PTHS 10-K & 10-Q changes, risk factors and insider trading
Pelthos Therapeutics Inc. · NYSE · Biological Products, (No Diagnostic Substances) · CIK 1919246 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have a limited operating history and history of commercializing products, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.”
New heading “Risks Related to Commercialization of Our Products and any Future Product Candidates”
New heading “We depend heavily on the commercial success of ZELSUVMI, which was approved by the FDA in January 2024, which we have only recently launched in the United States. There is no assurance that our commercialization efforts in the United States with respect to ZELSUVMI will be successful or that we will be able to generate profit at the levels or within the timing we expect.”
New heading “Our two recently acquired products, XEPI and XEGLYZE, both of which have been FDA approved, require substantial preparation prior to commercial launch. If we are unable to meet the manufacturing, regulatory, and commercialization requirements to successfully prepare these products for launch, including expanding our current commercial infrastructure to sell these products, our results of operations may be negatively impacted.”
New heading “ZELSUVMI, our approved products that have not yet been launched and any of our product candidates that receive regulatory approval, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.”
New heading “If we are unable to establish effective sales, marketing and distribution capabilities for ZELSUVMI, approved products not yet launched or any product candidate that may receive regulatory approval, we may not be successful in commercializing ZELSUVMI, approved products not yet launched or our other product candidates if and when they are approved.”
New heading “ZELSUVMI, approved products not yet launched or our product candidates may cause undesirable side effects or have other properties that could limit their commercial profile, expose us to product liability claims, delay or prevent regulatory approval of our product candidates or additional indications, or result in significant negative consequences following any additional marketing approval, any of which may adversely impact our business, financial condition, operating results and prospects.”
New heading “We face substantial competition, which may result in a smaller than expected commercial opportunity and/or other firms may discover, develop or commercialize products before or more successfully than we do.”
New heading “Our gross to net (“GTN”) expenses could increase, resulting in a negative impact to our net revenues, causing a reduction in cash flow, potential impact to our stock price and have other deleterious effects to our investors.”
New heading “The commercial success of our products and product candidates will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community.”
New heading “Our products may become subject to unfavorable third-party coverage or reimbursement policies, which would harm our business.”
New heading “The market for ZELSUVMI, approved products not yet launched and our future product candidates may not be as large as we expect.”
New heading “The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.”
New heading “Product liability lawsuits could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.”
New heading “Risks Related to Our Operations and Manufacturing”
New heading “Delays or disruptions in our supply chain and manufacturing of our products, including ZELSUVMI, approved products not yet launched and potential product candidates could adversely affect our sales and marketing efforts and our development and commercialization timelines and could result in increased costs or in our breaching our obligations to others.”
New heading “We have limited experience in producing commercial scale products that utilize the NITRICIL technology, which was assigned to Ligand in March 2024, including the API, berdazimer sodium, used in the ZELSUVMI product. Any delay or disruptions in the on-going qualification of manufacturing facilities and process or in the manufacture of our (i) API, including berdazimer sodium, or (ii) potential future clinical trial materials or commercial supplies of any other potentially approved product candidates utilizing the NITRICIL technology, could adversely affect our development and commercialization timelines and results or result in increased costs or in our breaching our obligations to others.”
New heading “Unexpected results in the analysis of raw materials, the API or drug product or problems with the execution of or quality systems supporting the analytical testing work, whether conducted internally or by third-party service providers, could adversely affect our development and commercialization timelines and result in increased costs of potential development programs initiated by us.”
New heading “Our business involves the use of hazardous materials, and we and our third-party suppliers and manufacturers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.”
New heading “The seasonal nature of our business may cause fluctuations in operations.”
New heading “We may be adversely affected by the effects of inflation or trade tariffs.”
New heading “Risks Related to Our Dependence on Third Parties”
New heading “We will rely on third parties to conduct any preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our future product candidates.”
New heading “Our employees, independent contractors, principal investigators, CMOs, CROs, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could expose us to liability and hurt our reputation.”
New heading “We sell to a limited number of wholesalers who have significant market share and if we lose our relationship with any one of those wholesalers, our revenue could be impacted and business could materially suffer.”
New heading “Risks Related to Intellectual Property”
New heading “We rely on in-licenses from third parties. If we lose these rights, our business may be materially and adversely affected, our ability to develop improvements to our technology platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation, as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.”
New heading “Third party intellectual property may prevent us from developing our potential products; our intellectual property may not prevent competition; and any intellectual property issues may be expensive and time consuming to resolve.”
New heading “If we are unable to obtain and maintain sufficient intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies similar to ours, and our ability to successfully sell our products and services may be impaired.”
New heading “Issued patents directed to the NITRICIL platform and technology could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.”
New heading “Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing Ligand’s ability to protect our products, platform and technology on which we rely.”
New heading “We rely on in-licenses from third parties. If we lose these rights, our business may be materially and adversely affected, our ability to develop improvements to our technology platform may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation, as well as the potential loss of or limitations on our ability to incorporate the technology covered by these license agreements.”
New heading “We may be subject to claims challenging the inventorship of the patents and other intellectual property on which we rely.”
New heading “If we are unable to protect the confidentiality of our information and our trade secrets, the value of our technology could be materially and adversely affected and our business could be harmed.”
New heading “If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed.”
New heading “Risks Related to Regulatory and Legal Compliance”
New heading “Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us to commercialize our products and may adversely affect the prices we may obtain and may have a negative impact on our business and results of operations.”
New heading “If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in which we participate, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.”
New heading “We are subject to federal, state and foreign healthcare laws and regulations, including fraud and abuse laws. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings.”
New heading “Changes in and actual or perceived failures to comply with applicable data privacy, security and protection laws, regulations, standards and contractual obligations may adversely affect our business, operations and financial performance.”
New heading “If plaintiffs bring product liability lawsuits against us or our partners, we or our partners may incur substantial liabilities and may be required to limit commercialization of our approved products, approved products not yet launched and product candidates.”
New heading “We face risks related to handling of hazardous materials and other regulations governing environmental safety.”
New heading “We may also be subject to other laws and regulations not specifically targeting the healthcare industry.”
New heading “Our Common Stock is currently listed on NYSE American. NYSE American may delist our Common Stock from trading, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.”
New heading “Our Series A Preferred Stock and Series C Preferred Stock have liquidation preferences over our Common Stock.”
New heading “If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, or we don’t meet expectations in those research reports, our Common Stock price and trading volume could decline.”
New heading “Other Risks and Uncertainties Affecting Our Business”
New heading “The occurrence of a catastrophic disaster could disrupt our business, damage our facilities beyond insurance limits, increase our costs and expenses, or we could lose key data which could cause us to curtail or cease operations.”
New heading “Impairment charges pertaining to goodwill, identifiable intangible assets or other long-lived assets from our mergers and acquisitions could have an adverse impact on our results of operations and our market value.”
New heading “Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn.”
New heading “Our business is subject to risks arising from pandemic and epidemic diseases.”
New heading “The biopharmaceutical industry may be negatively affected by federal government deficit reduction policies, which could reduce the value of ZELSUVMI.”
New heading “We may pursue strategic transactions, including asset divestitures, sales, spin‑outs or other distributions, which could materially adversely affect our business, financial condition, results of operations and the value of our securities.”
New heading “Our failure to maintain compliance with stock exchange listing requirements could result in our Common Stock being delisted.”
Removed heading “Summary of Risk Factors”
Removed heading “We are a clinical stage biopharmaceutical company with a limited operating history.”
Removed heading “We will need to raise additional funding to receive approval for CC8464, CT2000, CT3000 or any other future compound. Such funding may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit, sell or terminate certain of our product development efforts or other operations.”
Removed heading “We may be subject to litigation for a variety of claims, which could adversely affect our results of operations, harm our reputation or otherwise negatively impact our business.”
Removed heading “Risks Related to Development, Clinical Testing, and Regulatory Approval”
Removed heading “We are early in our efforts to develop CC8464, which is the only compound that we have advanced into clinical development. If we are unable to advance CC8464 through clinical trials, obtain regulatory approval and ultimately commercialize CC8464, or if we experience significant delays in doing so, our business will be materially harmed.”
Removed heading “We are early in our efforts to develop CT2000 and have not moved into clinical trials. If we are unable to advance CT2000 through clinical trials, obtain regulatory approval and ultimately commercialize CT2000, or if we experience significant delays in doing so, our business will be materially harmed.”
Removed heading “We are early in our efforts to develop CT3000 and have not moved into clinical trials. If we are unable to advance CT3000 through clinical trials, obtain regulatory approval and ultimately commercialize CT3000, or if we experience significant delays in doing so, our business will be materially harmed.”
Removed heading “CC8464 is in early-stage development, and there is no guarantee that the results from prior clinical and preclinical studies will be indicative of our ability to complete or the results to be obtained in the current or future studies and clinical trials. CC8464 is our only compound in clinical development and advancing a different compound would require substantial time and resources as well as being subject to the same risks and uncertainties as described here for CC8464.”
Removed heading “We may encounter substantial delays in our pre-clinical and clinical trials, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.”
Removed heading “Our drug development costs will increase if we experience delays in testing or obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, need to be restructured or be completed on schedule, if at all.”
Removed heading “Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize CC8464, CT2000 and CT3000 and the approval may be for a narrower indication than we seek.”
Removed heading “CC8464, CT2000 and CT3000 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial potential or result in significant negative consequences following any potential marketing approval.”
Removed heading “CC8464, CT2000 and CT3000 are based on specific modes of administration (dose escalation regime, eye drops and injection, respectively), which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval.”
Removed heading “Even if we obtain regulatory approval for CC8464, CT2000 and CT3000, our compounds will remain subject to regulatory oversight.”
Removed heading “Even if we obtain and maintain approval for CC8464, CT2000 and CT3000 from the FDA, we may never obtain approval for them outside of the United States, which would limit our market opportunities and adversely affect our business.”
Removed heading “While we plan to apply for orphan drug designation for CC8464 in the future, it may not effectively protect us from competition, and we may be unable to obtain similar designations for our future compounds. For instance, if our competitors are able to obtain orphan drug exclusivity for products that constitute the same drug and treat the same indications as our lead compounds before us, we may not be able to have competing products approved by the applicable regulatory authority for a significant period of time. To date, we have not submitted an application for orphan drug designation.”
Removed heading “FDA designations to expedite drug development and review, including “orphan drug” designation, Breakthrough Therapy designation, and/or Fast Track designation, even if granted for any of our compounds, may not lead to a faster development, regulatory review or approval process and do not increase the likelihood that any of our compounds will receive marketing approval in the United States.”
Removed heading “We may expend our limited resources to pursue a compound or indication and fail to capitalize on our compounds or indications that may be more profitable or for which there is a greater likelihood of success.”
Removed heading “If we are not successful in discovering, developing and commercializing additional compounds, our ability to expand our business and achieve our strategic objectives would be impaired.”
Removed heading “We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize CC8464, CT2000 and CT3000.”
Removed heading “On December 23, 2023, we entered into the Benuvia License Agreement. We are dependent on the Benuvia License Agreement, and the termination of the Benuvia License Agreement could have an adverse effect on our business.”
Removed heading “If Benuvia does not properly maintain or enforce the intellectual property underlying the Benuvia License Agreement, our competitive position and business prospects could be harmed. Benuvia may also seek to terminate our license.”
Removed heading “Rizatriptan is an off-patent branded generic that can be manufactured and sold by other pharmaceutical manufacturers, which may increase the competition we face and reduce our ability to diversify our pipeline of non-opioid pain treatment therapies, while adding therapeutic options for related conditions under the Benuvia License Agreement.”
