, may also impact our business by delaying review of our public filings, which in turn could delay or frustrate our ability to access the public capital markets. Similar developments at regulators in other countries (including the EMA) could have similar impacts on our applications for marketing approval and on our business.
In addition, changes in the requirements and policies of the FDA and other regulatory agencies with jurisdiction over our products, including applicable pricing and reimbursement frameworks under federal healthcare programs, could affect the commercial viability of our products, create revenue uncertainty, and impact our ability to achieve profitability. Regulatory challenges may introduce new challenges in obtaining FDA approval or navigating commercialization, and any delay in securing applicable regulatory approvals would adversely affect our business and prospects.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our potential product candidates, we may be unable to generate any revenues from product sales.
We do not have a team with experience in the sales, marketing and distribution of pharmaceutical products and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. To market any products that may be approved, we must build our sales, marketing, managerial and other non-technical capabilities or arrange with third parties to provide these services.
Our current and future partners may not dedicate sufficient resources to the commercialization of our potential product candidates or may otherwise fail in their commercialization efforts due to factors beyond our control. If we are unable to establish effective alliances to enable the sale of our potential product candidates to healthcare professionals and in geographical regions, including the United States, that will not be covered by our own marketing and sales force, or if our potential future strategic partners do not successfully commercialize the potential product candidates, our ability to generate revenues from product sales will be adversely affected.
If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, we may not be able to generate sufficient product revenue and may not become profitable. We will be competing with many companies that have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third-party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.
If we obtain approval to commercialize any approved products outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.
If any of our potential product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwide basis or in more limited geographical regions. We expect to be subject to additional risks related to entering into international business relationships, including:
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different regulatory requirements for drug approvals in foreign countries;
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reduced protection for intellectual property rights;
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unexpected changes in tariffs, trade barriers and regulatory requirements;
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economic weakness, including inflation, or political instability in foreign economies and markets;
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compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
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foreign taxes, including withholding of payroll taxes;
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foreign currency fluctuations, which could cause increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where labor unrest is endemic;
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the impact of any war or hostilities such as those occurring in Ukraine and the Middle East;
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production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
If we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other personnel or experience increases in our compensation costs, our business may materially suffer.
We depend on principal members of our executive and research teams; the loss of whose services may adversely impact the achievement of our objectives. We are highly dependent on certain key personnel, particularly Frederick Pierce, our Chief Executive Officer, Peter Marschel, our Chief Business Officer, Barbara Hibner, our Chief Scientific Officer, and Michael Lipp, our Chief Technology Officer. If we lose the services of any of these individuals, we may be unable to locate replacements capable of performing these roles effectively, and any such individual will require high compensation in a competitive market for experienced and qualified personnel within our industry. We do not carry “key-man” life insurance on any of its employees or advisors. Furthermore, our future success will also depend in part on the continued service of our key scientific and management personnel and our ability to identify, hire, and retain additional personnel. We may not be able to attract and retain personnel on acceptable terms, as there is significant competition among numerous pharmaceutical companies for individuals with similar skill sets. Because of this competition, our compensation costs may increase significantly. If we lose key employees, our business may suffer.
Any relationships with customers and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply, or have not fully complied with such laws, we could face criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
If we obtain FDA approval for any of our potential product candidates and commercialize those products in the United States, our operations may be directly, or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. These laws may impact, among other things, our proposed sales, marketing and education programs. We may be subject to patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we conduct our business. The laws that may affect our ability to operate include:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the purchase or recommendation of an item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs;
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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;
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the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
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HIPAA, as amended by the Health Information Technology and Clinical Health Act of 2009 , and our implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and
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state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
If our operations are found to violate any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, possible exclusion from Medicare, Medicaid and other government healthcare programs, and curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our results of operations.
Because we will face potential product liability as we further develop potential product candidates and more so if we can commercialize any product candidate, if claims are brought against us, we may incur substantial liability and costs.
Using our potential product candidates in clinical trials and the sale of any products for which we obtain marketing approval will expose us to the risk of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others selling or otherwise coming into contact with our products. These claims may allege that our products caused harm to them and/or that any adverse side effects or outcomes were not adequately disclosed or labelled. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. Regardless of merit or eventual outcome, product liability claims may cause:
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impairment of our business reputation;
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withdrawal of clinical trial participants;
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costs due to related litigation;
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distraction of management’s attention from our primary business;
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substantial monetary awards to patients or other claimants;
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regulatory scrutiny and product recalls, withdrawals or labeling, marketing or promotional restrictions;
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the inability to commercialize our potential product candidates; and
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decreased demand for our potential product candidates, if approved for commercial sale.
Insurance coverage is becoming increasingly expensive, and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for potential product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. Occasionally, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.
