HEPA 10-K & 10-Q changes, risk factors and insider trading
Hepion Pharmaceuticals, Inc. (also CTRVP) · OTC · Pharmaceutical Preparations · CIK 1583771 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We conduct our business in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenue, adversely affect our results of operations and financial condition and harm our business.”
New heading “The insurance coverage and reimbursement status of newly approved products, in a new category of diagnostics and therapeutics, is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for current or future products could limit our ability, and that of our collaborators, to fully commercialize our products and decrease our ability to generate revenue.”
New heading “Changes in law relating to health insurance coverage and payment may adversely affect our business.”
New heading “Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.”
New heading “We must maintain compliance with marketing authorization requirements of the FDA and equivalent foreign and state regulatory authorities for our products and services whose sale is subject to their authority and failure to maintain compliance with FDA requirements may prevent or delay the marketing of our products and services.”
New heading “For each product we are developing that requires FDA premarket review or equivalent regulatory approval, the FDA or other regulatory authority may not grant clearance, authorization or premarket approval and failure to obtain necessary approvals for our future products and services would adversely affect our ability to grow our business.”
New heading “Modifications to our products with FDA clearance may require new FDA clearances, authorizations or approvals, or may require us to cease marketing or recall the modified clinical diagnostic products or future clinical products until clearances are obtained.”
New heading “Our employees, consultants and collaborators may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.”
New heading “Future Medicare payment rates are uncertain.”
New heading “Our products, and those jointly developed with our collaborators, may in the future be subject to product or service recalls. A recall of products or services, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our or our collaborators’ products or services, could have a significant adverse impact on us.”
New heading “Any additional commercialized products or any future products that obtain regulatory clearance, authorization, approval, accreditation or licensure will remain subject to regulatory scrutiny and our failure to maintain our regulatory clearances, authorizations, approvals, accreditations or licensures could adversely affect our reputation, business and results of operations.”
New heading “If any of our diagnostic products or services cause or contribute to a death or serious injury, or malfunction in certain ways, we will be required to report such death, serious injury or malfunction under applicable medical device reporting regulations, and such events can result in voluntary corrective actions or agency enforcement actions.”
New heading “We are subject to various laws and regulations, such as healthcare fraud and abuse laws, false claim laws and health information privacy and security laws, among others, and failure to comply with these laws and regulations may have an adverse effect on our business.”
New heading “Our common stock is a “penny stock,” which may make it more difficult for investors to sell their shares of common stock due to suitability requirements.”
New heading “Our common stock is currently traded on the OTC QB Market, which may have an unfavorable impact on our stock price and liquidity.”
New heading “Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock, which could depress the price of our common stock.”
New heading “Since our common stock is currently quoted on the OTC QB Markets our stockholders may face significant restrictions on the resale of our common stock due to state “blue sky” laws and the sale of common stock in this offering is subject to state “blue sky” laws.”
Removed heading “Our product candidates may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products or investigational new drugs, which may delay or preclude further development or regulatory approval or limit their use if approved.”
Removed heading “We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.”
Removed heading “Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.”
Removed heading “Delays in clinical testing could result in increased costs to us and delay our ability to generate revenue.”
Removed heading “If our product candidates are unable to compete effectively with marketed drugs targeting similar indications as our product candidate, our commercial opportunity will be reduced or eliminated.”
Removed heading “If the manufacturers upon whom we intend to rely on fail to produce our product candidates, in the volumes that we require on a timely basis or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and commercialization of our product candidate.”
Removed heading “Our industry is highly competitive and subject to rapid technological changes. As a result, we may be unable to compete successfully or develop innovative products, which could harm our business.”
Removed heading “We do not currently have any internal drug discovery capabilities, and therefore we are dependent on in-licensing or acquiring development programs from third parties in order to obtain additional product candidates.”
Removed heading “Even if our product candidates receive regulatory approval, it may still face future development and regulatory difficulties.”
Removed heading “Even if our product candidates receive regulatory approval in the United States, we may never receive approval to commercialize it outside of the United States.”
Removed heading “We intend to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to seek or obtain regulatory approval for or commercialize our product candidates.”
Removed heading “Reimbursement may not be available for our product candidates, which would impede sales.”
Removed heading “Healthcare reform measures and other recent legislative initiatives could adversely affect our business.”
Removed heading “Our clinical activities involve the handling of hazardous materials, and we must comply with environmental laws and regulations, which can be expensive and restrict how we do business.”
Removed heading “Our common stock may be delisted if we fail to comply with continued listing standards.”
Largest changes
“We are exposed to the risk of fraud or other misconduct by our employees, consultants and those of our collaborators. Misconduct by these parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the U.S. and abroad, report financial information or data accurately or disclose unauthorized activities to us. …”see in full comparison
“Our ability to raise additional funds is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital. The accompanying consolidated financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to predict at this time the potential success of our business. The revenue and income potential of our business and operations are currently unknown. …”see in full comparison
“While we will oversee compliance by our contract manufacturers, ultimately, we will not have control over our manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. …”see in full comparison
“Our products, and those jointly developed with our collaborators, may in the future be subject to product or service recalls. A recall of products or services, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our or our collaborators’ products or services, could have a significant adverse impact on us.”see in full comparison
“The AKS, which prohibits, among other things, persons and entities, including clinical laboratories, from knowingly and willfully soliciting, receiving, offering or paying remuneration, whether directly or indirectly, overtly or covertly, in case or in kind, to induce or reward or in return for either the referral of an individual or the purchase, lease, order or recommendation of an item or service reimbursable, in whole or in part, under a federal healthcare program such as Medicare or Medicaid. …”see in full comparison
“If our operations are found to be in violation of any of the health regulatory laws described above or any other laws that apply to us, we may be subject to penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in government healthcare programs, injunctions, private qui tam actions brought by individual whistleblowers in the name of the government and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we …”see in full comparison
Full comparison: every changed paragraph (135)
Our ability to raise additional funds is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital. The accompanying consolidated financial statements do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to predict at this time the potential success of our business. The revenue and income potential of our business and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all of your investment in our company. Absent further funding, we currently expect to run out of available cash resources during the third quarter of 2026. As a result of our lack of cash resources, we have slowed the timeline of our clinical trial work to preserve cash resources in the near-term. If we fail to obtain additional financing, we likely will be forced to abandon such activities entirely and file for bankruptcy protection, with the possible loss of such properties or assets (including the license to our core technology). Based on our explorations to date, we do not expect that any other strategic alternatives, such as a potential sale of the Company or its assets or other restructuring efforts, will be available to us in the near-term. As a result, any inability to obtain additional financing in the near-term, including a material amount of financing over the next 2-3 years, would likely result in a material adverse effect on our business, results of operations, cash flow, financial condition and prospects and cause our stockholders to receive little or no return on their shares of common stock.
Our
ability to raise additional funds is contingent upon, among other factors, the sale of the shares of our common stock or obtaining alternate
financing. We cannot provide any assurance that we will be able to raise additional capital. If we are unable to secure additional capital,
we may be required to curtail our research and development initiatives and take additional measures to reduce costs in order to conserve
our cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays in our clinical
and regulatory efforts, which is critical to the realization of our business plan. The accompanying consolidated financial statements
do not include any adjustments that may be necessary should we be unable to continue as a going concern. It is not possible for us to
predict at this time the potential success of our business. The revenue and income potential of our business and operations are currently
unknown. If we cannot continue as a viable entity, you may lose some or all of your investment in our company.