Removed heading “Risks Related to Manufacturing”
Removed heading “Delays in obtaining regulatory approvals of the process and facilities needed to manufacture CC8464, CT2000, CT3000 or any of our other compounds or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts.”
Removed heading “Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our clinical development or marketing schedules.”
Removed heading “Risks Related to Commercialization of Our Compounds”
Removed heading “If we are unable to expand our market development capabilities or enter into agreements with third parties to market and sell our compounds, we may be unable to generate any revenue.”
Removed heading “If the market opportunities for CC8464, CT2000, CT3000 or our future compounds are smaller than we believe they are, our revenues may be adversely impacted, and our business may suffer.”
Removed heading “Government price controls or other changes in pricing regulation could restrict the amount that we are able to charge for CC8464, CT2000 and CT3000, if approved, or any of our other future compounds that may be approved in the future, which would adversely affect our revenue and results of operations.”
Removed heading “The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our products, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.”
Removed heading “Risks Related to Our Business Operations”
Removed heading “We may not be successful in our efforts to identify or discover additional compounds and may fail to capitalize on programs or compounds that may be a greater commercial opportunity or for which there is a greater likelihood of success.”
Removed heading “If we are unable to manage expected growth in the scale and complexity of our operations, our performance may suffer.”
Removed heading “Our future success depends on our ability to retain key employees and scientific advisors and to attract, retain and motivate qualified personnel.”
Removed heading “Our employees, principal investigators and advisors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.”
Removed heading “We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.”
Removed heading “If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.”
Removed heading “Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.”
Removed heading “Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and financial condition and results of operations.”
Removed heading “Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.”
Removed heading “Risks Related to Our Intellectual Property”
Removed heading “If we are unable to obtain and maintain adequate U.S. and foreign patent protection for our compounds, including CC8464, CT2000 and CT3000, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technologies similar or identical to ours, and our ability to successfully commercialize CC8464, CT2000, CT3000 and any of our other current or future compounds may be adversely affected.”
Removed heading “We may not be able to protect our intellectual property or enforce our intellectual property rights adequately throughout the world.”
Removed heading “Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.”
Removed heading “Third parties may initiate legal or administrative proceedings attacking the validity of our patents protecting CC8464, CT2000, CT3000 and future compounds the outcome of which would be uncertain and could have a material adverse effect on the success of our business.”
Removed heading “Instituting and defending against patent and other types of intellectual property litigation and administrative proceedings could cause us to spend substantial resources, distract our personnel from their normal responsibilities, and have uncertain outcomes.”
Removed heading “Changes in United States patent law and its administrative and judicial interpretation could diminish the value of patents in general, thereby impairing our ability to protect our compounds.”
Removed heading “Intellectual property rights and regulatory exclusivity rights do not necessarily address all potential threats.”
Removed heading “If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.”
Removed heading “Our Common Stock is currently listed on The NYSE American LLC (“NYSE American)”. NYSE American may delist our Common Stock from trading, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.”
Removed heading “A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future, which could cause the market price of our Common Stock to drop significantly, even if our business is performing well.”
Removed heading “The Series C Preferred Stock has a liquidation preference over our Common Stock.”
Removed heading “If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline.”
Removed heading “Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies, CC8464, CT2000 and CT3000.”
Removed heading “Risks Related to our CEF Purchase Agreement”
Removed heading “It is not possible to predict the actual number of Purchase Shares we will sell under the CEF Purchase Agreement, or the actual gross proceeds resulting from those sales. We may not have access to the full amount available under the CEF Purchase Agreement with Tikkun.”
Removed heading “Sales of a substantial number of our Common Stock in the public market by our existing stockholders could cause the price of our shares of our Common Stock to fall.”
Removed heading “Investors who buy shares of our Common Stock at different times will likely pay different prices.”
Removed heading “We may require additional financing to sustain our operations and, without it, we will not be able to continue operations.”
Removed heading “The terms of the CEF Purchase Agreement limit the amount of shares of Common Stock we may issue to Tikkun, which may have an adverse effect on our liquidity.”
Removed heading “Future sales of substantial amounts of our Common Stock, or the possibility that such sales could occur, could adversely affect the market price of our Common Stock.”
Removed heading “Management will have broad discretion as to the use of the proceeds from our sale of Purchase Shares to Tikkun under the CEF Purchase Agreement, and such uses may not improve our financial condition or market value.”
Largest changes
“We also may become subject to rapidly evolving data protection laws, rules and regulations in foreign jurisdictions. For example, the European Union General Data Protection Regulation (“GDPR”) went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area(“EEA”) or in the context of our activities within the EEA. …”see in full comparison
“We are exposed to the risk that our employees, independent contractors, principal investigators, CMOs, CROs, consultants, commercial partners and vendors may engage in fraudulent conduct or other illegal activity. …”see in full comparison
“We are exposed to the risk of fraud or other misconduct by our employees, principal investigators and advisors. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations applicable in the European Union and other jurisdictions, provide accurate information to the FDA, the EMA and other regulatory authorities, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. …”see in full comparison
“Compliance with applicable data privacy and security laws, rules and regulations could require us to take on more onerous obligations in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or our partners’ ability to operate in certain jurisdictions. Each of these constantly evolving laws can be subject to varying interpretations and may conflict with one another or other legal obligations with which we must comply. …”see in full comparison
“Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues, military conflicts, including Operation Epic Fury involving U.S. military strikes against Iran, the wars between Russia and Ukraine and Israel and Hamas, terrorism, public health emergencies or pandemics, the availability and cost of credit, and the U.S. …”see in full comparison
“Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of our control, such as the impact of health and safety concerns, as well as the recent inflation in the United States, foreign and domestic government sanctions imposed on Russia as a result of its invasion of Ukraine, war or other military conflict, terrorist activities, and other disruptions to global supply chains. …”see in full comparison
Full comparison: every changed paragraph (532)
Our business, financial condition and operating results are subject to a number of risk factors, both those that are known to us and identified below and others that may arise from time to time. These risk factors could cause our actual results to differ materially from those suggested by forward-looking statements in this Annual Report on Form 10-K and elsewhere, and may adversely affect our business, financial condition or operating results. These risk factors reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. If any of these risk factors should occur, moreover, the trading price of our securities could decline, and investors in our securities could lose all or part of their investment in our securities. These risk factors should be carefully considered in evaluating our prospects.
Summary
of Risk Factors
Our
business is subject to a number of risks that you should be aware of before making an investment decision to purchase our securities.
You should carefully consider all of the information set forth in this Report and, in particular, should evaluate the specific
factors set forth in the section titled “Risk Factors” in deciding whether to invest in our securities. Among these
important risks are the following:
These
and other risks are more fully described in the section entitled “Risk Factors” in this Report. If any of these risks
actually occurs, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely
affected. As a result, you could lose all or part of your investment in our securities.
Risks
Related to Our BusinessFinancial Condition and Capital Needs
The
report of the independent registered public accounting firm on our 2024 and 2023 financial statements containscontained a going concern
qualification. The report of the independent registered public firm on our 2025 financial statements does not contain a going concern qualification; however, if we are unable to maintain sustainable revenues, we may be unable to continue as a going concern.
The
report of the independent registered public accounting firm covering our consolidated financial statements for the yearsyear ended
December 31, 2024 and 2023 stated that certain factors, including that we havehad suffered recurring losses from operations and have
had an accumulated deficit at December 31, 2024, raised substantial doubt as to our ability to continue as a going concern. Because
we arewere not yet producing sufficient revenue to sustain our operating costs, we arewere dependent upon raising capital to continue
our business. If we are unable to raise capital, we may be unable to continue as a going concern.
The report of the independent registered public accounting firm on our 2025 financial statements does not contain a going concern qualification. Based on current projections, including forecasted cash flows related to net product sales of ZELSUVMI, proceeds from the convertible note agreement in November 2025, proceeds from the initial draw of the January 2026 Venture Loan and Security Agreement, and the potential additional availability under the January 2026 Venture Loan and Security Agreement, management believes it has sufficient capital, or access to capital, to fund its operations through at least the next twelve months following the issuance of these consolidated financial statements; however, if we are unable to maintain sustainable revenues, we may be unable to continue as a going concern.
We
are a clinical stage biopharmaceutical company with a limited operating history.
The
operations of our company, contributed to us by Chromocell Holdings, to date have been limited to financing and staffing our Company,
developing and licensing compounds, conducting preclinical and clinical studies of CC8464 for EM and iSFN, CT2000 for eye pain,
CT3000 for post-surgical pain and other pain indications. We have not yet demonstrated the ability to successfully complete a
large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, arrange for a third party
to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently,
predictions about our future success or viability may not be as accurate as they could be if we had a history of successfully
developing and commercializing pharmaceutical products.
Accordingly,
you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies
in the early stages of development, especially early-stage clinical pharmaceutical companies such as ours. Potential investors
should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular,
potential investors should consider that we cannot assure you that we will be able to, among other things:
If
we cannot successfully execute any one of the foregoing, our business may fail, and your investment will be adversely affected.
We
have incurred netsignificant losses since our inception. We expect to incur losses foruntil therevenue foreseeablefrom futureZELSUVMI is sufficient to fund our operations, if ever, and may never achieve or maintain
profitability. If we do not achieve or maintain profitability, we may need additional funding to continue our business operations.
Since the Merger, we have devoted substantially all of our financial resources and efforts to the development and commercialization of ZELSUVMI, our product for the topical treatment of molluscum contagiosum. ZELSUVMI was approved by the FDA for the treatment of molluscum contagiosum in adults and pediatric patients one year of age and older in January 2024.
During the year ended December 31, 2025, the Company had a net loss of approximately $43.3 million. As of December 31, 2025, the Company had cash of approximately $18.0 million and working capital of $27.4 million. For the year ended December 31, 2025, the Company recorded net revenue in the amount of $16.2 million, which represented approximately six months of commercial activity for its lead commercial product, ZELSUVMI. For the year ended December 31, 2025, the Company recorded total operating expenses of $49.2 million.
On January 12, 2026, the Company entered into a Venture Loan and Security Agreement with Horizon Technology Finance Corporation, a Delaware corporation, as lender and collateral agent. The Venture Loan and Security Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $50.0 million. The proceeds of the facility will be used to support the commercialization of the Company’s existing commercialized pharmaceutical product, to prepare for the launch of two recently acquired products, working capital and general corporate purposes. The Company borrowed $30.0 million of the facility on January 12, 2026. The remaining $20.0 million of the facility may be borrowed upon the achievement by the Company of certain milestones set forth in the Venture Loan and Security Agreement.
Based on current projections, including cash flows related to net product sales of ZELSUVMI, proceeds from the convertible note agreement in November 2025, proceeds from the initial draw of the January 2026 Venture Loan and Security Agreement, and the potential additional availability under the January 2026 Venture Loan and Security Agreement, management believes it has sufficient capital, or access to capital, to fund its operations through at least the next twelve months following the issuance of these consolidated financial statements.
We expect to continue to incur significant expenses and operating losses until revenue from ZELSUVMI is sufficient to fund our operations, if ever. Our net losses may fluctuate significantly from quarter to quarter and year to year. Our expenses may increase substantially, as we:
•commercialize ZELSUVMI;
•operate our manufacturing facility, at which we create the API for ZELSUVMI;
•work with third-party contract manufacturers to produce the ZELSUVMI finished product;
•prepare our XEPI and XEGLYZE products for commercialization;
•maintain or expand a sales, commercial and distribution infrastructure and manufacturing and logistics capabilities to commercialize currently approved products as well as any future products that receive regulatory approval;
•seek to in-license or acquire additional products or programs;
•launch new clinical trials on other indications;
•develop our regulatory compliance efforts to address requirements applicable to marketed products;
•maintain, expand and protect our intellectual property portfolio;
•hire and retain sales, marketing, manufacturing, commercial and scientific personnel;
•incur additional legal, accounting and other expenses in operating as a public company; and incur additional legal expenses associated with managing the regulatory environment or any litigations that may arise.
