Item 1A. Risk factors
Investing in our common stock involves a high degree of risk. You
should carefully consider the following risk factors, together with all of the information included in this 2025 10-K Report and our
other filings with the SEC, before you decide to purchase shares of our common stock. We believe the risks and uncertainties described
below are the most significant we face. Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial,
also may become important factors that affect us. If any of the following risks occur, our business, financial condition, or results
of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you
may lose all or part of your investment.
Our business is subject to a number of risks and uncertainties. The
following is a summary of the principal risk factors described in this section:
● There is substantial doubt about our ability to continue as a going concern.
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● We could be affected by transitions in our senior management team.
● Our products and our licensees are subject to extensive government regulation.
● Our success is tied to the distribution channels of our licensees.
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Risks related to our business
We currently derive all revenue from royalties related to sales
of our licensed women’s healthcare products, and the failure of our licensees to maintain or increase sales of these products could
have an adverse effect on our business, financial condition, results of operations, and growth prospects.
Following the Mayne Transaction, we derive all revenue from royalties
related to sales of our women’s healthcare products, including patient-controlled, long-acting contraceptive, hormone therapy pharmaceutical
products, prenatal and women’s multi-vitamins, and iron supplements. We cannot assure you that our licensees will be able to sustain
such sales or that such sales will grow. In addition to other risks described herein, the ability of our licensees to maintain or increase
existing product sales is subject to several risks and uncertainties, including the following:
● changed or increased regulatory restrictions or regulatory actions by the FDA;
● acceptance of our products as safe and effective by physicians and patients.
If revenue from royalties related to sales of our products does not
increase, we may be required to seek to raise additional funds, which could have an adverse effect on our business, financial condition,
results of operations, and growth prospects. In addition, our revenue from royalties is based on information compiled by, and received
from, our licensees. If the sales information provided by our licensees is erroneous, it could have an adverse effect on our business,
financial condition and results of operations.
We have incurred net losses in the past and may not be able to
maintain or increase profitability in the future.
In the past, we have incurred recurring net losses, including net losses
of $569 thousand and $2.2 million for 2025 and 2024, respectively. In 2022, we recognized net income of $112.0 million due to the net
proceeds from the Mayne Transaction and divestiture of our former subsidiary vitaCare Prescription Services, Inc. (“vitaCare”)
exceeding our costs and expenses. We utilized most of the net proceeds to repay borrowings and redeem our preferred stock. As of December
31, 2025, our stockholders’ equity was $26.9 million. We have funded our operations to date primarily through revenue from licensed
royalties, public offerings of our common stock and private placements of equity and debt securities and the transactions with Mayne Pharma.
We may incur substantial additional losses over the next few years because of costs associated with the wind down of our historical business
as well as the ongoing costs of being a public company. As a result, we may not maintain or increase profitability. If we continue
to incur substantial losses, because the royalties of our products are insufficient or otherwise, and are unable to secure additional
financing, we could be forced to discontinue or curtail our business operations, merge, consolidate, or combine with a company with greater
financial resources in a transaction that might be unfavorable to us.
There is substantial doubt about our ability to continue as
a going concern.
Our current liquidity position raises substantial doubt about our ability
to continue as a going concern and Carr, Riggs & Ingram, L.L.C, our independent registered public accounting firm for the fiscal year
ended December 31, 2025, has included an explanatory paragraph in their opinion that accompanies our audited consolidated financial statements
as of and for the year ended December 31, 2025, indicating such.
As of December 31, 2025, we had $7.5 million in cash and cash equivalents.
Our ability to fund operations over the next twelve months is dependent upon, among other things, continued receipt of royalty payments
under the Mayne License Agreement, resolution of the Mayne Lawsuits on terms that do not materially adversely affect our liquidity, and
our ability to minimize operating expenses. An adverse outcome in the Mayne Lawsuits could result in significant damages, indemnification
obligations, offsets against future royalty payments, or other relief that could materially reduce our available cash and expected future
cash flows.
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If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA grow
more slowly than expected or decline, if the net working capital settlement with Mayne Pharma under the Transaction Agreement is greater
than our current estimates, if we are unsuccessful with future financings or if the supply chains related to the third-party contract
manufacturers are worse than we anticipate, our existing cash reserves may be insufficient to satisfy our liquidity requirements. Our
ability to continue as a going concern may depend on our ability to obtain additional capital. As substantial doubt about our ability
to continue as a going concern exists, our ability to finance our operations through the sale and issuance of debt or equity securities
or through bank or other financing could be impaired. Our ability to obtain financing on reasonable terms is subject to factors beyond
the Company’s control, including general economic, political, and financial market conditions. The capital markets have in the past
experienced, are currently experiencing, and may in the future experience, periods of upheaval that could impact the availability and
cost of equity and debt financing and such financing may not be available on terms commercially acceptable to the Company, or at all.
If we are unable to improve our liquidity position, we may be required to significantly reduce operating expenses, seek additional equity
or debt financing that may be materially dilutive, sell assets, enter into strategic transactions or pursue other alternatives, any of
which may be unfavorable to our stockholders. If we are unable to implement such measures, we may not be able to continue as a going concern.
We have experienced significant turnover in our top executives,
and our business could be adversely affected by these and other transitions in our senior management team.
We have experienced turnover in our top executives and the replacement
of these positions with new officers. In December 2022, following the Mayne Transaction, all our top executives, except for our former
General Counsel, were terminated, and our former General Counsel was appointed as Chief Executive Officer. In August 2023, our former
Principal Financial and Accounting Officer resigned and was replaced with a new Principal Financial and Accounting Officer.
