Item 1A. Risk Factors 15
Item 1B. Unresolved Staff Comments 40
Item 1C. Cybersecurity 40
Item 2. Properties 41
Item 3. Legal Proceedings 41
Item 4. Mine Safety Disclosures 41
PART II
Item 6. [Reserved] 42
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48
Item 8. Financial Statements and Supplementary Data 49
Item 9A. Controls and Procedures 70
Item 9B. Other Information 71
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 71
PART III
PART IV
Item 15. Exhibits and Financial Statement Schedules 73
SIGNATURES 75
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Cautionary
Note Regarding Forward-Looking Statements
This
Annual Report on Form 10-K (this “Annual Report”) contains forward-looking statements that involve substantial risks and
uncertainties. Any statements in this Annual Report about our expectations, beliefs, plans, objectives, assumptions or future events
or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through
the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,”
“intend,” “plan” and “would.” For example, statements concerning financial condition, possible or
assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common
stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees
of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity,
performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied
by any forward-looking statement. We do not assume any obligation to update forward-looking statements as circumstances change and thus
you should not unduly rely on these statements.
Any
forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report.
Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained
in the forward-looking statements include but are not limited to:
● Market conditions;
● Our capital position;
● Our ability to compete with larger better financed pharmaceutical companies;
● Our uncertainty of developing marketable products;
● Our ability to develop and commercialize our products;
● Our ability to obtain regulatory approvals;
● Our ability to maintain and protect intellectual property rights;
● Our ability to control product development costs;
● We may not be able to attract and retain key employees;
● We may not be able to compete effectively;
● We may not be able enter into new strategic collaborations;
● The possibility that there will be no market acceptance for our products; and
The
foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements, which speak only as of the date of this Annual Report. We assume no obligation and expressly disclaim any duty to update
any forward-looking statement to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of
unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements contained in this Annual
Report. All written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified
in their entirety by the cautionary statements contained or referred to in this section.
All
share amounts included in this Annual Report have been retroactively adjusted to reflect a 1-for-50 reverse stock split, which took effect
on March 17, 2025.
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Risk
Factor Summary
Our
business is subject to significant risks and uncertainties that make an investment in us speculative and risky. Below we summarize what
we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider
the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this
Annual Report on Form 10-K. If any of the following risks actually occurs (or if any of those listed elsewhere in this Annual Report
on Form 10-K occur), our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously
harmed. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important
factors that adversely affect our business.
Risks
Related to Our Business
We
have incurred losses since inception, anticipate that we will incur continued losses for the foreseeable future indicating the possibility
that we may not be able to operate in the future.
We,
and our collaborators, must comply with extensive government regulations in order to advance our product candidates through the development
process and ultimately obtain and maintain marketing approval for our products in the U.S. and abroad.
We
will require substantial additional funding which may not be available to us on acceptable terms, or at all. If we fail to raise the
necessary additional capital, we may be unable to complete the development and commercialization of our product candidates or continue
our development programs.
Our
product candidates, if approved for sale, may not gain acceptance among physicians, patients and the medical community, thereby limiting
our potential to generate revenues.
Risks
Relating to the Commercialization of our Product Candidates
We
may delay or terminate the development of a product candidate at any time if we believe the perceived market or commercial opportunity
does not justify further investment, which could materially harm our business.
If
we fail to enter into collaborations, license agreements or other transactions with third parties to accelerate the development of our
product candidates, we will bear the risk of developmental failure.
If
government and third-party payers fail to provide adequate reimbursement or coverage for our products or those we develop through collaborations,
our revenues and potential for profitability will be harmed.
Risks
Related to Our Intellectual Property
If
we are unable to adequately protect or expand our intellectual property related to our current or future product candidates, our business
prospects could be harmed.
If
a third party claims we are infringing on its intellectual property rights, we could incur significant expenses, or be prevented from
further developing or commercializing our product candidates.
Our
failure to successfully discover, acquire, develop, and market additional product candidates or approved products would impair our ability
to grow.
Risks
Related to Government Regulation
Even
if our product candidate receives regulatory approval, it may still face future development and regulatory difficulties.
Health
care reform measures and other recent legislative initiatives could adversely affect our business.
Risks
Related to Our Common Stock
If
we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures in the future, or,
if we discover additional material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price
could decline significantly and raising capital could be more difficult. Our management determined that our disclosure controls and procedures
and internal controls were ineffective as of December 31, 2024 and if they continue to be ineffective could result in material misstatements
in our financial statements.
Certain
provisions in our certificate of incorporation and by-laws, and of Delaware law, may prevent or delay an acquisition of our company,
which could decrease the trading price of our common stock.
