SMNR 10-K & 10-Q changes, risk factors and insider trading
Semnur Pharmaceuticals, Inc. (also SMNRW) · OTC · Pharmaceutical Preparations · CIK 1913577 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risk Factor Summary”
New heading “Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements”
New heading “Risks Related to Our Product Development”
New heading “Risks Related to Our Business and Operations”
New heading “Risks Related to Our Intellectual Property”
New heading “Risks Related to Government Regulations”
New heading “Risks Related to Our Relationship with Scilex”
New heading “Risks Related to Ownership of Our Common Stock”
New heading “Risks Related to Cryptocurrency”
New heading “Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements”
New heading “We are a late-stage clinical specialty pharmaceutical company and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.”
New heading “We have only one product candidate, SP-102, no products approved for commercial sale, have never generated any revenue from product sales and may never be profitable.”
New heading “We currently have no sales and marketing organization. If we are unable to establish satisfactory sales and marketing capabilities or secure a third-party sales and marketing relationship, we may not be able to successfully commercialize SP-102 or any future product candidates, if any.”
New heading “We will require substantial additional funding, which may not be available to us on acceptable terms, or at all.”
New heading “We may not be able to generate sufficient cash to service our indebtedness and other liquidity needs.”
New heading “Our recurring losses from operations, negative cash flows and substantial cumulative net losses raise substantial doubt about our ability to continue as a going concern.”
New heading “In the past, we have identified material weaknesses in our internal control over financial reporting. Any material weakness may cause us to fail to timely and accurately report our financial results or result in a material misstatement of our financial statements.”
New heading “Risks Related to Our Product Development”
New heading “We are substantially dependent on the success of our only product candidate, SP-102. If we are unable to complete development of, obtain approval for and commercialize SP-102 in a timely manner or at all, our business will be harmed.”
New heading “We have historically obtained our clinical supply of our only product candidate, SP-102, and certain of the raw materials used in SP-102, from a sole or single source supplier and manufacturer, and we may not be able to find an alternative source on commercially reasonable terms, or at all. In addition, if any such supplier or manufacturer fails to comply with FDA regulations, we may be subject to sanctions or delays in the delivery of our clinical supplies which could affect the development of SP-102.”
New heading “We rely on third parties to conduct our clinical trials and intend to rely on third parties to conduct all of our future clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with applicable regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approval for our current and future product candidates.”
New heading “We may in the future enter into collaborations, in-licensing arrangements, joint ventures, or strategic alliances with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues.”
New heading “Delays in clinical trials could result in increased costs to us and delay our ability to obtain commercial approval and generate revenue.”
New heading “Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval for our product candidates and the approval may be for a more narrow indication than we seek.”
New heading “We may find it difficult to enroll or maintain patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.”
New heading “The incidence and prevalence for target patient populations of our product candidates are based on estimates and third-party sources. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.”
New heading “We face significant competition and our competitors may discover, develop or commercialize products faster or more successfully than us.”
New heading “Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, healthcare payers and operators of major clinics, and we may not be successful in attaining such market acceptance.”
New heading “The third-party payor coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain coverage and adequate reimbursement for our current or future product candidates, if approved, could decrease our ability to generate product revenue.”
New heading “Results of preclinical studies and early clinical trials may not be predictive of results of future clinical trials, and such results do not guarantee approval of a product candidate by regulatory authorities. In addition, our clinical trials to date have been limited in scope, and results received to date may not be replicated in expanded or additional future clinical trials.”
New heading “Interim “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.”
New heading “Our clinical trials may fail to demonstrate substantial evidence of the safety and efficacy of product candidates that we may identify and pursue for their intended uses, which would prevent, delay or limit the scope of regulatory approval and commercialization.”
New heading “Even if we obtain FDA approval for any of our current or future product candidates in the United States, we may never obtain approval for or commercialize any of them in any other jurisdiction, which would limit our ability to realize their full market potential.”
New heading “Our business may suffer reputational harm due to failures of our product candidates.”
New heading “Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval.”
New heading “Our current product candidate is complex and difficult to manufacture. We could experience delays in satisfying regulatory authorities or manufacturing problems that result in delays in our development or commercialization programs, limit the supply of our current product candidate, or otherwise harm our business.”
New heading “Risks Related to Our Business and Operations”
New heading “If we are unable to retain our key executives, it may delay our development efforts and harm our business, financial condition and results of operations.”
New heading “We may need to increase the size of our company and may not effectively manage our growth.”
New heading “Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.”
New heading “If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.”
New heading “Any disruption in our research and development facilities could adversely affect our business, financial condition and results of operations.”
New heading “We may seek to grow our business through acquisitions and may fail to realize the anticipated benefits of any acquisition, and acquisitions can be costly and dilutive.”
New heading “If we conduct business outside of the United States, the international components of our business will expose us to business, legal, regulatory, political, operational, financial and economic risks associated with conducting business outside of the United States.”
New heading “The increasing use of social media platforms presents new risks and challenges.”
New heading “Our business and operations would suffer in the event of a system failure.”
New heading “Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and results of operations.”
New heading “Risks Related to Our Intellectual Property”
New heading “Potential disputes over intellectual property rights that we have licensed may prevent or impair our ability to maintain our current licensing arrangements on acceptable terms.”
New heading “If we are unable to maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.”
New heading “We may not be successful in obtaining or maintaining necessary rights to product components and processes and brands for our development pipeline through acquisitions and in-licenses.”
New heading “We may become subject to claims challenging the inventorship or ownership of our patents and other intellectual property.”
New heading “Claims that we infringe, misappropriate, or violate the intellectual property rights of third parties may give rise to costly and lengthy litigation, and we could be prevented from selling product candidates, if approved, forced to pay damages, and defend against litigation.”
New heading “We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.”
New heading “If our intellectual property rights are invalidated or circumvented, our business, financial condition and results of operations will be adversely affected.”
New heading “If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition and our business, financial condition and results of operations may be adversely affected.”
New heading “Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.”
New heading “Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.”
New heading “Confidentiality agreements with employees may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete.”
New heading “We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.”
New heading “Our position as a relatively small company may cause us to be at a significant disadvantage in defending our intellectual property rights and in defending against infringement claims by third parties.”
New heading “Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.”
New heading “We may be subject to claims that we have wrongfully hired an employee from a competitor or that we or our employees have wrongfully used or disclosed alleged confidential information or trade secrets of their former employers.”
New heading “We may not be able to protect our intellectual property rights throughout the world.”
New heading “If we do not obtain patent term extension and data exclusivity for any of our product candidates we are developing or may develop, our business may be materially harmed.”
New heading “If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.”
New heading “Our reliance on third parties may require us to share our trade secrets, which increases the possibility that our trade secrets will be misappropriated or disclosed.”
New heading “Intellectual property rights and regulatory exclusivity rights do not necessarily address all potential threats to our competitive advantage.”
New heading “Risks Related to Government Regulations”
New heading “The regulatory approval processes of the FDA and comparable non-U.S. regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business, financial condition and results of operations will be substantially harmed. Moreover, gaining approval for a product candidate in one country or jurisdiction does not guarantee that we will be able to obtain approval for or commercialize it in any other jurisdiction, which would limit our ability to realize our full market potential.”
New heading “If the FDA does not conclude that our product candidate satisfies the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for our product candidate under Section 505(b)(2) are not as we expect, the approval pathway for our product candidate will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.”
New heading “Any approved product candidate will be subject to ongoing and continued regulatory requirements, which may result in significant expense and limit our ability to commercialize such products.”
New heading “A fast track product designation or other designation to facilitate product candidate development may not lead to faster development or regulatory review or approval process, and it does not increase the likelihood that SP-102 will receive marketing approval.”
New heading “Changes in funding for the FDA could hinder its ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business, financial condition and results of operations.”
New heading “A sustained government shutdown could adversely affect our business, financial condition and results of operations.”
New heading “Failure to comply with health and data protection laws and regulations could lead to government enforcement actions and civil or criminal penalties, private litigation or adverse publicity and could negatively affect our operating results and business.”
New heading “Our business involves the use of hazardous materials and we and third parties with whom we contract must comply with environmental laws and regulations, which can be expensive and restrict how we do business.”
New heading “Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could have a material adverse effect on our business, financial condition and results of operations.”
New heading “We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, transparency and disclosure, or sunshine, laws, government price reporting, 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.”
New heading “The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.”
New heading “Healthcare reform measures could hinder or prevent our product candidate’s commercial success.”
New heading “We will need to obtain prior FDA authorization for any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business, financial condition and results of operations.”
New heading “We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, financial condition and results of operations.”
New heading “We may in the future conduct clinical trials for current or future product candidates outside the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials.”
New heading “Risks Related to Our Relationship with Scilex”
New heading “Certain of our directors and officers may have actual or potential conflicts of interest because of their positions with Scilex.”
New heading “Scilex currently performs or supports many of our important corporate functions. Our consolidated financial statements may not necessarily be indicative of the conditions that would have existed or our results of operations if we had been operated as an unaffiliated company of Scilex, and we incurred significant charges in connection with the Business Combination and will incur incremental costs as a stand-alone public company.”
New heading “Our Executive Chairman and Chief Financial Officer each holds an executive officer position at Scilex and devotes time to both companies, which could cause a diversion of their time and attention from our business and operations, and as a result could have a material adverse effect on our business and operations.”
New heading “We are controlled by Scilex, whose interests may differ from those of our public shareholders.”
New heading “Scilex, as the holder of Series A Preferred Stock, has rights, preferences and privileges that are not held by, and are preferential to, the rights of holders of our Common Stock.”
New heading “Risks Related to Ownership of Our Common Stock”
New heading “If our operations and performance do not meet the expectations of investors or securities analysts, the market price of our securities may decline.”
New heading “We have not paid cash dividends in the past and we do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the capital appreciation, if any, of Common Stock.”
New heading “Future sales, or the perception of future sales, of a substantial number of shares of Common Stock may cause the price of the Common Stock to decline.”
New heading “Our operating results may fluctuate significantly.”
New heading “Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.”
New heading “If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse opinion regarding our stock, our stock price and trading volume could decline.”
New heading “Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidate.”
New heading “Our principal stockholders, directors and executive officers will own a significant percentage of our capital stock, and have significant influence over our management.”
New heading “Our ability to use our net operating loss and tax credit carryforwards may be subject to limitation.”
New heading “If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Common Stock.”
New heading “Anti-takeover provisions in the Charter and the Bylaws and under Delaware law could make an acquisition of our company, which may be beneficial to its stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.”
New heading “The Charter designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the United States as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with the Company.”
New heading “We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.”
New heading “As of the date of this Annual Report, we are a controlled company within the meaning of the Nasdaq Listing Rules and, as a result, if our Nasdaq listing application is approved, will qualify for, and may rely on, exemptions from certain corporate governance requirements. Stockholders may not have the same protection afforded to stockholders of companies that are subject to such governance requirements.”
New heading “We will incur increased costs as a result of operating as a public company, and our management will devote substantial time to related compliance initiatives.”
New heading “If we cannot satisfy the initial listing requirements and other rules of Nasdaq, our securities may not be listed on Nasdaq, which could negatively impact the price of its securities and your ability to sell them.”