Management transition is often difficult and inherently causes some
loss of institutional knowledge, which could negatively affect the results of operations and financial condition. Our ability to execute
our business strategies may be adversely affected by the uncertainty associated with these transitions and the time and attention of the
board and management dedicated to management transitions could disrupt our business. Further, we cannot guarantee that we will not face
similar turnover in the future. Although we generally enter into employment agreements with our executives, our executive officers may
terminate their employment relationship with us at any time, and we may not be able to retain the services of any of them. Our senior
management’s knowledge of our business and industry could be difficult to replace, and management turnover could negatively affect
our business, growth, financial conditions, results of operations and cash flows.
We currently depend on the services of Marlan D. Walker as our
Chief Executive Officer and sole employee. Should we lose Mr. Walker due to death, disability, retirement or otherwise, such loss could
adversely affect our business, management and operations.
Marlan Walker is presently our sole employee and we are therefore
dependent upon Mr. Walker, who works for us as an at will employee. Mr. Walker may terminate his employment with us at any time and we
cannot guarantee that we would be able to hire a similarly qualified executive if he should choose to leave. We do not currently maintain
key person life insurance on Mr. Walker. Any change in Mr. Walker’s involvement with our Company may negatively affect our business,
management and operations. The loss of his services could be detrimental to the business and could force us to no longer operate. Our
future success could depend in part on our ability to retain Mr. Walker.
Our dependence upon third parties for the manufacture and supply
of our existing women’s healthcare products may cause delays in or prevent our licensees from successfully commercializing and
marketing our products.
We do not currently have, nor do we currently plan to build or acquire,
the infrastructure or capability to internally manufacture our existing women’s healthcare products, IMVEXXY, BIJUVA, and ANNOVERA.
We have relied, and will continue to rely, on third parties to manufacture these products in accordance with specifications and in compliance
with applicable regulatory requirements, including the FDA’s current Good Manufacturing Practice (“cGMPs”). We entered
into long-term supply agreements with Catalent Pharma Solutions, LLC for the commercial supply of IMVEXXY and BIJUVA which have been
assigned to Mayne Pharma. We also entered into a long-term supply contract with QPharma AB, now known as Sever Pharma Solutions, for
ANNOVERA, which contract was also assigned to Mayne Pharma. We depended on Lang, a full-service, private label and corporate brand manufacturer,
to supply our vitaMedMD and BocaGreen products. We do not have long-term contracts for the commercial supply of our vitaMedMD and BocaGreen
products. We believe that our licensees evolved these relationships based on the products they licensed from us. We continue to provide
support for the third-party manufacturers and our licensees as needed.
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Regulatory requirements could pose barriers to the manufacture of
our women’s healthcare products. All of our existing products are manufactured by third-party contract manufacturing organizations
(“CMOs”). These CMOs are required to manufacture our products in compliance with the applicable regulatory requirements.
The CMO that manufactures IMVEXXY and BIJUVA has previously been inspected by the FDA and received Form 483 observations with respect
to its softgel manufacturing plant that is used for the manufacture of the commercial supply of IMVEXXY and BIJUVA. The CMO that manufactures
ANNOVERA has previously been inspected by the FDA and received Form 483 observations with respect to its facility that is used for the
commercial supply of ANNOVERA. We believe that corrective actions to address the compliance issues identified in the referenced Forms
483 have been implemented by the CMOs and that the CMOs continue to have the right to manufacture under current regulations.
If the manufacturers of our products cannot successfully manufacture
material that conforms to specifications and the strict regulatory requirements of the FDA and any applicable foreign regulatory authority,
regulatory submissions related to our products may be delayed or disapproved, and our marketed products may be affected. If these facilities
are not in compliance for the manufacture of our products, our licensees may need to find alternative manufacturing facilities, which
would result in substantial disruptions of sales of our products. In addition, manufacturers of our products will be subject to ongoing
periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory
requirements. Failure by any of the manufacturers of our products to comply with applicable cGMP regulations or other applicable requirements
could result in sanctions being imposed on us or our licensees, including fines, injunctions, civil penalties, violation letters, delays,
suspensions or withdrawals of approvals, operating restrictions, interruptions in supply, recalls, withdrawals, issuance of safety alerts,
and criminal prosecutions, any of which could have an adverse impact on our business, financial condition, results of operations, and
prospects. Our licensees may seek to enter into long-term agreements with alternative manufacturers on commercially reasonable terms,
and if they do enter into agreements with alternative manufacturers, those alternative manufacturers may not be approved by the FDA or
subsequently lose FDA approval to manufacture our drugs, any of which could have an adverse impact on our business. We also could experience
manufacturing delays if our CMOs give greater priority to the supply of other products over our products to the delay or other detriment
of our products, or otherwise do not satisfactorily perform according to the terms of their agreements.
We have also in the past experienced a greater than expected amount
of raw materials for ANNOVERA being out of specification. If any of the third-party CMOs of our products or any suppliers of raw materials
or API experience further difficulties, do not comply with the terms of their agreements, or do not devote sufficient time, energy, and
care to providing our manufacturing needs, or if any manufacturing specification modifications that we or Mayne Pharma have requested
are not approved by the FDA, we could experience additional interruptions in the supply of our products, which may have a material adverse
impact on our revenue, results of operations, and financial position.
Our licensees may not have long-term contracts for the supply of all
the API used in BIJUVA, and ANNOVERA. If any supplier of the API or other products used in our products experiences any significant difficulties
in its respective manufacturing processes, chooses to cease supplying, or does not devote sufficient time, energy, and care to providing
our manufacturing needs, we could experience significant interruptions in the supply of our products, which could impair our licensee’s
ability to supply our products at the levels required for commercialization and prevent or delay their successful commercialization.
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The commercial success of our existing products will depend
upon gaining and retaining significant market acceptance of these products among physicians and payers.
Physicians may not prescribe our products, which would prevent us
from generating revenue or becoming profitable. Market acceptance of our products, including our hormone therapy pharmaceutical products
and patient-controlled, long-acting contraceptive, by physicians, patients, and payers, will depend on a number of factors, many of which
are beyond our control, including the following:
● the availability and efficacy of competitive drugs and devices;
● the effectiveness of our licensee’s sales force and marketing efforts;
● limitations or warnings contained in a product’s FDA-approved labeling; and
● prevalence and severity of adverse side effects.