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If we fail to comply with applicable laws and regulations, including environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes, and the treatment of animals used in research. Our operations involve using hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. If contamination occurs or injury results from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
The Federal Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for health care employers, including clinical laboratories, whose workers may be exposed to pathogens such as those we aim to treat. These requirements, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens. In addition, the Needlestick Safety and Prevention Act requires, among other things, that we include in our safety programs the evaluation and use of engineering controls such as safety needles if found to be effective at reducing the risk of needlestick injuries in the workplace.
Although our workers’ compensation insurance may cover us for costs and expenses, we may incur additional costs due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, and this insurance may not provide adequate coverage against other potential liabilities. We may incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may cause substantial fines, penalties or other sanctions.
Our ability to use our net operating losses and tax credits to offset future taxable income and income tax liabilities may be limited.
At December 31, 2025, the Company had approximately $54.4 million of gross federal and $8.5 million of gross state net operating loss carry-forwards. Tax Cuts and Jobs Act (“TCJA”) in 2017 amended the net operating losses carryforward rules. Net operating losses generated after December 31, 2017, may be carried forward indefinitely, subject to certain limitations on their use. Net operating losses generated prior to 2018 may be carried forward for twenty years. State net operating losses have varying carryforward and applicable expiration periods. $54.4 million of the federal net operating losses were incurred after December 31, 2017, and will be carried forward indefinitely; the balance of the federal net operating losses are subject to expiration no later than 2037. The utilization of such net operating loss carry-forwards and realization of tax benefits in future years depends predominantly upon having taxable income. The Company has approximately $3.5 million of federal research and development credits and $.4 million of state research and development credits which will begin to expire in 2040 if not utilized
In addition, under sections 382 and 383 of the Code, our federal net operating losses and tax credit carryforwards, such as research/development credits, may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders (or groups of stockholders) in excess of 50% over a rolling three-year period. Similar state provisions may also exist. These ownership changes may limit the amount of the net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and income tax, respectively.
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Entities are also required to evaluate, measure, recognize and disclose any uncertain federal or state income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2025, there were no uncertain tax positions. The Company's U.S. federal and state net operating losses have occurred since its inception in 2017 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant tax year to audit by The U.S. Internal Revenue Service (“IRS”) and/or state taxing authorities. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the 12 months ended December 31, 2025 and 2024.
Business interruptions resulting from natural disasters and adverse weather events could cause delays in research and development of our potential product candidates.
We and third parties on which we rely upon are vulnerable to natural disasters such as earthquakes, tornados, severe storms, hurricanes, tsunamis, and fires, as well as other events that could disrupt our operations and cause delays in research and development of our potential product candidates. We do not carry insurance for natural disasters or similar events, and we may not carry sufficient business interruption insurance to compensate for losses that may occur. Any losses or damages we incur could have a material adverse effect on our operations.
Risks Related to Ownership of our Common Stock
The price of our common stock may fluctuate substantially.
You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section, are:
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The price of our common stock may fluctuate substantially;
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volatility and limitations in trading volumes of our shares of common stock;
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speculative trading in and short sales of our stock, as well as trading phenomena such as the “short squeeze” and “short and distort” schemes;
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our ability to obtain financings to conduct and complete research and development activities including, but not limited to, our clinical trials, and other business activities;
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the timing and success of introductions of new applications and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;
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network outages or security breaches;
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our ability to secure resources and the necessary personnel to conduct clinical trials on our desired schedule;
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commencement, enrollment or results of our clinical trials for our potential product candidates or any future clinical trials we may conduct;
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changes in the development status of our potential product candidates;
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any delays or adverse developments or perceived adverse developments with respect to the FDA’s review of our preclinical and clinical trials;
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any delay in our submission for studies or product approvals or adverse regulatory decisions, including failure to receive regulatory approval for our potential product candidates;
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unanticipated safety concerns related to the use of our potential product candidates;
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failures to meet external expectations or management guidance;
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changes in our capital structure or dividend policy, future issuances of securities, sales of large blocks of common stock by our stockholders;
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our cash position;
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announcements and events surrounding financing efforts, including debt and equity securities;
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our inability to enter into new markets or develop new products;
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reputational issues;
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competition from existing technologies and products or new technologies and products that may emerge;
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announcements of acquisitions, partnerships, collaborations, joint ventures, new products, capital commitments, or other events by us or our competitors;
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changes in general economic, political and market conditions in or any of the regions in which we conduct our business;
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changes in industry conditions or perceptions;
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changes in valuations of similar companies or groups of companies;
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analyst research reports, recommendation and changes in recommendations, price targets, and withdrawals of coverage;
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departures and additions of key personnel;
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disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations;
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changes in applicable laws, rules, regulations, or accounting practices and other dynamics; and
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other events or factors, many of which may be out of our control.