New heading “Comprehensive U.S. federal income tax reform could adversely affect Semnur.”
New heading “The Warrants are exercisable for Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.”
New heading “The Warrants may never be in the money, they may expire worthless and the terms of the Warrants may be amended in a manner adverse to a holder if holders of a majority of the then-outstanding Warrants approve of such amendment.”
New heading “We may redeem any unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making the Warrants worthless.”
New heading “Risks Related to Artificial Intelligence”
New heading “Risks Related to Cryptocurrency”
New heading “The Company intends to use the net proceeds from the Biconomy SPA, which as of the date of this Annual Report has not closed and will be paid in Bitcoin, to fund investments in other companies. The price of Bitcoin has been, and will likely continue to be, highly volatile. The Company’s operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.”
New heading “Our cryptocurrency treasury strategy has not been implemented or tested.”
New heading “Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.”
New heading “If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.”
New heading “The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of cryptocurrencies we hold and adversely affect our business.”
New heading “The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.”
New heading “The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.”
New heading “Changes in the accounting treatment of cryptocurrency holdings could have significant accounting impacts, including increasing the volatility of our results.”
New heading “Cryptocurrency holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.”
New heading “Cryptocurrencies do not pay interest or dividends.”
New heading “We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.”
New heading “If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our cryptocurrency, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our cryptocurrency and our financial condition and results of operations could be materially adversely affected.”
New heading “Our custodially-held cryptocurrencies may become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.”
Largest changes
“In the future, in order to properly manage our internal control over financial reporting, we may need to take additional measures to further augment our finance resources, and we cannot be certain that the measures we have taken, and expect to take, to improve our internal controls will be sufficient to ensure that our internal controls will remain effective and eliminate the possibility that other material weaknesses or deficiencies may develop or be identified in the future. …”see in full comparison
“Further, the global equity markets in general have recently experienced extreme price and volume fluctuations, including as a result of the COVID-19 pandemic, economic uncertainty and increased interest rates, inflation, the government closure of Silicon Valley Bank and Signature Bank, and liquidity concerns at other financial institutions that may be unrelated to our operating performance. Continued market fluctuations could result in extreme volatility in the price of our Common Stock, which could cause a decline in the value of our Common Stock. …”see in full comparison
“Further, a security incident or privacy violation that leads to the unauthorized acquisition, interruption, modification, loss, theft, corruption, interference, or other unauthorized disclosure of, or prevents access to, personal data, including patient data or other protected health information, could harm our reputation, compel us to comply with federal or state breach notification laws and foreign equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents, and otherwise subject us to liability under laws and regulations that protect …”see in full comparison
“If we do not generate cash flow from operations sufficient to pay our debt service or other obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Our ability to refinance our debt and fund other obligations will depend on the condition of the capital markets and our financial condition at that time. …”see in full comparison
“We are exposed to the risk of fraud, illegal activity or other misconduct by our employees, independent contractors, consultants, commercial partners and vendors. …”see in full comparison
“If we are found to have improperly promoted off-label uses of our current or future product candidates, if approved, or if we are found to have improperly engaged in pre-approval promotion prior to the approval of such product candidates, we may become subject to significant liability. Such enforcement has become more common in the industry. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our product candidates, if approved. …”see in full comparison
Full comparison: every changed paragraph (705)
Investing in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully the following risk factors, as well as the other information set forth in this this Annual Report, including matters addressed in the section of this Annual Report titled “Cautionary Note Regarding Forward-Looking Statements”. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this Annual Report are not the only risks and uncertainties that we face. We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial. The following discussions should be read in conjunction with our consolidated financial statements and the notes to the consolidated financial statements included therein.
Risk Factor Summary
Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks that we face, follows this summary. This summary is qualified in its entirety by that more complete discussion of such risks and uncertainties:
Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements
We are a late-stage clinical specialty pharmaceutical company and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.
We have only one product candidate, SP-102, no products approved for commercial sale, have never generated any revenue from product sales and may never be profitable.
We currently have no sales and marketing organization and if we do not establish satisfactory sales and marketing capabilities, we may not successfully commercialize SP-102 or any future product candidates.
Our recurring losses from operations, negative cash flows and substantial cumulative net losses raise substantial doubt about our ability to continue as a going concern.
Risks Related to Our Product Development
We have historically obtained our clinical supply of our only product candidate, SP-102, and certain of the raw materials used in SP-102, from a sole or single source supplier and manufacturer, and we may not be able to find an alternative source on commercially reasonable terms, or at all. In addition, if any such supplier or manufacturer fails to comply with FDA regulations we may be subject to sanctions or delays.
We rely on third parties to conduct clinical trials and intend to rely on third parties to conduct all future clinical trials. If these third parties do not successfully carry out their contractual duties, fail to comply with regulatory requirements or meet expected deadlines, we may be unable to obtain regulatory approvals.
Delays in clinical trials could result in increased costs to us and delay our ability to obtain commercial approval and generate revenue.
Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval for our product candidates and the approval may be for a more narrow indication than we seek.
Risks Related to Our Business and Operations
If we are unable to retain our key executives, it may delay our development efforts and harm our business, financial condition and results of operations.
We may need to increase the size of our company and may not effectively manage our growth.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
Any disruption in our research and development facilities could adversely affect our business, financial condition and results of operations.
Risks Related to Our Intellectual Property
If we are unable to maintain patent protection for our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
If our intellectual property rights are invalidated or circumvented, our business will be adversely affected.
Confidentiality agreements with employees may not prevent disclosure of our trade secrets and proprietary information and may not adequately protect our intellectual property, which could limit our ability to compete.
Risks Related to Government Regulations
The regulatory approval processes of the FDA and comparable non-U.S. regulatory authorities are time-consuming and unpredictable, and if we are unable to obtain regulatory approval for our product candidates, our business will be substantially harmed. Moreover, gaining approval for a product candidate in one jurisdiction does not ensure approval in other jurisdictions, which could limit our total market.
If the FDA does not conclude that our product candidate satisfies the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for our product candidate under Section 505(b)(2) are not as we expect, the approval pathway for our product candidate could take significantly longer, cost significantly more and entail greater risks than anticipated, and in either case may not be successful.
Any approved product candidate will be subject to ongoing and continued regulatory requirements, which may result in significant expense and limit our ability to commercialize such products.
Risks Related to Our Relationship with Scilex
Certain of our directors and officers may have conflicts of interest because of their positions with Scilex.
Scilex currently performs or supports many of our important corporate functions. Our financial statements may not necessarily be indicative of the conditions that would have existed or our results of operations if we had been operated as an unaffiliated company of Scilex, and we incurred significant charges in connection with the Business Combination and will incur incremental costs as a stand-alone public company.
Our Executive Chairman and Chief Financial Officer each holds an executive officer position at Scilex and devotes time to both companies, which could cause a diversion of their time and attention from our business.
We are controlled by Scilex, whose interests may differ from those of our public shareholders.
Risks Related to Ownership of Our Common Stock
If our operations and performance do not meet the expectations of investors or securities analysts, the market price of our securities may decline.
We have not paid cash dividends in the past and we do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the capital appreciation, if any, of Common Stock.
Risks Related to Cryptocurrency
The Company intends to use the net proceeds of the Biconomy SPA, which as of the date of this Annual Report has not closed and will be paid in Bitcoin, to fund investments in other companies. The price of Bitcoin will likely continue to be highly volatile, which could cause the Company’s share price to significantly fluctuate.
Our cryptocurrency treasury strategy has not been implemented or tested.
If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.
Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements
We are a late-stage clinical specialty pharmaceutical company and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.
We are a late-stage clinical biopharmaceutical company focused on developing and commercializing innovative non-opioid pain management products for the treatment of acute and chronic pain, and we have a limited operating history. We have not commenced revenue-producing operations and to date, we have focused on organizing and staffing our company, business planning, raising capital, identifying potential non-opioid pain therapy candidates, undertaking preclinical studies and clinical trials of our product candidate and establishing research and development collaborations. Our relatively short operating history as a company makes any assessment of our future success and viability subject to significant uncertainty.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to overcome such risks and difficulties successfully. Our ability to execute on our business model and generate revenues depends on a number of factors including our ability to:
successfully complete ongoing pre-clinical studies and clinical trials and obtain regulatory approvals for our current and future product candidates;
identify new acquisition or in-licensing opportunities;
successfully identify new product candidates and advance those product candidates into pre-clinical studies and clinical trials;
raise additional funds when needed and on terms acceptable to us;
attract and retain experienced management and advisory teams;
add operational, financial and management information systems and personnel, including personnel to support clinical, pre-clinical manufacturing and planned future commercialization efforts and operations;
launch commercial sales of our current and future product candidates, whether alone or in collaboration with others;
initiate and continue relationships with third-party suppliers and manufacturers;
set acceptable prices for current and future product candidates and obtain coverage and adequate reimbursement from third-party payors;
achieve market acceptance of current and future product candidates in the medical community and with third-party payors and consumers; and maintain, expand and protect our intellectual property portfolio.
If we cannot successfully execute any one of the foregoing, our business may not succeed or become profitable. Since our inception, we have incurred significant net losses. For the years ended December 31, 2025 and 2024, we had net losses of $160.4 million and $4.7 million, respectively. As of December 31, 2025, we had an accumulated deficit of $275.8 million. For the foreseeable future, we expect to continue to incur significant expenses related to the research and development of our product candidate, SP-102. We expect to incur substantial losses for the foreseeable future and may never become profitable.
We are subject to risks incidental to the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. If we do 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 impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
We have only one product candidate, SP-102, no products approved for commercial sale, have never generated any revenue from product sales and may never be profitable.