Even if the medical community accepts that our products are safe and
effective for their approved indications, physicians may not immediately be receptive to their use or may be slow to adopt our products
as an accepted treatment for the symptoms for which they are intended. Labeling approved by the FDA may not permit our licensees to promote
our products as being superior to competing products, because the FDA applies a heightened level of scrutiny to comparative claims when
applying its statutory standards for advertising and promotion, including with regard to its requirements for supporting data and that
promotional labeling be truthful and not misleading, and there is potential for differing interpretations of whether certain communications
are consistent with a product’s FDA-required labeling. If our products do not achieve an adequate level of acceptance by physicians
and payers, we may not generate sufficient or any revenue from royalties related to sales of these products. In addition, the efforts
of our licensees to educate the medical community and third-party payers on the benefits of our products may require significant resources
and may never be successful.
Coverage and reimbursement may not be available for our products,
which could make it difficult for our licensees to sell our products profitably.
Market acceptance and sales of our products, including IMVEXXY, BIJUVA,
and ANNOVERA, and our prescription vitamins, will depend on coverage and reimbursement policies and may be affected by healthcare reform
measures. Government healthcare programs and third-party payers decide which prescription pharmaceutical products they will pay for and
establish reimbursement levels. Payers generally do not cover OTC products, and coverage for prescription vitamins and dietary supplements
varies. Many private third-party payers, such as managed care plans, manage access to pharmaceutical products’ coverage partly
to control costs to their plans, and may use drug formularies and medical policies to limit their exposure. Factors considered by these
payers include product efficacy, cost effectiveness, and safety, as well as the availability of other treatments including generic prescription
drugs. The ability to commercialize IMVEXXY, BIJUVA, and ANNOVERA successfully depends on coverage and reimbursement levels set by government
healthcare programs and third-party private payers. Obtaining and maintaining favorable reimbursement can be a time-consuming and expensive
process, and our licensees may not be able to negotiate or continue to negotiate reimbursement or pricing terms for our products with
payers at levels that are profitable to them, or at all.
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In both the U.S. and some foreign jurisdictions, there have been several
legislative and regulatory proposals to change the healthcare system in ways that could affect our licensees’ ability to sell our
products profitably. Payment or reimbursement of prescription drugs by Medicaid or Medicare requires manufacturers of the drugs to submit
pricing information to CMS. The Medicaid Drug Rebate statute requires manufacturers to calculate and report price points, which are used
to determine Medicaid rebate payments shared between the states and the federal government and Medicaid payment rates for the drug. For
drugs paid under Medicare Part B, manufacturers must also calculate and report their Average Sales Price (“ASP”), which is
used to determine the Medicare Part B payment rate for the drug. The federal government sets general guidelines for Medicaid and requires
rebates on outpatient drugs. Each state creates specific regulations that govern its individual program, including supplemental rebate
programs that prioritize coverage for drugs on the state Preferred Drug List. In the United States, private health insurers and other
third-party payers often provide reimbursement for products and services based on the level at which the government provides reimbursement
through the Medicare or Medicaid programs for such products and services. In addition, government programs like Medicaid include substantial
penalties for increasing commercial prices over the rate of inflation which can affect realization and return on investment. The cost
of pharmaceuticals continues to generate substantial governmental and third-party payer interest and states have begun to take action
to increase transparency in drug pricing through mandatory reporting requirements. The pharmaceutical industry and our licensees may
experience pricing pressures in connection with the sale of our products generally due to the trend toward managed healthcare, the increasing
influence of health maintenance organizations, the scrutiny of pharmaceutical pricing, the ongoing debates on reducing government spending
and additional legislative proposals. We cannot predict whether new proposals will be made or adopted, when they may be adopted, or what
impact they may have on us if they are adopted. Our results of operations could be adversely affected by current and future healthcare
reforms. While we cannot predict whether any proposed cost-containment measures will be adopted or otherwise implemented in the future,
any such cost-reduction initiatives could decrease the coverage and price that our licensees receive for our products from Medicare,
if any, including IMVEXXY, BIJUVA, and ANNOVERA, and could significantly harm our business.
The ability of our licensees to commercialize ANNOVERA depends on coverage
and reimbursement levels set by government healthcare programs and third-party private payers. Despite our licensees’ coverage with
commercial payers, there is no guarantee that our licensees will be able to retain ours or their agreements or obtain new agreements,
or that they will be able to negotiate favorable reimbursement or pricing terms for our products in the future. Healthcare reform implementation,
additional legislation or regulations, and other changes in government policy or regulation may affect our licensees’ reimbursement
or impose additional coverage limitations and/or cost-sharing obligations on patients, any of which could have an adverse effect on coverage
and reimbursement of our products, and our business, financial condition, results of operations, and prospects could be harmed.
The availability of generic products at lower prices than branded
products may substantially reduce the likelihood of reimbursement for branded products, such as IMVEXXY, BIJUVA, and ANNOVERA.
If our licensees fail to successfully secure and maintain adequate
coverage and reimbursement for our products or are significantly delayed in doing so, they could have difficulty achieving market acceptance
of our products and our business, financial condition, results of operations, and prospects could be harmed.
Our revenue, results of operations and financial position could
be affected by our ongoing disputes with Mayne Pharma.
We and Mayne Pharma are disputing the allowance calculation for payer
rebates and wholesale distributor fees pursuant to the Mayne Transaction Agreement. In February 2024, Mayne Pharma provided us with calculations
that significantly differed from our estimates. In August 2024 and February 2025, Mayne Pharma provided additional information relating
to the net working capital allowance for returns that we believe also differs significantly from our estimates.