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PART
I
ITEM
1. BUSINESS
Overview
We
are a biopharmaceutical company headquartered in Morristown, New Jersey, previously focused on the development of drug therapy for treatment
of chronic liver diseases. Our cyclophilin inhibitor, rencofilstat (formerly CRV431), was being developed to offer benefits to address
multiple complex pathologies related to the progression of liver disease.
We
have completed a number of Phase 1 and Phase 2 clinical trials. In May 2023, we announced that our Phase 2a study (“ALTITUDE-NASH”)
met its primary endpoint by demonstrating improved liver function and was well tolerated after four months of treatment with once daily
oral rencofilstat administered to NASH subjects with stage 3 or greater fibrosis. All additional secondary efficacy and safety endpoints
were also met. These observations provide further evidence that builds on previous findings from a shorter 28-day Phase 2a (“AMBITION”)
trial.
In
June 2023, we announced that the Data and Safety Monitoring Board (“DSMB”) met to review the current data for the ASCEND-NASH
2b study and has issued a “study may proceed without modification” clearance. This, the first planned DSMB meeting, occurred
on schedule, and all labs, electrocardiogram’s, adverse events, and protocol deviations were reviewed, focusing on any potential
safety signals from the placebo-controlled trial.
In
December 2023, the board of directors approved a strategic restructuring plan to preserve capital by reducing operating costs. We incurred
a one-time restructuring charge of approximately $0.7 million in the fourth quarter of 2023. Additionally, we initiated a process to
explore a range of strategic and financing alternatives focused on maximizing stockholder value within the current financial environment
and NASH drug development landscape.
On April 19, 2024, we announced that we have begun wind-down activities in our ASCEND- NASH clinical
trial. We did not have access to sufficient funding to complete the study, as
designed. The wind-down activities were implemented to halt further clinical activities other than those which would allow for an orderly
and patient safety manner that would meet the minimum FDA requirements for safely closing a clinical trial. All clinical trial activities
were completed and the trial was closed in August 2024.trial.
On
July 19, 2024, we along with Pharma Two B Ltd., a company organized under the laws of the State of Israel (“Parent”),
and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”),
entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things, on the
terms and subject to the conditions set forth therein, Merger Sub will merge with and into us (the “Merger”), pursuant
to which we would survive the Merger as an indirect wholly owned subsidiary of Parent.
Concurrently
with the Merger, on July 19, 2024, we entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers
pursuant to which we sold an aggregate of $2.9 million in principal amount of our Original Issue Discount Senior Unsecured Nonconvertible
Notes (the “Notes”). The Notes are due on the earlier of: (i) December 31, 2024, (ii) the date of the closing of the
Merger, (iii) the date that the Merger is terminated pursuant to the terms of the Merger Agreement, or (iv) such earlier date as the
Notes are required or permitted to be repaid as provided in the Note, as may be extended at the option of the holder of the Note as described
in the Note.
On
December 10, 2024, Parent informed us that Nasdaq would not exclude our historical losses from its burn rate calculation and as a result
on December 10, 2024, we and Pharma Two B and Pearl entered into an agreement to terminate the Merger Agreement (the “Termination
Agreement”). Pursuant to the Termination Agreement, the Merger Agreement was terminated.
On
January 23, 2025, we consummated a best efforts registered offering for 73,222 shares
of common stock, Pre-Funded Warrants to purchase 480,624 shares of common stock, Series
A Warrants to purchase 553,846 shares of common stock and Series B Warrant to purchase 553,846
shares of common stock for gross proceeds of $9,000,000. A portion of the net proceeds was used to repay the Notes along with
accrued interest.
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Rencofilstat
Rencofilstat
is a therapeutic drug candidate that binds and inhibits the function of a specific class of isomerase enzymes called cyclophilins that
mainly regulate protein folding. Many closely related isoforms of cyclophilins exist in humans. Cyclophilins A, B, and D are the best
characterized cyclophilin isoforms. Inhibition of cyclophilins has been shown in the scientific literature to have therapeutic effects
in a variety of experimental models, including liver disease models. In preclinical in vitro and/or in vivo experiments
conducted to date rencofilstat decreased liver fibrosis, liver inflammation, liver tumor burden, and titers of HBV, HCV, HDV, and HIV-1.
Importantly, reduction in liver fibrosis by rencofilstat was observed in vivo in several experimental models and studies of NASH
and liver fibrosis. Findings to date suggest that rencofilstat might treat certain inciting agents of liver disease such as hepatitis
viruses and also the ensuing disease processes resulting from those agents such as fibrosis.