Our
product candidates must satisfy rigorous regulatory standards of safety and efficacy before we can advance or complete their clinical
development, or they can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy preclinical studies
and clinical trials, develop acceptable manufacturing processes, and obtain regulatory approval of our product candidates. Despite these
efforts, our product candidates may not:
Even
if we demonstrate favorable results in preclinical studies and early-stage clinical trials, we cannot assure you that the results of
late-stage clinical trials will be favorable enough to support the continued development of our product candidates. Several companies
in the pharmaceutical and biopharmaceutical industries have experienced significant delays, setbacks and failures in all stages of development,
including late-stage clinical trials, even after achieving promising results in preclinical testing or early-stage clinical trials. Accordingly,
results from completed preclinical studies and early-stage clinical trials of our product candidates may not be predictive of the results
we may obtain in later-stage trials. Furthermore, even if the data collected from preclinical studies and clinical trials involving our
product candidates demonstrate a satisfactory safety and efficacy profile, such results may not be sufficient to support the submission
of a New Drug Application, or NDA or a biologics license application, or BLA to obtain regulatory approval from the FDA in the U.S.,
or other similar regulatory agencies in other jurisdictions, which is required to market and sell the product.
Our
product candidates will require significant additional research and development efforts, the commitment of substantial financial resources,
and regulatory approvals prior to advancing into further clinical development or being commercialized by us or collaborators. We cannot
assure you that our product candidates will successfully progress through the drug development process or will result in commercially
viable products. We do not expect our product candidates to be commercialized by us or collaborators for at least several years.
Our
product candidates may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products
or investigational new drugs, which may delay or preclude further development or regulatory approval or limit their use if approved.
Throughout
the drug development process, we must continually demonstrate the safety and tolerability of our product candidates to obtain regulatory
approval to further advance clinical development or to market them. Even if our product candidates demonstrate biologic activity and
clinical efficacy, any unacceptable adverse side effects or toxicities, when administered alone or in the presence of other pharmaceutical
products, which can arise at any stage of development, may outweigh potential benefits. We may observe adverse or significant adverse
events or drug-drug interactions in future preclinical studies or clinical trial candidates, which could result in the delay or termination
of development, prevent regulatory approval, or limit market acceptance if ultimately approved.
The
product candidates that we, or our collaborators, may develop require regulatory approval to advance through clinical development and
to ultimately be marketed and sold and are subject to extensive and rigorous domestic and foreign government regulation. In the U.S.,
the FDA regulates, among other things, the development, testing, manufacture, safety,efficacy,safety, efficacy, record-keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of pharmaceutical and biopharmaceutical products.
We
will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely
impact our business.
A
pharmaceutical product cannot be marketed in the U.S. or other countries until we have completed rigorous and extensive regulatory review
processes, including approval of a brand name. Any brand names we intend to use for our product candidate will require approval from
the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or the PTO.
The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion with other product
names. The FDA may also object to a product brand name if
the FDA believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may
be required to adopt an alternative brand name for our product candidate. If we adopt an alternative brand name, we will lose the benefit
of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an
effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights
of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely
manner or at all, which would limit our ability to commercialize our product candidate.
Clinical
trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive
of future trial results.
Our
product candidates may not prove to be safe and efficacious in clinical trials and may not meet all the applicable regulatory requirements
needed to receive regulatory approval. In order to receive regulatory approval for the commercialization of our product candidates, we
must conduct, at our own expense, extensive preclinical testing and clinical trials to demonstrate safety and efficacy of our product
candidates for the intended indication of use. Clinical testing is expensive, can take many years to complete, if at all, and its outcome
is uncertain. Failure can occur at any time during the clinical trial process.
The
results of preclinical studies and early clinical trials of new drugs do not necessarily predict the results of later-stage clinical
trials. The design of our clinical trials is based on many assumptions about the expected effects of our product candidates, and if those
assumptions are incorrect, it may not produce statistically significant results. Preliminary results may not be confirmed on full analysis
of the detailed results of an early clinical trial. Product candidates in later stages of clinical trials may fail to show safety and
efficacy sufficient to support intended use claims despite having progressed through initial clinical testing. The data collected from
clinical trials of our product candidate may not be sufficient to support the filing of an NDA or to obtain regulatory approval in the
United States or elsewhere. Because of the uncertainties associated with drug development and regulatory approval, we cannot determine
if or when we will have an approved product for commercialization or achieve sales or profits.
Delays
in clinical testing could result in increased costs to us and delay our ability to generate revenue.
We
may experience delays in clinical testing of our product candidate. We do not know whether planned clinical trials will begin on time,
will need to be redesigned or will be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including
delays in obtaining regulatory approval to commence a clinical trial, in securing clinical trial agreements with prospective sites with
acceptable terms, in obtaining institutional review board approval to conduct a clinical trial at a prospective site, in recruiting patients
to participate in a clinical trial, or in obtaining sufficient supplies of clinical trial materials. Many factors affect patient enrollment,
including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical
trial, competing clinical trials and new drugs approved for the conditions we are investigating. Clinical investigators will need to
decide whether to offer their patients enrollment in clinical trials of our product candidate versus treating these patients with commercially
available drugs that have established safety and efficacy profiles. Any delays in completing our clinical trials will increase our costs,
slow down our product development, timeliness and approval process and delay our ability to generate revenue.
If
our product candidates are unable to compete effectively with marketed drugs targeting similar indications as our product candidate,
our commercial opportunity will be reduced or eliminated.
We
face competition generally from established pharmaceutical and biotechnology companies, as well as from academic institutions, government
agencies and private and public research institutions. Many of our competitors have significantly greater financial resources and expertise
in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing
approved products than we do. Small or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large, established companies. Our commercial opportunity will be reduced or eliminated if our competitors develop and
commercialize any drugs that are safer, more effective, have fewer side effects or are less expensive than our product candidate. These
potential competitors compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical
trial sites and patient enrollment for clinical trials, as well as in acquiring technologies and technology licenses complementary to
our programs or advantageous to our business.
We
expect that our ability to compete effectively will depend upon our ability to:
Because
we will be competing against significantly larger companies with established track records, we will have to demonstrate that, based on
experience, clinical data, side-effect profiles and other factors, our products, if approved, are competitive with other products. If
we are unable to compete effectively and differentiate our products from other marketed shingles drugs, we may never generate meaningful
revenue.
If
the manufacturers upon whom we intend to rely on fail to produce our product candidates, in the volumes that we require on a timely basis
or fail to comply with stringent regulations applicable to pharmaceutical drug manufacturers, we may face delays in the development and
commercialization of our product candidate.
We
do not currently possess internal manufacturing capacity. We plan to utilize the services of contract manufacturers to manufacture our
clinical supplies. Any curtailment in the availability of rencofilstat, however, could result in production or other delays with consequent
adverse effects on us. In addition, because regulatory authorities must generally approve raw material sources for pharmaceutical products,
changes in raw material suppliers may result in production delays or higher raw material costs.
We
continue to pursue active pharmaceutical ingredients, or API, and drug product supply agreements with other manufacturers. We may be
required to agree to minimum volume requirements, exclusivity arrangements or other restrictions with the contract manufacturers. We
may not be able to enter into long-term agreements on commercially reasonable terms, or at all. If we change or add manufacturers, the
FDA and comparable foreign regulators may require approval of the changes. Approval of these changes could require new testing by the
manufacturer and compliance inspections to ensure the manufacturer is conforming to all applicable laws and regulations and good manufacturing
practices or GMP. In addition, the new manufacturers would have to be educated in or independently develop the processes necessary to
produce our product candidate.
The
manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing
techniques and process controls. Manufacturers of pharmaceutical products may encounter difficulties in production, particularly in scaling
up production. These problems include difficulties with production costs and yields, quality control, including stability of the product
and quality assurance testing, shortages of qualified personnel, as well as compliance with federal, state and foreign regulations. In
addition, any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical trials, increase
the costs associated with conducting our clinical trials and, depending upon the period of delay, require us to commence new clinical
trials at significant additional expense or to terminate a clinical trial.