On April 8, 2025, we filed the Mayne Lawsuit seeking damages for breach
of contract, breach of implied covenant of good faith and fair dealing, fraudulent inducement and unjust enrichment. On May 30, 2025,
Mayne Pharma filed the Mayne Countersuit against us, seeking damages for breach of contract, fraudulent inducement and indemnification.
We intend to resolve this matter, but the outcome of the Mayne Lawsuits
is uncertain. If the court determines that amounts are owed to Mayne Pharma in excess of our estimates, or if Mayne Pharma is permitted
to offset any alleged obligations against royalties otherwise payable to us, our revenue, results of operations and financial condition
could be materially adversely affected. In addition, the Mayne Lawsuits may damage our relationship with Mayne Pharma, which could further
impair our ability to enforce our contractual rights and cooperate in the ongoing operation of the Mayne License Agreement.
Unfavorable global economic conditions could harm our business,
financial condition or results of operations.
Our results of operations could be harmed by general conditions in
the global economy and in the global financial markets. A severe or prolonged economic downturn, including the impact of increased interest
rates, the imposition of tariffs and inflation, could result in a variety of risks to our business, including our ability to raise additional
capital when needed on acceptable terms, if at all. For example, the current U.S. administration has taken action, and may take action
in the future, with respect to major changes to trade policies, such as the imposition of tariffs on imported products and the withdrawal
from or renegotiation of certain trade agreements. New or increased tariffs or other material changes in trade policies could increase
costs in the pharmaceutical supply chain, including costs incurred by our licensees in manufacturing or distributing our licensed products.
Any such increased costs or supply disruptions could adversely affect sales of our licensed products and reduce the royalties we receive.
The foregoing could harm our business, and we cannot anticipate all the ways in which unfavorable economic conditions and financial market
conditions could harm our business.
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We sublease our properties, which could expose us to possible
liabilities and losses.
We sublease our former headquarters to third parties. In the event
that we are unable to sublease our properties on favorable terms, or at all, or if we are able to sublease our properties but our subtenants
fail to make lease payments to us or otherwise default on their obligations to us, we could incur unanticipated payment obligations.
Our lease agreements may also expose us to liabilities, such as rent escalations, maintenance obligations, termination rights, or indemnification
claims, that may negatively affect our operations and profitability.
Licensing of intellectual property involves complex legal, business,
and scientific issues, and disputes could jeopardize our rights under such agreements.
We are currently and may in the future be a party to license agreements
of importance to our business and to our products. Disputes have and may continue to arise between us and any of these counterparties
regarding intellectual property subject to and each parties’ obligations under such agreements, including:
● the effects of termination.
These or other disputes over our obligations, our licensees’
obligations, or intellectual property that we have licensed may prevent or impair our ability to maintain our current arrangements on
acceptable terms, or may impair the value of the arrangement to us. Any such dispute could have an adverse effect on our business.
In July 2018, we entered into the Population Council License Agreement
to obtain exclusive U.S. rights to commercialize ANNOVERA. The agreement required us to commercialize this product and enter into certain
manufacturing agreements, make timely milestone and other payments, provide certain information regarding our activities under the agreement,
and indemnify the other party with respect to our development and commercialization activities under the terms of the agreements. The
Company’s license under the Population Council License Agreement was sold to Mayne Pharma as part of the Mayne Transaction.
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If Mayne Pharma, with respect to the ANNOVERA license agreement that
we have assigned to Mayne Pharma, fails to meet obligations under that license agreement in a material respect, the Population Council
could have the right to terminate the agreement and upon the effective date of such termination, have the right to re-obtain the related
technology as well as, potentially, aspects of any intellectual property controlled by Mayne Pharma and developed during the period the
agreement was in force that relate to the applicable technology. This means that Population Council could effectively take control of
the development and commercialization of ANNOVERA after an uncured, material breach of the agreement by us or Mayne Pharma. Any uncured,
material breach under a license agreement could result in our loss of exclusive rights and may lead to a complete termination of any
commercialization efforts for the applicable product.
In connection with the Mayne Transaction, we granted a license to
Mayne Pharma (i) to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products
in the United States and its possessions and territories and (ii) to manufacture, have manufactured, import and have imported the Licensed
Products outside the United States for commercialization in the United States and its possessions and territories. Any disputes arising
under the agreements governing the Mayne Transaction may have a material adverse impact on our revenue, results of operations and financial
position.
We have also entered into licensing and supply agreements with Knight
pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and with Theramex pursuant to
which we granted Theramex an exclusive license to commercialize BIJUVA, and IMVEXXY outside of the U.S., except for Canada.
Sales of our products in the U.S. and our rights to receive royalties
with respect to such sales could be adversely affected if products manufactured outside of the U.S. or for sale outside of the U.S. under
the terms of these licensing and supply agreements are reimported and sold in the U.S. In addition, our rights to receive royalties with
respect to our products sold outside the U.S. could be adversely affected if our licensees fail to diligently pursue approval of our
products, or opt not to sell our products, in certain jurisdictions where they are not required to do so.
We maintain our cash at financial institutions, often in balances
that exceed federally insured limits.
All our cash is held in accounts at U.S. banking institutions that
we believe are of high quality. Cash held in depository accounts may exceed the $250 thousand Federal Deposit Insurance Corporation (“FDIC”)
insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance
limitations. In the future, our access to our cash in amounts adequate to finance our operations could be significantly impaired by the
financial institutions with which we have arrangements directly facing liquidity constraints or failures. Any material loss that we may
experience in the future could have a material adverse effect on our financial condition and could materially impact our ability to pay
our operational expenses or make other payments.
Our products and our licensees are subject to extensive and
costly government regulation.