Cyclophilins
are pleiotropic enzymes that play a role in injury and steatosis through mechanisms including cell death occurring through mitochondrial
transition pore permeability (cyclophilin D). Inhibition of cyclophilin D, therefore, may play an important role in protection from cell
injury and death. Cyclophilin A binding to CD147 is known to play a role in inflammation, cyclophilin B plays a role in fibrosis through
collagen production, and cyclophilins also play a role in cirrhosis and cancer (e.g., cell proliferation and metastasis). Cyclophilin
inhibition with rencofilstat, therefore, may play an important role in reducing liver disease.
To
date, we have completed a number of separate preclinical animal efficacy studies of rencofilstat to assess antifibrotic activity. These
studies were conducted by independent laboratory collaborations at, for example, The Scripps Research Institute (San Diego, CA), SMC
Corporation (Tokyo, Japan), and Physiogenex S.A.S. (France), Each of these studies demonstrated consistent and significant reductions
in fibrosis in mice and rats. Rencofilstat was also tested in ex vivo Precision Cut Liver Slices and in Precision Cut Lung Slices
obtained from human donors. Again, rencofilstat demonstrated an antifibrotic effect in human tissue that was consistent with the animal
study findings. These studies provide support of advancing rencofilstat into clinical trials for NASH, and potentially additional indications
where fibrosis plays a role.
On
June 10, 2016, we entered into an agreement with Ciclofilin Pharmaceuticals, Inc. (Ciclofilin) to acquire 100% of the issued and outstanding
shares of common stock of Ciclofilin. The transaction was accounted for as a business combination (in accordance with Accounting Standards
Codification (“ASC”) 805, Business Combinations) and, as such, the Ciclofilin assets acquired, and liabilities assumed
were recorded at their respective fair values as of the effective date of the executed agreement. The transaction had been accounted
for using the acquisition method of accounting, which required that assets acquired, and liabilities assumed be recognized at their fair
values as of the acquisition date. The acquisition consisted of cash consideration and certain milestone payments (contingent consideration).
The
Merger Agreement was amended on January 14, 2022 primarily for the following: (i) upon receipt of Phase II positive data from the first
Phase II clinical trial of rencofilstat in NASH patients which has been achieved: (1) such number of validly issued, fully paid and non-assessable
shares of our common stock equal to 7.5% of the issued and outstanding of our common stock on the Closing Date as defined in the original
agreement, which 4,317 were issued in March 2022, and (2) a payment of $2.0 million to Ciclofilin shareholders, including a payment to
our CEO of $0.8 million and other Hepion employees of $0.2 million, which such payment being made in January 2022, (ii) a payment of
$1.0 million upon the positive read out of the first planned interim futility analysis of a Phase IIb clinical trial of rencofilstat
in NASH patients, supporting the continuation of the Phase IIb trial, (iii) a payment of $5.0 million upon initiation of the first Phase
III trial of rencofilstat in patients, where initiation occurs with first patient in the study dosed with study medication, (iv) a payment
of $5.0 million upon the filing and acceptance by the U.S. Food and Drug Administration of the first new drug application for CPI-431-32;
and (v) a payment of $8.0 million upon the regulatory approval by the U.S. Food and Drug Administration of the first new drug application
for rencofilstat.
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On
June 17, 2019, we submitted an IND to the FDA to support initiation of a rencofilstat clinical development program for NASH in the United
States and received approval in July 2019. We completed dosing of rencofilstat in our multiple ascending dose (“MAD”) clinical
trial in September 2020.
On
November 19, 2021, we submitted an IND to the FDA to support initiation of a rencofilstat clinical development program in the United
States for the treatment of HCC and received approval on December 17, 2021.
On
November 30, 2021, the FDA granted Fast Track designation for our lead drug candidate, rencofilstat, for the treatment of NASH. The FDA
Fast Track designation allows sponsors to gain access to expedited drug approval reviews for medical conditions that are serious and
potentially life-threatening, and where there is an unmet medical need. The program is also designed to facilitate drug development by
making provisions for more frequent meetings with the FDA to discuss drug development plans, and Fast Track designation can lead to Accelerated
Approval and/or Priority Review eligibility if certain criteria are met.
On
June 20, 2022, the FDA granted Orphan Drug Designation to rencofilstat, a liver-targeting, orally administered, novel cyclophilin inhibitor,
for the treatment of HCC. The FDA Orphan Drug Designation program provides orphan status to drugs or biologics intended for the prevention,
diagnosis, or treatment of diseases that affect fewer than 200,000 people in the United States. Sponsors of medicines that are granted
Orphan Drug Designation are entitled to certain incentives, including tax credits for qualified clinical trials, prescription drug user-fee
exemptions, and potential seven-year marketing exclusivity upon FDA approval.