To become and remain profitable, we must succeed in commercializing ZELSUVMI and/or develop and potentially commercialize future products or product candidates that generate significant revenue. This will require us to be successful in a range of challenging activities, including commercialization of ZELSUVMI, completing preclinical testing and clinical trials of any of our potential future product candidates, acquiring and integrating products or product candidates, obtaining regulatory approval, and manufacturing, marketing and selling any future products or product candidates for which we may obtain regulatory approval, as well as discovering and developing additional products or product candidates. We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.
Our revenue will be dependent, in part, upon the size of the markets in the territories for which we have gained or may gain regulatory approval, the accepted price for the product, the ability to obtain coverage and reimbursement and whether we own the commercial rights for that territory. If the number of our addressable patients is not as significant as we estimate, if any indication approved by regulatory authorities is narrower than we expect, or any targeted treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of such products.
Because of the numerous risks and uncertainties associated with commercialization and product development, we may not achieve profitability in the time frame we currently expect, or at all. If we are required by regulatory authorities to perform additional post-approval studies, or if there are any delays in the adoption of ZELSUVMI or the development of any of our future products or product candidates, our expenses could increase, and we may never reach profitability.
Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could depress our value and could impair our ability to raise capital, diversify our offerings or continue our operations.
We have a limited operating history and history of commercializing products, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
Our operations to date have been largely focused on developing and commercializing ZELSUVMI, which was approved by the FDA for the treatment of molluscum contagiosum in adult and pediatric patients one year of age and older in January 2024. We hold a worldwide license to commercialize ZELSUVMI, subject to an out license for Japan, and recently launched the product in July 2025, but our commercialization efforts are in early stages. We have limited experience in demonstrating the ability to successfully complete clinical trials, obtain regulatory approval for a product, manufacture a product on a commercial scale, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful commercial launch and commercialization over time. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully commercializing products.
We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.
Risks Related to Commercialization of Our Products and any Future Product Candidates
We depend heavily on the commercial success of ZELSUVMI, which was approved by the FDA in January 2024, which we have only recently launched in the United States. There is no assurance that our commercialization efforts in the United States with respect to ZELSUVMI will be successful or that we will be able to generate profit at the levels or within the timing we expect.
Our business currently depends heavily on our ability to successfully commercialize ZELSUVMI in the United States, which was launched in the United States in July 2025. We may never be able to successfully commercialize ZELSUVMI or reach our expectations with respect to revenue or profit. There is no guarantee that the infrastructure, systems, processes, policies, personnel, relationships and materials we built in preparation for the launch and commercialization of ZELSUVMI in the United States will be sufficient for us to achieve success at the levels we expect. Additionally, healthcare providers may not accept a new treatment for the treatment of molluscum contagiosum. We may also encounter challenges related to reimbursement of ZELSUVMI, even if we have positive early indications from payors, including potential limitations in the scope, breadth, availability, or amount of reimbursement covering ZELSUVMI. Similarly, healthcare settings or patients may determine that the financial burdens of treatment are not acceptable. Our results may also be negatively impacted if we encounter deficiencies or inefficiencies in our infrastructure or processes. Any of these issues could impair our ability to successfully commercialize ZELSUVMI or to generate substantial profit or to meet our expectations with respect to the amount or timing of profit. Any issues or hurdles related to our commercialization efforts for ZELSUVMI may materially adversely affect our business, results of operations, financial condition and prospects. There is no guarantee that we will be successful in our commercialization efforts with respect to ZELSUVMI, or that we will generate significant profit from ZELSUVMI or any product candidate or become profitable.
Our two recently acquired products, XEPI and XEGLYZE, both of which have been FDA approved, require substantial preparation prior to commercial launch. If we are unable to meet the manufacturing, regulatory, and commercialization requirements to successfully prepare these products for launch, including expanding our current commercial infrastructure to sell these products, our results of operations may be negatively impacted.
We acquired the rights to XEPI and XEGLYZE in the fourth quarter of 2025. Prior to commercial launch of either product, we must complete the following for each product, individually:
•complete all contracting with external manufacturers for both API and finished product, ensuring that all commercial supply, master services, and quality agreement are fully established and implemented;
•successfully document and implement appropriate CMC processes governing both the API and finished product;
•navigate the regulatory requirements to allow for commercial launch of the products, including appropriate filings with regulatory bodies, including the FDA;
•process validation of API and finished product, as applicable, including stability testing;
•incorporate these products into our current QMS and ERP systems;
•establish complete supply chain relationships and connections to meet expected demand;
•manage our third-party manufacturers to meet the regulatory requirements needed to be addressed while maintaining our projected development and launch timelines; and
•ensure quality standards and guidelines are observed to facilitate regulatory acceptance.
If we are unable to successfully meet our internal development and manufacturing timelines, including the management of third-parties on which we rely, we may have delays in the expected commercial launch of XEPI and/or XEGLYZE, or we may be unable to commercialize either product at all.
ZELSUVMI, our approved products that have not yet been launched and any of our product candidates that receive regulatory approval, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
ZELSUVMI, our approved products that have not yet been launched and any of our product candidates that receive regulatory approval may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If ZELSUVMI, approved products not yet launched or our potential product candidates, if approved, do not achieve an adequate level of acceptance, we may not generate sufficient revenue, and we may not become profitable. The degree of market acceptance of ZELSUVMI, approved products not yet launched and our product candidates, if approved for commercial sale, will depend on a number of factors, including:
•the efficacy, safety and potential advantages compared to alternative treatments;
•our ability to offer our products for sale at competitive prices;
•the convenience and ease of administration compared to alternative treatments;
•the willingness of the target patient population to try new treatments and of physicians to prescribe these treatments;
•our ability to hire and retain a sales force in the United States;
•the strength of marketing and distribution support;
•the availability of third-party coverage and adequate reimbursement;
•the prevalence and severity of any side effects; and
Management's Discussion & Analysis (MD&A)
New heading “Recent Business Updates”
New heading “Venture Loan and Security Agreement”
New heading “Key Factors Affecting Our Results of Operations and Future Performance”
New heading “Net Product Revenues”
New heading “Cost of Goods Sold”
New heading “Research and Development Expense”
New heading “Amortization of Intangible Assets Expense”
New heading “Impairment of Intangible Assets”
New heading “Change in Fair Value of Convertible Debt”
New heading “Provision for Income Taxes”
New heading “Capital Requirements”
New heading “Contractual Obligations and Commitments”
New heading “Ligand Pharmaceuticals Inc.”
New heading “Ligand Assignment Agreement”
New heading “Ligand Assignment Agreement Amendment”
New heading “Ligand Royalty Agreement”
New heading “Ligand Master Services Agreement”
New heading “Ligand Transition Services Agreement”
New heading “UNC License Agreement”
New heading “July 1, 2025 Royalty Agreements”
New heading “November 6, 2025 Royalty Agreements”
New heading “Convertible Notes”
New heading “Pledge Agreement”
New heading “Biofrontera Asset Purchase Agreement”
New heading “Ferrer License Agreement”
New heading “XEGLYZE Asset Purchase Agreement”
New heading “Facility Lease Agreement”
New heading “Contract Manufacturing Agreement”
New heading “Business Acquisitions”
New heading “Revenue Recognition”
New heading “Net Product Revenues”
New heading “License and Collaboration Revenues”
New heading “Intangible Assets, Net and Goodwill”
New heading “Fair Value Measurements and Fair Value of Financial Instruments”
New heading “Reedy Creek Purchase Agreement”
New heading “July 1, 2025 and November 6, 2025 Royalty Agreements”
New heading “Convertible Notes”
New heading “XEPI Transaction”
New heading “XEGLYZE Asset Purchase Agreement”
Removed heading “Operating Expenses”
Removed heading “Professional Fees”
Removed heading “Future Funding Requirements”
Removed heading “Segment Reporting”
Largest changes
“The Convertible Notes contain certain customary events of default provisions, including failure to timely issue the Convertible Conversion Shares, failure to maintain the listing of the Common Stock on an Eligible Market (as defined in the Convertible Notes) for a period of five (5) consecutive trading days, failure to maintain sufficient authorized shares for the issuance of Convertible Conversion Shares, a breach of any representation or warranty by the Company under the Convertible Securities Purchase Agreement and the Convertible Notes, the failure of any Security Document to create a …”see in full comparison
“Upon an event of default, a holder has the option to require the Company to redeem a Convertible Note at a conversion price equal to the greater of (i) the Convertible conversion amount to be redeemed multiplied by (B) 115.0% (the “Redemption Premium”) and (ii) the product of (X) the conversion rate with respect to the conversion amount in effect at such time as the holder delivers to the Company a notice requiring the Company to redeem the Convertible Note upon an event of default (the “Convertible Event of Default Redemption Notice”) multiplied by (Y) the greatest closing price of the …”see in full comparison
“As further discussed in Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” in the accompanying notes to our consolidated financial statements, in prior periods, management disclosed substantial doubt about the Company’s ability to continue as a going concern. The conditions and events that previously raised substantial doubt have been alleviated by management’s plans and actions. …”see in full comparison
“On the Convertible Note Financing Closing Date, the Company, as pledgor and Ligand, as secured party, in its capacity as Collateral Agent for each holder of Convertible Notes, entered into a pledge agreement (the “Pledge Agreement”). In accordance with the terms of the Pledge Agreement, the Convertible Notes are secured by a lien on, and security interest in, (i) 10.0% of all aggregate net sales of the “End Product” as defined in the Ferrer License Agreement, including XEPI, in the United States, including Puerto Rico and the U.S. …”see in full comparison
“UNC may terminate the agreement or render the license granted thereunder non-exclusive for material breach of the agreement that remains uncured after 90 days of receipt of written notice thereof from UNC and may also terminate the agreement or render the license granted thereunder non-exclusive upon providing written notice for bankruptcy or insolvency-related events within 30 days of the occurrence of such events.”see in full comparison
“The preparation of consolidated financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the financial statements and accompanying notes. The U.S. …”see in full comparison
Full comparison: every changed paragraph (315)
You
should read the following discussion and analysis of our financial condition and results of operations together with our consolidated
financial statements and related notes appearing in this Report.Annual Report on Form 10-K. Some of the information contained in this discussion and analysis
or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those
factors set forth in the “Risk Factors” section of this Report, our actual results could differ materially from the
results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Pelthos Therapeutics Inc. is a bio-pharmaceutical company committed to commercializing innovative, safe, and efficacious therapeutic products to help patients with unmet treatment burdens. The Company currently has three FDA approved products in its commercial portfolio, in various stages of commercialization, including ZELSUVMITM, XEPI®, and XEGLYZE®.
The Merger between Channel and LNHC resulted in the Company initially having (i) a commercially marketable product, ZELSUVMI for the treatment of molluscum contagiosum, which was launched in July 2025 shortly after the Merger; (ii) a manufacturing facility, equipment and know-how to produce the API used in ZELSUVMI and the NITRICILTM technology platform; and (iii) clinical-stage assets which selectively target the sodium ion-channel known as “NaV1.7”, which has been genetically validated as a pain receptor in human physiology. In addition, during the fourth quarter of 2025 the Company acquired two additional FDA approved products to expand its commercial product portfolio.