Our products are subject to extensive and rigorous domestic government
regulation, including regulation by the FDA, the Centers for Medicare & Medicaid Services (“CMS”), other divisions of
the U.S. Department of Health and Human Services, including its Office of Inspector General (“OIG”), the U.S. Department
of Justice (“DOJ”), the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or
indirectly by those departments, state and local governments, and their respective foreign equivalents. The FDA regulates dietary supplements,
cosmetics, and drugs under different regulatory schemes. For example, the FDA regulates the processing, formulation, safety, manufacturing,
packaging, labeling, and distribution of dietary supplements and cosmetics under its dietary supplement and cosmetic authority, respectively.
The FDA also regulates the research, development, pre-clinical and clinical testing, manufacture, safety, effectiveness, record keeping,
reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import, and export of pharmaceutical products under
various regulatory provisions. If any of our products are marketed abroad, they will also be subject to extensive regulation by foreign
governments, whether or not we have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or
more demanding than corresponding U.S. regulation.
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We and our licensees are also subject to additional healthcare regulation
and enforcement by the federal government and the states in which we conduct our business. Applicable federal and state healthcare laws
and regulations include the following:
● The federal Anti-Kickback Statute (“AKS”)
● The Civil Monetary Penalties Law (“CMPL”)
● The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”)
● Section 5(a) of the Federal Trade Commission Act
● The Physician Payments Sunshine Act
● Analogous state laws and regulations
Many aspects of these laws have not been definitively interpreted
by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations that increases
the risk of potential violations. In addition, these laws and their interpretations are subject to change. Many state laws differ from
each other in significant ways and often are not preempted by federal laws, thus complicating compliance efforts. Moreover, the number
and complexity of both federal and state laws continues to increase, and additional governmental resources are being used to enforce
these laws and to prosecute companies and individuals who are believed to be violating them. We anticipate that government scrutiny of
pharmaceutical sales and marketing practices will continue for the foreseeable future and subject us to the risk of government investigations
and enforcement actions. For example, federal enforcement agencies recently have shown interest in pharmaceutical companies’ product
and patient assistance programs, including manufacturer reimbursement support services and relationships with specialty pharmacies. Some
of these investigations have resulted in significant civil and criminal settlements.
Efforts to ensure that our operations, including our business arrangements
with third parties including our licensees, comply with applicable healthcare laws and regulations could be costly. Although effective
compliance programs can help mitigate the risk of investigation, regulatory and enforcement actions, and prosecution for violations of
these laws, the risks cannot be entirely eliminated. Moreover, achieving and sustaining compliance with applicable federal and state
fraud, privacy, security, and reporting laws may prove costly. We cannot guarantee that a government agency will agree with our interpretations,
and it is possible that an enforcement authority may find or we may discover that one or more of our business practices may not comply.
If our past or present operations, including activities conducted by our sales team or agents, are found to be in violation of any of
these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal, and administrative
penalties, damages, fines, and exclusion from government healthcare programs. Any action against us for violation of these laws, even
if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from
the operation of our business, and damage our reputation. In addition, even if we are not determined to have violated these laws, government
investigations into these issues typically require the expenditure of significant resources and generate negative publicity, and could
result in related stockholder suits, any of which could also have an adverse effect on our business, financial condition and results
of operations.
In addition, from time to time in the future, we or our licensees
may become subject to additional laws or regulations issued by federal or state agencies, all of which are subject to influence resulting
from changes in political party control. We are uncertain of the impact or outcome of new legislation, regulation, Executive Orders,
rescission of rules and policy statements, or new agency priorities, especially any relative impact on the healthcare regulatory and
policy landscape, or the impact they may have on our business.
Such developments could, however, require reformulation of certain
products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping
requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific
substantiation, additional personnel, or other new requirements. Any such developments could have an adverse effect on our business.
Current or future legislation or regulations may adversely affect
reimbursement from government healthcare programs and third-party payers.
There have been significant efforts by government officials and legislators
to implement changes in healthcare systems to regulate prices or payment for pharmaceutical products, including legislation on drug importation,
which could adversely affect our royalty revenues. Federal and state laws have put considerable pressure on the pricing of pharmaceutical
products, and additional reforms may further constrain pricing, reimbursement and access.
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In August 2022, the Inflation Reduction Act of 2022 (“IRA”)
was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare
(beginning in 2026), with prices that can be negotiated subject to a cap, and establishes monetary penalties for manufacturers that do
not comply. The IRA also requires manufacturers to pay rebates to Medicare if the prices of certain drugs outpace inflation (first due
in 2023), and it replaces the Medicare Part D coverage gap discount program with a new discounting program (beginning in 2025). Further.
the IRA permits the Secretary of the Department of Health and Human Services (“HHS”) to implement certain of these provisions
through guidance, as opposed to regulation, for the initial years and significant aspects of the law remain subject to ongoing regulatory
implementation and legal challenges.
Additionally, in April 2025, an executive order was signed directing
the Secretary of HHS to take appropriate steps to, among other things, modify certain provisions of the Medicare Drug Price Negotiation
Program, and develop and implement a payment model to reduce the price of high-cost prescription drugs and biological products covered
by Medicare. In May 2025, a further executive order was signed directing the Secretary of HHS to propose rules that impose “most-favored-nation”
pricing and to take other measures to reduce the cost of prescription drugs. It is currently unclear whether and to what extent these
measures will be implemented and what impact any such implementation would have on our business.
Although we do not directly commercialize pharmaceutical products,
our royalty revenues are based on the net sales of products commercialized by our licensees, and the IRA’s drug pricing and rebate
provisions could reduce the prices that may be charged for certain products or increase mandatory rebates and discounts owed by manufacturers.
To the extent our licensed products are or become subject to Medicare price negotiations, inflation-based rebates, Medicare Part D manufacturer
discounts or other pricing constraints, our licensees’ net sales of such products may be reduced. Because our royalty revenues are
based on a percentage of net sales, any reduction in pricing, increased rebates or discounts, or other limitations on reimbursement could
materially reduce the royalty payments we receive.
We are unable to predict the future course of federal or state healthcare
legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare.