Intellectual
Property
Patents
and other proprietary intellectual rights are crucial in our business and establishing and maintaining these rights are essential to
justify the development of our product candidate. We have sought, and intend to continue to seek, patent protection for our inventions
and rely upon patents, trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain
a competitive advantage for our product candidate. In order to protect these rights, know-how and trade secrets, we typically require
employees, consultants, collaborators and advisors to enter into confidentiality agreements with us, generally stating that they will
not disclose any confidential information about us to third parties for a certain period of time and will otherwise not use confidential
information for anyone’s benefit but ours.
As
patent applications in the U.S. are maintained in secrecy until patents are published or issued, unless earlier publication is required
under applicable law or in connection with patents filed under the Patent Cooperation Treaty (“PCT”) or as publication of
discoveries in the scientific or patent literature often lags behind the actual discoveries, we cannot be certain that we or our licensors
were the first to make the inventions described in our pending patent applications or that we or our licensors were the first to file
patent applications for such inventions. Furthermore, the patent positions of biotechnology and pharmaceutical companies are highly uncertain
and involve complex legal and factual questions, and therefore, the breadth of claims allowed in biotechnology and pharmaceutical patents,
or their enforceability cannot be predicted.
Pursuant
to the terms of the Uruguay Round Agreements Act, patents filed on or after June 8, 1995 have a term of 20 years from the date of filing,
somewhat irrespective of the period of time it may take for the patent to ultimately issue. This may shorten the period of patent protection
afforded to our products as patent applications in the biopharmaceutical sector often take considerable time to issue. Under the Drug
Price Competition and Patent Term Restoration Act of 1984, a sponsor may obtain marketing data exclusivity for a period of time following
FDA approval of certain drug applications, regardless of patent status, if the drug is a new chemical entity or if new clinical studies
were used to support the marketing application for the drug. The Drug Price Competition and Patent Term Restoration Act of 1984 also
allows a patent owner to obtain an extension of applicable patent terms for a period equal to one-half the period of time elapsed between
the filing of an IND and the filing of the corresponding New Drug Application (“NDA”) plus the period of time between the
filing of the NDA and FDA approval, with a five-year maximum patent extension. We cannot be sure that we will be able to take advantage
of either the patent term extension or marketing data exclusivity provisions of this law.
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On
June 13, 2016, we completed our merger with Ciclofilin Pharmaceuticals, Inc. (“CPI”) acquiring all its outstanding equity
interests. We acquired Ciclofilin’s lead asset, CPI-431-32, which we renamed rencofilstat, strengthens our liver disease portfolio
and is currently in preclinical development for the treatment of liver fibrosis. On February 14, 2014, CPI, through its wholly owned
subsidiary, had entered into a Purchase and Sale Agreement to acquire Aurinia Pharmaceuticals Inc. (“Aurinia”) entire interest
in rencofilstat. There was no upfront consideration. There are future milestone payments of up to CAD $2.9 million, which are to be paid
within 30 days of achieving such milestone. In addition to the milestone payments, future payment obligations (in Canadian Dollars “CAD”)
include a royalty of 2.5% of net sales. The amount payable under the foregoing royalty obligation is uncapped.
Patents
extend for varying periods according to the date of patent filing or grant and the legal term of patents in the various countries where
patent protection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends on the type
of patent, the scope of its coverage and the availability of legal remedies in the country.
While
trade secret protection is an essential element of our business and we have taken security measures to protect our proprietary information
and trade secrets, we cannot give assurance that our unpatented proprietary technology will afford us significant commercial protection.
We seek to protect our trade secrets by entering into confidentiality agreements with third parties, employees, and consultants. Our
employees and consultants also sign agreements requiring that they assign to us their interests in intellectual property arising from
their work for us. All employees sign an agreement not to engage in any conflicting employment or activity during their employment with
us and not to disclose or misuse our confidential information. However, it is possible that these agreements may be breached or invalidated,
and if so, there may not be an adequate corrective remedy available. Accordingly, we cannot ensure that employees, consultants or third
parties will not breach the confidentiality provisions in our contracts, infringe or misappropriate our trade secrets and other proprietary
rights or that measures we are taking to protect our proprietary rights will be adequate.
In
the future, third parties may file claims asserting that our technologies or products infringe on their intellectual property. We cannot
predict whether third parties will assert such claims against us or against the licensors of technology licensed to us, or whether those
claims will harm our business. If we are forced to defend ourselves against such claims, whether they are with or without merit and whether they are resolved in favor of, or against, our licensors or us, we may face costly
litigation and the diversion of management’s attention and resources. As a result of such disputes, we may have to develop costly
non-infringing technology or enter into licensing agreements. These agreements, if necessary, may be unavailable in terms acceptable to
us, or at all.
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Sales and Marketing
We
currently do not have any commercialization or sales and marketing capabilities, and currently have no plans to invest in or build such
capabilities internally.