Recent Business Updates
Venture Loan and Security Agreement
On January 12, 2026, the Company entered into a Venture Loan and Security Agreement with Horizon Technology Finance Corporation, a Delaware corporation, as lender and collateral agent. The Venture Loan and Security Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $50.0 million. The proceeds of the facility will be used to support the commercialization of the Company’s existing commercialized pharmaceutical product, to prepare for the launch of two recently acquired products, working capital and general corporate purposes. The Company borrowed $30.0 million of the facility on January 12, 2026. The remaining $20.0 million of the facility may be borrowed upon the achievement by the Company of certain milestones set forth in the Venture Loan and Security Agreement.
Overview
We
are a clinical-stage biotech company focused on developing and commercializing new therapeutics to alleviate pain. Our clinical
focus is to selectively target the sodium ion-channel known as “NaV1.7”, which has been genetically validated as a
pain receptor in human physiology. A NaV1.7 blocker is a chemical entity that modulates the structure of the sodium-channel in
a way to prevent the transmission of pain perception to the CNS. Our goal is to develop a novel and proprietary class of NaV blockers
that target the body’s peripheral nervous system.
We
have formally launched three programs developing pain treatment therapeutics, all of which are based on the same proprietary molecule,
as follows:
Eye
Pain: Based on a novel formulation of CC8464, our Eye Pain program, titled CT2000, is for the potential treatment of both
acute and chronic eye pain. NaV1.7 channels are present on the cornea, making it a viable biological target for treating eye pain.
Eye pain may occur with various conditions, including severe dry eye disease, trauma and surgery. Existing therapies for eye pain
(such as steroids, topical non-steroidal anti-inflammatory agents, lubricants, local anesthetics) are limited in their effectiveness
and/or limited in the duration that they may be prescribed because of safety issues. We intend to explore the viability of developing
CT2000 as a topical agent for the relief of eye pain. A potential advantage of this approach is that topical administration of
CT2000 is unlikely to lead to any hypersensitivity or skin reactions, like what was noted with systemic administration of CC8464,
because the systemic absorption from a topical administration would be extremely limited. We have developed topical ophthalmic
formulations and are pursuing trial plans as set forth below.
Current
options for the treatment of ocular pain center on the use of corticosteroids and non-steroidal anti-inflammatory drug (“NSAID”)
based therapeutics. These options suffer from sight-threatening complications such as Glaucoma and corneal melting, thus there
is a large unmet need for other approaches. As an example of the potential patient population, we estimate that there are approximately
5 million cases of corneal abrasions per year in the United States. In addition, other potential indications associated with eye
pain include:
As
NaV1.7 channels are present on the cornea and is a viable biological target for treating eye pain, we believe that we have a sound
scientific basis for our ability to treat a multitude of eye pain indications. We have successfully developed an eye drop formulation
and have determined that the eye drops are well tolerated by animals. We have completed animal efficacy studies and are in the
process of running toxicology studies on animals. We expect to announce the efficacy and toxicology results by April 2025.
Following
the animal studies, if successful, we intend to move into POC studies in humans. We plan to conduct the POC study in Australia
to avail ourselves of a 43.5% tax credit for clinical expenses incurred in Australia and, on January 9, 2023, established an Australian
subsidiary through which the work will be conducted. We are planning to conduct the POC in a clinic in Brisbane, Australia
and are in the process of contracting the services to perform such trial.
Depot
Program: Based on several novel formulations of CC8464, the Company’s most recently launched program, titled CT3000,
is for the potential treatment of post operative pain with the use of nerve blocks. Examples would include knee surgery
or shoulder surgery. Existing therapies for nerve blocks lead to neuromuscular blockade which prevents movement following surgery.
Doctors often want patients to move soon after surgery to avoid complications such as blood clots. A NaV1.7 inhibitor used for
nerve blocks may provide good analgesia but will not lead to neuromuscular blockade that prevents movement like other local anesthetics.
The
Company has successfully developed a number of formulations and in December 2024, announced that it achieved its endpoints in
two pre-clinical in vivo models of the Company’s nerve block formulations for acute pain, showing material improvement over
the existing standard of care, bupivacaine, in both efficacy and duration.
The
Company performed a thermal hyperalgesia test in rodents with a placebo arm, bupivacaine arm and four arms of the main formulations
of the Company’s molecule. The Company also performed a mechanical allodynia test in rodents with the same arms as above.
For both models, the drugs were administered as a sciatic nerve block. All four Company formulations showed a depot effect in
excess of four days, an improvement over bupivacaine, the current standard of care.
The
results of the thermal hyperalgesia results are shown in the chart below. After thirty minutes, three of the four formulations
showed materially better efficacy than bupivacaine, with each of the three being statistically superior to placebo for more than
two days longer than bupivacaine. One of the formulations remained statistically superior to placebo for more than four days.
Further, as NaV1.7 does not have an impact on mobility, this approach may offer a better option for post-surgical physical therapy
as current nerve block therapies cause temporary paralysis in the affected area.
Similarly
for the mechanical allodynia test results, three of the four formulations showed statistically better efficacy for a longer duration
of time than bupivacaine. The mechanical allodynia test is shorter in duration, reflecting the subject’s innate swift recovery
rate to surgical incisions. Nonetheless, the results mirrored the successful results set forth with the thermal hyperalgesia test.
The
Company will commence toxicology and CMC work in 2025 and expects to commence human POC trial in early 2026.
Neuropathic
Pain: CC8464 is being developed to address certain types of neuropathic pain. The chemical characteristics of CC8464 restrict
its entry into the CNS and limit its effect to the NaV1.7 channels in the peripheral nervous system, which consists of the nerves
outside the brain and spinal cord. Activation of other channels in the CNS can result in side effects, including addiction and
other centrally mediated adverse effects. Since CC8464 is designed to not penetrate the CNS it is highly unlikely to produce CNS
mediated side effects including euphoria or addiction. Based on its characteristics, preclinical studies (described below) and
the Phase 1 studies we have completed to date, we believe that CC8464, if approved, could become an attractive option for both
patients and physicians as a treatment for moderate-to-severe pain in Erythromelalgia (“EM”) and idiopathic
small fiber neuropathy (“iSFN”).
We
conducted four Phase 1 trials with 207 patients. The results showed that CC8464 has a good overall tolerability and demonstrated
no liver or renal toxicity, no central nervous system changes and no cardiovascular findings but may cause skin rashes in certain
patients. The occurrence of skin rashes is not uncommon with the class of molecules to which CC8464 belongs and the rashes were
successfully treated in all cases with topical steroids and/or topical antihistamines (with the exception of one patient requiring
systemic steroids).
As
a result of the potential for skin rashes, following discussions with the FDA, we will conduct a slow dose escalation study
to further evaluate the incidence of rashes. By titrating the dose over several weeks, we anticipate that we will reduce or eliminate
this side effect. We expect that the slow dose escalation study will also help determine the need for dose escalation in the final
treatment regime. Even though the FDA has in the past approved drugs that listed rashes as a potential side effect, we do not
know if CC8464 will be approved by the FDA (or any foreign authority).
When
the dose escalation trial is funded, we will enroll approximately 20 healthy volunteers who will receive CC8464 over a period
of several weeks, with the dose escalation study expected to take approximately 9-12 months in total. We anticipate that the slower
dose escalation will decrease the likelihood of drug-related skin reactions. The primary endpoint of the dose escalation trail
will be safety and tolerability of the slower dose titration; however, we will also be measuring blood concentrations of CC8464,
which will allow us to better understand the pharmacokinetics of CC8464. Even if it is ultimately determined that we will need
an escalation period for chronic pain treatment therapy, which patients could well take for the remainder of their lives, we do
not believe the dose escalation approach will be consequential.
We
plan to conduct the dose escalation trial in Australia to avail ourselves of the tax credit set forth above, utilizing our Australian
subsidiary through which the work will be conducted. The location of the POC has not been determined at this time, with availability
of facilities and patient population, costs, tax credits, centers of excellence in the respective fields (EM or iSFN) are all
factors in the ultimate determination of the location.
In
parallel with the dose escalation study, we expect to run a pilot efficacy study on approximately ten EM patients. In this study,
we will induce EM flares, determine baseline pain, and then dose escalate CC8464, after which, we will attempt to induce flares.
The primary endpoint will be the amount of pain experienced, and the secondary endpoint is a determination if CC8464 reduces the
frequency of EM flares.
We
are currently working on the development of the Phase 2a POC plan and expect to launch the Phase 2a POC study following the dose
escalation study and EM pilot study, to assess the potential efficacy of CC8464 in iSFN patients. Both of iSFN and EM are orphan
indications for which we plan to apply for orphan drug designations. The orphan indication may decrease the scope of the ultimate
development program that is necessary for approval and is associated with a marketing exclusivity period from the FDA along with
some tax advantages.
Though
the Phase 2a POC study design has not yet been completed, the study will take approximately twelve months after it is initiated.
The primary endpoint will be the amount of pain experienced from iSFN with secondary endpoints including other measurements like
pain relief and neuropathy scores. The final design may change based on feedback from regulatory authorities or information learned
during the dose escalation trial.
The
potential population for EM in the United States is estimated to be between 5,000 and 50,000 patients and the potential population
for ISFN in the United States is estimated to be between 20,000 and 80,000 patients. In both instances, we expect patients would
potentially take our drug for the remainder of their lives, and given the lack of good therapeutic alternatives, we expect to
have a robust, ongoing, and durable market.
The
Phase 2a results will have significance beyond EM and iSFN and provide important insights about NaV1.7 as a potential target to
find novel pain medications as an alternative to opioids, the continuing primary standard of care in analgesics. We believe that
positive results from the Phase 2a study could not only act as support for CC8464’s potential in EM and iSFN but may also
provide guidance of its potential for other indications of peripheral neuropathic pain.
We
may further expand our pipeline with other internal or external compounds in the future, but all other internally discovered compounds
are pre-clinical.
Benuvia
Spray Formulations: In addition to our NaV1.7 programs set forth above, on December 23, 2023, we entered into an exclusive
licensing agreement (the “Benuvia License Agreement”) with Benuvia for a sublingual formulation of a Diclofenac spray
for the treatment of acute pain, a Rizatriptan intranasal spray formulation and an Ondansetron sublingual spray formulation (collectively,
the “Spray Formulations”). The Spray Formulations diversify our pipeline of non-opioid pain treatment therapies, while
adding therapeutic options for related conditions. The sublingual formulation of a Diclofenac spray for the treatment of acute
pain (the “Diclofenac Spray Formulation”) is patented and has started clinical development in human volunteers. Preliminary
pharmacokinetics suggest that this formulation may have a faster onset of action than oral Diclofenac tablets. Diclofenac is an
NSAID that is also marketed under additional brand names including Voltaren and Cataflam in its pill form. A single Phase 1 trial
of the Diclofenac Spray Formulation was completed in 24 healthy volunteers wherein a single dose of 50mg diclofenac-potassium
was compared to 25 mg of Diclofenac Spray Formulation. In this trial, the blood plasma concentrations of Diclofenac rose more
quickly with the Diclofenac Spray Formulation than with the diclofenac administered orally by approximately 15 minutes. This suggests
that the Diclofenac Spray Formulation may have a faster onset of analgesia; however, additional trials may be needed to confirm
this effect. Additionally, the initial pharmacokinetic study demonstrated that a 25mg dose of Diclofenac Spray Formulation resulted
in lower systemic exposure to Diclofenac than the oral dose of 50mg diclofenac-potassium which means that an additional Phase
I pharmacokinetic study exploring additional higher doses of the sublingual diclofenac spray will likely be necessary to determine
the appropriate dose.