We
are responsible for ensuring that each of our contract manufacturers comply with the GMP requirements of the FDA and other regulatory
authorities from which we seek to obtain product approval. These requirements include, among other things, quality control, quality assurance
and the maintenance of records and documentation. The approval process for NDAs includes a review of the manufacturer’s compliance
with GMP requirements. We are responsible for regularly assessing a contract manufacturer’s compliance with GMP requirements through
record reviews and periodic audits and for ensuring that the contract manufacturer takes responsibility and corrective action for any
identified deviations. Manufacturers our product candidates may be unable to comply with these GMP requirements and with other FDA and
foreign regulatory requirements, if any.
While
we will oversee compliance by our contract manufacturers, ultimately, we will not have control over our manufacturers’ compliance
with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension
of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety our
product candidates is compromised due to a manufacturers’ failure to adhere to applicable laws or for other reasons, we may not
be able to obtain regulatory approval for or successfully commercialize our product candidates, and we may be held liable for any injuries
sustained as a result. Any of these factors could cause a delay of clinical trials, regulatory submissions, approvals or commercialization
of our product candidates, entail higher costs or result in us being unable to effectively commercialize our product candidates. Furthermore,
if our manufacturers fail to deliver the required commercial quantities on a timely basis and at commercially reasonable prices, we may
be unable to meet demand for any approved products and would lose potential revenues.
If
our any of our product candidates are approved by the FDA or comparable regulatory authorities in other countries for commercial sale, we
we will need to manufacture such product candidates in larger quantities. We may not be able to successfully increase the manufacturing
capacity for our product candidates in a timely or economic manner, or at all. Significant scale-up of manufacturing may require additional
validation studies, which the FDA must review and approve. If we are unable to successfully increase the manufacturing capacity for a
product candidate, the clinical trials as well as the regulatory approval or commercial launch of that product candidate may be delayed
or there may be a shortage in supply. Our product candidates require precise, high-quality manufacturing. Our failure to achieve and
maintain these high-quality manufacturing standards in collaboration with our third-party manufacturers, including the incidence of manufacturing
errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost
overruns or other problems that could harm our business, financial condition and results of operations.
Our
industry is highly competitive and subject to rapid technological changes. As a result, we may be unable to compete successfully or develop
innovative products, which could harm our business.
Our
industry is highly competitive and characterized by rapid technological change. Key competitive factors in our industry include, among
others, the ability to successfully advance the development of a product candidate through preclinical and clinical trials; the efficacy,
toxicological, safety, resistance or cross-resistance, and dosing profile of a product or product candidate; the timing and scope of
regulatory approvals, if ever achieved; reimbursement rates for and the average selling price of competing products and pharmaceutical
products in general; the availability of raw materials and qualified contract manufacturing and manufacturing capacity; manufacturing
costs; establishing and maintaining intellectual property and patent rights and their protection; and sales and marketing capabilities.
If ultimately approved, rencofilstat or any other product candidate we
may develop, would compete against existing therapies or other product candidate in various stages of clinical development that we believe
may potentially become available in the future.
Developing
a pharmaceutical product candidate is a highly competitive, expensive and risky activity with a long business cycle. Many organizations,
including the large pharmaceutical and biopharmaceutical companies that have existing products on the market or in clinical development
that could compete with our product candidate have substantially more resources than we have, and much greater capabilities and experience
than we have in research and discovery, designing and conducting preclinical studies and clinical trials, operating in a highly regulated
environment, manufacturing drug substances and drug products, and marketing and sales. Our competitors may be more successful than we
are in obtaining FDA or other regulatory approvals for their product candidates and achieving broad market acceptance once they are approved.
Our competitors’ drugs or product candidates may be more effective, have fewer negative side effects, be more convenient to administer,
have a more favorable resistance profile, or be more effectively marketed and sold than any drug we, or our potential collaborators,
may develop or commercialize. New drugs or classes of drugs from competitors may render our product candidate obsolete or non-competitive
before we are able to successfully develop them or, if approved, before we can recover the expenses of developing and commercializing
them. We anticipate that we or our collaborators will face intense and increasing competition as new drugs and drug classes enter the
market and advanced technologies or new drug targets become available. If our product candidate does not demonstrate any competitive
advantages over existing drugs, new drugs or product candidate, we or our future collaborators may terminate the development or commercialization
of our product candidate at any time.
We
anticipate that our product candidate if successfully developed and approved, will compete directly or indirectly with existing drugs,
some of which are generic. Generic drugs are drugs whose patent protection has expired, and generally have an average selling price substantially
lower than drugs protected by intellectual property rights. Unless a patented drug can differentiate itself from a generic drug in a
meaningful manner, the existence of generic competition in any indication may impose significant pricing pressure on competing patented
drugs.
We
also face, and will continue to face, intense competition from other companies for collaborative arrangements with pharmaceutical and
biopharmaceutical companies, and for attracting investigators and clinical sites capable of conducting our preclinical studies and clinical
trials. These competitors, either alone or with their collaborators, may succeed in developing technologies or products that are safer,
more effective, less expensive or easier to administer than ours. Accordingly, our competitors may succeed in obtaining FDA or other
regulatory approvals for their product candidates more rapidly than we can. Companies that can complete clinical trials, obtain required
regulatory approvals and commercialize their products before their competitors may achieve a significant competitive advantage, including
certain patent and FDA marketing exclusivity rights that could delay the ability of competitors to market certain products. We cannot
assure you that product candidates resulting from our research and development efforts, or from joint efforts with our collaborators,
will be able to compete successfully with our competitors’ existing products or products under development.
We
do not currently have any internal drug discovery capabilities, and therefore we are dependent on in-licensing or acquiring development
programs from third parties in order to obtain additional product candidates.
If
in the future we decide to further expand our pipeline, we will be dependent on in-licensing or acquiring product candidates as we do
not have significant internal discovery capabilities at this time. Accordingly, in order to generate and expand our development pipeline,
we have relied, and will continue to rely, on obtaining discoveries, new technologies, intellectual property and product candidates from
third parties through sponsored research, in-licensing arrangements or acquisitions. We may face substantial competition from other biotechnology
and pharmaceutical companies, many of which may have greater resources then we have, in obtaining these in-licensing, sponsored research
or acquisition opportunities. Additional in-licensing or acquisition opportunities may not be available to us on terms we find acceptable,
if at all. In-licensed compounds that appear promising in research or in preclinical studies may fail to progress into further preclinical
studies or clinical trials.
In
addition, we rely on a third-party manufacturer to manufacture API for our product candidate. Any disruption in production or inability
of our manufacturer to produce or ship adequate quantities to meet our needs, whether as a result of a natural disaster or other causes
(such as the COVID-19 pandemic), could impair our ability to operate our business on a day-to-day basis and to continue our research
and development of our product candidate. In addition, we are exposed to the possibility of product supply disruption and increased costs
in the event of changes in the policies of the United States or political unrest in areas in which we do business. Any recall of the
manufacturing lots or similar action regarding our API used in clinical trials could delay the trials or detract from the integrity of
the trial data and its potential use in future regulatory filings. In addition, manufacturing interruptions or failure to comply with
regulatory requirements by any of these manufacturers could significantly delay clinical development of potential products and reduce
third-party or clinical researcher interest and support of proposed trials. These interruptions or failures could also impede commercialization
of our product candidate and impair our competitive position.
We conduct our business in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenue, adversely affect our results of operations and financial condition and harm our business.