Manufacturing
We
do not own or operate any facilities in which we can formulate and manufacture our product candidates.
Pharmaceutical
Pricing and Reimbursement
In
the U.S. and most foreign markets, any revenue associated with the sale of our product candidate, if approved for sale, will depend largely
upon the availability of reimbursement from third-party payers. Third-party payers include various government health authorities such
as The Centers for Medicare and Medicaid Services (“CMS”), which administers Medicare and Medicaid in the U.S., managed-care
providers, private health insurers and other organizations. Third-party payers are increasingly challenging the price and examining the
cost-effectiveness of medical products and services, including pharmaceuticals. In addition, significant uncertainty exists as to the
reimbursement status of newly approved pharmaceutical products. Our products may ultimately not be considered cost-effective, and adequate
third-party reimbursement may not be available to enable us to maintain price levels sufficient to support a profitable operation or
generate an appropriate return on our investment in product development.
The
U.S. and foreign governments periodically propose and pass legislation designed to reduce the cost of healthcare and pharmaceutical products.
Accordingly, legislation and regulations affecting the pricing of pharmaceuticals may change before our product candidate is ever approved
for sale. In addition, the adoption of new legislation could further limit reimbursement for pharmaceuticals. Further, an increasing
emphasis on managed care in the U.S. has and will continue to increase the pressure on pharmaceutical pricing. The marketability of our
products may suffer if the government and other third-party payers fail to provide adequate coverage and reimbursement rates for our
product candidate.
Regulatory
Matters
Overview
The
preclinical and clinical testing, manufacture, labeling, storage, distribution, promotion, sale, export, reporting and record-keeping
of drug products and product candidates are subject to extensive regulation by numerous governmental authorities in the U.S., principally
the FDA and corresponding state agencies, and regulatory agencies in foreign countries.
Non-compliance
with applicable regulatory requirements can result in, among other things, total or partial suspension of the clinical development of
a product candidate, manufacturing and marketing, failure of the FDA or similar regulatory agency in other countries to grant marketing
approval, withdrawal of marketing approvals, fines, injunctions, seizure of products and criminal prosecution.
U.S.
Regulatory Approval
Pursuant
to FDA regulations, we are required to successfully undertake a long and rigorous development process before our product candidate can
be marketed or sold in the U.S. This regulatory process typically includes the following steps:
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Successfully
completing this development process requires a substantial amount of time and financial resources. We cannot assure you that this process
will result in the granting of an approval for our product candidate on a timely basis, if at all, or that we will have sufficient financial
resources to see the process for our product candidate through to completion.
Preclinical
Studies
Preclinical
studies generally include laboratory, or in vitro, evaluation of a product candidate, its chemistry, formulation, stability, and toxicity,
as well as certain in vivo animal studies to assess a product’s potential safety and biologic activity. We must submit the results
of these preclinical studies, together with other information, including manufacturing records, analytical data and proposed clinical
trial protocols, to the FDA as part of an IND, which must be reviewed and become effective before we may begin any human clinical trials.
An IND generally becomes effective approximately 30 days after receipt by the FDA, unless the FDA, within this 30-day time period, raises
material concerns or questions about the intended conduct of the trials and imposes what is referred to as a clinical hold. If our product
candidate is placed on clinical hold, we may be required to resolve any outstanding issues to the satisfaction of the FDA before we could
begin, or continue, clinical trials of such product candidate. Preclinical studies supportive of an IND generally take a year or more
to complete, and there is no guarantee that an IND based on those studies will become effective, allowing human clinical testing to begin.
Certain
preclinical studies must be conducted in compliance with the FDA’s GLP regulations and the U.S. Department of Agriculture’s
Animal Welfare Act. Violations of these regulations can, in some cases, lead to invalidation of the studies, requiring such studies to
be conducted again.
Clinical
Trials
This
clinical trial phase of drug development follows a successful IND submission and involves the activities necessary to demonstrate the
safety, tolerability, biologic activity, efficacy and dosage of an investigational new drug product in humans, as well as the ability
to produce the drug substance and drug product in accordance with the FDA’s cGMP requirements. Clinical trials are conducted under
protocols detailing, among other things, the objectives of the study and the parameters to be used in assessing the safety and the activity
or efficacy of the product candidate. Each clinical trial protocol must be submitted to the FDA as part of the IND prior to beginning
the trial. Each trial and the clinical protocol must be reviewed, approved and conducted under the auspices of an IRB and, with limited
exceptions, requires the patient’s informed consent to participate in the trial. Sponsors, investigators, and IRBs also must satisfy
extensive GCPs, including regulations and guidelines for obtaining informed consent from the study subjects, complying with the protocol
and investigational plan, adequately monitoring the clinical trial, and reporting any serious adverse events on a timely basis. The FDA,
the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients
are being exposed to an unacceptable health or safety risk.