Rizatriptan,
whose brand name is Maxalt, is used for the acute treatment of migraines as a pill. By a number of clinical measures it is thought
to be superior to Sumatriptan. Both Rizatriptan and Sumatriptan belong to a family of tryptamine-based medications named “triptans”
that work as serotonin 1A receptor (or 5-HT1A-receptor) agonists and are indicated for the treatment of migraine. An intranasal
spray formulation of Rizatriptan (the “Rizatriptan Spray Formulation”) may potentially have a faster onset of action
than an oral form and may be easier to tolerate than swallowing a pill when patients are experiencing nausea as a result of the
migraine headache. According to a study that was reported in 2001, Rizatriptan has a higher bioavailability and a more rapid onset
of action which may be responsible for better results in resolving migraines as well as better results in patients reporting that
they are “pain free” after 2 hours. Both Sumatriptan and Rizatriptan are competitors for the same indication, though
neither are widely marketed because they are generic drugs.
Ondansetron
is an anti-emetic that is available in oral and intravenous form. An Ondansetron sublingual spray formulation (the “Ondansetron
Spray Formulation”) may potentially have a faster onset of action than an oral form and may be easier to tolerate than swallowing
a pill when patients are experiencing nausea. Under the terms of the Benuvia License Agreement, Benuvia will be responsible for
the manufacturing and supply of the Spray Formulations, but we will have exclusive, worldwide rights to develop, commercialize
and distribute the Spray Formulations.
We
currently do not have strategy and development plans for the Spray Formulations licensed from Benuvia.
Background
We
were incorporated in Delaware on March 19, 2021. On August 10, 2022, we entered into the Contribution Agreement with Chromocell
Holdings. Pursuant to the Contribution Agreement, as of the Contribution Date, we acquired from Chromocell Holdings all
assets, liabilities and results of operations related to Chromocell Holdings’ therapeutic business, including all patents,
pre-clinical and Phase I study results and data, and trade secrets related to the CC8464 compound, in exchange for the issuance
by us of 1,111,112 shares of our common stock, par value $0.0001 per share (“Common
Stock”) and (ii) 600,000 shares of Series A Convertible Preferred Stock (“Series
A Preferred Stock”).
On
August 2, 2023, we entered into a Side Letter to the Contribution Agreement with Chromocell Holdings (the “Holdings Side
Letter”). Pursuant to the Holdings Side Letter, upon closing of our initial public offering (“IPO”): (a) Chromocell
Holdings re-assumed all $1.6 million in direct liabilities previously assumed by the Company in accordance with the Contribution
Agreement, (b) Chromocell Holdings waived the Company’s obligations to make a cash payment in the amount of $0.6 million
to Chromocell Holdings, and (c) in consideration thereof, we issued to Chromocell Holdings 2,600 shares of Series C Preferred
Stock.
On
February 21, 2024, we completed the IPO and issued and sold 1,100,000 shares of Common Stock at a price to the public of $6.00
per share. The aggregate net proceeds from the IPO were approximately $5.7 million after deducting underwriting discounts and
commissions of approximately $0.5 million and offering expenses of approximately $0.4 million.
In
connection with the completion of the IPO: (A) we effected the 9-for-1 reverse stock split effective February 15, 2024 (the “Reverse
Stock Split”) of our shares of Common Stock, (B) all 600,000 issued and outstanding shares of our Series A Preferred Stock
automatically converted into 499,429 shares of Common Stock, (C) $389,757 and accrued interest of approximately $28,336 as of
February 21, 2024 outstanding under our senior secured convertible notes issued in a
bridge financing in April 2023 for an aggregate principal amount of $393,808 (the “April Bridge Financing”)
after giving effect to the Representative Affiliate Transactions (as defined below), automatically converted into approximately
87,109 shares of Common Stock, (D) $197,421 and accrued interest of $8,169 as of February 21, 2024 outstanding under our senior
secured convertible notes issued in a bridge financing in September 2023 for an aggregate
principal amount of $198,128 (the “September Bridge Financing” and together with the April Bridge Financing, the “Bridge
Financings”) after giving effect to the Representative Affiliate Transactions, automatically converted into
approximately 43,385 shares of Common Stock, which includes an additional 549 shares of Common Stock issuable as consideration
for the September Bridge Financing (the “Bonus Shares”), (E) we issued 37,500 shares of Common Stock to an investor
as consideration for its previous agreement to provide funding that is no longer necessary in connection with the IPO, (F) we
effected the Representative Affiliate Transactions, (G) we effected the transactions contemplated by the Holdings Side Letter,
and issued an aggregate of 2,600 shares of Series C Preferred Stock to Chromocell Holdings pursuant thereto, and (H) we issued
(i) 93,823 shares to a lender holding a note payable for $450,000 (the “Investor Note”) and (ii) 29,167 shares to
one of our directors holding the promissory note in the aggregate principal amount of $175,000 (the “Director Note”)
in full satisfaction of our obligations thereunder (in the case of (A) through (D) and (H) above, based on the IPO price of $6.00
per share of Common Stock). We refer to these actions as the “IPO Transactions.”
In
addition, certain stockholders of the Company (“Selling Stockholders”), as identified in the Registration Statement,
have agreed to offer for resale of up to an aggregate of 2,969,823 shares of Common Stock (the “Selling Stockholder Shares”)
to the public. After conversion of the convertible notes or shares of preferred stock, as applicable, the Selling Stockholders,
or their respective transferees, pledgees, donees or other successors-in-interest, may sell the Selling Stockholders Shares through
public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated
prices. We will not receive any proceeds from the sale of the Selling Stockholder Shares by the Selling Stockholders.
The
affirmative vote of a majority of the outstanding shares of Common Stock present in person, by remote communication, if applicable,
or represented by proxy at the annual meeting of stockholders held on October 22, 2024 approved a reincorporation merger of the
Company in the State of Nevada with and into Channel Therapeutics Corporation, a wholly-owned subsidiary of the Company, with
Channel Therapeutics Corporation remaining as the surviving corporation immediately following the reincorporation merger (the
“Reincorporation Merger”). The Reincorporation Merger occurred on November 18, 2024.
On
December 18, 2024, 747,187 shares of Common Stock and 2,600 shares of Series C Preferred Stock held by Chromocell Holdings were
transferred by the Company to Alexandra Wood (Canada) Inc. (“AWI”) in satisfaction of a default judgement against
Chromocell Holdings regarding the default by Chromocell Holdings of a secured promissory note by order of the Supreme Court of
the State of New York, County of New York on November 25, 2024 in the matter Alexandra Wood (Canada) Inc v. Chromocell Corp.,
Index No. 651735/2024. AWI subsequently transferred 173,000 shares of Chromocell Holding’s shares of Common Stock that
it received such that AWI now owns 574,187 shares of the Common Stock originally issued to Chromocell Holdings in connection with
the Contribution Agreement.
Seasonality
Sales of ZELSUVMI may be affected by a number of factors, including but not limited to annual insurance deductible resets, weather, HCP office openings, holidays and school and summer activities.
During the fourth quarter of 2025, we experienced a downward impact on the growth of total prescriptions of ZELSUVMI associated with, we believe, is the seasonality corresponding with HCP office closures for the Thanksgiving, Christmas and New Year’s holidays. In addition, we believe that certain severe weather events, in addition to these holidays, may influence the ability of patients suffering from molluscum, or their care givers, from scheduling appointments with healthcare professionals. Also, many healthcare professionals also take time-off during these periods, which may impact the total number of prescriptions of ZELSUVMI written.
During the first quarter of 2026, we experienced a return to the previous growth trend for total prescriptions of ZELSUVMI, which we believe supports our belief that there is an element of seasonality related to the total number of prescriptions written for ZELSUVMI at certain times during the year.
Our Customers
The Company primarily sells its ZELSUVMI product to national and regional wholesaler channels. Our wholesalers purchase products from us and, in turn, supply products to retail drug store chains, independent pharmacies and mail order pharmacies.
As of December 31, 2025, three of the Company’s wholesaler customers accounted for 90% of its total gross accounts receivable balance at 38%, 31% and 21%, respectively. In addition, for the year ended December 31, 2025, these three wholesalers accounted for 89% of gross revenue at 35%, 28% and 26%, respectively.
Competition
The pharmaceutical industry is subject to rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. The Company faces potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, compounding facilities, academic institutions, governmental agencies, and public and private research institutions.
ZELSUVMI is the first and only FDA-approved prescription pharmaceutical therapy for the treatment of molluscum contagiosum that can be administered by patients or caregivers outside of a medical setting. The Company believes the key competitive factors affecting the success of ZELSUVMI are likely to be its efficacy, safety, convenience, and pricing. With respect to ZELSUVMI for the treatment of molluscum contagiosum, the Company will be primarily competing with therapies such as other topical products, natural oils, off-label drugs, natural remedies, cantharidin or medical procedures such as curettage, cryotherapy, and laser surgery.
Key Factors Affecting Our Results of Operations and Future Performance
The Company believes that its financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that the Company must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties.
•The Company must effectively implement and maintain sales, marketing and distribution capabilities for our products to successfully commercialize and generate revenues from our products.
•Our products must achieve a broad degree of physician and patient adoption and use necessary for commercial success. The commercial success of our approved products depends significantly on the broad adoption and use of such products by physicians and patients for approved indications.
•Our product revenues will be dependent on sales to a few significant wholesale customers and the loss of, or substantial decline in, sales to one of these wholesale customers could have a material adverse effect on our expected future revenues and profitability.
•Delays or disruptions in our supply chain and the manufacturing of our product could adversely affect our sales and marketing efforts.
•Unexpected results in the analysis of raw materials, the API or drug product or problems with the execution of or quality systems supporting the analytical testing work, whether conducted internally or by third-party service providers, could adversely affect our commercialization activities.
On
December 23, 2023, we entered into an exclusive licensing agreement (the “Benuvia License Agreement”) with Benuvia
Operations LLC (“Benuvia”) for the Diclofenac Spray Formulation (as defined below), an intranasal spray formulation
of Rizatriptan and an Ondansetron sublingual spray formulation (collectively, the “Spray Formulations”), diversifying
our pipeline of non-opioid pain treatment therapies, while adding therapeutic options for related conditions. The sublingual formulation
of a Diclofenac spray for the treatment of acute pain (the “Diclofenac Spray Formulation”) is patented and has started
clinical development in human volunteers. Preliminary pharmacokinetics suggest that this formulation may have a faster onset of
action than oral Diclofenac tablets. Diclofenac is an NSAID that is also marketed under additional brand names including Voltaren
and Cataflam in its pill form. Rizatriptan, whose brand name is Maxalt, is used for the acute treatment of Migraines as a pill.
By a number of clinical measures it is thought to be superior to Sumatriptan. A sublingual formulation of Rizatriptan may potentially
have a faster onset of action than an oral form and may be easier to tolerate than swallowing a pill when patients are experiencing
nausea as a result of the migraine headache. Ondansetron is an anti-emetic that is available in oral and intravenous form. An
Ondansetron sublingual spray formulation may potentially have a faster onset of action than an oral form and may be easier to
tolerate than swallowing a pill when patients are experiencing nausea. Under the terms of the Benuvia License Agreement, Benuvia
will be responsible for the manufacturing and supply of the Spray Formulations, but we will have exclusive, worldwide rights to
develop, commercialize and distribute the Spray Formulations.
What changed in the latest 10-Q
Risk Factors
New heading “We have restated our condensed consolidated financial statements for the interim period ended March 31, 2026, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price.”
New heading “We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.”