The ACA, the IRA and any further changes in the law or regulatory framework, including additional drug pricing reform measures, could
also have an adverse effect on our business, financial condition, and results of operations.
Further, if a federal government shutdown were to occur for a prolonged
period, federal government payment obligations, including its obligations under Medicaid and Medicare, may be delayed. Similarly, if state
government shutdowns were to occur, state payment obligations may be delayed. If the federal or state governments fail to make payments
under these programs on a timely basis, the ability of our licensees to sell our products to government payers may be limited, thereby
reducing anticipated net sales and royalty revenues.
Time and costs associated with winding down our general and administrative,
commercial, and research and development activities may be significant.
There are significant costs associated with winding down our normal
historic operations, such as separation of employees, termination of contracts and engagement of external consultants, all of which have
and, in the future, will reduce our cash resources and take up large portions of our employees’ and consultants’ time. We
have received certain invoices related to our historic operations that we are currently disputing. Our accruals related to such invoices
reflect the amount we believe we will be responsible for based on the current information we have. Any litigation related to such disputes
or to the winding down of our operations, as well as any unforeseen liabilities related to the same, could have a material impact on our
business, growth, financial conditions, results of operations and cash flows. There is no guarantee that our cash and cash equivalents
on hand at any given time will be enough to cover our liabilities associated with winding down our historic operations.
Even after the approval of IMVEXXY, BIJUVA, and ANNOVERA, the
products and the holder of the marketing authorizations will still face extensive, ongoing regulatory requirements and review, and the
products may face future development and regulatory difficulties.
With respect to IMVEXXY, BIJUVA, and ANNOVERA, the FDA may still impose
significant restrictions on a product’s indicated uses or marketing or to the conditions for approval or impose ongoing requirements
for potentially costly post-approval studies, including phase 4 clinical trials or post-market surveillance. As a condition to granting
marketing approval of a product, the FDA may require additional clinical trials. The results generated in these post-approval clinical
trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about side effects or efficacy
of a product. For example, the labeling for IMVEXXY, BIJUVA, and ANNOVERA contains restrictions on use and warnings. The Food and Drug
Administration Amendments Act of 2007 gives the FDA enhanced post-market authority, including the imposition of a Risk Evaluation and
Mitigation Strategy (“REMS”) as well as explicit authority to require post-market studies and clinical trials, labeling changes
based on new safety information, and compliance with FDA-approved REMS programs. IMVEXXY, BIJUVA, and ANNOVERA will also be subject to
ongoing FDA requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance and reporting,
advertising, promotion, record keeping, and reporting of safety and other post-market information. The FDA’s exercise of its authority
could result in delays or increased costs during product development, clinical trials and regulatory review, increased costs to comply
with additional post-approval regulatory requirements, and potential restrictions on sales of approved products. Foreign regulatory agencies
often have similar authority and may impose comparable requirements.
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As part of the FDA’s approval of IMVEXXY, we committed to conduct
a post-approval observational study to evaluate the risk of endometrial cancer in post-menopausal women with a uterus who use a low-dose
vaginal estrogen unopposed by a progestogen such as IMVEXXY, which study was assumed by Mayne Pharma as the holder of the NDA. As part
of the FDA’s approval of ANNOVERA, the FDA has required four non-closed post-marketing studies, including both post-marketing reviews
and post-marketing commitments. Each study has a timeline for completion and submission of a final report to the FDA. If a post-approval
study is not fulfilled according to FDA requirements, the FDA may impose certain further requirements and penalties against the holder
of the NDA, which could include withdrawal of the NDA approval and withdrawal of the product from the market. For ANNOVERA, post marketing
studies are being performed by the Population Council and Mayne Pharma as the NDA holder. In July 2021, we received a letter from the
FDA indicating that the post-marketing commitment study being conducted by the Population Council for ANNOVERA to characterize the in
vivo release rate of ANNOVERA was not fulfilled to FDA’s satisfaction. In addition, the final reports for the two post-marketing
requirement studies being performed by the Population Council for ANNOVERA were not submitted by the initial listed submission deadline,
which deadlines have since been extended by FDA. To the extent that Mayne Pharma or the Population Council, as applicable, does not fulfil
these studies to the FDA’s satisfaction, the ability of our licensees to sell the applicable product may be limited and there may
be an adverse impact on our revenue and results of operations.
Post-marketing studies, whether conducted by us or by others and whether
mandated by regulatory agencies or voluntary, and other emerging data about marketed products, such as adverse event reports, may also
adversely affect sales of our pharmaceutical product candidates once approved, and potentially our other marketed products. Further,
the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate) an
entire class of products could have an adverse effect on sales of our approved products. Accordingly, new data about our products could
negatively affect demand because of real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result
in product withdrawal or recall. Furthermore, new data and information, including information about product misuse, may lead government
agencies, professional societies, and practice management groups or organizations involved with various diseases to publish guidelines
or recommendations related to the use of our products or the use of related therapies or place restrictions on sales. Such guidelines
or recommendations may lead to lower sales of our products.
Manufacturers of pharmaceutical products and their facilities are
subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with the FDA’s
cGMP regulations and other regulatory requirements, such as adverse event reporting. Facilities for the manufacturer of pharmaceutical
products also undergo internal audits as well as external audits by third parties. If our licensees or a regulatory agency discovers
problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product
is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility, or our licensees, including
requiring recall or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling
changes to limit use of the drug, requiring that additional clinical trials be conducted, imposing new monitoring requirements, or requiring
the establishment of a REMS program. Advertising and promotional materials must comply with FDA rules in addition to other potentially
applicable federal and state laws and are subject to review by FDA. If the FDA raises concerns regarding our licensees’ promotional
materials or messages, they may be required to modify or discontinue using them and may be required to provide corrective information.