In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
Future sales of a significant number of our shares of common stock in the public markets, or the perception that such sales could occur, could depress the market price of our shares of our common stock or cause our stock price to decline.
We expect that significant additional capital will be needed in the future to continue our planned operations, including, without limitation, funding our trials and studies, marketing and commercializing our products and funding our operations. Accordingly, we have sold, and in the future may sell, common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. To the extent we raise additional capital by issuing additional shares of common stock or securities convertible or exchangeable for our common stock, our stockholders may experience substantial dilution, and new investors could gain rights superior to our existing stockholders.
Sales of a substantial number of our shares of common stock in the public markets, or the perception that such sales could occur, including from the exercise of warrants or sales of common stock issuable thereunder, could cause the market price of our shares of common stock to decline and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the number of these shares that might be sold nor the effect that future sales of our shares of common stock, including shares issuable upon the exercise of warrants, would have on the market price of our shares of common stock.
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We do not currently intend to pay dividends on our common stock, and any return to investors is expected to come, if at all, only from potential increases in the price of our common stock.
At the present time, we intend to use available funds to finance our operations. Accordingly, while payment of dividends rests within the discretion of our board of directors, we have no intention of paying any such dividends in the foreseeable future. Any return to investors is expected to come, if at all, only from potential increases in the price of our common stock.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” for purposes of the 1940 Act if (1) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (2) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an “investment company,” as such term is defined in the 1940 Act.
Notwithstanding Sections 3(a)(1)(A) and (C) of the 1940 Act, we are a research and development company and comply with the safe harbor requirements of Rule 3a-8 of the 1940 Act. We intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
We are a “smaller reporting company” and are able to avail ourselves of reduced disclosure requirements applicable to smaller reporting companies, which could make our common stock less attractive to investors.
We are a smaller reporting company, and we will remain a smaller reporting company until we determine that either (1) our annual revenues are at least $100 million and our voting and non-voting common stock held by non-affiliates is at least $250 million measured on the last business day of our most recent second fiscal quarter, or (2) our voting and non-voting common stock held by non-affiliates is at least $700 million measured on the last business day of our most recent second fiscal quarter. Smaller reporting companies are able to provide simplified executive compensation disclosure, and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information or risk factors. In addition, as a non-accelerated filer, we are exempt from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
We have elected to take advantage of certain of the reduced reporting obligations. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile.
Our certificate of incorporation, our bylaws, and Delaware law may have anti-takeover effects that could discourage, delay, or prevent a change in control, which may cause our stock price to decline.
Our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are authorized to issue up to 10 million shares of preferred stock. This preferred stock may be issued
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in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. No preferred stock is currently outstanding. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by the present management.
Provisions of our amended and restated certificate of incorporation and our amended and restated bylaws and Delaware law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, the certificate of incorporation and bylaws and Delaware law, as applicable, among other things:
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provide the board of directors with the ability to alter the bylaws without stockholder approval;
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place limitations on the removal of directors;
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establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; and
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provide that vacancies on the board of directors may be filled by a majority of directors in office, although less than a quorum.
Financial reporting obligations of being a public company in the U.S. are expensive and time-consuming, and our management is required to devote substantial time to compliance matters.
As a publicly traded company we have incurred and will continue to incur significant legal, accounting and other expenses. The obligations of being a public company in the U.S. require significant expenditures and place significant demands on our management and other personnel, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements of the stock exchange on which our securities are listed. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and changes in corporate governance practices, among many other complex rules that are often difficult to implement, monitor and maintain compliance with. Moreover, despite reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly as we are no longer an “emerging growth company.” In addition, we expect these and similar rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain such insurance. Our continued compliance with applicable requirements and to keep pace with new regulations requires management and other personnel to devote a substantial amount of their time, otherwise we may fall out of compliance and risk becoming subject to litigation or being delisted, among other potential problems.
General Risk Factors
If securities or industry analysts do not publish research or reports, or publish unfavorable research or reports about our business, our stock price and trading volume may decline.
The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our
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common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, which has occurred in the past, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.
Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our business, results of operations, financial condition and cash flows.