The life sciences industry is highly regulated, and the regulatory environment in which we and our collaborators operate may change significantly and adversely to us in the future. Areas of the regulatory environment that may affect our ability to conduct business include, without limitation, federal and state laws relating to:
In particular, the laws, regulations and policies governing the marketing of RUO products, LDTs and clinical diagnostic tests and services are extremely complex and are subject to interpretation by the courts and governmental agencies. Our failure to comply could lead to civil or criminal penalties, exclusion from participation in state and federal health care programs, or prohibitions or restrictions on our laboratories’ ability to provide or receive payment for our services. We believe that we are in material compliance with all statutory and regulatory requirements, but there is a risk that one or more government agencies could take a contrary position, or that a private party could file suit under the qui tam provisions of the federal False Claims Act or a similar state law. Such occurrences, regardless of their outcome, could damage our reputation and adversely affect important business relationships with third parties, including managed care organizations, and other private third-party payors.
The insurance coverage and reimbursement status of newly approved products, in a new category of diagnostics and therapeutics, is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for current or future products could limit our ability, and that of our collaborators, to fully commercialize our products and decrease our ability to generate revenue.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford the clinical diagnostic tests and therapeutics that we and our collaborators plan to develop and sell. In addition, because our clinical diagnostics and some of our potential therapeutic products will represent new approaches to the research, diagnosis, detection and treatment of diseases, we cannot accurately estimate how our products and services, and those jointly created with our collaborators, would be priced, whether reimbursement could be obtained or any potential revenue generated. Sales of our products will depend substantially, both domestically and internationally, on the extent to which the costs of our products and services are paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize some of our products or services. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment in any of our products or services. If we adopt a self-pay strategy with respect to any products or services, we may experience similar difficulties in the establishment or maintenance of sufficiently high pricing. Changes in the reimbursement landscape may occur, which are outside of our control, and may impact the commercial viability of our products and services.
There is significant uncertainty related to the insurance coverage and reimbursement of newly cleared, authorized or approved products and services. In the U.S., many significant decisions about reimbursement for new diagnostics and medicines are typically made by CMS, an agency within the HHS, and its contractors. CMS and its contractors decide whether and to what extent a new diagnostic or medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS policies to a substantial degree. It is difficult to predict what CMS and its contractors will decide with respect to reimbursement for novel products and services such as ours. Additionally, reimbursement agencies in Europe may be more conservative than CMS. These inherent limitations could affect our ability to realize revenues from our clinical products.
Outside the U.S., the reimbursement process and timelines vary significantly. Certain countries, including a number of member states of the EU, set prices and make reimbursement decisions for diagnostics and pharmaceutical products, or medicinal products, as they are commonly referred to in the EU, with limited participation from the marketing authorization or Conformité Européene (“CE”) mark holders, or may take decisions that are unfavorable to the authorization or CE mark holder where they have participated in the process. We cannot be sure that such prices and reimbursement decisions will be acceptable to us or our collaborators. If the regulatory authorities in these foreign jurisdictions set prices or make reimbursement criteria that are not commercially attractive for us or our collaborators, our revenues and the potential profitability of our products and services in those countries would be negatively affected.
An increasing number of countries, including the U.S. and the EU, are pursuing initiatives to attempt to control the healthcare budget by focusing cost-cutting efforts on medicinal products, and to a lesser extent, medical devices, provided under their state-run healthcare systems. Additionally, some countries require approval of the sale price of a product before it can be marketed or mandatory discounts or profit caps may be applied. Further, after the sale price is approved, it remains subject to review during the product lifecycle. In many countries, the pricing review period begins after marketing or product licensing approval is granted or the CE mark is obtained. As a result, we or our collaborators might obtain marketing approval for a product or service in a particular country, but then may experience delays in the reimbursement approval or be subject to price regulations that would delay the commercial launch of our product or service, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of that product or service in that particular country.
Moreover, increasing efforts by governmental and third-party payors, in the U.S. and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly cleared, authorized or approved devices and medicines and, as a result, they may not cover or provide adequate payment for our clinical diagnostics or the cellular therapies to be sold by us or our collaborators. For example, the U.S. government introduced the Lower Drug Costs Now Act of 2019 to reduce the cost of drugs. This blueprint contains certain measures that HHS is already working to implement. In addition, the No Surprises Act (“NSA”) took effect in January 2022. One of the goals of the NSA is to protect patients from “surprise” medical bills resulting from gaps in coverage for services provided by out-of-network providers, such as laboratories, related to patient visits at in-network facilities. The NSA limits the amount out-of-network laboratories may charge a patient for laboratory services ordered during an in-network facility visit and establishes an independent dispute resolution process for determining the amount of reimbursement for the laboratory service in the event that the laboratory and insurer cannot agree on a rate. To the extent the NSA limits the price charged for our diagnostic products or cellular therapeutics, the commercial viability of those products may be adversely affected.
At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, which are, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect to experience pricing pressures on our clinical diagnostics and cellular therapies sold by us and our collaborators due to the trend toward value-based pricing and coverage, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Changes in law relating to health insurance coverage and payment may adversely affect our business.
In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, the ACA was passed, which substantially changes the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. clinical diagnostic and biopharmaceutical industries. The ACA, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs and medical devices, including laboratory kits, and promoted a new Medicare Part D coverage gap discount program.
Some of the provisions of the ACA have been subject to judicial and Congressional challenges. It is also unclear how regulatory provisions and sub-regulatory guidance, both of which fluctuate continually, may affect interpretation and implementation of the ACA and its practical effects on our business. In addition, changes in the number of patients that can look to third-party payment to help afford our products and services may affect the demand for these products and services.
We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory developments are likely, and we expect ongoing initiatives to increase downward pressure on drug and device pricing. Such reforms could have an adverse effect on anticipated revenues from our products and services, including those that we jointly develop with our collaborators, and may affect our overall financial condition and ability to develop or obtain regulatory clearance, authorization or approval for our products and services.
Inadequate funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and clear, authorize or approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel, and statutory, regulatory and policy changes. In addition, government funding of agencies on which our operations may rely, including those that fund research and development activities, is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and devices to be reviewed and cleared, authorized or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
We must maintain compliance with marketing authorization requirements of the FDA and equivalent foreign and state regulatory authorities for our products and services whose sale is subject to their authority and failure to maintain compliance with FDA requirements may prevent or delay the marketing of our products and services.
Even after we have obtained marketing authorization we must comply with the scope of that clearance, authorization or approval. Failure to comply with those limitations or the additional, extensive and ongoing post-marketing obligations imposed by the FDA or other regulatory requirements of other regulatory agencies, such as the Clinical Laboratory Evaluation Program for New York State, could result in unanticipated compliance expenditures, a range of administrative enforcement actions, injunctions and criminal prosecution. FDA post-market obligations include, among other things, compliance with the FDA QSR, establishing registration and device listings, labeling requirements, reporting of certain adverse events and malfunctions, and reporting of certain recalls. In addition, circumstances may arise that cause us to recall equipment used in connection with our products and services. Such recalls could have an adverse effect on our ability to provide those products and services, which in turn would adversely affect our financial condition. Our collaborators will also be required to maintain FDA clearance and possibly also other authorizations or approvals for the products and services that we jointly develop. Any failure by us or our collaborators to maintain such clearance, authorization or approval could impair or cause a delay in our ability to profit from these collaborations.
For each product we are developing that requires FDA premarket review or equivalent regulatory approval, the FDA or other regulatory authority may not grant clearance, authorization or premarket approval and failure to obtain necessary approvals for our future products and services would adversely affect our ability to grow our business.
Before we begin to manufacture, label and market additional clinical diagnostic products for commercial diagnostic use in the U.S., we may be required to obtain either clearance, marketing authorization or approval from the FDA and state regulatory authorities with jurisdiction over such products, unless an exemption applies or, in the case of the FDA, it exercises its enforcement discretion and refrains from enforcing its requirements. For example, the FDA currently refrains from enforcing its medical device requirements with respect to LDTs, which the FDA considers to be a type of in vitro diagnostic test that is designed, manufactured and used within a single properly licensed laboratory.