Commercial products must now meet the requirements of the Drug Supply
Chain Security Act (“DSCSA”) which imposes obligations on manufacturers of prescription pharmaceutical products for commercial
distribution, regulating the distribution of the products at the federal level, and sets certain standards for federal or state registration
and compliance of entities in the supply chain (manufacturers and re-packagers, wholesale distributors, third-party logistics providers,
and dispensers). The DSCSA preempts previously enacted state pedigree laws and the pedigree requirements of the Prescription Drug Marketing
Act (“PDMA”) and its implementing regulations. Trading partners within the drug supply chain must now ensure certain product
tracing requirements are met that they are doing business with other authorized trading partners; and they are required to exchange transaction
information, transaction history, and transaction statements. Product identifier information (an aspect of the product tracing scheme)
is also now required. The DSCSA requirements, development of standards, and the system for product tracing have been and will continue
to be phased in over a period of years. The distribution of product samples continues to be regulated under the PDMA, and some states
also impose regulations on drug sample distribution.
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Our activities and the activities of our licensees are also potentially
subject to federal and state consumer protection and unfair competition laws. If we, our licensees or our third-party suppliers fail
to comply with applicable regulatory requirements, a regulatory agency may take any of the following actions:
● seek an injunction or impose civil or criminal penalties or monetary fines;
● suspend or withdraw regulatory approval;
Government authorities continue to pursue actions against pharmaceutical
companies for violations of fraud, abuse and other laws.
The federal government has pursued actions against pharmaceutical
companies for violations of fraud, abuse, and other laws, including, but not limited to the AKS, False Claims Act, FDCA, HIPAA, HITECH,
Ryan Haight Act, and others, including marketing and promotional compliance programs or codes of conduct, and law or rules requiring
reporting of commercial activities.
Ours or our licensee’s compliance controls, policies, and procedures
may not be sufficient to protect against acts of ours or their employees, business partners, licenses, or vendors that may violate federal
or state fraud and abuse laws or other applicable requirements.
The violations of any of these law or rules may result in penalties
that may force us to expend significant amounts of time and money and may significantly inhibit our licensee’s ability to continue
to market our products and generate revenue. Following the closing of the vitaCare divestiture, we may still be required to indemnify
the buyer of vitaCare in the event any enforcement related to activities prior to the vitaCare divestiture. Similar regulations apply
in foreign jurisdictions.
If our dietary supplement, hormone therapy pharmaceutical
products or patient-controlled, long-acting contraceptive products do not have the effects intended or cause undesirable side effects,
our business may suffer.
Although many of the ingredients in our dietary supplement products
are vitamins, minerals, and other substances for which there is a long history of human consumption, they also contain innovative ingredients
or combinations of ingredients. Furthermore, our hormone therapy or patient-controlled, long-acting contraceptive pharmaceutical products
have been approved by the FDA based on its assessment of the safety and efficacy of these products. While we believe that all of these
products and the combinations of ingredients in them are safe when taken as directed, the products could have certain undesirable side
effects if not taken as directed or if taken by a consumer who has certain medical conditions. In addition, these products may not have
the effect intended if they are not taken in accordance with certain instructions, which include certain dietary or other labeling restrictions.
Furthermore, the products, even when used as directed, may not have the effects intended or will not have harmful side effects in an unforeseen
way or on an unforeseen cohort. If any of our products are shown to be harmful or generate negative publicity from perceived harmful effects,
our business, financial condition, results of operations, and prospects could be harmed significantly.
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Our products face significant competition from branded and generic
products, and our operating results will suffer if we fail to compete effectively.
Development and awareness of our products will depend largely upon
our licensee’s success in increasing the consumer base for our products. The pharmaceutical and dietary supplement industries are
intensely competitive and subject to rapid and significant technological change. Our products face intense competition, including from
major multinational pharmaceutical and dietary supplement companies, established biotechnology companies, specialty pharmaceutical, and
generic drug companies. Many of these companies have greater financial and other resources, such as larger R&D staffs and more experienced
marketing and manufacturing organizations. As a result, these companies may obtain regulatory approval more rapidly and may be more effective
in selling and marketing their products. They also may invest heavily to accelerate discovery and development of novel compounds or to
in-license novel compounds that could make the products that we sell or develop obsolete. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative arrangements with large, established companies. If our licensees are
unable to economically promote or maintain our brand, our business, results of operations and financial condition could be severely harmed.
Loss of exclusivity may provide opportunity for competing products, particularly generics, to siphon off our consumers. In addition, under
the Mayne License Agreement, the royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the expiration or revocation
of the last valid claim covering a Licensed Product, and (ii) a generic product launch (a “LOE”).
In February 2020, we received a Paragraph IV certification notice letter
(the “IMVEXXY Notice Letter”) regarding an ANDA submitted to the FDA by Teva Pharmaceuticals USA, Inc. (“Teva”)
seeking approval to market a generic version of IMVEXXY. See “If our efforts or the efforts of our licensees to protect the proprietary
nature of the intellectual property covering our hormone therapy pharmaceutical products and other products are not adequate, we may not
be able to compete effectively in our market” below for more information regarding the IMVEXXY Notice Letter. In March 2020, we
received a Paragraph IV certification notice letter (the “BIJUVA Notice Letter”) regarding an ANDA submitted to FDA by Amneal
Pharmaceuticals. See Item 1. Business – Pharmaceutical Regulation – Regulatory Exclusivity for more information on the BIJUVA
Notice Letter.
In addition, in June 2024, Mayne Pharma received a Paragraph IV certification
notice letter (the “Sun Notice Letter”) regarding an ANDA submitted to the FDA by Sun Pharma Inc. (“Sun Pharma”),
seeking approval from the FDA to commercially manufacture, use, or sell a generic version of IMVEXXY and alleging that the IMVEXXY Patents
are invalid, unenforceable, and/or will not be infringed by Sun Pharma’s commercial manufacture, use, or sale of its proposed generic
drug product. An adverse ruling in this matter could trigger LOE, and thereby reduce our royalty rate under the Mayne License Agreement,
earlier than expected. As of December 31, 2025, the litigation remains ongoing and has progressed to claim construction. See Item 3. Legal
Proceedings for more information.