The tax regimes we are subject to or operate under, including income and non-income taxes, are unsettled and may be subject to significant change. Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially adversely affect our business, financial condition, results of operations, and prospects. For example, the TCJA, the Coronavirus Aid, Relief and Economic Security Act, and the Inflation Reduction Act (the “IRA”) made many significant changes to the U.S. tax laws. Beginning in 2022, the TCJA requires taxpayers to capitalize and amortize certain research and development expenditures over five years if incurred in the U.S. and 15 years if incurred in foreign jurisdictions, rather than deducting them currently. Although there have been legislative proposals to repeal or defer the research and development expenditure capitalization requirement to later years, there can be no assurance that the provision will be repealed or otherwise modified. As another example, the IRA includes provisions that will impact the U.S. federal income taxation of certain corporations, including imposing a minimum tax on the book income of certain large corporations and a 1% excise tax on the value of certain corporate stock repurchases by publicly traded companies that would be imposed on the company repurchasing such stock. Regulatory or accounting guidance with respect to existing or future tax laws could materially affect our tax obligations and effective tax rate. It is uncertain if, and to what extent, various states will conform to current federal law or any newly enacted federal tax legislation.
Additional indirect taxes in various jurisdictions could materially adversely affect our business, financial condition, results of operations, and prospects.
We currently collect and remit applicable indirect taxes in jurisdictions where we, through our employees or economic activity, have a presence and where we have determined, based on applicable legal precedents, that our activities are taxable. We do not currently collect and remit indirect taxes, including state and local excise, utility user, and ad valorem taxes, fees, and surcharges in jurisdictions where we believe we do not have sufficient “nexus.” Tax authorities may challenge our position that we do not have sufficient nexus in a taxing jurisdiction or that our activities are not taxable in such jurisdiction and may decide to audit our business and operations with respect to indirect taxes, which could result in significant tax liabilities (including related penalties and interest) for us or our customers, which could materially adversely affect our business, financial condition, results of operations, and prospects.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
We maintain standard procedures to help assess, identify and manage material risk posed by cybersecurity threats and regularly evaluate how we can integrate these procedures into our overall risk management processes. For example, we require that all of our employees who have access to our internal network complete formal cybersecurity training upon hire and on a periodic basis, including training on phishing, malware, and other cybersecurity risks. We also continuously evaluate our information technology systems and our practices that relate to our information technology systems. To date, we have not engaged any formal assessment or cyber security auditors or other third parties in connection with these efforts but may elect to do so in the future.
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To the extent we identify areas in our information systems that need improvement, we seek to timely implement and monitor such improvements. While we believe that we have taken appropriate security measures to protect our data and information technology systems, and have been informed by our third-party vendors that they have as well, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems, or those of our third-party vendors, that could materially adversely affect our business and financial condition. For additional information regarding whether risks from cybersecurity threats are reasonably likely to materially affect the Company, including our business strategy, results of operations, or financial condition, see Item 1A, “Risk Factors,” in this Annual Report on Form 10-K.
Governance
We currently engage a qualified IT consultant who reports to our Chief Executive Officer.This consultant has over 30 years of experience with cybersecurity, information technology development and deployment and information technology risk assessment and management, including information security management.
Our IT consultant regularly monitors our information technology systems and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents in consultation with our Chief Executive Officer. Our Chief Executive Officer periodically reports information regarding our cybersecurity program to our Board, which has overall responsibility for risk oversight. In addition, our management is responsible for alerting our Board of any material cybersecurity incidents.
Over the last two years, we have not experienced any cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business, results of operations, or financial condition.
Item 2. Properties
Our principal executive offices are in the Texas Medical Center in Houston, Texas, under a month-to-month lease. Currently, this facility consists of approximately 300 square feet and accommodates our general and administrative activities. We also maintain a facility at One Broadway, 14th Floor, Cambridge, MA 02142. Additionally, we lease laboratory space at 45-18 Ct Square W, Long Island City, NY 11101. Neither company owns any physical property, plants, or laboratories.
Item 3. Legal Proceedings
We are not currently a party to any legal proceedings the outcome of which we believe, if determined adversely to us, would individually or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. From time to time, we may become involved in legal proceedings arising in the ordinary course of business.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is listed on the Nasdaq Capital Market under the symbol “DCOY.”
As of March 19, 2026, we had approximately 16 record holders of our common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of individual stockholders represented by these record holders.
Equity Compensation Plan Information
Information required by Item 5 of Form 10-K regarding our equity compensation plans is incorporated herein by reference from Item 12 of Part III of this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
On December 12, 2024, we entered into a securities purchase agreement (the “ELOC Agreement”) with C/M Capital Master Fund, LP (the “Purchaser”), we have issued and sold a total of 37,035 shares (the “Purchase Shares”) of our common stock to the Purchaser pursuant to the ELOC Agreement at a weighted average exercise price of $128.76 for an aggregate purchase price of $4.8 million through March 27, 2026. These issuances and sales were made following written notice delivered by us to Investor, directing Investor to purchase the Purchase Shares. We also issued 370 shares of our common stock to the Purchaser as commitment shares pursuant to the terms of the ELOC Agreement.