Largest changes
“On August 12, 2026, we concluded that, because of a misapplication of ASC 820, Fair Value Measurements, related to certain Level 3 fair value measurements of the Company’s convertible debt we entered into on November 6, 2025, our previously issued condensed consolidated financial statements for the interim period ended March 31, 2026 should no longer be relied upon. As such, we determined that we would restate our condensed consolidated financial statements for the interim period ended March 31, 2026. …”see in full comparison
“We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.”see in full comparison
“We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. …”see in full comparison
“Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. …”see in full comparison
“To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our understanding of the nuances of the complex accounting standards that apply to our condensed consolidated financial statements specifically related to fair valuation techniques in accordance with ASC 820, Fair Value Measurements. …”see in full comparison
“Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with United States generally accepted accounting principles, or U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. …”see in full comparison
Full comparison: every changed paragraph (10)
There have been no material changes to the risk factors disclosed in our Annual Report, except as follows:
We have restated our condensed consolidated financial statements for the interim period ended March 31, 2026, which may lead to additional risks and uncertainties, including loss of investor confidence and negative impacts on our stock price.
On August 12, 2026, we concluded that, because of a misapplication of ASC 820, Fair Value Measurements, related to certain Level 3 fair value measurements of the Company’s convertible debt we entered into on November 6, 2025, our previously issued condensed consolidated financial statements for the interim period ended March 31, 2026 should no longer be relied upon. As such, we determined that we would restate our condensed consolidated financial statements for the interim period ended March 31, 2026. As a result of this event, we have become subject to a number of additional costs and risks, including unanticipated costs for accounting and legal fees in connection with the restatement and the remediation of our ineffective disclosure controls and procedures and material weakness in internal control over financial reporting. In addition, the attention of our management team has been diverted by these efforts. We could be subject to additional stockholder, regulatory or other actions in connection with the restatement or other matters. If any such actions occur, they will, regardless of the outcome, consume a significant amount of management’s time and attention and may result in additional legal, accounting, insurance and other costs. If we do not prevail in any such proceedings, we could be required to pay substantial damages or settlement costs. In addition, the restatement and related matters could impair our reputation or could cause our counterparties to lose confidence in us. Each of these occurrences could have a material adverse effect on our business, results of operations, financial condition and stock price.
We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with United States generally accepted accounting principles, or U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We identified a material weakness in our internal control over financial reporting related to the accounting for a significant and unusual transaction related to the convertible debt we entered into on November 6, 2025. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of June 30, 2026. This material weakness resulted in a material misstatement of our convertible debt, change in fair value of convertible debt, other comprehensive income, accumulated deficit and related financial disclosures for the interim period ended March 31, 2026.
To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resources to the remediation and improvement of our internal control over financial reporting. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our understanding of the nuances of the complex accounting standards that apply to our condensed consolidated financial statements specifically related to fair valuation techniques in accordance with ASC 820, Fair Value Measurements. Our plans at this time include, but are not limited to, (i) discontinuing our current relationship with the external third party valuation firm that was previously used to assist management in the fair value calculation process for the convertible debt; (ii) engaging a more specialized and experienced external third party valuation firm to assist management in determining the fair value of convertible debt and other complex financial instruments; and (iii) increasing the number of finance and accounting personnel within the Company’s accounting department with the expertise to review and identify complex matters and discrepancies in utilized valuation assumptions. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the convertible debt we entered into on November 6, 2025, see Part I, Item 4: Controls and Procedures included in this Quarterly Report.
Any failure to maintain such internal control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities. In either case, there could result a material adverse effect on our business. Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3 or Form S-4, which may impair our ability to obtain capital in a timely fashion to execute our business strategies or issue shares to effect an acquisition. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.
As a smaller reporting company, the Company is not required to include the disclosure required under this Item 1A.
Management's Discussion & Analysis (MD&A)
New heading “Senior Secured Loan Facility”
New heading “Emerging Growth Company”
Removed heading “Business Acquisitions”
Removed heading “Revenue Recognition”
Removed heading “Net Product Revenues”
Removed heading “License and Collaboration Revenues”
Removed heading “Intangible Assets, Net and Goodwill”
Removed heading “Fair Value Measurements and Fair Value of Financial Instruments”
Removed heading “Reedy Creek Purchase Agreement”
Removed heading “July 1, 2025 and November 6, 2025 Royalty Agreements”
Removed heading “XEPI Transaction”
Removed heading “XEGLYZE Asset Purchase Agreement”
Largest changes
“Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed for impairment at the reporting unit level at least annually, or more frequently if an event occurs indicating the potential for impairment. During a goodwill impairment review, management performs an assessment of qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill. …”see in full comparison
“Indefinite-lived intangible assets, including goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis on July 1 or when events or changes in circumstances indicate evidence that a potential impairment exists, using a fair value-based test.”see in full comparison
“The Company periodically assesses the estimated royalty payments and to the extent the amount or timing of such payments is materially different than the original estimates, an adjustment is made to the effective interest rate, which will be recorded prospectively to increase or decrease interest expense. There are a number of factors that could materially affect the amount and timing of royalty payments and the amount of interest expense recorded by the Company over the term. …”see in full comparison
“Fair Value Measurements and Fair Value of Financial Instruments”see in full comparison
Full comparison: every changed paragraph (132)
From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including risks related to market, economic and other conditions;conditions, our current liquidity position, the need to obtain additional financing to support ongoing operations, the Company’s ability to continue as a going concern;concern, the Company’s ability to maintain the listing of its Common Stock on the NYSE American, the Company’s ability to manage costs and execute on its operational and budget plans;plans, and, the Company’s ability to achieve its financial goals. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report.
On November 18, 2024, Chromocell merged with and into its wholly-owned subsidiary, Channel, a Nevada corporation, pursuant to an agreement and plan of merger, dated as of November 18, 2024, for the purposes of reincorporating Chromocell in Nevada. Concurrently with the closing of the reincorporation merger, the Company changed its name from “Chromocell Therapeutics Corporation” to “Channel Therapeutics CorporationCorporation.”.
LNHC was incorporated in the state of Delaware in September 2023 by Ligand Pharmaceuticals, Inc. (“Ligand”) and was initially formed to facilitate a transaction between Ligand and Novan, Inc. (“Novan”). On September 27, 2023, Ligand acquired certain assets of Novan, after providing debtor in possession financing and acquiring specific assets from Novan, under Section 363 of the U.S. Bankruptcy Code (a “363 transaction”). Novan was a medical dermatology company focused on developing and commercializing innovative therapeutic products for skin diseases. Through its NITRICIL technology platform, Novan developed ZELSUVMIZelsuvmi (berdazimer gel, 10.3%), formerly named SB206, as a topical prescription gel for the treatment of viral skin infections, with a focus on molluscum contagiosum. As of the acquisition date in September 2023 by Ligand, all assets and liabilities acquired in the Novan acquisition were held by LNHC, which was a wholly ownedwholly-owned subsidiary of Ligand, including the NITRICIL technology platform.
Recent Business Updates
On January 12, 2026, the Company entered into a Venture Loan and Security Agreement with Horizon Technology Finance Corporation, a Delaware corporation, as lender and collateral agent (the “Venture Loan and Security Agreement”). The Venture Loan and Security Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $50.0 million. The proceeds of the facility will be used to support the commercialization of the Company’s existing commercialized pharmaceutical product, to prepare for the launch of two recently acquired products, working capital and general corporate purposes. The Company borrowed $30.0 million of the facility on January 12, 2026. TheAs remainingof January 12, 2026, the Company had $20.0 million ofremaining on the facility that may be borrowed upon the achievement by the Company of certain milestones set forth in the Venture Loan and Security Agreement. Based on the Company achieving trailing twelve-month net product revenues of $42.3 million as of June 30, 2026, the Company understands it has achieved access to an additional $10.0 million under the Venture Loan and Security Agreement, subject to the lender’s discretion. Potential access to the remaining $10.0 million continues to be subject to the achievement of the applicable milestones set forth in the Venture Loan and Security Agreement.
The Company’s market research and feedback to date indicate physicians have highly favorable opinions about ZELSUVMI’sZelsuvmi’s clinical efficacy, safety, and practicality as the first and only topical medication indicated for molluscum contagiosum that does not require in-office administration by a healthcare provider. The Company believes that ZELSUVMIZelsuvmi is likely to complement or represent a differing treatment regimen of currentto procedural treatments administered in medical settings such as cryosurgery, cantharidin application and curettage.
In November 2025, the Company acquired XEPIthe U.S. commercialization rights to Xepi (ozenoxacin) cream, 1% for the treatment of impetigo.impetigo from Biofrontera, Inc. (“Biofrontera”) and entered into an exclusive license agreement with Ferrer Internacional S.A. (“Ferrer”) and Interquim, S.A.U. (“Interquim”). The acquisition of this asset providedadded a complementary dermatology product to the Company’s portfolio anchored by ZELSUVMI.Zelsuvmi.
XEPIXepi is a novel FDA-approved non-fluorinated quinolone antimicrobial indicated for the topical treatment of impetigo due to Staphylococcus aureus or Streptococcus pyogenes in adult and pediatric patients two months of age and older. The Company believes XEPI addresses a critical unmet need in antibiotic-resistant skin infections caused by staph and strep infections, most commonly affecting children. Impetigo affects approximately 3 million people in the U.S. every year and is among the most common bacterial skin infections seen in pediatric offices.
The Company acquired the U.S. commercialization rights to XEPI, from Biofrontera, Inc. (“Biofrontera”) and an exclusive license agreement with Ferrer Internacional S.A. (“Ferrer”) and Interquim, S.A.U. (“Interquim”). XEPIXepi was developed by Ferrer and Medimetriks Pharmaceuticals, Inc., and approved by the FDA in 2017. At the time of approval, XEPIXepi was the first new novel treatment for impetigo in more than 10 years. Biofrontera had owned the U.S. rights to XEPIXepi since 2019 but, hashad not been actively promoting the product.
The Company believes Xepi addresses a critical unmet need in antibiotic-resistant skin infections caused by staph and strep infections, most commonly affecting children. Impetigo affects approximately 3 million people in the U.S. every year and is among the most common bacterial skin infections seen in pediatric offices.
XEPI,Xepi, a new chemical entity, belongs to a new generation of non-fluorinated quinolones. In two Phase 3 pivotal studies, XEPIXepi showed positive efficacy and appeared to be safe and well tolerated in both adult and pediatric populations aged 2 months and older. In addition, XEPIXepi has demonstrated excellent in vitro antibacterial activity against pathologically relevant bacteria and clinical isolates of organisms with emerging antibiotic resistance, such as methicillin-resistant s. aureus (“MRSA”). The Company believes Xepi represents a novel and important therapy for the topical treatment of impetigo.
aureus (“MRSA”). The Company believes XEPI represents a novel and important therapy for the topical treatment of impetigo.
The Company expects to commercially relaunch XEPIXepi once certain manufacturing, supply chain, and regulatory activities are validated, implemented and completed, respectively. In addition, the Company will also need to implement its commercial marketing, trade and access strategy prior to the relaunch of XEPI,Xepi, currently expected in earlythe first quarter of 2027.
XEGLYZEXeglyze is a novel, patent protected FDA-approved prescription medication indicated for the topical treatment of head lice infestation in patients 6 months of age and older. Abametapir, the active ingredient in XEGLYZE,Xeglyze, inhibits metalloproteinases that have a role in physiological processes critical to egg development and survival of lice. The single, 10 minute10-minute application does not require nit combing and has sufficient volume in each bottle to treat either short or long hair.