In addition, we cannot predict what additional ANDAs could be filed
by Teva or other potential generic competitors requesting approval to market generic forms of our products, which if approved, could
result in significant decreases in the revenue derived from royalties sales of our marketed products and thereby harm our business and
financial condition.
Our future success depends on our ability to attract and retain
qualified personnel.
We have one employee and use a limited number of external consultants
for the operation of our company, any of whom may terminate their consultancy with us at any time. We may not be able to attract and
retain consultants on acceptable terms given the competition for similar personnel. Some of our consultants and advisors may be employed
by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability
to us. We do not maintain “key person” insurance. If we are unable to continue to use our current consultants, or if we are
unable to recruit new consultants, then our ability to operate our business will be negatively impacted and it could interfere with our
ability to receive any potential royalties.
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Our financial condition and results of operations may be adversely
affected by any future pandemics or epidemics.
Our business may be impacted by any future pandemics or epidemics.
The severity of the impact of any pandemic on our business and operating results will depend on future developments that are highly uncertain
and cannot be accurately predicted.
Any future pandemics or epidemics can negatively affect the ability
of our licensees’ sales force to access healthcare providers to promote our products and the ability of patients to visit their
healthcare professionals for non-emergent matters. Accordingly, the sales force of our licensees may continue to use a hybrid model of
office visits when necessary and digital engagement tools and tactics and virtual detailing, which may be less effective than their ordinary
course sales and marketing programs.
Further, our future results of operations and liquidity could be adversely
affected during or following any future pandemics or epidemics by extended billing and collection cycles at our company, our licensees,
or otherwise; delays in payments of outstanding receivable amounts beyond normal payment terms, including royalty payments; supply chain
disruptions; and uncertain demand.
Also, disruptions have occurred and may occur in the future that affect
our licensees’ ability to obtain supplies or other components for our products, manufacture additional products, or deliver inventory
in a timely manner. This would result in lost sales (and royalties) and damage to our reputation.
We may also experience other unknown impacts from any future pandemics
or epidemics that cannot be predicted. Accordingly, disruptions to our business as a result of pandemics or epidemics could result in
an adverse effect on our business, results of operations, financial condition and prospects.
Failure to obtain regulatory approval outside the U.S. will
prevent our licensees from marketing our hormone therapy pharmaceutical products in non-U.S. markets.
We have entered into licensing and supply agreements with Knight and
Theramex to commercialize IMVEXXY and BIJUVA in non-U.S. markets. To market these products in the European Union and many other non-U.S.
jurisdictions, our licensees must obtain separate regulatory approvals. We have had limited interactions with non-U.S. regulatory authorities,
the approval procedures vary among countries and can involve additional testing, and the time required to obtain approval may differ
from that required to obtain FDA approval or clearance. Approval or clearance by the FDA does not ensure approval by regulatory authorities
in other countries, and approval by one or more non-U.S. regulatory authorities does not ensure approval by other regulatory authorities
in other countries or by the FDA. The non-U.S. regulatory approval process may include all risks associated with obtaining FDA approval
or clearance. For these non-U.S. regulatory approvals, our licensees may not obtain them on a timely basis, if at all. Our licensees’
failure to receive necessary non-U.S. regulatory approvals to commercialize IMVEXXY and BIJUVA in a given market could have an adverse
effect on our business, financial condition, results of operations, and prospects.
In addition, by seeking to obtain approval to market IMVEXXY and BIJUVA
in one or more non-U.S. markets, we or our licensees will be subject to rules and regulations in those markets relating to our products.
In some countries, particularly countries of the European Union, each of which has developed its own rules and regulations, pricing is
subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after
the receipt of regulatory approval for a drug. To obtain reimbursement or pricing approval in some countries, our licensees may be required
to conduct a clinical trial that compares the cost-effectiveness of our pharmaceutical product to other available products. If reimbursement
of our pharmaceutical product is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our licensees
may be unable to generate revenues and achieve or sustain profitability with respect to any given market, which could have an adverse
effect on our business, financial condition, results of operations, and prospects. If our licensees obtain approval to market IMVEXXY
or BIJUVA in one or more non-U.S. markets, there will be additional pharmacovigilance reporting requirements for our products. To the
extent that the non-U.S. markets in which our licensees distribute our products have different pharmacovigilance reporting requirements
than the U.S., there is a risk that the marketing of our drugs in those countries may increase the number of adverse events reported
for our products.
Our success is tied to our licensees’ distribution channels.
Our revenue is dependent on our licensees’ distribution through
wholesale distributors and retail pharmacy distributors. Our business would be harmed if our licensees’ customers refused to distribute
our products and if our licensees were not able to replace such customers through their distribution channels.
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Our ability to utilize net operating loss carryforwards may
be limited.
As of December 31, 2025, we had federal net operating loss (“NOL”)
carryforwards of $584.6 million. Subject to applicable limitations, our NOL may be used to offset future taxable income, to the extent
we generate any taxable income, and thereby reduce our future federal income taxes otherwise payable.
Section 382 of the Internal Revenue Code of 1986, as amended, imposes
limitations on a corporation’s ability to utilize NOL carryforwards if it experiences an ownership change as defined in Section
382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock
of a corporation by more than 50 percent over a three-year period. If an ownership change has occurred, or were to occur, utilization
of our NOL carryforwards would be subject to an annual limitation under Section 382 determined by multiplying the value of our stock
at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to
later years. We may be found to have experienced an ownership change under Section 382 because of events in the past or the issuance
of shares of our common stock in the future. If so, the use of our NOL carryforwards, or a portion thereof, against our future taxable
income may be subject to an annual limitation under Section 382.