During the three years ended December 31, 2025, we granted to our directors and officers options to purchase an aggregate of 115 shares of our common stock at exercise prices ranging from $734.40 to $822.38 per share, and 25 shares of restricted stock
Other than as described above or as previously disclosed on our Current Reports on Form 8-K or Quarterly Reports on Form 10-Q filed with the SEC, we did not issue any unregistered equity securities during the twelve months ended December 31, 2025.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 6.
RESERVED
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview
This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess our financial condition and results of operations. Statements that are not historical are forward-looking and involve risks and uncertainties discussed under the headings Special Note Regarding Forward-Looking Statements” and “Risk Factors” of this report. The following discussion of our results of operations and financial condition should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this report. These risks could cause our actual results to differ materially from any future performance suggested below. The Merger (as defined below) of Salarius Pharmaceuticals, Inc. (“Salarius”) and Decoy Therapeutics Inc. (“Legacy Decoy”) closed on November 12, 2026. Accordingly, post-merger operating activities of Legacy Decoy have been included in the consolidated Financial Statements of the Combined Company (as defined below).
Introduction
Our Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows.
Overview
We are a pre-clinical stage biotechnology company focused on advancing our pipeline of peptide conjugate therapeutics engineered through our proprietary IMP3ACT platform. Our IMP3ACT platform represents a paradigm shift in peptide conjugate drug discovery and manufacturing, leveraging machine learning ("ML") and artificial intelligence ("AI") tools alongside high-speed synthesis techniques to rapidly engineer, optimize and manufacture peptide conjugates that target serious unmet medical needs. Peptide conjugates are emerging as a major therapeutic drug modality, with the potential to transform multiple therapeutic areas.Utilizing our novel IMP3ACT platform that increases the drug development speed and reduce the complexity of variant synthesis, we aim to build a robust portfolio of novel peptide conjugate therapeutics, initially focusing on infectious diseases and oncology, with the goal of becoming a fully integrated biopharmaceutical company at the forefront of this field. Through this approach, we intend to revolutionize the design, development, and commercialization of peptide conjugate therapeutics. We have no products approved for commercial sales and have not generated any revenue from product sales.
Prior to January 8, 2026, we were known as Salarius Pharmaceuticals, Inc. In November 2025, (“Salarius or “Legacy Salarius”). completed a Merger (as defined below) with Legacy Decoy and conducted financings to raise capital for its business (together, along with future steps set forth elsewhere in this 10-K annual report, the “Decoy Transaction”). We refer herein to the post-transaction entity as the “Combined Company.” In connection with the Decoy Transaction, on January 8, 2026, Salarius filed an amendment to its amended and restated certificate of incorporation to change its name to Decoy Therapeutics Inc. (the “Name Change”). Prior to the Name Change, the Combined Company’s shares of common stock traded on the Nasdaq Capital Market (“Nasdaq”) under the symbol “SLRX.” Following the Name Change, the Combined Company’s shares of common stock now trade on the Nasdaq under the symbol “DCOY.”
The Merger (as defined below) combines our complementary approaches to create a comprehensive drug development platform. Our pipeline includes peptide conjugate drug candidates designed by our IMP3ACT platform, as well as two small molecule drugs that address gene dysregulation: (1) SP-3164, a targeted protein degrader, and (2) seclidemstat (“SP-2577”), a targeted protein inhibitor. SP-2577 has received FDA fast track designation as a potential treatment for Ewing sarcoma, a rare pediatric disease. We supported The University of Texas MD Anderson Cancer Center (“MDACC”) in MDACC’s sponsored clinical trial evaluating SP-2577 in combination with azacytidine in adult patients with myelodysplastic syndromes and chronic myelomonocytic leukemia through December, 2025. No further enrollment is planned. We intend to seek strategic alternatives for this program including potential out-licensing.
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We plan to integrate our assets, particularly the proprietary compound SP-3164, to expand our opportunities in creating a novel class of peptide conjugates called peptide-based proteolysis targeting chimeras (“P-PROTACs”). We believe the synergies from the Merger are evident in our combined approach to drug development, integrating expertise in peptide conjugates with our small molecule assets. This combination enables us to address a wider range of diseases and potentially “undruggable” targets.
Recent Developments
Nasdaq Listing
On December 31, 2025, the Company received written notice from Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price of the Company’s Common Stock for the last 30 consecutive business days was below the $1.00 per share minimum bid price requirement (the “Minimum Bid Price Requirement”). As the Company effected the 2025 Reverse Stock Split (as defined below) during the prior one-year period and remains subject to a mandatory panel monitor, the Company is not eligible for a 180-calendar day compliance period under Nasdaq listing rule 5810(c)(3)(A). The Company appealed the delisting determination by requesting a hearing before a Nasdaq Hearings Panel (the “Hearings Panel”). The Company presented its appeal to the Hearings Panel in early February 2026 and submitted a plan to regain compliance by March 20, 2026, including conducting a reverse stock split.