We currently only have one product candidate, SP-102. Our ability to generate revenue from product sales and achieve profitability will depend on our ability, alone or with collaborators, to successfully complete the development of, and obtain the regulatory approvals necessary to commercialize, SP-102 and any future product candidates, if any. As a result, we intend to devote a substantial portion of our research and development resources and business efforts to the development of SP-102. We do not anticipate generating revenues from product sales for the next several years, if ever. Our ability to generate future revenue from product sales depends heavily on our, or our future collaborators’, ability to successfully:
identify additional product candidates and complete research and preclinical and clinical development of SP-102 and any other product candidates we may identify;
seek and obtain regulatory and marketing approvals for any product candidates for which we complete clinical trials;
launch and commercialize any product candidates for which we obtain regulatory and marketing approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner;
qualify for coverage and adequate reimbursement by government and third-party payors for any product candidates for which we obtain regulatory and marketing approval;
Management's Discussion & Analysis (MD&A)
New heading “Business Combination”
New heading “Material Agreements”
New heading “Securities Purchase Agreement (the “PIPE SPA")”
New heading “Bitcoin Securities Purchase Agreement (the “Semnur/Biconomy SPA”)”
New heading “Promissory Notes”
New heading “Lifecore Master Services Agreement”
New heading “Legacy Semnur Merger Agreement”
New heading “Shah Assignment Agreement”
New heading “Comparability of Our Results and Our Relationship with Scilex”
New heading “Components of Our Results of Operations”
New heading “Operating Expenses”
New heading “General and Administrative”
New heading “Comparison of the Years Ended December 31, 2025 and 2024”
New heading “Research and Development Expenses”
New heading “General and Administrative Expenses”
New heading “Future Liquidity Needs”
New heading “Material Cash Requirements”
New heading “Subsidiary Guarantee to Scilex-Oramed Note”
New heading “Emerging Growth Company”
New heading “Smaller Reporting Company”
Removed heading “Cash Flows from Investing Activities”
Removed heading “Other Contractual Obligations”
Removed heading “Registration Rights”
Removed heading “Underwriting Agreement”
Removed heading “Recent Accounting Pronouncements”
Largest changes
“We cannot be certain that we will be able to secure additional sources of funds to support our operations on acceptable terms, or at all, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs. These conditions, among others, raise substantial doubt about our ability to continue as a going concern. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholder or increased fixed payment obligations. …”see in full comparison
“We anticipate that we will continue to incur net losses into the foreseeable future as we support our clinical development to expand approved indications, continue our development of, and seek regulatory approvals for, our product candidate, and expand our corporate infrastructure. As a result, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. …”see in full comparison
“Concurrently with the execution of the Merger Agreement, the sponsor and each of the Company’s directors and executive officers entered into a sponsor support agreement with the Company and Semnur (the “Sponsor Support Agreement”), pursuant to which the sponsor and each of Company’s directors and executive officers has agreed to, among other things: (i) vote in favor of the Parent Shareholder Approval Matters (as defined in the Merger Agreement) and in favor of any proposal in respect of an Extension Amendment (as such terms are defined in the Merger Agreement); …”see in full comparison
“In addition, in the case of an event of default, the promissory notes shall bear interest at a rate of 10% per annum until such event of default is cured. The promissory notes shall become immediately due and payable (in accordance with the terms thereof), upon our failure to make payments thereunder when due (subject to a 14-day cure period) or certain other actions related to voluntary or involuntary bankruptcy proceedings (as more fully described therein).”see in full comparison
“Concurrently with the execution of the Merger Agreement, the Company, Semnur and Scilex (as the sole stockholder of Semnur) entered into a company stockholder support agreement (the “Stockholder Support Agreement”), pursuant to which Scilex agreed to, among other things: (i) appear at any meeting of Semnur’s stockholders related to the transactions contemplated by the Merger Agreement, or otherwise cause its shares of Semnur common stock to be counted as present thereat for the purpose of establishing a quorum; …”see in full comparison
“On February 22, 2024, the Company received a letter (the “Letter”) from the staff at Nasdaq notifying the Company that, for the 30 consecutive business days prior to the date of the Letter, the Company’s Minimum Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A). …”see in full comparison
Full comparison: every changed paragraph (149)
References
to the “Company,” “Denali,” “our,” “us” or “we” refer to Denali Capital Acquisition
Corp. The following discussion and analysis of the Company’sour financial condition and results of operations should be read intogether conjunction
with the audited consolidated financial statements and therelated notes related thereto which are included elsewhere in “Item 8. Financial Statements
and Supplementary Data” of this Annual ReportReport. onIn Formaddition 10-K.to Certainhistorical informationinformation, contained in thethis discussion and analysis set forth
below includescontains forward-looking statements.statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors. Certain information contained in the discussion and analysis set forth below includes forward-looking statements.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of manycertain factors,factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including
those set forth underin the sections of this Annual Report titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements,Statements.” “ItemAs 1A.a Riskresult Factors”of andthese elsewhere
inrisks, thisyou Annualshould Reportnot place undue reliance on Formthese 10-K.forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
We are a late-stage clinical biopharmaceutical company focused on developing and commercializing innovative non-opioid pain management products for the treatment of acute and chronic pain. We believe that our innovative non-opioid product portfolio has the potential to provide effective pain management therapies that can have a transformative impact on patients’ lives. We target indications with high unmet needs and large market opportunities with non-opioid therapies for the treatment of patients with acute and chronic pain and are dedicated to advancing and improving patient outcomes. Our lead product candidate, SP-102, if approved, has the potential to become the first U.S. Food and Drug Administration (the “FDA”) approved non-opioid novel injectable corticosteroid gel formulation for patients with moderate to severe LRP (also known as sciatica), containing no preservatives, surfactants, solvents, or particulates and is expected to be available in a pre-filled syringe formulation following approval by the FDA.
Our guiding principle has always been and remains a patient-first approach, which drives our mission to meet the increasing global demand for more effective and safer non-opioid pain management solutions. Through rigorous research and development, we believe we are on the cusp of establishing Semnur as the preeminent name in commercial non-opioid pain management, specifically targeting the unmet needs in both acute and chronic pain sectors with our innovative and leading therapies. We believe that we have made substantial progress in demonstrating the rapid onset and enhanced tolerability of our product candidate.
We are developing SP-102 to be an injectable viscous gel formulation of a widely used corticosteroid designed to address the serious risks posed by off-label epidural injections, which are administered over 12 million times annually in the United States. SP-102 has been granted fast track designation by the FDA and, if approved, could become the only FDA-approved epidural injection for the treatment of sciatica. Although such designation has been granted, it may not lead to a faster development or regulatory review process and such designation does not increase the likelihood that SP-102 will receive marketing approval.
Legacy Semnur was founded in 2013 and we have invested substantial efforts and financial resources on building our intellectual property portfolio and infrastructure. We have conducted phospholipidosis and toxicology studies, including a Phase 1 pharmacokinetic bridging study, Phase 2 repeat dose study, a pivotal Phase 3 study and the second Phase 3 study initiated in September 2025. We expect to continue to make investments in research and development, clinical trials and regulatory affairs to develop our product candidate, SP-102.
We have completed a pivotal Phase 3 study with final results received in March 2022, which results reflected achievement of primary and secondary endpoints, with SP-102 treatment decreasing pain intensity for over a month in sciatica patients and resulting in statistically significant and clinically meaningful improvement in the disability index score while maintaining tolerability comparable to placebo. The Phase 3 study results were published in PAIN® Journal in June 2024, which is the leading journal devoted to pain medicine and research. This Phase 3 study represents a potential significant improvement in treatment of adult patients with sciatica, who struggle with the clinical consequences of no currently FDA approved therapies being available, suboptimal formulations of corticosteroids used off-label and/or excess pain and disability. We initiated a second Phase 3 study in September 2025.
We are focused on identifying treatment options for pain management with established mechanisms that have deficiencies in safety, efficacy or patient experience. We believe this approach allows us to potentially leverage the regulatory approval pathway available under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (the “FDCA”) for our product candidate.
We have incurred significant net losses to date. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of our current or future product candidates. As of December 31, 2025, we had cash and cash equivalents of $20 thousand and accumulated deficit of $275.8 million. During the year ended December 31, 2025, we had operating losses of $160.4 million and used $5.9 million of cash in operations. These losses have resulted primarily from costs incurred in connection with research and development activities, certain allocated general and administrative costs associated with our operations and certain costs associated with the Business Combination. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities. Further, the Company’s consolidated financial statements are dependent on assumptions and allocations from the Scilex Holding Company (“Scilex”) financial statements that management deems were reasonable and appropriate under the circumstances. Nevertheless, the Company’s consolidated financial statements may not include all of the actual expenses that would have been incurred had the Company operated as a standalone company during the periods presented and may not reflect the results of operations, financial position and cash flows had the Company operated as a standalone company during the periods presented. Actual costs that would have been incurred if the Company had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company also may have incurred additional costs associated with being a standalone, publicly listed company that were not included in the expense allocations and, therefore, would result in additional costs that are not reflected in its historical results of operations, financial position and cash flows.
Business Combination
References to “Legacy Semnur” refer to the private Delaware corporation that is now our wholly owned subsidiary and named Semnur, Inc. (formerly known as “Semnur Pharmaceuticals, Inc.”). Unless otherwise noted or the context requires otherwise, references to “Common Stock” refer to our common stock, par value $0.0001 per share.
On September 22, 2025 (the “Closing”), we consummated a business combination pursuant to an agreement and plan of merger, dated as of August 30, 2024 (the “Initial Merger Agreement,” as amended by Amendment No. 1 to Agreement and Plan of Merger, dated April 16, 2025, “Amendment No. 1 to the Initial Merger Agreement” and Amendment No. 2 to Agreement and Plan of Merger, dated July 22, 2025, “Amendment No. 2 to the Initial Merger Agreement” and collectively, the “Merger Agreement”), by and among Denali Capital Acquisition Corp. (“Denali”), Denali Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Denali (“Merger Sub”), and Legacy Semnur. Pursuant to the terms of the Merger Agreement, the business combination (herein referred to as the “Business Combination”) between Denali and Legacy Semnur was effected through the merger of Merger Sub with and into Legacy Semnur with Legacy Semnur surviving as Denali’s wholly owned subsidiary. In connection with the Business Combination, Denali changed its name from Denali Capital Acquisition Corp. to Semnur Pharmaceuticals, Inc.
Material Agreements
Securities Purchase Agreement (the “PIPE SPA")
On August 20, 2025, we and Legacy Semnur entered into the PIPE SPA with the investor named therein, pursuant to which the investor agreed to purchase 1,250,000 shares of Common Stock at a price of $16.00 per share, for an aggregate purchase price of $20.0 million following the consummation of the Business Combination. On September 22, 2025, the PIPE SPA was amended to provide that unless such agreement was terminated pursuant to its terms (or otherwise by mutual agreement of the parties thereto), the closing of the transactions contemplated thereby would occur not later than the 14th business day following the closing of the Business Combination, subject to the satisfaction or waiver of the closing conditions set forth therein. As of December 31, 2025, the transaction has not closed and accordingly, shares have not been issued and funds have not been received. As the transaction did not close on or before December 31, 2025, the nonbreaching party has an option to terminate the PIPE SPA without liability.
Additionally, in connection with the PIPE SPA, we are obligated to pay a cash financing service fee of 7% of the received investment funds.
Bitcoin Securities Purchase Agreement (the “Semnur/Biconomy SPA”)
On September 23, 2025, we entered into the Semnur/Biconomy SPA with Biconomy PTE.LTD (“Biconomy”). Pursuant to the Semnur/Biconomy SPA, we agreed to issue and sell, and Biconomy agreed to purchase, 6,250,000 shares of Common Stock, at a purchase price of $16.00 per share, for an aggregate purchase price of $100.0 million, payable in Bitcoin blockchain (“Bitcoin”), with such amount of Bitcoin equal to the quotient of (A) the buyer’s respective aggregate purchase price divided by (B) the spot exchange rate for Bitcoin as published by Coinbase.com at 8:00 p.m. (New York City time) on the trading day immediately prior to the closing date of the purchase. As of December 31, 2025, the transaction has not closed and accordingly, shares have not been issued and funds have not been received. As the transaction did not close on or before December 31, 2025, the nonbreaching party has an option to terminate the Semnur/Biconomy SPA without liability.
Promissory Notes
As of December 31, 2025, we have promissory notes totaling $3.5 million, all of which are due in less than a year.
Notwithstanding the payment schedules in the promissory notes, the balance due on any notes (less any payments previously made to the holder thereunder) shall be accelerated and become immediately due and payable in the event we receive gross proceeds from any equity or debt financing (including any private placement offering or registered offering), in an amount equal to or greater than the then-outstanding principal of such note plus any accrued but unpaid interest due thereon.