The Company expects to commercially launch XEGLYZEXeglyze once certain manufacturing, supply chain, and regulatory activities are validated, implemented and completed, respectively. In addition, the Company will also need to implement its commercial marketing, trade and access strategy prior to the launch of XEGLYZE,Xeglyze, currently expected in the third quarter of 2027.
On July 1, 2025 (the “Merger Closing Date”), the Company consummated the previously announced merger transaction (the “Merger”) pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, CHRO Merger Sub, Inc. a Delaware Corporation and a wholly ownedwholly-owned subsidiary of the Company (“Merger Sub”), LNHC, and solely for the purposes of Article III of the Merger Agreement, Ligand. Pursuant to the Merger Agreement, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the Merger and, after giving effect to such Merger, continuing as a wholly-owned subsidiary of the Company and (ii) the Company’s name was changed from Channel Therapeutics Corporation to Pelthos Therapeutics Inc.
The Company believes the NITRICIL technology platform has many other potential product candidates that could be further developed. Prior to the Merger, clinical work was performed in various indications, including, but not limited to, acne (SB204), atopic dermatitis and psoriasis (SB414), tinea pedis and onychomycosis (SB208) and external genital warts (SB207)., Other than SB207, tofor which the Company has existing rights, the rights are owned by Ligand. Any further development of these assets will require the Company to produce and manufacture the API for use by Ligand, Ligand affiliated parties,parties and third-party licensees or for our own account if we pursue SB207 or license any of the otherthese programs.
Depot Program (Pre-Clinical): Based on several novel formulations of CC8464, the Company’s most recently launched program, titled CT3000, is for the potential treatment of post operativepostoperative pain with the use of nerve blocks. Examples would include knee surgery or shoulder surgery. Existing therapies for nerve blocks lead to neuromuscular blockade which prevents movement following surgery. Doctors often want patients to move soon after surgery to avoid complications such as blood clots. A NaV1.7 inhibitor used for nerve blocks may provide good analgesia but will not lead to neuromuscular blockade that prevents movement like other local anesthetics. The Company will periodically review the timing and budget related to the commencement of toxicology and chemistry, manufacturing, and controls (“CMC”) work and a subsequent human proof-of-concept (“POC”) trial, but has no immediate plans to do so.
The Company is marketing ZELSUVMIZelsuvmi primarily to physicians with various types of electronic and physical promotion and direct sales efforts with a dedicated sales force supported by a product management team and support staff. The sales and marketing effort focuses on increasing awareness, adoption and usage of ZELSUVMIZelsuvmi to targeted pediatricians, pediatric dermatologists and dermatologists. The Company distributes ZELSUVMIZelsuvmi via standard retail pharmacy chains, mail order pharmacies and Amazon pharmacy utilizing a third-party logistics provider. Based on the Company’s conversations with HCPs, the Company believes these distribution channels are the most preferred by patients and HCPs. Critical to the launch and commercialization efforts of ZELSUVMIZelsuvmi will beare co-pay assistance and managing co-pay and patient out-of-pocket costs as well as prescription “pull-through” strategies and tactics to ensure patient access and utilization of ZELSUVMI.Zelsuvmi.
Due to the complexity of the proprietary manufacturing technology related to the NITRICIL platform, including intellectual property, know-how, trade secrets, production techniques, and the related physical manufacturing requirements and characteristics, the Company previously determined that constructing its custom manufacturing facility was the most effective way to mitigate risk associated with API production. The facility and production process has been fully validated and qualified and the facility has an operational and integrated QMS (Quality Management System) and Enterprise Resource Planning (“ERP”) platform governing the operations of the facility.
The Company currently has sufficient API manufacturing capacity within its facility, as it is configured, to comfortably meet its current sales forecasts to supply API for ZELSUVMI.Zelsuvmi. In its current configuration, the Company has excess capacity to increase utilization for additional API demand. Furthermore, the Company also has the ability to add additional manufacturing shifts and team members to manufacture even greater quantities of API, if needed, for our own account and current and potential future partners or customers of the NITRICIL technology. Effectively, the Company believes the current API theoretical manufacturing capacity could be roughly doubled, if needed, due to one or more of the following: a higher than expected sales demand for ZELSUVMI,Zelsuvmi, demand from current partners, such as Ligand, and potential future partnerships for ZELSUVMIZelsuvmi and/or the NITRICIL platform. The Company does not expect to need to invest in material or significant capital expenditures and other fixed costs to bring more manufacturing capacity on-lineon line in the foreseeable future. The Company does expect to incur certain levels of capital expenditures for on-going operations, maintenance and improvements.
The Company primarily sells its ZELSUVMIZelsuvmi product to national and regional wholesaler channels. Our wholesalers purchase products from us and, in turn, supply products to retail drug store chains, independent pharmacies and mail order pharmacies. As of MarchJune 31,30, 2026, three of the Company’s wholesaler customers accounted for 92%78% of its total gross accounts receivable balance at 39%,28%, 28%21% and 25%,29%, respectively. InAs addition,of December 31, 2025, these three wholesalers accounted for 90% of its total gross accounts receivable balance at 38%, 31% and 21%, respectively. For the three months ended MarchJune 31,30, 2026, these three wholesalers accounted for 92%82% of gross revenue at 36%,33%, 28%21% and 28%, respectively. In addition, for the six months ended June 30, 2026, these three wholesalers accounted for 86% of gross revenue at 34%, 24% and 28%, respectively.
On July 1, 2025, Channel, Merger Sub (a wholly ownedwholly-owned subsidiary of Channel), LNHC, and solely for the purposes of Article III within the Merger Agreement, Ligand consummated the Merger, pursuant to which, (i) Merger Sub merged with and into LNHC, with LNHC as the surviving company in the Merger and, after giving effect to such Merger, continuing as a wholly-owned subsidiary of Channel and (ii) Channel changed its name to Pelthos Therapeutics Inc.
Due to the Merger, the Company’s financial results for the three and six months ended June 30, 2026 are not directly comparable to the results for the three and six months ended June 30, 2025. The primary differences from the pre- and post-Merger reported results presented below relate to changes in operations of the business as of the Merger date, including the July 2025 launch of Zelsuvmi and ongoing commercialization efforts.
Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025
The following table sets forth our results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):
For the three and six months ended MarchJune 31,30, 2026, net product revenues were $10.7$15.4 million.million and $26.1 million, respectively. Net product revenues relate solely to the commercial launch of ZELSUVMI,Zelsuvmi, which was announced on July 10, 2025.
License and collaboration revenues for the three and six months ended June 30, 2026, were $0.2 million and $0.4 million, respectively. This revenue is related to recognition of deferred revenue from a collaboration agreement with Sato Pharmaceutical Co., Ltd. (“Sato Agreement”). During the second quarter of 2026 the Company re-evaluated the estimated performance period and extended the performance obligation through the fourth quarter of 2028. The Company previously estimated the end of development period in the first quarter of 2028, based upon a Sato-prepared Japanese development program timeline. The estimated percentage of completeness remains subject to prospective reassessment and adjustment based upon Sato’s interaction with the Japanese regulatory authorities and other developmental and timing considerations.
License and collaboration revenues for the three months ended March 31, 2026, were $0.2 million. This revenue is related to recognition of deferred revenue from a collaboration agreement with Sato Pharmaceutical Co., Ltd. (“Sato Agreement”).
Cost of goods sold includes direct and indirect costs related to the manufacture, production, packaging, and distribution of the Company’s commercial products. These costs primarily consist of manufacturing costs, including allocated overhead, supply costs, third-party logistics and distribution expenses, quality control and assurance costs, and freight and shipping charges incurred in fulfilling customer orders. The Company’s developed technology intangible asset amortization is excluded from cost of goods sold.
Additionally, the Company’s product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company records a write-down of any potential unmarketable inventory to its estimated net realizable value.
For the three and six months ended MarchJune 31,30, 2026, cost of goods sold was $1.7$3.6 million.million and $5.3 million, respectively. Cost of goods sold relate solely to ZELSUVMI,Zelsuvmi, which was launched in mid-2025,July 2025, and includes certain fair value adjustments related to semi-finished and finished goods inventory on hand at the time of the Merger.
Additionally, the Company’s product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company records a write-down of any potential unmarketable inventory to its estimated net realizable value. During the three and six months ended June 30, 2026, the Company wrote off $0.9 million of commercial API inventory. These write-offs related primarily to three batches of commercial API produced during the second quarter of 2026 that were identified, through the Company’s routine in-process quality control and testing, as narrowly falling outside specific tolerances for use in commercial drug product. The underlying procedural cause of these out-of-specification results was addressed and subsequent API manufacturing has commenced and met specifications.
The following table sets forth our cost of goods sold for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):
RoyaltyThe Company records royalty and/or milestone payments due to third parties under license arrangementsarrangements, or license agreements for commercial products, the associated payment obligations are expensed within SG&A and recorded as a current liabilityexpense in the periods in which the obligation is incurred.
The following table summarizes our SG&A expense for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):
(1) Personnel expense for the three and six months ended June 30, 2026 increased compared to the prior year periods primarily due to the addition of employees related to the July 1, 2025 Merger and the expansion of our commercial organization to support the July 2025 launch of Zelsuvmi. As of June 30, 2026 the Company had approximately 67 territory managers actively engaged in commercialization efforts related to Zelsuvmi. Personnel expense for the three and six months ended June 30, 2026 included approximately $0.5 million of non-recurring severance and $1.0 million of accelerated stock-based compensation related to the departure of our former Chief Financial Officer.
(2) Non-personnel related SG&A expense for the three and six months ended June 30, 2026 increased compared to the prior year periods primarily due to increased marketing, sales and commercial expenses and increased royalty and milestone expense following the launch of Zelsuvmi. During the three and six months ended June 30, 2026, the Company recorded two milestones to its license agreement counterparties, Ligand and the University of North Carolina at Chapel Hill, for $5.0 million and $0.3 million, respectively. In addition, certain consulting, legal, patent, insurance, accounting, public company, information technology and facilities expenses have increased from the three and six months ended June 30, 2026 as compared to the three and six months ended June 30, 2025, following the July 2025 launch of Zelsuvmi and the Merger.
The increase in SG&A for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 is primarily due to increased headcount and other costs associated with the commercial launch of ZELSUVMI, which commenced on July 10, 2025. The additional expenses include selling, patient services, pharmacovigilance, marketing, advertising, travel, sponsorships and trade shows related to the commercial detailing of ZELSUVMI. As of March 31, 2026 the Company had approximately 64 territory managers actively engaged in commercialization efforts related to ZELSUVMI.
In addition, certain corporate, administrative, consulting, legal, patent, insurance, accounting, public company, information technology and facilities expenses have increased from the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, following the launch of ZELSUVMI and the Merger.
R&D expenses related to the level of activities related to our NaV1.7 pain programs for the three and six months ended MarchJune 31,30, 2026 and 2025 are noted below (in thousands):
The increase in R&D expense for the three and six months ended June 30, 2026 compared to the prior year periods relates to the further clinical progression of CT2000. On March 31, 2026, the Company announced that the first patient had been dosed in its Phase 1b/2a clinical trial evaluating CT2000 as a potential treatment for eye pain. The Company’s wholly-owned subsidiary, Channel Pharmaceutical Corporation, owns the rights to CT2000 and its NaV1.7 inhibitor pipeline and is conducting the clinical work through its Australian subsidiary.
These assets are being amortized on a straight-line basis over the lesser of the term of the agreement and the useful life of the license or asset. For the three and six months ended MarchJune 31,30, 2026, amortization of intangible assets was $1.0 million.million and $2.1 million, respectively. There was no comparable amortization in the prior year periods because the underlying intangible assets were recognized in connection with the July 1, 2025 Merger. For more information, see Note 5 — “Goodwill and Intangible Assets” in the accompanying notes to our condensed consolidated financial statements.