On March 13, 2026, the Company received a written notice from the Hearings Panel notifying the Company that it has been granted until March 20, 2026 to regain compliance with the Minimum Bid Price Requirement. . Pursuant to the Hearings Panel's decision, the continued listing of the Company's securities is subject to the condition that the Company must demonstrate compliance with the Minimum Bid Price Requirement on or before March 20, 2026. In connection with its compliance plan, the Company completed the 2026 Reverse Stock Split (as defined below) on March 6, 2026 and subsequently achieved a closing bid price of $7.47 on March 20, 2026, thereby demonstrating compliance with the Minimum Bid Price Requirement.
Closing of Decoy Merger
On January 10, 2025, the Company entered into an Agreement and Plan of Merger, as amended by the First Amendment on March 28, 2025, by the Second Amendment on June 10, 2025, by the Third Amendment on July 18, 2025, by the Fourth Amendment on July 29, 2025, and by the Fifth Amendment dated September 17, 2025 (as amended, collectively, the “Merger Agreement”) with Decoy Therapeutics MergerSub I, Inc. (“MergerSub I”), Decoy Therapeutics MergerSub II, LLC (“MergerSub II”), and Legacy Decoy.
On November 12, 2025, pursuant to the Merger Agreement, MergerSub I merged with and into Legacy Decoy, and immediately thereafter Legacy Decoy merged with and into MergerSub II (the “Merger”), resulting in the Legacy Decoy business becoming a wholly owned subsidiary of the Company. The Merger is structured as a two-step transaction. In step one of the transaction, the Merger was consummated and all of Decoy’s outstanding equity interests were exchanged based on an exchange ratio for consideration of shares of Salarius’ Series A Preferred Stock. Additionally, certain holders of Decoy’s non-convertible promissory notes (the “Decoy Promissory Notes”) exchanged their notes for shares of Salarius’ Series B Preferred Stock pursuant to note exchange agreements entered into in connection with the Merger, with the closing of such exchange to occur at the Merger Closing. The Series A Preferred Stock and the Series B Preferred Stock are newly designated series of preferred stock (collectively, the “Preferred Stock”) that are intended to have economic rights equivalent to the Salarius common stock, but with only limited voting rights. The Series B Preferred Stock is identical in all material respects to the Series A Preferred Stock, except for certain redemption and conversion provisions that require (i) fifty percent (50%) of net proceeds from Salarius’ “at-the-market” equity program and equity line of credit to be used for mandatory redemption of the Series B Preferred Stock until fully redeemed, (ii) optional redemption allowing Salarius to redeem all or any portion of the outstanding Series B Preferred Stock at any time following the Merger Closing, and (iii) optional conversion at the discretion of the holders upon
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stockholder approval of the conversion of the Series B Preferred Stock and Salarius’ achievement of the Nasdaq initial listing standards for a period of one year following such approvals, at which time remaining shares of Series B Preferred Stock shall automatically convert into Company common stock at the conversion ratio.
In connection with the Merger, the Company issued 877.709 shares of the Series A Preferred Stock and 796.306 shares of the Series B Preferred Stock to former Legacy Decoy stockholders and debtholders and reserved 45.098 shares of Series A Preferred Stock for assumed in-the-money options and warrants of Legacy Decoy. In connection with the adjustment to the conversion ratio in the certificate of designations for the Series A and Series B Preferred Stock triggered by the offering, the number of Company common shares underlying the issued and reserved shares of Series A and Series B Preferred Stock is 401,126. The shares of Series A Preferred Stock and Series B Preferred Stock are not convertible into Common Stock until such time as the Company’s stockholders approve such conversion in accordance with Nasdaq Rule 5635 and the approval of the Company’s initial listing application with Nasdaq. When converted, the conversion ratio applicable to the Common Stock issuable upon conversion will be adjusted pursuant to the March 6, 2026 1-for-12 reverse stock split.