In addition, in the case of an event of default, the promissory notes shall bear interest at a rate of 10% per annum until such event of default is cured. The promissory notes shall become immediately due and payable (in accordance with the terms thereof), upon our failure to make payments thereunder when due (subject to a 14-day cure period) or certain other actions related to voluntary or involuntary bankruptcy proceedings (as more fully described therein).
Lifecore Master Services Agreement
On January 27, 2017, we entered into a Master Services Agreement (as amended, the “Lifecore Master Services Agreement”), with Lifecore Biomedical, LLC (“Lifecore”). Pursuant to the Lifecore Master Services Agreement, Lifecore is responsible for clinical trial material manufacturing and development services for SP-102 as set forth in each separate statement of work. For the purposes of Lifecore’s development and clinical trial material manufacturing obligations, we granted Lifecore a nonexclusive, worldwide and royalty-free license under our owned or controlled intellectual property rights necessary to manufacture SP-102, without additional right, title or interest in our intellectual property. The Lifecore Master Services Agreement expires on December 31, 2028, unless terminated earlier in accordance with the terms of such agreement, or unless renewed further by the parties.
During the year ended December 31, 2025, we incurred expenses of $0.9 million related to the Lifecore Master Services Agreement.
Legacy Semnur Merger Agreement
On March 18, 2019, Legacy Semnur was acquired by Scilex pursuant to an Agreement and Plan of Merger with Semnur (as amended, the “Legacy Semnur Merger Agreement”), Pursuant to the Legacy Semnur Merger Agreement, and upon the terms and subject to the conditions contained therein, Scilex agreed to pay the former holders of Legacy Semnur’s capital stock up to $280.0 million in aggregate contingent cash consideration based on the achievement of certain milestones (which amount is expected to be charged back to us through an intercompany arrangement), comprised of a $40.0 million payment that will be due upon obtaining the first approval of a NDA of our product by the FDA and additional payments that will be due upon the achievement of certain amounts of net sales of our products, as follows: (i) a $20.0 million payment upon the achievement of $100.0 million in cumulative net sales of our product, (ii) a $20.0 million payment upon the achievement of $250.0 million in cumulative net sales of our product, (iii) a $50.0 million payment upon the achievement of $500.0 million in cumulative net sales of our product, and (iv) a $150.0 million payment upon the achievement of $750.0 million in cumulative net sales of our product. To date, none of the foregoing payments have been triggered.
Shah Assignment Agreement
On August 6, 2013, Legacy Semnur entered into an Assignment Agreement (the “Shah Assignment Agreement”) with Shah Investor LP (“Shah Investor”). Pursuant to the Shah Assignment Agreement, Shah Investor assigned to Legacy Semnur the patents, know-how and other intellectual property related to pharmaceutical compositions of corticosteroids.
In consideration of the license and rights granted by Shah Investor, Legacy Semnur agreed to pay royalties (i) at the rate of 1.5% of the Net Sales for Annual Net Sales (each as defined therein) up to $250.0 million and (ii) at the rate of 2.5% of the Net Sales for Annual Net Sales of $250.0 million and above, subject to certain adjustments as set out in the Shah Assignment Agreement. Such royalties payment for a given calendar quarter shall be due and payable on the date the royalty report for such quarter is due under the Shah Assignment Agreement. To date, none of the foregoing payments have been triggered.
The Shah Assignment Agreement continues in full force and effect on a country-by-country and product-by-product basis until royalties are no longer due on such product under the agreement.
Comparability of Our Results and Our Relationship with Scilex
Since 2019, we have operated as a majority owned subsidiary of Scilex. As a result, our historical financial statements may not be reflective of what our results of operations would have been had we been a standalone public company and no longer a majority owned subsidiary of Scilex. In particular, certain clinical trial management, regulatory, information technology, legal, accounting and finance, facilities and other corporate and infrastructural functions have historically been provided to us by Scilex. We expect that Scilex will continue to provide us with some of the services related to these functions on a transitional basis in exchange for agreed-upon fees pursuant to the Transition Services Agreement (the “Transition Services Agreement”) with Scilex. The costs associated with these services and support were allocated to our operating expenses based on the estimated percentage of time certain Scilex employees spent supporting the SP-102 program, and we expect to incur other costs to replace the services and resources that will not be provided by Scilex. We will also incur additional costs as a standalone public company. As a standalone public company, our total costs related to certain support functions may differ from the costs that were historically allocated to us from Scilex. In addition, in the future, we expect to incur internal costs to implement certain new systems, including infrastructure and an enterprise resource planning system, while our systems are currently being fully supported by Scilex.
Components of Our Results of Operations
Operating Expenses
We
are a blank check company incorporated as a Cayman Islands exempted company on January 5, 2022 (inception), for the purpose of effecting
an initial business combination. While we will not be limited to a particular industry or geographic region in our identification and
acquisition of a target company, we intend to focus on technology, consumer and hospitality and will not complete our initial business
combination with a target that is headquartered in China (including Hong Kong and Macau) or conducts a majority of its business in China
(including Hong Kong and Macau). We intend to effectuate our initial business combination using cash from the proceeds of our IPO and
the sale of units in the Private Placement to the sponsor, additional shares, debt or a combination of cash, equity and debt.
We
expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete
a business combination will be successful.
Recent
DevelopmentsResearch and Development
Research and development expenses are expensed when incurred and consist primarily of direct and allocated costs incurred for our research activities, including the development of our product candidate, and include:
direct costs related to clinical trials, including contract manufacturing and supply;
allocated portion of salaries, benefits and other related costs, including stock-based compensation expense for Scilex personnel engaged in research and development functions related to the SP-102 program;
allocated costs of facilities and support services incurred by Scilex used in drug development related to the SP-102 program; and direct and allocated costs related to outside consultants engaged in research and development functions related to the SP-102 program.
We expect our research and development expenses to increase, as we will incur incremental expenses associated with our lead product candidate, SP-102, currently under development and in clinical trials. Product candidates in later stages of clinical development generally have higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect to incur significant research and development expenses in connection with our clinical trials for SP-102.
General and Administrative
General and administrative expenses consist primarily of allocated costs related to salaries and other related costs, including stock-based compensation, for personnel in Scilex’s executive, marketing, finance, corporate and business development and administrative functions. General and administrative expenses also include allocated professional fees for legal, patent, accounting, auditing, tax and consulting services and expenses related to the Business Combination.
We expect that our general and administrative expenses will vary year over year in the future as we adapt our strategies to changes in the business environment. We also expect to incur increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”), listing standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to allocate additional expenses relating to administrative, finance legal, and other corporate functions to adapt to the changes above and the anticipated growth of our business.
On
February 22, 2024, the Company received a letter (the “Letter”) from the staff at Nasdaq notifying the Company that, for
the 30 consecutive business days prior to the date of the Letter, the Company’s Minimum Value of Listed Securities (“MVLS”)
was below the minimum of $50 million required for continued listing on The Nasdaq Global Market pursuant to Nasdaq Listing Rule 5450(b)(2)(A).
The staff at Nasdaq also noted in the Letter that the Company is not in compliance with Nasdaq Listing Rule 5450(b)(3)(A), which requires
listed companies to have total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or for
two of the three most recently completed fiscal years. The Letter is only a notification of deficiency, not of imminent delisting, and
has no current effect on the listing or trading of the Company’s securities on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(C),
the Company has 180 calendar days, or until August 20, 2024, to regain compliance. The Letter notes that to regain compliance, the Company’s
MVLS must close at or above $50 million for a minimum of ten consecutive business days during the compliance period. The Letter further
notes that if the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing
of its securities to The Nasdaq Capital Market (provided that the Company then satisfies the requirements for continued listing on that
market). If the Company does not regain compliance by August 20, 2024, Nasdaq staff will provide written notice to the Company that its
securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel. The Company
intends to actively monitor the Company’s MVLS between now and August 20, 2024, and may, if appropriate, evaluate available options
to resolve the deficiency and regain compliance with the MVLS requirement. While the Company is exercising diligent efforts to maintain
the listing of its securities on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with
Nasdaq listing standards.
On
October 2, 2024, the Company received a written notice (the “Notice”) from the staff at Nasdaq notifying the Company that
the Company is not in compliance with Nasdaq Listing Rule 5450(b)(2)(A) (the “MVLS Rule”), which requires the Company
to maintain a MVLS of $50.0 million, and Nasdaq Listing Rule 5450(b)(3)(A) (the “Total Assets Rule” and, together with
the MVLS Rule, the “Listing Rules”), which requires the Company to maintain total assets and total revenue of at least $50.0
million each for the most recently completed fiscal year or two of the three most recently completed fiscal years, for continued listing
on the Nasdaq Global Market. The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on
the listing or trading of the Company’s securities on the Nasdaq Global Market.
The
Notice states that the Company has 180 calendar days, or until March 31, 2025, to regain compliance with the Listing Rules. To regain
compliance, the Company’s MVLS must meet or exceed $50.0 million for a minimum of ten consecutive business days during the 180-day
compliance period ending on March 31, 2025. In the event the Company does not regain compliance with the Listing Rules prior to the expiration
of the compliance period, it will receive written notification that its securities are subject to delisting. At that time, the Company
will have the opportunity to appeal the decision to a Nasdaq Hearing Panel. The Company intends to monitor its MVLS and consider its
available options to regain compliance with the Listing Rules.
On
January 25, 2023, we entered into the Longevity Merger Agreement, by and among Longevity, Holdco, Denali Merger Sub, Longevity Merger
Sub, and the Seller Representative.
On
March 29, 2023, Holdco filed a Form S-4 with the SEC to register shares of its common stock that will be issued in connection with the
business combination contemplated by the Longevity Merger Agreement, as amended by Amendments Nos. 1, 2, 3, 4, 5 and 6 thereto, filed
with the SEC on May 31, 2023, July 13, 2023, September 1, 2023, October 20, 2023, November 21, 2023 and December 6, 2023 respectively.
On December 14, 2023, HoldCo filed a notice of effectiveness. On January 9, 2024, our shareholders held a Business Combination Meeting
and voted in favor of approving the Longevity Business Combination.
On
June 26, 2024, pursuant to Section 11.1(a) of the Longevity Merger Agreement, the parties entered into a termination agreement (the “Termination
Agreement”) pursuant to which the Longevity Merger Agreement was terminated effective as of the date of the Termination Agreement.
As
a result of the Termination Agreement, the Longevity Merger Agreement will be of no further force and effect (other than certain customary
limited provisions that survive the termination pursuant to the terms of the Longevity Merger Agreement) and ancillary agreements entered
into in connection with the Longevity Merger Agreement will also automatically terminate in accordance with their respective terms. As
a result of the termination of the Longevity Merger Agreement, Holdco filed the Registration Withdrawal Request on Form RW on August
9, 2024, to withdraw its registration statement on Form S-4, as amended, initially filed with the SEC on March 29, 2023.
On
July 2, 2024, the Company issued a press release to announce that it entered into a letter of intent with Semnur Pharmaceuticals, Inc.
(“Semnur”), a wholly owned subsidiary of Scilex Holding Company (“Scilex”), for a potential business combination.