The process of obtaining PMA from the FDA is much more rigorous, costly, lengthy and uncertain than the 510(k) clearance process. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. Conversely, in the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a legally marketed “predicate” device in order for the product to be cleared for marketing. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics or if it has different technological characteristics as the predicate device, the proposed device must be as safe and effective as, and not raise different questions of safety or effectiveness than, the predicate device. Clinical data is sometimes required to support substantial equivalence. For lower-risk devices that would otherwise automatically be placed into Class III, which require a PMA because no predicate device is available and the devices do not fall within an existing 510(k)-exempt classification, an applicant may submit a de novo request to down classify the device into Class II or Class I, which would not require a PMA. In the de novo process, the FDA must determine that general and special controls are sufficient to provide reasonable assurance of the safety and effectiveness of a device, which is low to moderate risk and has no predicate. In other words, the applicant must justify the “down-classification” to Class I or II for a new product type that would otherwise automatically be placed into Class III, but is lower risk. Clinical data may be required. For laboratory tests for which FDA clearance, authorization or approval is required, the FDA may also require data to support analytical and clinical validity.
The 510(k), de novo and PMA processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies. The FDA’s 510(k) clearance pathway usually takes from three to nine months from submission, but it can take longer for a novel type of product. The FDA’s de novo classification pathway usually takes from six to 12 months, but for many applicants can take up to 18 months or more.
The process of obtaining a PMA generally takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or failure to obtain necessary regulatory clearances, authorizations or approvals would have a material adverse effect on our business, financial condition and prospects.
The FDA can delay, limit or deny clearance, authorization or approval of a device for many reasons, including:
Management's Discussion & Analysis (MD&A)
Removed heading “Research and Development”
Removed heading “In-Process Research and Development”
Removed heading “Share-based payments”
Largest changes
“In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental liability, and tax matters. In accordance with ASC Topic 450, Accounting for Contingencies, (“ASC 450”), we record accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. …”see in full comparison
“In-Process Research and Development (“IPR&D”) acquired in a business combination is capitalized as indefinite-lived assets on our consolidated balance sheets at the acquisition-date fair value. Once the project is completed, the carrying value of the IPR&D is reclassified to other intangible assets, net and is amortized over the estimated useful life of the asset. Post-acquisition research and development expenses related to the IPR&D projects are expensed as incurred. …”see in full comparison
“The annual, or interim if (events or changes in circumstances indicate that it is more likely than not that the asset is impaired), IPR&D impairment test is performed by comparing the fair value of the asset to the asset’s carrying amount. When testing indefinite-lived intangibles for impairment, we may assess qualitative factors for its indefinite-lived intangibles to determine whether it is more likely than not that the asset is impaired. …”see in full comparison
“We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. …”see in full comparison
“Asset impairment loss for the years ended December 31, 2025 and 2024 were $0.4 million and $0 million, respectively. The increase of $0.4 million was primarily impairment expense related to the asset acquired in the license agreement. We tested the asset for impairment during the reporting period, noting there were triggering events related to delayed timing to market resulting in an adverse effect on estimated cashflow over the next two years. …”see in full comparison
Full comparison: every changed paragraph (43)
We
are a biopharmaceuticalmedical diagnostic company headquartered in Morristown, New Jersey, that was 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. Taken together, the AMBITION and ALTITUDE-NASH trials reinforced rencofilstat’s direct antifibrotic mode of action and increase
our confidence level that we anticipated observing fibrosis reductions in our 12-month Phase 2b (“ASCEND-NASH”) clinical
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 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
January 23, 2025, we consummated a best effortsbest-efforts registered offering for 73,222 shares of common stock, Pre-Funded Warrants to purchase
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.
On May 9, 2025, we entered into a license agreement (the “License Agreement”) with New Day Diagnostics LLC (“New Day”) pursuant to which we in-licensed certain diagnostic tests for celiac disease, respiratory multiplex (Covid/Influenza A/B and RSV), helicobacter pylori (“H. pylori”) and hepatocellular carcinoma (“HCC”). The celiac, respiratory multiplex and H. pylori tests have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible markets that accept the CE mark, with the notable exception of the United States at the present time.
Pursuant to the License Agreement, we paid $525,000 in cash to New Day along with $200,000 in shares of our common stock. In addition, we have agreed to pay New Day up to $17.15 million upon achievement of certain regulatory, sales and reimbursement milestones. In addition, we will pay New Day royalty rates in the upper single to low double digits based on net sales.
From
inception through December 31, 2024,2025, we have an accumulated deficit of $237.8$246.1 millionmillion, and we have not generated any revenue from operations.
We expect to incur additional losses to perform further research and development activities and for ongoing administrative expenses,
and do not currently have any commercial biopharmaceutical products. We do not expect to have such for several years, if at all.
Research
and development expenses for the years ended December 31, 20242025 and 20232024 were $11.8$0.4 million and $35.6$11.8 million, respectively. The decrease
of $23.8$11.4 million was primarily due to a $18.5$10.6 million decrease in clinical trial costs and drug development primarily for our phase 2b
study,study (which includes a $2.9partial offset of $0.4 million in expense related to purchased in-process research and development from the New Day asset acquisition),
a $0.5 million decrease in employee compensation costs due to reduced headcounts and a $1.0$0.4 million decrease in stock-basedconsulting compensationand outside
costs. Also, there is a decrease of $0.7 million due to the absence of the one-time restructuring charge related to the strategic
restructuring plan implemented in Q4 2023.services.
General
and administrative expenses for the years ended December 31, 20242025 and 20232024 amounted to $7.5$3.3 million and $9.6$7.5 million, respectively. The
The decrease of $2.1$4.2 million is primarily due to a $1.4$0.7 million decrease in employee compensation costs, and a $0.7$0.8 million decrease in stock-based
compensation costs, $0.4 million decrease in consulting and outside services, $1.7 million decrease in professional fees, $0.2 million
in stock-basedrent, compensation$0.1 costs.million decrease in software and support, and $0.1 million decrease in insurance expense.
Asset impairment loss for the years ended December 31, 2025 and 2024 were $0.4 million and $0 million, respectively. The increase of $0.4 million was primarily impairment expense related to the asset acquired in the license agreement. We tested the asset for impairment during the reporting period, noting there were triggering events related to delayed timing to market resulting in an adverse effect on estimated cashflow over the next two years. Given that the license agreement requires both parties to agree to renewal after the initial two years, we projected the estimated cashflows for the first two years for the assets available for sales in eligible markets, noting the projected cashflow will not be enough to recover the allocated cost in the first two years of the license agreement, resulting in an impairment loss.
For
the year ended December 31, 2023, we incurred an impairment to our in-process research and development asset of $3.2 million. Our in-process
research and development asset was impaired in 2023 due to the slowdown of our Phase2b study, the delayed timeline of our clinical trials
and our removal of Hepatitis B as a second indication to focus solely on Rencofilstat.
We
have no products approved for commercial sale.sale in the United States. However, with the assets related to the New Day licensing agreement,
there are three products that have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible
markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and
how much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing and
staffing staffing
our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our product candidate.
As a result,
we are not profitable and have incurred losses in each period since our inception in 2013. As of December 31, 2024,2025, we had
an accumulated
deficit of $237.8$246.1 million. We expect to continue to incur significant losses for the foreseeable future.
Since
our inception, we have invested a significant portion of our efforts and financial resources in research and development activities for
our non-replicating and replicating technologies and our product candidates derived from these technologies. We believe that we will
continue to expend substantial resources for the foreseeable future in connection with ourthe anticipated acquisitiondevelopment of anacquired assetassets in connection
with our strategic alternatives strategy. In addition, other unanticipated costs may arise.