In step two of the Merger, Salarius has agreed to call a special stockholder meeting to approve, among other things, the conversion of the Preferred Stock to be issued at the Merger Closing into shares of Salarius common stock (the “Conversion Proposal”). The Conversion Proposal was approved by sharedholders in February 2026. Nasdaq has informed Salarius that the Decoy transaction constitutes a business combination that will result in a “Change of Control” pursuant to Listing Rule 5110(a) in connection with step two of the transaction and that the post-transaction entity will be required to satisfy all of Nasdaq’s initial listing criteria and to complete Nasdaq’s initial listing process prior to Salarius’ stockholder meeting to seek approval for the Conversion Proposal. Salarius therefore intends to commence the initial listing process following the consummation of this financing and the Merger Closing at such time that the post-transaction entity is expected to satisfy all of the applicable Nasdaq initial listing criteria. The Preferred Stock issued at the Merger Closing in connection with step one of the Decoy transaction will not be convertible into Salarius common stock until Nasdaq’s approval of the initial listing application and stockholder approval of the Conversion Proposal.
Management and Director Changes
In connection with the Merger closing on November 12, 2025, Mr. Frederick E. Pierce was appointed Chief Executive Officer and Director; Dr. Barbara Hibner was appointed Chief Scientific Officer; and Mr. Peter Marschel was appointed Chief Business Officer. Mr. Mark Rosenblum will continue to serve as Executive Vice President and Chief Financial Officer (including as principal financial officer and principal accounting officer).
November 2025 Financing
On November 11, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as the sole underwriter (the “Representative”), relating to the issuance and sale in a public offering (the “November 2025 Offering”) of: (i) 209,528 shares of the Company’s Common Stock, (ii) pre-funded warrants to purchase up to 179,361 shares of Common Stock, (iii) Series A warrants to purchase up to 388,889 shares of Common Stock, (iv) Series B warrants to purchase up to 3,88.889 shares of Common Stock, and (v) up to 58,333 additional shares of Common Stock, Series A warrants to purchase up to an additional 58,333 shares of Common Stock and Series B warrants to purchase up to an additional 58,333 shares of Common Stock that may be purchased pursuant to a 45-day option to purchase additional securities granted to the Representative by the Company. The Representative exercised this option on November 11, 2025 for 55,477 shares of Common Stock, Series A warrants to purchase up to 58,333 shares of Common Stock and Series B warrants to purchase up to 58,333 shares of Common Stock. The combined public offering price of each share of Common Stock, together with the accompanying Series A warrants and Series B warrants, was $18, less underwriting discounts and commissions. The combined public offering price of each pre-funded warrant, together with the accompanying Series A warrants and Series B warrants, was $17.9988, less underwriting discounts and commissions. Subject to limited exceptions, a warrant holder may not exercise any portion of its warrants to the extent that the holder would beneficially own more
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than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the Company’s outstanding Common Stock after exercise.
The November 2025 Offering, including the additional shares of Common Stock, Series A warrants and Series B warrants sold pursuant to the exercise of the Representative’s option, closed on November 12, 2025.
The net proceeds from the Offering, including the additional shares of Common Stock, Series A warrants and Series B warrants sold pursuant to the exercise of the Representative’s option, after deducting underwriting discounts and commissions and other estimated Offering expenses payable by the Company and excluding any net proceeds from the exercise of the Series A warrants, Series B warrants and pre-funded warrants, were approximately $6.3 million.
In connection with the November 2025 Offering, the Company and Equiniti Trust Company, LLC entered into a Warrant Agency Agreement pursuant to which Equiniti agreed to act as warrant agent with respect to the Series A warrants, the Series B warrants and the pre-funded warrants.
On November 12, 2025, pursuant to the Underwriting Agreement, the Company issued warrants to the Representative to purchase up to 22,218 shares of Common Stock at an exercise price of $27.9, subject to adjustments (the “Representative Warrants”). The Representative Warrants are exercisable at any time and from time to time, in whole or in part, until November 11, 2030, and have substantially similar terms to the Series A warrants.
All securities issued in the November 2025 Offering (including the shares of Common Stock issuable from time to time upon exercise of the warrants and the Representative Warrants) were offered pursuant to a registration statement on Form S-1, as amended, which became effective on November 10, 2025.
Reverse Stock Splits
On August 15, 2025, the Company filed a Certificate of Amendment to the Company’s restated certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share (the “2025 Reverse Stock Split” ) which became effective as of August 18, 2025.
On March 5, 2026, the Company filed a Certificate of Amendment to the Company’s amended and restated certificate of incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1-for-12 reverse stock split of the Company's issued and outstanding shares of Common Stock, par value $0.0001 per share (the “2026 Reverse Stock Split”) which became effective as of March 6, 2026.
Going Concern
We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since inception. We had an accumulated deficit of $94.4 million as of December 31, 2025. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.