On
July 10, 2024, the shareholders of the Company held an extraordinary general meeting of shareholders (the “Shareholder Meeting”)
to consider and vote upon a proposal to amend, by way of special resolution, the Articles to extend the date by which the Company must:
(i) consummate a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination involving
the Company and one or more businesses or entities (an “initial business combination”); (ii) cease its operations, except
for the purpose of winding up, if it fails to complete such initial business combination; and (iii) redeem 100% of the Company’s
Class A ordinary shares, par value $0.0001 per share (the “Class A ordinary shares”), included as part of the units sold
in the Company’s IPO that was consummated on April 11, 2022, from July 11, 2024 to April 11, 2025, by electing to extend the date
to consummate an initial business combination on a monthly basis for up to nine (9) times by an additional one month each time, unless
the closing of the Company’s initial business combination has occurred, without the need for any further approval of the Company’s
shareholders, provided that the sponsor (or its affiliates or permitted designees) will deposit into the Trust Account for each such
one-month extension the lesser of (a) an aggregate of $20,000 or (b) $0.02 per public share that remains outstanding and is not redeemed
prior to any such one-month extension, unless the closing of the Company’s initial business combination has occurred, in exchange
for a non-interest bearing promissory note payable upon consummation of an initial business combination.
In
connection with the Shareholder Meeting, shareholders holding 3,785,992 public shares exercised their right to redeem such shares for
a pro rata portion of the funds in the Company’s Trust Account. As a result, approximately $43.4 million (approximately $11.47
per share) was removed from the Trust Account to pay such holders. Following redemptions, the Company had 751,837 public shares outstanding.
On July 10, 2024, the Company
issued a convertible promissory note in the total principal amount of up to $180,000 to the sponsor (the “Sponsor Extension Convertible
Promissory Note”). The Sponsor Extension Convertible Promissory Note was issued with an initial principal balance of $15,037, with
the remaining $164,963 drawable at the Company’s request and upon the consent of the sponsor prior to the maturity of the Sponsor
Extension Convertible Promissory Note. The Sponsor Extension Convertible Promissory Note matures upon the earlier of (i) the effective
date of the consummation of the Company’s initial business combination and (ii) the date of the liquidation of the Company.
On
August 30, 2024, the Company entered into an agreement and plan of merger (the “Merger Agreement”) with Semnur and Denali
Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”).
Subject
to the terms and conditions set forth in the Merger Agreement, the total consideration to be paid at Closing by the Company to Semnur’s
equityholders will be an amount equal to the quotient of (a) $2,500,000,000 divided by (b) $10.00, and will be payable in shares of common
stock of New Semnur (the “New Semnur Common Shares”). In accordance with the terms and subject to the conditions of the Merger
Agreement, following the Domestication and at the effective time of the Merger (the “Effective Time”): (i) each share
of common stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into the right
to receive, without interest, a number of New Semnur Shares equal to the Exchange Ratio (as defined in the Merger Agreement); (ii) each
share of preferred stock of Semnur issued and outstanding immediately prior to the Effective Time will be automatically converted into
the right to receive, without interest, (a) one share of Series A preferred stock of New Semnur (the “New Semnur Preferred Share”)
and (b) one-tenth of one New Semnur Common Share, and (iii) subject to the Company’s receipt of the Option Exchange Approval (as
defined in the Merger Agreement), each option to purchase a share of Semnur common stock that is then outstanding shall be converted
into the right to receive an option to purchase a number of New Semnur Common Shares as determined by the Exchange Ratio upon substantially
the same terms and conditions as are in effect with respect to such option immediately prior to the Effective Time, with the exercise
price thereof adjusted by the Exchange Ratio. For purposes of the Merger Agreement, Semnur’s equity value is $2,500,000,000.
The
Merger Agreement contemplates the execution of various additional agreements and instruments, on or before the closing of the Merger,
including, among others, the following:
Concurrently
with the execution of the Merger Agreement, the sponsor and each of the Company’s directors and executive officers entered into
a sponsor support agreement with the Company and Semnur (the “Sponsor Support Agreement”), pursuant to which the sponsor
and each of Company’s directors and executive officers has agreed to, among other things: (i) vote in favor of the Parent Shareholder
Approval Matters (as defined in the Merger Agreement) and in favor of any proposal in respect of an Extension Amendment (as such terms
are defined in the Merger Agreement); (ii) vote against (or otherwise withhold written consent of, as applicable) any “Business
Combination” (as such term is defined in Denali’s organizational documents) or any proposal relating thereto (in each case,
other than as contemplated by the Merger Agreement); (iii) vote against (or otherwise withhold written consent of, as applicable) any
merger agreement or merger, consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company (other than the Merger Agreement and the transactions contemplated thereby); (iv) vote against (or
otherwise withhold written consent of, as applicable) any change in the business, management or board of directors of the Company (other
than in connection with the Merger Agreement and the transactions contemplated thereby); and (v) vote against (or otherwise withhold
written consent of, as applicable) any proposal, action or agreement that would (a) impede, frustrate, prevent or nullify any provision
of the Sponsor Support Agreement or the Merger Agreement or any of the transactions contemplated thereby, (b) result in a breach in any
respect of any covenant, representation, warranty or any other obligation or agreement of Denali or Merger Sub under the Merger Agreement,
(c) result in any of the conditions set forth in Article VIII of the Merger Agreement not being fulfilled or (d) change in any manner
the dividend policy or capitalization of, including the voting rights of any class of capital stock of, the Company. Under the terms
of the Sponsor Support Agreement, the sponsor also agreed to certain standstill provisions with respect to the ordinary shares and other
equity securities of the Company held by the sponsor.
What changed in the latest 10-Q
Risk Factors
Removed heading “Risks Related to Cryptocurrency”
Removed heading “Risks Related to Cryptocurrency”
Removed heading “The Company intends to use the net proceeds from the Biconomy SPA, which as of the date of this Quarterly Report on Form 10-Q has not closed and will be paid in Bitcoin, to fund investments in other companies. The price of Bitcoin has been, and will likely continue to be, highly volatile. The Company’s operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of such digital assets and erratic market movements.”
Removed heading “Our cryptocurrency treasury strategy has not been implemented or tested.”
Removed heading “Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.”
Removed heading “If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.”
Removed heading “The emergence or growth of other digital assets, including those with significant private or public sector backing, could have a negative impact on the price of cryptocurrencies we hold and adversely affect our business.”
Removed heading “The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.”
Removed heading “The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.”
Removed heading “Changes in the accounting treatment of cryptocurrency holdings could have significant accounting impacts, including increasing the volatility of our results.”
Removed heading “Cryptocurrency holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.”
Removed heading “Cryptocurrencies do not pay interest or dividends.”
Removed heading “We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.”
Removed heading “If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our cryptocurrency, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our cryptocurrency and our financial condition and results of operations could be materially adversely affected.”
Removed heading “Our custodially-held cryptocurrencies may become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.”
Largest changes
“Attacks upon systems across a variety of industries, including industries related to cryptocurrency, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. …”see in full comparison
“If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our cryptocurrency, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our cryptocurrency and our financial condition and results of operations could be materially adversely affected.”see in full comparison
“Our custodially-held cryptocurrencies may become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings.”see in full comparison
“If our custodially-held cryptocurrencies are considered to be the property of our custodians’ estates in the event that any such custodians were to enter bankruptcy, receivership or similar insolvency proceedings, we could be treated as a general unsecured creditor of such custodians, inhibiting our ability to exercise ownership rights with respect to such cryptocurrencies and this may ultimately result in the loss of the value related to some or all of such assets. …”see in full comparison
“improper disclosure of data and violations of applicable data privacy and other laws; or significant regulatory scrutiny, investigations, fines, penalties, and other legal, regulatory, contractual and financial exposure.”see in full comparison
“Cryptocurrency holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.”see in full comparison
Full comparison: every changed paragraph (136)
We are a late-stage clinical specialty pharmaceuticalbiopharmaceutical company and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.
We currently have no sales and marketing organization and if we do not establish satisfactory sales and marketing capabilities,capabilities or secure a third-party sales and marketing relationship, we may not successfully commercialize SP-102 or any future product candidates.
We have historically obtained our clinical supply of our only product candidate, SP-102, and certain of the raw materials used in SP-102, from a sole or single source supplier and manufacturer, and we may not be able to find an alternative source on commercially reasonable terms, or at all. In addition, if any such supplier or manufacturer fails to comply with FDA regulationsregulations, we may be subject to sanctions or delays.
Risks Related to Cryptocurrency
The Company intends to use the net proceeds of the Biconomy SPA, which as of the date of this Quarterly Report on Form 10-Q has not closed and will be paid in Bitcoin, to fund investments in other companies. The price of Bitcoin will likely continue to be highly volatile, which could cause the Company’s share price to significantly fluctuate.
Our cryptocurrency treasury strategy has not been implemented or tested.
If any of the digital assets that we hold are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.
We are a late-stage clinical specialty pharmaceuticalbiopharmaceutical company and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.
If we cannot successfully execute any one of the foregoing, our business may not succeed or become profitable. Since our inception, we have incurred significant net losses. For the threesix months ended MarchJune 31,30, 2026 and 2025, we had net losses of $4.6$8.9 million and $0.7$1.7 million, respectively. As of MarchJune 31,30, 2026, we had an accumulated deficit of $280.4$284.7 million. For the foreseeable future, we expect to continue to incur significant expenses related to the research and development of our product candidate, SP-102. We expect to incur substantial losses for the foreseeable future and may never become profitable.
At present, we have no sales or marketing personnel. We intend to leverage the sales force and marketing capacities of our parent company, Scilex, to commercialize our current product candidate, SP-102, if approved. As we further grow after the launch of the SP-102, if approved, we will establish our sales, marketing or product distribution strategy for our product candidates. We may use strategic partners, distributors, a contract sales force or establish our own commercial sales force. If we are not successful in recruiting sales and marketing personnel and building a sales and marketing infrastructure or entering into appropriate collaboration arrangements with third parties, we will have difficulty successfully commercializing our product candidate, if approved, which would adversely affect our business, operating results and financial condition.
As of MarchJune 31,30, 2026, our cash and cash equivalents were $0.1$39.0 millionthousand and we had an accumulated deficit of $280.4$284.7 million. The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to:
the extent to which our product candidate, if approved for commercialization, areis adopted by the physician community;
the costs of acquiring, licensing or investing in businesses, product candidatecandidates and technologies;
If we do not generate cash flow from operations sufficient to pay our debt service or other obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Our ability to refinance our debt and fund other obligations will depend on the condition of the capital markets and our financial condition at that time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. See the section titled “Liquidity and Going Concern” under Note 1 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for a discussion regarding our ability to continue as a going concern.