As
of December 31, 2024,2025, we had a working capital of $2.8 million compared to working capital deficit of $1.5 million compared to working capital of $12.2 million as of December 31,
2023.2024. The decreaseincrease of $13.7$4.3 million in working capital is primarily relateddue to cash spend related to our wind-down activities and operating
costs, offset by $3.0$8.2 million in net proceeds received from salesequity issuance
offset by the $3.4 million related to settlement of oura statenote NOLs.payable, and the Company’s other operating costs for the 12 months ended
December 31, 2025.
As
of December 31, 2024, we had $0.4 million in cash. Net cash used in operating activities was $18.2 million for the year ended December
31, 2024 consisting primarily of our net loss of $13.2 million, adjusted for an increase in non-cash charges of $5.3 million, primarily
for stock-based compensation, amortization of debt discount, write-off of the loan to Pharma Two B and warrant related inducement expense,
partially offset by $7.6 million in change in fair value of contingent consideration and the change in fair value of derivative warrants.
Changes in working capital accounts had a negative impact of $2.7 million on cash primarily due to an increase in accounts payable, accrued
expenses and prepaid expenses.
As
of December 31, 2023,2025, we had $14.8$1.8 million in cash. Net cash used in operating activities was $40.9$3.3 million for the year ended December
31, 20232025 consisting primarily of our net loss of $48.9$8.3 million, adjusted for an increase in non-cash charges of $4.9$4.5 million, including $0.4 million primarilyfor
forasset stock-based compensation, impairment of our in-process researchimpairment, and development$4.1 asset,million and thein change in fair value of derivative
warrants. Changes in working capital accounts had a positive negative
impact of $3.0$0.4 million on cash primarily due to aan decreaseincrease in accounts payable, accrued expenses and prepaid expenses.
As of December 31, 2024, we had $0.4 million in cash. Net cash used in operating activities was $18.3 million for the year ended December 31, 2024 consisting primarily of our net loss of $13.2 million, adjusted for an increase in non-cash charges of $5.3 million, primarily for stock-based compensation, amortization of debt discount, write-off of the loan to Pharma Two B and warrant related inducement expense, partially offset by $7.6 million in change in fair value of contingent consideration and the change in fair value of derivative warrants. Changes in working capital accounts had a negative impact of $2.7 million on cash primarily due to an increase in accounts payable, accrued expenses and prepaid expenses.
Net
cash used in investing activities duringwas $0.1 million for the year ended December 31, 20242025 andrelated 2023to wasthe $600,000acquisition andof delicenses minimis,from respectively.New
Day TheDiagnostics. $600,000
Net cash used in investing activityactivities duringwas $0.6 million for the year ended December 31, 2024 related to the loan to the loan
Pharma Two B.
Net
cash provided by financing activities was $4.4 million and $4.5$4.8 million for the year ended December 31, 2024 and 2023, respectively,
primarily2025, due primarily to the$8.3 exercisemillion ofproceeds warrants (induced), and the equity and debt issuance under a Securities Purchase Agreement, in 2024received
.and the issuance offrom common stock and warrantswarrant, innet 2023.of issuance costs offset by $3.4 million payment on notes payable.
Net cash provided by financing activities was $4.4 million for the year ended December 31, 2024 primarily due to the exercise of warrants (induced), and the equity and debt issuance under a Securities Purchase Agreement.
CRITICAL
ACCOUNTING ESTIMATESESTIMATE
We
believe that the assumptions and estimates associated with fair value of derivative financial instruments,instruments-warrants, income taxes, contingencies, research
and development, in-process research and development, and share-based payments havehas the greatest
potential impact on our consolidated
financial statements. We evaluate thesethis estimatesestimate on an ongoing basis. Actual results could differ
from those estimates under different
assumptions or conditions, and any differences could be material. For further information on all
of our significant accounting policies,
see Note 3 of the Notes to the Consolidated Financial Statements under Item 8 of this Annual
Report on Form 10-K.
Fair
Value of Derivative Financial InstrumentsInstruments- Warrants
Financial
instruments consist of cash, accounts payable, contingent consideration and derivative financial instruments. These financial instruments
are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature, except for contingent
consideration and derivatives. We record contingent consideration and our derivative financial instruments at fair value at the end of
each reporting period.
Contingent
consideration was related to the acquisition of Ciclofilin and recorded on June 10, 2016. The contingent consideration represented the
acquisition date fair value of potential future payments, to be paid in cash, upon the achievement of certain milestones and in 2016
was estimated based on a probability-weighted discounted cash flow model. For the year ended December 31, 2023, significant assumptions
used to calculate the fair value of the contingent consideration included the discount rate, projected milestone achievement dates, and
the probability of success. For the year ended December 31, 2024, the fair value of the contingent consideration is zero as management
concluded the milestones will not be achieved.
Derivative financial instruments are related to the issuance of warrants accounted for as a liability. The Black-Scholes model, which uses significant assumptions including risk-free interest rate, volatility, stock price and expected term to calculate fair value. To calculate the fair value of the 2025 warrants, we performed a back solve at inception that contemplated a Discount for Lack of Marketability (DLOM) and dilution adjustments. Refer to Note 4.
Income
Taxes
We
account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax
rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize
the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the
enactment date. We reduce the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not
that we will not realize some or all of the deferred tax asset. We account for uncertain tax positions by recognizing the financial statement
effects of a tax position only when, based upon technical merits, it is “more-likely-than-not” that the position will be
sustained upon examination. Potential interest and penalties associated with unrecognized tax positions are recognized in income tax
expense.
We
continue to maintain a full valuation allowance for our U.S and foreign net deferred tax assets. Income tax expense for the years ended
December 31, 2024 and 2023 are related to our foreign operations. For the year ended December 31, 2024, we received $3.0 million in proceeds
from sales of our state NOLs related to prior years under the State of New Jersey’s Technology Business Tax Certificate Transfer
Program.
Contingencies
In
the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business
that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental
liability, and tax matters. In accordance with ASC Topic 450, Accounting for Contingencies, (“ASC 450”), we record accruals
for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated.
In accordance with this guidance, we do not recognize gain contingencies until realized.
Research
and Development
Research
and development costs, which include expenditures in connection with an in-house research and development laboratory, salaries and staff
costs, application and filing for regulatory approval of proposed products, purchased in-process research and development, license costs,
regulatory and scientific consulting fees, as well as contract research, insurance and FDA consultants, are accounted for in accordance
with ASC Topic 730, Research and Development (“ASC 730”). Also, as prescribed by this guidance, patent filing and maintenance
expenses are considered legal in nature and therefore classified as general and administrative expense, if any.
We
do not currently have any commercial biopharmaceutical products and do not expect to have such for several years, if at all. Accordingly,
our research and development costs are expensed as incurred. While certain of our research and development costs may have future benefits,
our policy of expensing all research and development expenditures is predicated on the fact that we have no history of successful commercialization
of product candidates to base any estimate of the number of future periods that would be benefited.
Also
as prescribed by ASC 730, non-refundable advance payments for goods or services that will be used or rendered for future research and
development activities should be deferred and capitalized. As the related goods are delivered or the services are performed, or when
the goods or services are no longer expected to be provided, the deferred amounts would be recognized as an expense. At December 31,
2024 and 2023, we had prepaid research and development costs of $0 million and $2.5 million, respectively.