Clinical
trials to support an NDA for marketing approval are typically conducted in three sequential phases: Phase 1, 2 and 3, with Phase 4 clinical
trials often conducted after marketing approval has been granted. The FDA may require sponsors to conduct Phase 4 clinical trials to
study certain safety issues or other patient populations. Data from these activities are compiled in an NDA or a BLA for submission to
the FDA requesting approval to market the drug. These phases may be compressed, may overlap, or may be omitted in some circumstances.
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In
the case of product candidates being developed for serious or life- threatening diseases, Phase 1 trials may be conducted in patients
with the respective disease rather than in healthy volunteers. These studies may provide initial evidence of activity or efficacy traditionally
obtained in Phase 2 clinical trials, and therefore these trials may be referred to as Phase 1/2 or Phase 1b clinical trials.
A
company may request an “end-of-Phase 2 Meeting” with the FDA to assess the safety of the dose regimen to be studied in the
Phase 3 clinical trial, to evaluate the planned design of a Phase 3 trial, and to identify any additional information that will be needed
to support an NDA. If a Phase 3 clinical trial has been the subject of discussion at an “end- of-Phase 2 Meeting,” the trial
sponsor may be eligible for a Special Protocol Assessment (“SPA”), by the FDA, a process by which the FDA, at the request
of the sponsor, will evaluate the trial protocol and issues relating to the protocol within 45 days to assess whether it is deemed to
be adequate to meet the scientific and regulatory requirements identified by the sponsor. If the FDA and the sponsor reach agreement
on the design and size of a Phase 3 clinical trial intended to form the primary basis of an efficacy claim in an NDA or BLA, the FDA
may reduce the understanding to writing. The SPA, however, is not a guarantee of product approval by the FDA, or approval of any permissible
claims about the product.
Throughout
the various phases of clinical development, samples of the product candidate made in different batches are tested for stability to establish
any shelf-life constraints. In addition, large-scale production protocols and written standard operating procedures for each aspect of
commercial manufacture and testing must be developed. Phase 1, 2, and 3 testing may not be completed successfully within any specified
time period, if at all. The FDA closely monitors the progress of each of the three phases of clinical development that are conducted
under an IND and may, at its discretion, reevaluate, alter, suspend, or terminate further evaluation or trials based upon the data accumulated
to that point and the FDA’s assessment of the risk/benefit ratio to the subject or patient. The FDA, the sponsor, or an IRB may
suspend or terminate a clinical trial at any time for various reasons, including a finding that the subjects or patients are being exposed
to an unacceptable health or safety risk. The FDA can also request additional clinical trials be conducted as a condition to product
approval or advancement to the next stage of development. Additionally, new government requirements may be established that could delay
or prevent regulatory approval of products under development. Furthermore, IRBs, which are independent entities constituted to protect
human subjects in the institutions in which clinical trials are being conducted, have the authority to suspend clinical trials in their
respective institutions at any time for a variety of reasons, including safety issues. A Data Safety Monitoring Board may suspend or
terminate a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an
unacceptable health or safety risk.
Clinical
trials performed outside the U.S. under an IND must meet the same requirements that apply to studies conducted in the U.S. The FDA may
accept a foreign clinical study not conducted under an IND only if the study is well- designed, well-conducted, performed by qualified
investigators, and conforms to the ethical principles contained in the Declaration of Helsinki, or with the laws and regulations of the
country in which the research was conducted, whichever provides greater protection of the human subjects.
Certain
information about clinical trials, including a description of the study, participation criteria, location of study sites, and contact
information, is required to be sent to the National Institutes of Health, (“NIH”) for inclusion in a publicly accessible
database that is available at www.clinicaltrials.gov. Sponsors also are subject to certain state laws imposing requirements to make publicly
available certain information on clinical trial results. In addition, the Food and Drug Administration
Amendments Act of 2007 directed the FDA to issue regulations that will require sponsors to submit to the NIH the results of all controlled
clinical studies, other than Phase 1 studies.
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New
Drug and Biologics License Applications
If
and when we believe that all the requisite clinical trials for a product candidate have been completed with satisfactory and supporting
clinical data, we must submit an NDA or BLA to the FDA in order to obtain approval for the marketing and sale of a product candidate
in the U.S. Among many other items, an NDA or BLA typically includes the results of all preclinical and toxicology studies and human
clinical trials and a description of the manufacturing process and quality control methods. The FDA must approve the NDA or BLA prior
to the marketing and sale of the related product. The FDA may deny an NDA or BLA if it believes all applicable regulatory criteria are
not satisfied, or it may require additional data, including clinical, toxicology, safety, or manufacturing data prior to approval. The
FDA has 60 days from its receipt of an NDA or BLA to review the application to ensure that it is sufficiently complete for a substantive
review before accepting it for filing. The FDA may request additional information rather than accept an NDA or BLA for filing. In this
event, the NDA or BLA must be amended with the additional information. The FDA may also refer applications for novel drug products or
drug products which present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians
and other experts, for review, evaluation, and a recommendation as to whether the application should be approved. The FDA is not bound
by the recommendation of an advisory committee.