In the section titled “Liquidity and Going Concern” under Note 1 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, we disclose that there is substantial doubt about our ability to continue as a going concern. In addition, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2025, which stated that substantial doubt existed about our ability to continue as a going concern. We have negative working capital and have incurred significant operating losses and negative cash flows from operations and expect to continue incurring losses for the foreseeable future. Further, we had an accumulated deficit of $280.4$284.7 million and $275.8 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. These conditions raise substantial doubt about our ability to continue as a going concern. Our condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
the acceptance of individual investigationalinstitutional review boards (“IRBs”) and scientific review committees at each clinical trial site as to the adequacy of the preclinical data package to support clinical development of SP-102 and their overall general agreement with the use of SP-102 in the intended patient population in the intended manner;
the maintenance of existing, or the establishment of new, scaled production arrangements with third- partythird-party manufacturers to obtain finished products that are appropriate for commercial sale of SP-102, if it is approved;
Under our Master Services Agreement, dated January 27, 2017 (as amended, the “Lifecore Master Services Agreement”), with Lifecore Biomedical, LLC (“Lifecore”), we depend on Lifecore to manufacture clinical supplies of SP-102. Lifecore has the right to terminate the Lifecore Master Services Agreement under certain circumstances, including, but not limited to: (1) if we are in material breach of the agreement and fail to cure such breach within 30 days of written notice; (2) if we (a) become insolvent, (b) cease to function as a going concern, (c) become convicted of or plead guilty to a charge of violating any law relating to either party’s business, or (d) engage in any act which materially impairs goodwill associated with SP-102 or materially impairs the terminating party’s trademark or trade name; (3) if we fail to pay past due invoices upon 30 days’ written notice, or (4) if we reject or fail to respond to a major change proposed by Lifecore that does not change Semnur’sour written and approved acceptance criteria in itsour product specifications. In the event that Lifecore decides to terminate the Lifecore Master Services Agreement, finding an alternative manufacturer on commercially reasonable terms, or at all, may be difficult. The Lifecore Master Services Agreement expires on December 31, 2028, unless terminated earlier in accordance with the terms of such agreement, or unless renewed further by the parties.
Further, any of these third parties may terminate their engagements with us or be unable to fulfill their contractual obligations. If the third parties conducting our clinical trials do not adequately perform their contractual duties or obligations, experience significant business challenges, disruptions or failures, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our protocols or to GCPs,GCP, or for any other reason, we may need to enter into new arrangements with alternative third parties. This could be difficult, costly or impossible, and our clinical trials may need to be extended, delayed, terminated or repeated. As a result, we may not be able to obtain regulatory approval or successful commercialization in a timely fashion, or at all, for the applicable product candidate. Our financial results and the commercial prospects for our current and future product candidates would be harmed, our costs could increase, and our ability to generate revenue could be delayed.
Additionally, with respect to current and future collaborations, we may not be in a position to exercise sole decision-making authority regarding the transaction or arrangement, which could create the potential risk of creating impasses on decisions, and our collaborators may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals. It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration. If any conflicts arise with our current or future collaborators, they may act in their self-interest, which may be adverse to our best interest, and they may breach their obligations to us. In addition, we have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to our collaborators’ products or our future products. Disputes between us and our collaborators may result in litigation or arbitration which would increase our expenses and divert the attention of our management. Further, these transactions and arrangements are contractual in nature and may be terminated or dissolved under the terms of the applicable agreements and, in such event, we may not continue to have rights to the products relating to such transaction or arrangement or may need to purchase such rights at a premium.
failure to perform in accordance with GCPsGCP;
Even if we receive regulatory approval, the FDA may approve a product candidate for more limited indications than requested or theyit may impose significant limitations in the form of narrow indications, black box warnings or a Risk Evaluation and Mitigation Strategy (“REMS”). The FDA may require labeling that includes warnings and precautions or contra-indications with respect to conditions of use, or may grant approval subject to the performance of costly post-marketing clinical trials. In addition, the FDA may not approve the labeling claims that are considered necessary or desirable for the successful commercialization of a product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for a product candidate.
be required to perform additional clinical trials to support approval or be subject to additional post- marketingpost-marketing testing requirements;
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to it,us, because some patients who have opted to enroll in our trials may instead opt to enroll in a trial being conducted by a competitor. We may conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites.
The incidence and prevalence forof target patient populations of our product candidates are based on estimates and third-party sources. If the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.
In addition, even if we obtain adequate levels of reimbursement, third-party payors carefully review and increasingly question the coverage of, and challenge the prices charged for, products. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Increasingly, third-party payors are requiring that pharmaceutical companies provide them with predetermined discounts from list prices and are challenging the prices for products. We cannot be sure that coverage and reimbursement will be available for any product candidate that we commercialize and, if reimbursement is available, what the level of reimbursement will be. If coverage and reimbursement of our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability. Furthermore, the requirements governing medical product pricing vary widely from country to country. In some foreign countries, the proposed pricing for a prescription device must be approved before it may be lawfully marketed. Historically, products launched in the European Union (“EU”) do not follow price structures of the United States and generally prices tend to be significantly lower.
We cannot be sure that coverage and reimbursement will be available for any product candidate that we commercialize and, if reimbursement is available, what the level of reimbursement will be. If coverage and reimbursement of our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability. Furthermore, the requirements governing medical product pricing vary widely from country to country. In some foreign countries, the proposed pricing for a prescription device must be approved before it may be lawfully marketed. Historically, products launched in the European Union (“EU”) do not follow price structures of the United States and generally prices tend to be significantly lower.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial procedures and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our product candidate, the development timeline and regulatory approval and commercialization prospects for our only product candidate, and, correspondingly, our business and financial prospects would be negatively impacted. A Phase 3 trial was completed for SP-102 for the treatment of sciatica and the second Phase 3 trial has beenwas initiated in September 2025. We may not have the necessary capabilities, including adequate staffing, to successfully manage the execution and completion of such clinical trials in a way that leads to our obtaining marketing approval for our product candidate in a timely manner, or at all. Our clinical trials may produce negative or inconclusive results, and, in the future, we may decide, or regulators may require us, to conduct additional clinical trials and preclinical studies in addition to those we have planned.
As is the case with pharmaceuticals generally, it is likely that there may be side effects and adverse events associated with our current or future product candidates. In the clinical trials we conduct with our current or future product candidates, patients may experience changes in their health, including illnesses, injuries, discomforts or a fatal outcome. Often, it is not possible to determine whether the product candidate being studied caused or was associated with these conditions. In addition, it is possible that as we test our clinical products in larger, longer and more extensive clinical programs, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier clinical trials, as well as conditions that did not occur or went undetected in previous clinical trials, will be reported by subjects. Many times, side effects are only detectable after investigational products are tested in large-scale, Phase 3 clinical trial.trials.
Our industry has experienced a high rate of turnover of management personnel in recent years. If we are not able to attract, retain and motivate key executives to accomplish our business objectives, we may experience constraints that will significantly impede our ability to raise additional capital and our ability to implement our overall business strategy. In particular, we are highly dependent upon our executive officers, including Henry Ji, Ph.D., our Chief Executive Officer and PresidentPresident, and Stephen Ma, our Chief Financial Officer. The loss of services of these executive officers could delay or prevent the successful development of our product pipeline and completion of our planned clinical trials. We do not carry “key person” insurance on any of our executive officers or other employees.
As of MarchJune 31,30, 2026, we have five full-time employees, including one employee who has aan M.D. As a subsidiary of Scilex, we have been dependent upon the services provided by Scilex employees. As of MarchJune 31,30, 2026, Scilex has 32 full-time employees, including five employees who have M.D.s or Ph.D.s providing services to us. We will need to expand our managerial, operational, sales and marketing, finance and other resources in order to manage our operations, clinical trials, research and development activities, regulatory filings, manufacturing and supply activities, and any marketing and commercialization activities, including co-promotion activities. Future growth would impose significant added responsibilities on members of management, including:
The ongoing conflict between Russia and Ukraine, war in Iran and other conflicts and instability in the Middle East and instability in Venezuela are causing disruptions to global economic conditions. It is not possible to predict the broader consequences of these ongoing conflicts. It is also not possible to predict with certainty the duration of these ongoing conflicts andor their additional adverse effects on existing U.S. macroeconomic conditions and financial markets, all of which could impact theour business, financial condition, and results of operations of the Companyoperations, as well as our ability to raise capital. There can be no assurances that further deterioration in credit and financial markets and confidence in economic conditions will not occur. In addition, the closure of any additional national or regional commercial banks could lead to further economic instability.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to commercialize our product candidates.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. We may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us. If we are unable to do so, the third-party may offer, on an exclusive basis, theirits proprietary rights to other parties, potentially blocking our ability to pursue our program.
Intellectual property protection varies throughout the world and is subject to change over time. In the United States, for small molecule drug products the Hatch-Waxman ActAmendments providesprovide generic companies powerful incentives to seek to invalidate our pharmaceutical patents. As a result, we expect that our U.S. patents on major pharmaceutical products will be routinely challenged, and there can be no assurance that our patents will be upheld. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a distraction to management and other employees. We face generic manufacturer challenges to our patents outside the United States as well. In addition, competitors or other third parties may claim that our activities infringe patents or other intellectual property rights held by them. If successful, such claims could result in our being unable to market a product in a particular territory or being required to pay damages for past infringement or royalties on future sales.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providingprovide opportunities for third parties to challenge any issued patent in the PTO. This applies to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in PTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a PTO proceeding sufficient for the PTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
We may become involved in opposition, interference, derivation, inter partes review, post-grant review, or other proceedings challenging our or our licensors’ patent rights, and the outcome of any proceedings areis highly uncertain. An adverse determination in any such proceeding could reduce the scope of, or invalidate, our owned or in-licensed patent rights, allow third parties to commercialize our product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
Additionally, the U.S. Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations, and there are other open questions under patent law that courts have yet to decisively address. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts and the PTO, the laws and regulations governing patents could change in unpredictable ways and could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Any waiver of our patent or other intellectual property protection by the U.S. and other foreign governments could have a material adverse effect on our competitive position, business, financial condition and results of operations. For example, recent decisions raise questions regarding the award of patent term adjustment (“PTA”) for patents in families where related patents have issued without PTA. Thus, it cannot be said with certainty how PTA will or will not be viewed in the future and whether patent expiration dates may be impacted. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution, but the complexity and uncertainty of European patent laws hashave also increased in recent years. For example, in Europe, a new unitary patent system took effect June 1, 2023, which will significantly impact European patents, including those granted before the introduction of such a system. Under the unitary patent system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the Unitary Patent Court (the “UPC”). As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. Patents granted before the implementation of the UPC have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes. Complying with these laws and regulations could limit our ability to obtain new patents in the future that may be important for our business.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to develop and commercialize one or more of our current and future product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, oror, in developing our current and future product candidates, limit our uses, pay royalties or redesign our infringing current and future product candidates, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our current and future product candidates, if approved. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to develop and commercialize one or more of our current and future product candidates, which could harm our business, financial condition and results of operations significantly.
Depending upon the timing, duration and conditions of any FDA marketing approval of our current and future product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the EU. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended; the extension cannot extend the total patent term beyond 14 years from approval; and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. If we are unable to obtain a patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for the applicable product candidate will be shortened, and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case, and our competitive position, business, financial condition, results of operations, and prospects could be materially harmed.