The following table summarizes our interest expense for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):
On November 6, 2025, the Company entered into a securities purchase agreement with certain investors, including Ligand, pursuant to which, among other things, on the closing date, the convertible investors purchased for cash, and the Company issued and sold to the convertible investors, senior secured Convertible Notes of the Company in the aggregate original principal amount of $18.0 million, which are convertible into shares of the Company’s Common Stock at a conversion rate of $29.73. The Convertible Notes accrue interest at a rate of 8.5% per annumannum, compounded quarterly, and mature on November 6, 2027.2027, as revised based on the Convertible Notes subordination agreement. The Convertible Notes subordination agreement, also described above, subordinated all payment obligations under the Convertible Notes, including principal and accrued interest, until 90-days after the Venture Loan and Security Agreement has been repaid in full.
The Company analyzed the terms of the Convertible Notes and its embedded features concluding it appropriate to account for the Convertible Notes at fair value under the allowable fair value option. Accordingly, the Company initially recognized the Convertible Notes at fair value and subsequently measures the Convertible Notes at fair value with changes in fair value recorded in current period earnings, or other comprehensive income if specific to Company credit risk.
For the three and six months ended June 30, 2026, the change in fair value of the Convertible Notes was $3.7 million and $13.3 million, respectively, due primarily to (i) changes in the Company’s common stock price; (ii) a change in fair value related to the Convertible Notes; and (iii) a change to the principal balance related to the payment-in-kind for the quarterly interest payments due January 1, 2026 and April 1, 2026.
For the three months ended March 31, 2026, the change in fair value of the Convertible Notes was $5.2 million, due primarily to a decline in the Company’s common stock price of $31.00 at December 31, 2025 to $21.01 at March 31, 2026. This change in fair value excludes a $3.2 million gain, recorded in accumulated other comprehensive income on the condensed consolidated balance sheet, related to the Convertible Notes credit risk component for the three months ended March 31, 2026. The credit risk component adjustment was primarily driven by the subordination of the Convertible Notes resulting from the Company's entry into the Venture Loan and Security Agreement on January 12, 2026.
For the six months ended June 30, 2026, the Company had net cash flows used in operating activities of $20.8 million. As of June 30, 2026, the Company had cash of approximately $24.2 million and working capital of $31.4 million. Working capital represents current assets less current liabilities as reported on the Company’s condensed consolidated balance sheets. For the six months ended June 30, 2026, the Company recorded net product revenues in the amount of $26.1 million for its lead commercial product, Zelsuvmi. Since the commercial launch of Zelsuvmi in July of 2025, the Company has recorded net product revenues in its preceding four fiscal quarters ending September 30, 2025, December 31, 2025, March 31, 2026, and June 30, 2026 of $7.1 million, $9.1 million, $10.7 million, and $15.4 million, respectively. The quarter over quarter percentage growth of net product revenues over the prior three fiscal quarters ending December 31, 2025, March 31, 2026, and June 30, 2026 were 28%, 17%, and 45% respectively.
During the three months ended March 31, 2026, the Company had a net loss of approximately $10.2 million. As of March 31, 2026, the Company had cash of approximately $32.0 million and working capital of $44.8 million. For the three months ended March 31, 2026, the Company recorded net revenue in the amount of $10.7 million, which represented nine months of commercial activity for its lead commercial product, ZELSUVMI. For the three months ended March 31, 2026, the Company recorded total operating expenses of $24.0 million.
On January 12, 2026, the Company entered into a Venture Loan and Security Agreement with Horizon Technology Finance Corporation,Corporation (“Horizon”), a Delaware corporation, as lender and collateral agent. The Venture Loan and Security Agreement provides for a senior secured term loan facility in an aggregate principal amount of up to $50.0 million.million (the “Term Loans”). The proceeds of the facility will be used to support the commercialization of the Company’s existing commercialized pharmaceutical product, to prepare for the launch of two recently acquired products, working capital and general corporate purposes. The Company borrowed $30.0 million of the facility on January 12, 2026. TheAs remainingof January 12, 2026, the Company had $20.0 million ofremaining on the facility that may be borrowed upon the achievement by the Company of certain milestones set forth in the Venture Loan and Security Agreement. Based on the Company achieving trailing twelve-month net product revenues of $42.3 million as of June 30, 2026, the Company understands it has achieved access to an additional $10.0 million under the Venture Loan and Security Agreement, subject to the lender’s discretion. Potential access to the remaining $10.0 million continues to be subject to the achievement of the applicable milestones set forth in the Venture Loan and Security Agreement.
Our material cash requirements include manufacturing and commercialization expenditures, employee compensation and benefits, lease obligations, debt service obligations under our Venture Loan and Security Agreement, royalty financing obligations and general corporate purposes. In addition, as described below in Contractual Obligations and Commitments, the Company has entered into arrangements that contractually obligate it to make payments that will affect its liquidity and cash flows in future periods.
The Company has current obligations reported on its condensed consolidated balance sheets within accrued expenses two milestone payments due to Ligand totaling $10.0 million related to Zelsuvmi. In addition, the Company’s related party convertible notes payable, with a principal balance at June 30, 2026 of $18.6 million, have a stated maturity date of November 6, 2027. However, as discussed in Note 7 — “Notes Payable,” and Note 9 — “License and Other Agreements,” Ligand and the counterparties to the convertible notes have entered into subordination agreements related to the Venture Loan and Security Agreement which prohibit the Company from making milestone payments on the Zelsuvmi License and repaying the convertible notes, until certain defined criteria are achieved.
The Company’s future liquidity requirements also include repayment obligations under the Venture Loan and Security Agreement. The Company is required to make monthly interest payments through February 1, 2029, followed by scheduled principal and interest payments through maturity on January 31, 2031. If specified revenue milestones are achieved, the interest-only payment period may be extended through February 1, 2030, with principal repayments commencing thereafter. See Note 7 — “Notes Payable” for additional information regarding the Venture Loan and Security Agreement.
As further discussed in Note 2 — “Basis of Presentation and Summary of Significant Accounting Policies” in the accompanying notes to our condensed consolidated financial statements, in certain prior periods, management disclosed substantial doubt about the Company’s ability to continue as a going concern. The conditions and events that previously raised substantial doubt have been alleviated by management’s plans and actions. Based on current projections, including forecasted cash flows related to net product sales of ZELSUVMI,Zelsuvmi, proceeds from the convertible note agreement in November 2025, proceeds from the initial draw of the January 2026 Venture Loan and Security Agreement, and the potential additional availability under the January 2026 Venture Loan and Security Agreement, management believes it has sufficient capital, or access to capital, to fund its operations through at least the next twelve months following the issuance of the accompanying condensed consolidated financial statements and management has concluded there are no conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern under ASC 205-40, Presentation of Financial Statements - Going Concern. While risks remain, management believes available liquidity and cash generation from operations are sufficient for near-term needs.
The increase in cash used in operations from the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily attributable to (i) the timing of the Merger, which closed on July 1, 2025, resulting in a full six months of post-Merger operations during the 2026 period, and (ii) changes in working capital associated with the launch and ongoing commercialization efforts associated with Zelsuvmi, including routine operating fluctuations in inventory, license obligations, accounts receivable and accounts payable. The increase was also driven by higher cash royalties, rebates, coupons, and distribution costs associated with our increased gross product sales, increased cash interest payments, higher employee compensation costs, and payments of contingent consideration.
For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities wasof $13.1$20.8 million and consisted primarily of a net loss of $10.2$48.5 million, with adjustments for non-cash amounts related primarily to (i) stock-based compensation expense of $1.9$4.7 million, (ii) amortization of definite lived intangible assets of $1.0$2.1 million, (iii) $0.5$0.7 million of depreciation expense, (iv) $1.1$2.0 million of accretion of interest expense for royalty obligations, (v) a write-off of inventory of $0.9 million, (vi) $0.1 million of lease amortization, (vivii) amortization of debt discount of $0.2$0.4 million, (viiviii) change in fair value of Convertible Notes of $5.2$13.3 million, and (viiiix) a $2.4$3.3 million decreasenet increase in cash related to changes in operating assets and liabilities.
The favorable impacts to cash related to changes in operating assets and liabilities was primarily due to (i) a $0.2 million change in inventory,accrued expenses of $6.4 million, (ii) a change in accounts payable of $3.2$2.8 million, (iii) a $1.4 million change in inventory, (iv) a change in operating lease assets of $0.1$0.2 million, and (ivv) a change in prepaid expenses of $0.5$0.1 million. The unfavorable impacts to cash related to changes in (i) accounts receivable of $2.8$5.6 million, (ii) accrued expenses of $1.9 million, (iii) contingent consideration of $1.2 million, (iii) operating lease liabilities of $0.3 million and (iv) deferred revenue of $0.2$0.4 million.
For the threesix months ended MarchJune 31,30, 2025, the Company incurred a net loss of $2.0$5.4 million and net cash flows used in operating activities was $0.6$1.1 million. The cash flow used in operating activities was primarily due to the net loss, offset by stock-based compensation expense of $0.5$0.9 million, amortization of debt discount of $0.1$0.3 million,,million, and a change in accounts payable of $0.7$3.1 million.
Net Cash ProvidedUsed Byin Investing Activities
PTHS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 35,948 shares, about $999.8K) and open-market sales in 8 filings (4 insiders, 4 trade dates, 6,065 shares, about $148.9K; 7 of these filings say the sales were made under a Rule 10b5-1 trading plan). Net open-market shares: 29,883 (purchases minus sales); net value about $851.0K.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 |
|---|---|---|---|---|---|
| 2026-10-02 | Greenleaf Peter |
Open-market sale |
797 | $21.17 | $16.9K |
| 2026-10-02 | Friedberg Ezra M |
Open-market sale |
558 | $20.72 | $11.6K |
| 2026-10-02 | Pauls Matthew |
Open-market sale |
786 | $21.00 | $16.5K |
| 2026-07-02 | Friedberg Ezra M |
Open-market sale |
534 | $26.03 | $13.9K |
| 2026-07-02 | Friedberg Ezra M |
Open-market sale |
24 | $27.33 | $656 |
| 2026-07-02 | Pauls Matthew |
Open-market sale |
94 | $27.36 | $2.6K |
| 2026-07-02 | Pauls Matthew |
Open-market sale |
692 | $26.00 | $18.0K |
| 2026-07-02 | Greenleaf Peter |
Open-market sale |
712 | $26.00 | $18.5K |
| 2026-07-02 | Greenleaf Peter |
Open-market sale |
85 | $27.27 | $2.3K |
| 2026-06-15 | Friedberg Ezra M |
Open-market sale |
224 | $27.12 | $6.1K |
| 2026-06-15 | Friedberg Ezra M |
Open-market sale |
59 | $27.94 | $1.6K |
| 2026-06-11 | Davis Todd C |
Open-market purchase | 503 | $28.73 | $14.5K |
| 2026-06-11 | Davis Todd C |
Open-market purchase | 35,445 | $27.80 | $985.4K |
| 2026-05-22 | Francis Knuettel Ii |
Open-market sale | 1,500 | $26.84 | $40.3K |
| 2026-05-22 | Francis Knuettel Ii |
Disposition to issuer | 13,947 | — | — |
| 2026-05-14 | Friedberg Ezra M |
Shares withheld for tax |
144 | $27.01 | $3.9K |
Well-known investors holding PTHS (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 15,046 | $425.2K | 0.0% | New position |