An
NDA or BLA can receive either standard or priority review. A product candidate representing a potentially significant improvement in
the treatment, prevention or diagnosis of a life threatening or serious disease may receive a priority review. In addition, product candidates
studied for their safety and effectiveness in treating serious or life-threatening illnesses that provide meaningful therapeutic benefit
over existing treatments may also receive accelerated approval on the basis of adequate and well-controlled clinical trials establishing
that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on the basis of
an effect on a clinical endpoint other than survival or irreversible morbidity. As a condition of approval, the FDA may require that
a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing Phase 4 clinical trials. Priority
review and accelerated approval do not change the standards for approval but may expedite the approval process.
If
the results of the FDA’s evaluation of the NDA or BLA, and inspection of manufacturing facilities and clinical sites are favorable,
the FDA will issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information
for a specific indication. As a condition of NDA or BLA approval, the FDA may require post-approval testing, including Phase 4 trials,
and surveillance to monitor the drug’s safety or efficacy and may impose other conditions, including labeling or distribution restrictions
which can materially impact the potential market and profitability of the drug. Once granted, product approvals may be withdrawn if compliance
with regulatory standards is not maintained, or problems are identified following initial marketing.
If
the FDA determines that it cannot approve the application in its present form, it generally issues what is referred to as a complete
response letter. A complete response letter will describe all the specific deficiencies that the agency has identified in an application
that must be met in order to secure final approval of the NDA or BLA. If and when those conditions are met to the FDA’s satisfaction,
the FDA will typically re-review the application and possibly issue an approval letter. However, even after submitting this additional
information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. It can take several
years for the FDA to approve an NDA or BLA once it is submitted, and the actual time required for any product candidate to be approved
may vary substantially, depending upon the nature, complexity, and novelty of the product candidate.
We
cannot assure you that the FDA, or any other similar regulatory agency in another country, will grant approval for our product candidate
on a timely basis, if at all. Success in preclinical or early-stage clinical trials does not assure success in later stage clinical trials.
Data obtained from preclinical and clinical activities is not always conclusive and may be susceptible to varying interpretations that
could delay, limit or prevent regulatory approval.
Post-Approval
Regulations
If
and when a product candidate receives regulatory approval to be marketed and sold, the approval is typically limited to a specific clinical
indication or use. Further, even after regulatory approval is obtained, subsequent discovery of previously unknown safety problems with
a product may result in restrictions on its use, or even complete withdrawal of the product from the market. Any FDA-approved products
manufactured or distributed by us are subject to continuing regulation by the FDA, including record-keeping requirements and reporting
of adverse events or experiences. Further, drug manufacturers and their subcontractors are required to register their establishments
with the FDA and state agencies and are subject to periodic inspections by the FDA and state agencies for compliance with cGMP regulations,
which impose rigorous procedural and documentation requirements upon us and our contract manufacturers. We cannot be certain that we,
or our present or future contract manufacturers or suppliers, will be able to comply with cGMP regulations and other FDA regulatory requirements.
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Failure
to comply with these requirements may result in, among other things, total or partial suspension of production activities for our current
and future product candidates, failure of the FDA to grant approval for marketing of such product candidate, and withdrawal, suspension,
or revocation of marketing approvals.
If
the FDA approves our product candidate, we, or our collaborators if applicable, and our contract manufacturers must provide the FDA with
certain updated safety, efficacy, and manufacturing information. Product changes, as well as certain changes in the manufacturing process
or facilities where the manufacturing occurs, or other post-approval changes may necessitate additional FDA review and approval. We rely,
and expect to continue to rely, on third parties for the formulation and manufacture of clinical and commercial quantities of our products.
Future FDA and state inspections may identify compliance issues at the facilities of our contract manufacturers that may disrupt production
or distribution or require substantial resources to correct.
The
labeling, advertising, promotion, marketing and distribution of an approved drug or biologic product must also comply with FDA and Federal
Trade Commission (“FTC”) requirements which include, among others, standards and regulations for direct-to-consumer advertising,
off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. The
FDA and FTC have very broad enforcement authority, and failure to abide by these regulations can result in penalties, including the issuance
of a Warning Letter directing us to correct deviations from regulatory standards and enforcement actions that can include seizures, fines,
injunctions, and criminal prosecution.