As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case, and our competitive position, business, financial condition, results of operations, and prospects could be materially harmed.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection. If these changes were to occur, they could have a material adverse effect on our ability to generate revenue. For example, recent decisions raise questions regarding the award of PTA for patents in families where related patents have issued without PTA. Thus, it cannot be said with certainty how PTA will/ or will not be viewed in the future and whether patent expiration dates may be impacted. Similarly, the complexity and uncertainty of European patent laws have also increased in recent years. In Europe, a new unitary patent system took effect on June 1, 2023, which will significantly impact European patents, including those granted before the introduction of such a system. Under the unitary patent system, European applications have the option, upon grant of a patent, of becoming a Unitary Patent which will be subject to the jurisdiction of the UPC. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation.
For our product candidate SP-102, we may seek FDA approval through the Section 505(b)(2) regulatory pathway. The Hatch-Waxman ActAmendments added Section 505(b)(2) to the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from trials that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2) allows an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidate by potentially decreasing the amount of data that we would need to generate in order to obtain FDA approval. If the FDA does not agree that the Section 505(b)(2) regulatory pathway is acceptable as we anticipated, we may need to conduct additional clinical trials, provide additional data and information and meet additional standards for regulatory approval.
Other requirements include submissions of safety and other post-marketing information and reports, registration and listing, product tracking and tracing, as well as continued compliance with cGMPscGMP and GCPsGCP for any clinical trials that we conduct post-approval. The future discovery of previously unknown problems with a product, including adverse events of unanticipated type, severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
In addition, three decisions from the U.S. Supreme Court in June and July 2024 may lead to an increase in litigation against regulatory agencies that could create uncertainty and thus negatively impact our business. The first decision overturned established precedent that required courts to defer to regulatory agencies’ interpretations of ambiguous statutory language. The second decision overturned a regulatory agency’s ability to impose civil penalties in administrative proceedings. The third decision extended the statute of limitations within which entities may challenge agency actions. These cases may result in increased litigation by industry against regulatory agencies and impact how such agencies choose to pursue enforcement and compliance actions. However, the specific, lasting effects of these decisions, which may vary within different judicial districts and circuits, isare unknown. We also cannot predict the extent to which FDA and other agency regulations, policies, and decisions may become subject to increasing legal challenges, delays and changes.
The FTC alsohas setsstated expectations forthat failing to take appropriate steps to keep consumers’ personal information secure, or failing to provide a level of security commensurate to promises made to individuals about the security of their personal information (such as in a privacy notice), may constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act. While we do not intend to engage in unfair or deceptive acts or practices, the FTC has the power to enforce promises as it interprets them, and events that we cannot fully control, such as data breaches, may be result in FTC enforcement. Enforcement by the FTC under the FTC Act can result in civil penalties or enforcement actions. Additionally, the FTC’s Health Breach Notification RuleRule, thatwhich the FTC has clarified applies to health apps and other similar technologies andtechnologies, includes breach notification requirements,requirements whichthat addsadd complexity to compliance obligations. Further, the SEC implemented rules around incident reporting, requiring cybersecurity incidents to be reported 4 business days after determining that an incident is material.
The U.S. Department of Justice issued a final rule entitled, “Access to U.S. Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons,” codified at 28 CFR part 202 (the “Bulk Transfer Rule”). The Bulk Transfer Rule prohibits and restricts bulk transfers of sensitive personal data (including genetic and health data) to countries of concern, such as China, Russia, and Iran to prevent access by foreign adversaries. It restricts our ability to engage in certain cross-border transactions involving genomic or biological samples and related data, which may increase compliance costs, lead to increased regulatory scrutiny or liability, and may require additional contractual negotiations, which may adversely impact our business, financial condition,condition and operatingresults results.of operations.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, led to aggregate reductions of Medicare payments to providers of, on average, 2% per fiscal year. These reductions went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020, through May 31, 2022, due to the COVID-19 pandemic. The law provides for 1% Medicare sequestration in the second quarter of 2022 and allows the full 2% sequestration thereafter until 2030. To offset the temporary suspension during the COVID-19 pandemic, in 2030, the sequestration will be 2.25% for the first half of the year, and 3% in the second half of the year. The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Any brand names we intend to use for our current and future product candidates will require authorization from the FDA regardless of whether we have secured a formal trademark registration from the PTO. The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we would lose the benefit of our existing trademark applications for such product candidatecandidates and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner, or at all, which would limit our ability to successfully commercialize our product candidates.
Mr. Shah, Dr. Ji, Dr. Chun, Mr. Followwill, Ms. NavaniFollowwill and Dr. Wu serve on our Board of Directors. Dr. Ji is also one of our executive officers,officers and continues to serve as a member of the board of directors of Scilex and as Scilex’s Chairperson, Chief Executive Officer and President. Mr. Ma, our Chief Financial Officer and Chief Operating Officer, continues to serve as Chief Financial Officer, Senior Vice President, Secretary and director of Scilex.
In addition, such directors and officers may own shares of Scilex common stock, options to purchase shares of Scilex common stock or other Scilex equity awards. These individuals’ holdings of Scilex common stock, options to purchase shares of Scilex common stock or other equity awards of Scilex may be significant for some of these persons compared to these persons’ total assets. Their position at Scilex and the ownership of any Scilex equity or equity awards creates,create, or may createcreate, the appearance of,of conflicts of interest when these directors and officers are faced with decisions that could have different implications for Scilex than the decisions have for us. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between Scilex and us regarding the terms of the agreements governing the transition services and the relationship thereafter between the companies. Potential conflicts of interest may also arise if we enter into commercial arrangements with Scilex in the future. As a result of these actual or apparent conflicts, we may be precluded from pursuing certain growth initiatives.
Scilex currently performs or supports many important corporate functions for our company. Our financial statements as of and for the periods ended MarchJune 31,30, 2026 and December 31, 2025 reflect charges for these services on an allocation basis. As a result, our financial statements may not be reflective of conditions that would have existed or what our results of operations would have been had we been a stand-alone public company and no longer a majority owned subsidiary of Scilex. In connection with the closing of the Business Combination, we entered into the Transition Services Agreement with Scilex, pursuant to which we will be able to utilize certain employees and other service providers of Scilex (including Scilex’s sales force) to operate our business, including with respect to the following business functions: finance, human resources, information systems, legal and administrative, R&D support and commercialization support. The services under the Transition Services Agreement will be provided for a period of three years on a cost plus 10% basis, provided that the service fees will not exceed $2.0 million per annum until all payments under the Scilex-Oramed Note have been paid in full in cash, and we will reimburse Scilex for its out-of-pocket fees, costs or expenses. We expect to incur other costs to replace the services and resources that will not be provided by Scilex. We will also incur additional costs as a stand-alone public company. As a stand-alone public company, our total costs related to certain support functions may differ from the costs that were historically allocated to us from Scilex. In addition, in the future, we expect to incur internal costs to implement certain new systems, including infrastructure and an ERP system, while our systems are currently being fully supported by Scilex.
Dr. Ji serves as our Executive Chairman and also serves as the Chairman of the board of directors of Scilex and its Chief Executive Officer and President. Mr. Ma, our Chief Financial Officer and Chief Operating Officer, also serves as the Chief Financial Officer of Scilex. The amount of time that each of Dr. Ji and Mr. Ma devotes to us varies day-to-day and week-to-week depending on the then current needs and demands of each company’s business, transactions each company may be evaluating, and other corporate matters. Such diversion of management attention could have a material adverse effect on our business and operations.
As of MarchJune 31,30, 2026, Scilex (together with certain of its subsidiaries) controls approximately 81.9%75.3% of the voting power of our company (excluding voting power represented by the Series A Preferred Stock held by Scilex), which means that, based on its percentage voting power controlled, Scilex will control the vote of all matters submitted to a vote of our stockholders. This control will enable Scilex to control the election of the members of our Board of Directors and all other corporate decisions. In particular, for so long as Scilex continues to own a majority of our Common Stock, Scilex will be able to cause or prevent a change of control of our company or a change in the composition of our Board of Directors and could preclude any unsolicited acquisition of us.
Pursuant to the Amended and Restated Registration Rights Agreement by and among us and certain stockholders, dated September 22, 2025 (the “Registration Rights Agreement”), and the Restated Certificate of Incorporation of Semnur Pharmaceuticals, Inc., filed with the Secretary of State of the State of Delaware on September 22, 2025 (the “Charter”), Scilex has certain rights, and the ability to take certain actions, that are not otherwise available to all our stockholders. For example, the Registration Rights Agreement provides Scilex the right, subject to certain conditions, to demand that we file a registration statement or request that their shares of Common Stock be covered by a registration statement that we are otherwise filing. In addition, until such time as Scilex first ceases to own greater than 50% of the outstanding voting power of our Common Stock, the Charter effectively provides Scilex with the ability to fill vacancies on our Board of Directors, remove directors (with or without cause), call a special meeting of our stockholders, amend the Charter (subject to approval of our Board of Directors) and amend the Bylaws of Semnur Pharmaceuticals, Inc., effective as of September 22, 2025 (the “Bylaws”). The directors so elected have the authority, subject to the terms of our indebtedness and applicable rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions.
Even when Scilex ceases to control a majority of our total voting power, for so long as Scilex continues to own a significant percentage of our Common Stock and for so long as Scilex together with its affiliates, subsidiaries, successors and assigns (other than Semnur and its subsidiaries) (the “Scilex Group”) owns any shares of our Series A Preferred Stock, Scilex will still be able to significantly influence the composition of our Board of Directors and the approval of actions requiring stockholder approval. Accordingly, for such period of time, Scilex will have significant influence with respect to our management, business plans and policies. Because of the significant ownership position held by Scilex, our classified board structure and the rights granted to Scilex under the Stockholder Agreement with Scilex (the “Scilex Stockholder Agreement”), new investors may not be able to effect a change in our business or management. The concentration of ownership and availability of the foregoing rights could deprive our stockholders of an opportunity to receive a premium for their shares of Common Stock as part of a sale of our company and ultimately might affect the market price of our Common Stock. See the risk factor below titled “Scilex, as the holder of our Series A Preferred Stock, will havehas rights, preferences and privileges that are not held by, and are preferential to, the rights of holders of our Common Stock.”
our ability to commercialize itsour product candidate, if approved;
the status and cost of our marketing commitments for itsour product candidate;
unanticipated serious safety concerns related to the use of any of our product candidate;
Management's Discussion & Analysis (MD&A)
Largest changes
Comparison of thesee in full comparisonThreethreeMonthsandEndedsixMarchmonths31,ended June 30, 2026 and 2025
Total research and development expenses for the three months endedsee in full comparisonMarchJune31,30, 2026 and 2025 were$1.3$1.2 million and$0.2$0.5 million, respectively. The increase of$1.1$0.7 million was primarily driven by higherpersonnel‑relatedcontractedcostsresearch and development expenses of approximately$0.3$0.4millionmillion,dueprincipallytoconsisting of increasedfull‑time equivalent headcount, higher consultantconsulting costsof approximately $0.3 million related to the SP‑102‑5 study,andincreasedclinical developmentcosts of approximately $0.2 millionactivities associated with theinitiationSP-102ofprogram.thePersonnel-relatedSP‑102‑5costsstudyincreasedinbytheapproximatelyfourth$0.2quartermillion,ofprimarily2025.driven by higher stock-based compensation and employee-related costs. Other research and development expenses increased by approximately $0.1 million, primarily due to higher allocated overhead, travel, and other supporting research activities.