The lack of revenue from product sales to date and recurring losses from operations since our inception raise substantial doubt as to our ability to continue as a going concern. We will continue to require substantial additional capital to continue our operation and clinical development activities and may need such additional capital sooner than 12 months. As of December 31, 2025, we had cash and cash equivalents of $10.7 million, which includes approximately $3.0 million of cash that is restricted for use under the Gates Grant Agreement. Accordingly, we will need to raise substantial additional capital to continue to fund our operations beyond 2026. The amount and timing of our future funding requirements will depend on many factors, including the result of our strategic alternatives process, our ability to raise additional capital on commercially reasonable terms, the pace and results of clinical development
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activities, and market conditions. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on our financial condition and our ability to continue our operations.
Results of Operations
The following table sets forth the consolidated results of our operations for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Year Ended December 31,
Acquired in-process research and development expenses 8,517,966 - 8,517,966
Research and Development Expenses
Research and development expenses were $8.9 million during the year ended December 31, 2025 compared to $0.8 million during the year ended December 31, 2024. This increase of $8.1 million principally resulted from IPR&D assets acquired in connection with the Merger.
Research and development costs by candidates and by categories:
Employee-related costs — —
General and Administrative Expense
General and administrative expenses were $3.7 million for the year ended December 31, 2025 compared to $5.0 million for the year ended December 31, 2024, the decrease is mainly driven by lower personnel costs, public company expenses and D&O insurance cost. The Merger was closed on November 12, 2026. Accordingly, post-merger operating activities of Legacy Decoy have been included in the consolidated Financial Statements of the Combined Company.
Liquidity and Capital Resources
Current and Future Financing Needs
Since inception, we have incurred operating losses and we anticipate that we will continue to incur losses for the foreseeable future. We have not generated any cash inflows from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and
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until we obtain regulatory approval for and commercializes any of our potential product candidates, all of which are in early stages of development.
During the twelve months ended December 31, 2025, we received $0.8 million and $12.3 million of cash from investing in the asset acquisition and financing activities, respectively. As of December 31, 2025, we had $5.8 million of working capital and our cash and cash equivalents totaled $10.7 million, which were held in bank and money market accounts. Approximately $3.0 million of our December 31, 2025 cash position is restricted for use under our Gates Grant Agreement and can only be used for specific development purposes, not for general or administrative purposes. Our cash and cash equivalents balance increased during the year ended December 31, 2025, primarily due to financing and investing activities offset by capital used in operations. Under current operating conditions, we believe that our cash and cash equivalents on hand as of December 31, 2025 is sufficient to fund our anticipated operations into late 2026. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders.
Cash Flow
Year Ended December 31,
Net cash (used in) provided by:
Year Ended December 31,
Operating Activities
Net cash used in operating activities was $4.8 million for the year ended December 31, 2025, compared to $4.5 million for the year ended December 31, 2024. The increase is primarily due to general administrative activities. From an operational perspective, the Company incurred lower Legacy Salarius spending year to year. Combined Company expenses are included for the period from November 12, 2025 through December 31, 2025.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the consolidated balance sheet and the reported amounts of expenses during the reporting period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances at the time such estimates are made. Actual results may differ materially from our estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our consolidated financial statements prospectively from the date of the change in estimate.
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Our significant accounting policies are described in Note 2 to our audited consolidated financial statements for the year ended December 31, 2025 in this Annual Report on Form 10-K. The Company evaluates acquisitions to determine whether the transaction should be accounted for as a business combination or an asset acquisition. Transactions that do not meet the definition of a business are accounted for as asset acquisitions. Asset acquisitions typically consist of acquired in‐process research and development (“IPR&D”) programs, technology rights, licenses, or other intangible assets that do not have alternative future use at the acquisition date. The total consideration transferred in an asset acquisition is allocated to the individual assets acquired on a relative fair value basis. Transaction costs incurred in connection with asset acquisitions are capitalized as part of the cost of the acquired assets. Significant judgment is required in determining the fair value of the consideration transferred, which may include cash, equity instruments, or contingent consideration such as development, regulatory, or commercial milestone payments. The fair value of equity instruments issued as consideration is measured at the acquisition date based on the Company’s market price or, in the absence of a quoted market price, using valuation techniques that require assumptions about expected volatility, term, and marketability. Acquired IPR&D assets that do not have alternative future use are expensed as research and development costs at the acquisition date. If an acquired asset has alternative future use, the asset is capitalized and amortized over its estimated useful life once placed in service. Because asset acquisitions are often unique and involve early‐stage technologies, changes in assumptions related to the determination of alternative future use, estimated useful lives, or the timing and probability of milestone payments could have a material impact on the Company’s results of operations and financial position. We have identified this policy as critical because it is important to the presentation of our financial condition and results of operations and requires us to make judgments and estimates on matters that are inherently uncertain and may change in future periods. For more information regarding these policies, you should refer to Note 2 of our audited consolidated financial statements included in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements and does not have any holdings in variable interest entities.
Application of New Accounting Standards
See Note 2 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
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