In-Process
Research and Development
In-Process
Research and Development (“IPR&D”) acquired in a business combination is capitalized as indefinite-lived assets on our
consolidated balance sheets at the acquisition-date fair value. Once the project is completed, the carrying value of the IPR&D is
reclassified to other intangible assets, net and is amortized over the estimated useful life of the asset. Post-acquisition research
and development expenses related to the IPR&D projects are expensed as incurred. The projected discounted cash flow models used to
estimate the fair values of our IPR&D assets, acquired in connection with the Ciclofilin acquisition, reflect significant assumptions
regarding the estimates a market participant would make in order to evaluate a drug development asset, including: (i) probability of
successfully completing clinical trials and obtaining regulatory approval; (ii) market size, market growth projections, and market share;
(iii) estimates regarding the timing of and the expected costs to advance clinical programs to commercialization; (iv) estimates of future
cash flows from potential product sales; and (v) a discount rate. These assumptions are based on significant inputs not observable in
the market and thus represent Level 3 measurements within the fair value hierarchy. The use of different inputs and assumptions could
increase or decrease our estimated discounted future cash flows, the resulting estimated fair values and the amounts of related impairments,
if any.
The
annual, or interim if (events or changes in circumstances indicate that it is more likely than not that the asset is impaired), IPR&D
impairment test is performed by comparing the fair value of the asset to the asset’s carrying amount. When testing indefinite-lived
intangibles for impairment, we may assess qualitative factors for its indefinite-lived intangibles to determine whether it is more likely
than not that the asset is impaired. Alternatively, we may bypass this qualitative assessment for our indefinite-lived intangible asset
and perform the quantitative impairment test that compares the fair value of the indefinite-lived intangible asset with the asset’s
carrying amount. If IPR&D becomes impaired or is abandoned, the carrying value of the IPR&D is written down to the revised fair
value with the related impairment charge recognized in the period in which the impairment occurs. If the carrying value of the asset
becomes impaired as the result of unfavorable data from any ongoing or future clinical trial, changes in assumptions that negatively
impact projected cash flows, or because of any other information regarding the prospects of successfully developing or commercializing
our programs, we could incur significant charges in the period in which the impairment occurs.
We
concluded that during the three months ended December 31, 2023, our IPR&D asset was impaired due to the slowdown of our Phase 2b
clinical trial delaying the potential approval of Rencofilstat, which also resulted in lower revenue and profit projections. We also
discarded Hepatitis B as a second indication due to costs and to focus solely on NASH. The full $3.2 million IPR&D asset was impaired
at December 31, 2023.
Share-based
payments
ASC
Topic 718, Compensation—Stock Compensation (“ASC 718”), requires companies to measure the cost of employee and
non-employee services received in exchange for the award of equity instruments based on the estimated fair value of the award at the
date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for
the award. Generally, we issue stock options with only service-based vesting conditions and record the expense for awards using the straight-line
method (see Note 9 to the consolidated financial statements). We account for awards granted to employees that are in excess of what is
available to grant as a liability and is recorded at fair value each reporting period in the consolidated financial statements.
The
fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The estimated expected
stock volatility is based on the historical volatility of our common stock. The expected term of stock options has been determined utilizing
the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options
granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference
to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term
of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and do not expect to pay any cash dividends
in the foreseeable future.
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the six months ended June 30, 2026 and 2025:”
Largest changes
see in full comparisonAs of March 31, 2025, we had $4.6 million in cash.Net cash used in operating activities was$1.1$2.5 million for thethreesix months endedMarchJune31,30,20252025, consisting primarily of our net loss of$6.1$7.1 million, adjusted for non-cash charges of$4.8$4.5 million, including$20,783for stock-based compensation, and $4.8$4.1 million in change in fair value of derivativewarrants.warrants and $0.4 million in asset impairment loss. Changes inworkingoperatingcapital accounts had a positive impact of $0.2 million on cash primarily due to an increase in accounts payableassets andaccruedliabilitiesexpenses.increased by $0.1 million.
“Asset impairment loss for the three months ended June 30, 2026 and 2025 was $0 and $0.4 million, respectively. The decrease in asset impairment loss is related to the asset from the New Day license agreement that was fully impaired in prior year.”see in full comparison
“Asset impairment loss for the three months ended June 30, 2026 and 2025 was $0 and $0.4 million, respectively. The decrease in asset impairment loss is related to the asset from the New Day license agreement that was fully impaired in prior year.”see in full comparison
“On July 31, 2026, we entered into securities purchase agreements with certain accredited investor pursuant to which the Company agreed to sell and issue an aggregate of 61,100,000 shares of Common Stock and warrants to purchase 61,100,000 shares of Common Stock, in a private placement offering at an offering price of $0.05 per share for gross proceeds of $3.1 million. The warrants are exercisable at an exercise price of $0.06 per share for five years from the date of issuance. The July 2026 Offering closed on August 3, 2026.”see in full comparison
General and administrative expenses for the three months endedsee in full comparisonMarchJune31,30, 2026 and 2025 was$0.7approximately $1.2 million and$1.3$0.9 million, respectively. Thedecreaseincrease of$0.5$0.2 million was primarily due to a$0.4$0.3 milliondecreaseincrease in personnel costs of our general and administrative employees, $0.1 million in non-income tax expense and $0.1 million increase in public company costs. These increases were offset by decreases in legal fees and accountingfees,fees of $0.1 milliondecrease in insurance,and$0.2 million decrease inconsulting and outsideservices.servicesThese increases were partially offset by aof $0.2million increase in severance.million.
Full comparison: every changed paragraph (26)
On
February 25, 2026, we entered into an intellectual property license agreement
with Cirna Diagnostics, LLC (“Cirna”)
pursuant to which we licensed certain liver disease diagnostic assets from Cirna.
We will paypaid an upfront payment of $50,000$70,000 asduring wellthe assix
months certainended patentJune expenses,30, 2026 and will pay up to $2,350,000 in milestone payments, up to $4,500,000
in sales milestone payments and a royalty
payment on net sales in the low single digits. We accounted for this transaction as an asset
acquisition. The total upfront consideration
of $70,000 (upfront payment and certain patent expenses) was allocated to purchased in-process research
and development, and it was expensed upon the completion of the transaction. We
did not recognize any contingent consideration (milestone
payments) given the low probability of meeting those targets. Royalties will
be recognized when earned.
From
inception through MarchJune 31,30, 2026, we have an accumulated deficit of $246.9$248.2 million, and we have not generated any revenue from operations.
During
the threesix months ended MarchJune 31,30, 2026, there were no significant changes to our critical accounting estimates from those described in the
the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual Report
Report on Form 10-K for the year ended December 31, 2025.
Comparison
of the three months ended MarchJune 31,30, 2026 and 2025:
We
had no revenues during the three months ended MarchJune 31,30, 2026 and 2025, respectively,
because we have not commercialized any of our medical diagnostic
products and we do not expect to have such products for several years,
if at all.
Research
and development expenses for the three months ended MarchJune 31,30, 2026 and 2025 was $70,000
approximately $0.1 million and $22,235,$0.4 million, respectively.
The $70,000decrease incurredin research and development expense in 2026 is primarily related to Cirnapurchased licensingin-process agreement,research whereasand development from the $22,235New incurred
Day asset acquisition in prior period was primarily due to certain residual costs to close out the prior our phase 2b study.2025.
General
and administrative expenses for the three months ended MarchJune 31,30, 2026 and 2025 was $0.7approximately $1.2 million and $1.3$0.9 million,
respectively. The
decrease increase of $0.5$0.2 million was primarily due to a $0.4$0.3 million decreaseincrease in personnel costs of our general and
administrative employees, $0.1 million in non-income tax expense and $0.1 million increase in public company costs. These increases
were offset by decreases in legal fees and accounting fees,fees of $0.1 million
decrease in insurance, and $0.2 million decrease in consulting and outside services.services These increases were partially offset by aof $0.2 million increase in severance.
million.
Asset impairment loss for the three months ended June 30, 2026 and 2025 was $0 and $0.4 million, respectively. The decrease in asset impairment loss is related to the asset from the New Day license agreement that was fully impaired in prior year.