The
FDA’s policies may change in the future and additional government regulations may be enacted that could prevent or delay regulatory
approval of our product candidate. Moreover, increased attention to the containment of health care costs in the U.S. and in foreign markets
could result in new government regulations that could have a material adverse effect on our business. We cannot predict the likelihood,
nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in the
U.S. or abroad, or the impact such changes could have on our business.
Once
an approval is granted, the FDA may withdraw the approval if compliance with regulatory standards is not maintained or if problems occur
after the product reaches the market. After approval, some types of changes to the approved product, such as adding new indications,
manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDA may require
testing and surveillance programs to monitor the effect of approved products that have been commercialized, and in some circumstances
the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.
From
time to time, legislation is drafted, introduced, and passed in Congress that could significantly change the statutory provisions governing
the approval, manufacturing and marketing of products regulated by the FDA. In addition, FDA regulations and guidance are often revised
or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether
legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will change or what the impact of such changes,
if any, may be.
Foreign
Regulatory Approval
In
addition to regulations in the U.S., we will be subject to a variety of regulations in other jurisdictions governing, among other things,
clinical trials and any commercial sales and distribution of our products.
Whether
or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries
prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the U.S. have
a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical
trials. In Europe, for example, a clinical trial application, or CTA, must be submitted to each country’s national health authority
and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s
requirements, clinical trial development may proceed.
The
requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to
country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical
principles that have their origin in the Declaration of Helsinki.
To
obtain regulatory approval of an investigational drug under European Union regulatory systems, we must submit a marketing authorization
application. The application used to file the NDA in the U.S. is similar to that required in Europe, with the exception of, among other
things, country-specific document requirements. For other countries outside of the European Union, such as countries in Eastern Europe,
Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from
country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements
and the ethical principles that have their origin in the Declaration of Helsinki.
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If
we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal
of regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution.
Medicines
can be authorized in the European Union by using either the centralized authorization procedure or national authorization procedures.
Human
Capital
The
human capital objectives we focus on in managing our business include attracting, developing, and retaining key personnel. Our employees
are critical to the success of our organization, and we are committed to supporting our employees’ professional development. We
believe our management team has the experience necessary to effectively implement our growth strategy and continue to drive shareholder
value. We provide competitive compensation and benefits to attract and retain key personnel, while also providing a safe, inclusive and
respectful workplace. In December 2023, the board of directors approved a strategic restructuring plan to preserve capital by reducing
operating costs, which included a reduction in personnel in the first quarter of 2024.
As
of December 31, 2024, we had no employees.
Corporate
Information
We
were incorporated under the laws of the State of Delaware in May 2013. Our principal executive offices are located at 55 Madison Ave,
Suite 400- PMB #462, Morristown, New Jersey.
Available
Information
Our
annual report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the United States Securities
and Exchange Commission, or the SEC, and all amendments to these filings, are available, free of charge, on our website at www.Hepion.com
as soon as reasonably practicable following our filing of any of these reports with the SEC. You can also obtain copies free of charge
by contacting our Investor Relations department at our office address listed above. The public may read and copy any materials we file
with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Room 1580, Washington, DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
The information posted on or accessible through these websites are not incorporated into this filing.
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ITEM
1A. RISK FACTORS
An
investment in our common stock involves a high degree of risk. Before making an investment decision, you should give careful consideration
to the following risk factors, in addition to the other information included in this Annual Report, including our consolidated financial
statements and related notes, before deciding whether to invest in shares of our common stock. The occurrence of any of the adverse developments
described in the following risk factors could materially and adversely harm our business, financial condition, results of operations
or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks
Related to Our Business
We
have incurred losses since inception, anticipate that we will incur continued losses for the foreseeable future indicating the possibility
that we may not be able to operate in the future.
For
the years ended December 31, 2024 and 2023, we had an accumulated deficit of $237.8 million, and $224.6 million, respectively. We
expect to incur significant and increasing operating losses for the next several years as we expand our research and development
efforts, initiate new clinical trials, acquire or license technologies, advance other product candidates into clinical development,
complete clinical trials, seek regulatory approval and, if we receive FDA approval, commercialize our products. For the years ended
December 31, 2024 and 2023, we raised net proceeds of approximately $4.3 million and $4.5 million, respectively, through the sale of
notes payable, common stock and warrants, to fund our future operations.
The
consolidated financial statements included in this Annual Report on Form 10-K have been prepared
under the assumption that we will continue as a going concern. Due to our recurring and expected continuing losses from operations, we
have concluded there is substantial doubt in our ability to continue as a going concern within one year of the issuance of these consolidated
financial statements without additional capital becoming available.