Comparison of the six months ended June 30, 2026 and 2025:
We had no revenues during the six months ended June 30, 2026 and 2025, because we have not commercialized any of our medical diagnostic products and we do not expect to have such products for several years, if at all.
Research and development expenses for the six months ended June 30, 2026 and 2025 were approximately $0.1 million and $0.4 million, respectively. The decrease in research and development expense in 2026 is primarily related to the purchase of in-process research and development related to the New Day asset acquisition in 2025, partially offset by Cirna license fees incurred in 2026.
General and administrative expenses for the six months ended June 30, 2026 and 2025 were approximately $1.9 million and $2.2 million, respectively. The decrease of approximately $0.3 million was primarily due to a $0.5 million decrease in legal and accounting fees and $0.4 million decrease in consulting and outside services. These decreases were partially offset by a $0.6 million increase in personnel costs of our general and administrative employees, including severance of $0.2 million.
Asset impairment loss for the three months ended June 30, 2026 and 2025 was $0 and $0.4 million, respectively. The decrease in asset impairment loss is related to the asset from the New Day license agreement that was fully impaired in prior year.
We
have funded our operations through MarchJune 31,30, 2026 primarily through the issuance of convertible preferred stock, warrants, the issuance
and sale of shares of our common stock, and subsequent issuances of shares of our common stock through at-the market offerings.
On
April 21, 2026, we entered into securities purchase agreements (the “Agreements”) with certain accredited investors (the
“Investors”) pursuant to which the Company agreed
to sell and issue toan theaggregate Investorsof 17,500,000 shares of Common Stock in a private placement offering (the
“Offering”), an aggregate offering of 17,500,000 shares of common stock, par value $0.0001 per share at an offering price
of $0.04 per
share for gross proceeds of $700,000. The Offering closed on April 21, 2026. Approximately $250,000 of the $700,000 was
received prior to March 31, 2025, and is recorded as a subscription liability.
On July 31, 2026, we entered into securities purchase agreements with certain accredited investor pursuant to which the Company agreed to sell and issue an aggregate of 61,100,000 shares of Common Stock and warrants to purchase 61,100,000 shares of Common Stock, in a private placement offering at an offering price of $0.05 per share for gross proceeds of $3.1 million. The warrants are exercisable at an exercise price of $0.06 per share for five years from the date of issuance. The July 2026 Offering closed on August 3, 2026.
We
have no products approved for commercial sale in the United States. However, with the assets related to the New Day licensing agreement,
there are three products that have CE marks and are eligible to be sold in the European Union (“EU”) and certain eligible
markets that accept the CE mark, with the notable exception of the United States at the present time but we cannot guarantee when and
how much revenue will be generated from those products. To date, we have devoted substantially all of our resources to organizing
and and
staffing our company, business planning, raising capital, undertaking preclinical studies and clinical trials of our former product
candidates. candidate.
As a result, we are not profitable and have incurred losses in each period since our inception in 2013. As of MarchJune 31,30, 2026,
we had
an accumulated deficit of $246.9$248.2 million. We expect to continue to incur significant losses for the foreseeable future.
A
change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could
could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans
plans may change in the future, and we will need additional funds to meet operational needs and capital requirements associated with
such operating
plans.
The
condensed consolidated financial statements as of MarchJune 31,30, 2026 have been prepared under the assumption that we will continue as a going
concern within one year after the financial statements are issued. Due to our accumulated deficit and our recurring and expected continuing
losses from operations, we have concluded there is substantial doubt in our ability to continue as a going concern without additional
capital becoming available to attain further operating efficiencies and, ultimately, to generate revenue. Our financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
As
of MarchJune 31,30, 2026, we had working capital of $2.0$1.4 million compared to working capital of $2.8 million as of December
31, 2025. The decrease
of $0.8$1.4 million in working capital is primarily
due to operating costs incurred during the period.
As of March 31, 2026, we had $2.6 million in cash. Net
cash fromused in operating activities was $0.6$0.8 million for the threesix months ended MarchJune 31,30, 20262026, wasconsisting primarily dueof toour net loss of
$2.1 million, offset by a refund receipt of a $1.0
million from a previously inactive prepaid insurance policy, partiallychange offsetin byaccounts
payable operatingand loss,accrued adjustedexpense forof $0.2 million, and non-cash charges.change in fair value of derivative instrument related to outstanding
warrants of $0.1 million.
As of March 31, 2025, we had $4.6 million in cash. Net
cash used in operating activities was $1.1$2.5 million for the
three six months ended MarchJune 31,30, 20252025, consisting primarily of our net loss of $6.1
$7.1 million, adjusted for non-cash charges of $4.8$4.5 million, including
$20,783 for stock-based compensation, and $4.8$4.1 million in change in fair value of derivative warrants.warrants
and $0.4 million in asset impairment loss. Changes in workingoperating capital accounts
had a positive impact of $0.2 million on cash primarily due to an increase in accounts payableassets and accruedliabilities expenses.increased by $0.1 million.
There
was no cash provided by or used in investing activities during the threesix months ended MarchJune 31,30, 20262026. andNet 2025.cash used in investing activities
was $0.1 million for the six months ended June 30, 2025 related to the acquisition of licenses from New Day Diagnostics.
Net cash provided by financing activities
was $0.2 million for the three months ended March 31, 2026, a $250,000 cash receipt related to a stock subscription liability, partially offset by the $54,066 payment on the D&O note payable.
Net
cash provided by financing activities was $5.3$0.6 million for the threesix months ended MarchJune 31,30, 2025,2026, dueconsisting primarily
to $8.2Mof net proceeds receivedof $0.7 million
from the exercise of the warrants
and equity issuanceraise in April 2026, offset by $2.9 million payment onof notes payable.payable of $0.1 million.
Net cash provided by financing activities was $5.3 million for the six months ended June 30, 2025, due primarily to $8.2 million in net proceeds received from the exercise of the warrants and equity issuance offset by $2.9 million payment on notes payable.
HEPA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 10 Form 4 filings (6 insiders, 3 trade dates, 26,700,000 shares, about $1.2M) and open-market sales in 0 filings. Net open-market shares: 26,700,000 (purchases minus sales); net value about $1.2M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-29 | Fisher Danina |
Open-market purchase | 200,000 | $0.05 | $10.0K |
| 2026-08-03 | Stetz Gary S. Ii |
Open-market purchase | 500,000 | $0.05 | $25.0K |
| 2026-08-03 | Stetz Gary S. |
Open-market purchase | 2,000,000 | $0.05 | $100.0K |
| 2026-08-03 | Purcell Michael J. |
Open-market purchase | 2,000,000 | $0.05 | $100.0K |
| 2026-08-03 | Appajosyula Sireesh |
Open-market purchase | 2,000,000 | $0.05 | $100.0K |
| 2026-08-03 | Lopriore Vincent S |
Open-market purchase | 2,000,000 | $0.05 | $100.0K |
| 2026-08-03 | Lopriore Vincent S |
Open-market purchase | 8,000,000 | $0.05 | $400.0K |
| 2026-04-21 | Purcell Michael J. |
Open-market purchase | 1,250,000 | $0.04 | $50.0K |
| 2026-04-21 | Lopriore Vincent S |
Open-market purchase | 1,250,000 | $0.04 | $50.0K |
| 2026-04-21 | Lopriore Vincent S |
Open-market purchase | 5,000,000 | $0.04 | $200.0K |
| 2026-04-21 | Appajosyula Sireesh |
Open-market purchase | 1,250,000 | $0.04 | $50.0K |
| 2026-04-21 | Stetz Gary S. |
Open-market purchase | 1,250,000 | $0.04 | $50.0K |
Well-known investors holding HEPA (13F)
None of the 59 investors we track reported a position in their latest 13F.