“Total research and development expenses for the six months ended June 30, 2026 and 2025 were $2.5 million and $0.7 million, respectively. The increase of $1.8 million was primarily driven by higher contracted research and development expenses of approximately $1.1 million, mainly related to increased consulting and clinical development costs associated with the SP-102 program. Personnel-related costs increased by approximately $0.5 million, primarily due to higher salaries, employee-related expenses, and stock-based compensation. …”see in full comparison
Net cash used in operating activities increased bysee in full comparison$2.3$4.7 million during thethreesix months endedMarchJune31,30,20262026, compared to thethreecorrespondingmonthsperiodended March 31,in 2025. The increaseiswas primarilyrelatedattributable to a higher net loss driven by increased research and development and general and administrative expensesprimarilyasduethetoCompanyanexpanded its operations. The increaseinwasheadcount,partiallyanoffsetincreaseby higher non-cash stock-based compensation expense of approximately $2.8 million and favorable changes inclinicalworkingdevelopmentcapital,activitiesincluding increases in accounts payable andanaccruedincreased in general costs associated with managing a public company.expenses.
“On March 18, 2019, Legacy Semnur was acquired by Scilex pursuant to an Agreement and Plan of Merger with Semnur (as amended, the “Legacy Semnur Merger Agreement”), Sigma Merger Sub, Inc., a wholly owned subsidiary of Scilex (“Sigma Merger Sub”), Fortis Advisors LLC, solely as representative of the holders of Legacy Semnur’s equity, and for limited purposes, Sorrento Therapeutics, Inc. Pursuant to the Legacy Semnur Merger Agreement, Sigma Merger Sub merged with and into Legacy Semnur, and Legacy Semnur survived as Scilex’s wholly owned subsidiary.”see in full comparison
“Total general and administrative expenses for the six months ended June 30, 2026 and 2025 were $6.2 million and $0.9 million, respectively. The increase of $5.3 million was primarily attributable to higher personnel-related costs, including salaries, stock-based compensation, and employee-related expenses. The increase was also driven by higher consulting, legal, professional, insurance, board-related, and corporate support costs incurred to support the Company's growth and public company operations.”see in full comparison
Full comparison: every changed paragraph (32)
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those set forth in the sections of this Quarterly Report on Form 10-Q titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” As a result of these risks, you should not replaceplace undue reliance on these forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.
We are a late-stage clinical biopharmaceutical company focused on developing and commercializing innovative non-opioid pain management products for the treatment of acute and chronic pain. We believe that our innovative non-opioid product portfolio has the potential to provide effective pain management therapies that can have a transformative impact on patients’ lives. We target indications with high unmet needs and large market opportunities with non-opioid therapies for the treatment of patients with acute and chronic pain and are dedicated to advancing and improving patient outcomes. Our lead product candidate, SP-102, if approved, has the potential to become the first U.S. Food and Drug Administration (the “FDA”) approved non-opioid novel injectable corticosteroid gel formulation for patients with moderate to severe lumbosacral radicular pain (“LRP”) (also known as sciatica), containing no preservatives, surfactants, solvents, or particulates and is expected to be available in a pre-filled syringe formulation following approval by the FDA.
We are developing SP-102 to be an injectable viscous gel formulation of a widely used corticosteroid designed to address the serious risks posed by off-label epidural injections, which are administered over 12 million times annually in the United States. SP-102 has been granted fast track designation by the FDA and, if approved, could become the only FDA-approved epidural injection for the treatment of sciatica. Although such designation has been granted, it may not lead to a faster development or regulatory review process and such designation does not increase the likelihood that SP-102 will receive marketing approval. According to a report by Decision Resources Group published in May 2017, it was estimated that over 4.8 million patients would suffer from sciatica in the United States in 2024.
Legacy Semnur was founded in 2013 and we have invested substantial efforts and financial resources onin building our intellectual property portfolio and infrastructure. We have conducted phospholipidosis and toxicology studies, including a Phase 1 pharmacokinetic bridging study, Phase 2 repeat dose study, a pivotal Phase 3 study and the second Phase 3 study initiated in September 2025. We expect to continue to make investments in research and development, clinical trials and regulatory affairs to develop our product candidate, SP-102.
We have incurred significant net losses to date. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of our current or future product candidates. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $0.1$39.0 millionthousand and accumulated deficit of $280.4$284.7 million. During the threesix months ended MarchJune 31,30, 2026, we had operating losses of $4.6$8.8 million and negative cash flows from operations of $2.7$4.8 million. These losses have resulted primarily from costs incurred in connection with research and development activities, certain allocated general and administrative costs associated with our operations and certain costs associated with the Business Combination. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities. Further, the Company’s condensed consolidated financial statements are dependent on assumptions and allocations from the Scilex Holding Company (“Scilex”) financial statements that management deems were reasonable and appropriate under the circumstances. Nevertheless, the Company’s condensed consolidated financial statements may not include all of the actual expenses that would have been incurred had the Company operated as a standalone company during the periods presented and may not reflect the results of operations, financial position and cash flows had the Company operated as a standalone company during the periods presented. Actual costs that would have been incurred if the Company had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. The Company also may have incurred additional costs associated with being a standalone, publicly listed company that were not included in the expense allocations and, therefore, would result in additional costs that are not reflected in its historical results of operations, financial position and cash flows.
On August 20, 2025, we and Legacy Semnur entered into the PIPE SPA with the investor named therein, pursuant to which the investor agreed to purchase 1,250,000 shares of Common Stock at a price of $16.00 per share, for an aggregate purchase price of $20.0 million following the consummation of the Business Combination. On September 22, 2025, the PIPE SPA was amended to provide that unless such agreement was terminated pursuant to its terms (or otherwise by mutual agreement of the parties thereto), the closing of the transactions contemplated thereby would occur not later than the 14th business day following the closing of the Business Combination, subject to the satisfaction or waiver of the closing conditions set forth therein. In the event the transaction did not close on or before December 31, 2025, the nonbreaching party had an option to terminate the PIPE SPA without liability. As of MarchJune 31,30, 2026, the transaction had not closed and accordingly, shares have not been issued and funds have not been received.
Additionally, in connection with the PIPE SPA, we arewould have been obligated to pay a cash financing service fee of 7% of the received investment funds.
On September 23, 2025, we entered into the Semnur/Biconomy SPA with Biconomy PTE.LTDPte.Ltd (“Biconomy”). Pursuant to the Semnur/Biconomy SPA, we agreed to issue and sell, and Biconomy agreed to purchase, 6,250,000 shares of Common Stock, at a purchase price of $16.00 per share, for an aggregate purchase price of $100.0 million, payable in Bitcoin blockchain (“Bitcoin”), with such amount of Bitcoin equal to the quotient of (A) the buyer’s respective aggregate purchase price divided by (B) the spot exchange rate for Bitcoin as published by Coinbase.com at 8:00 p.m. (New York City time) on the trading day immediately prior to the closing date of the purchase. In the event the transaction did not close on or before December 31, 2025, the nonbreaching party had an option to terminate the Semnur/Biconomy SPA without liability. As of MarchJune 31,30, 2026, the transaction had not closed and accordingly, shares have not been issued and funds have not been received.
As of MarchJune 31,30, 2026 and December 31, 2025, we have promissory notes totaling $2.7$2.1 million and $3.5 million, respectively, all of which are due in less than a year.
During the three and six months ended MarchJune 31,30, 2026, we incurred expenses of $0.14$(0.05) million and $0.08 million, respectively, related to the Lifecore Master Services Agreement.
On March 18, 2019, Legacy Semnur was acquired by Scilex pursuant to an Agreement and Plan of Merger with Semnur (as amended, the “Legacy Semnur Merger Agreement”), Sigma Merger Sub, Inc., a wholly owned subsidiary of Scilex (“Sigma Merger Sub”), Fortis Advisors LLC, solely as representative of the holders of Legacy Semnur’s equity, and for limited purposes, Sorrento Therapeutics, Inc. Pursuant to the Legacy Semnur Merger Agreement, Sigma Merger Sub merged with and into Legacy Semnur, and Legacy Semnur survived as Scilex’s wholly owned subsidiary.
On March 18, 2019, Legacy Semnur was acquired by Scilex pursuant to an Agreement and Plan of Merger with Semnur (as amended, the “Legacy Semnur Merger Agreement”), Pursuant to the Legacy Semnur Merger Agreement, and upon the terms and subject to the conditions contained therein, Scilex agreed to pay the former holders of Legacy Semnur’s capital stock up to $280.0 million in aggregate contingent cash consideration based on the achievement of certain milestones (which amount is expected to be charged back to us through an intercompany arrangement), comprised of a $40.0 million payment that will be due upon obtaining the first approval of a new drug application of our product by the FDA and additional payments that will be due upon the achievement of certain amounts of net sales of our products, as follows: (i) a $20.0 million payment upon the achievement of $100.0 million in cumulative net sales of our product, (ii) a $20.0 million payment upon the achievement of $250.0 million in cumulative net sales of our product, (iii) a $50.0 million payment upon the achievement of $500.0 million in cumulative net sales of our product, and (iv) a $150.0 million payment upon the achievement of $750.0 million in cumulative net sales of our product. To date, none of the foregoing payments have been triggered.
In consideration of the license and rights granted by Shah Investor, Legacy Semnur agreed to pay royalties (i) at the rate of 1.5% of the Net Sales for Annual Net Sales (each as defined therein) up to $250.0 million and (ii) at the rate of 2.5% of the Net Sales for Annual Net Sales of $250.0 million and above, subject to certain adjustments as set out in the Shah Assignment Agreement. Such royaltiesroyalty payment for a given calendar quarter shall be due and payable on the date the royalty report for such quarter is due under the Shah Assignment Agreement. To date, none of the foregoing payments have been triggered.
Since 2019, we have operated as a majority owned subsidiary of Scilex. As a result, our historical financial statements may not be reflective of what our results of operations would have been had we been a standalone public company and no longer a majority owned subsidiary of Scilex. In particular, certain clinical trial management, regulatory, information technology, legal, accounting and finance, facilities and other corporate and infrastructural functions have historically been provided to us by Scilex. We expect that Scilex will continue to provide us with some of the services related to these functions on a transitional basis in exchange for agreed-upon fees pursuant to the Transition Services Agreement (the “Transition Services AgreementTSA”) with Scilex. The costs associated with these services and support were allocated to our operating expenses based on the estimated percentage of time certain Scilex employees spent supporting the SP-102 program, and we expect to incur other costs to replace the services and resources that will not be provided by Scilex. We will also incur additional costs as a standalone public company. As a standalone public company, our total costs related to certain support functions may differ from the costs that were historically allocated to us from Scilex. In addition, in the future, we expect to incur internal costs to implement certain new systems, including infrastructure and an enterprise resource planning system, while our systems are currently being fully supported by Scilex.
We expect that our general and administrative expenses will vary year over year in the future as we adapt our strategies to changes in the business environment. We also expect to incur increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”), listing standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to allocate additional expenses relating to administrative, financefinance, legal, and other corporate functions to adapt to the changes above and the anticipated growth of our business.
Comparison of the Threethree Monthsand Endedsix Marchmonths 31,ended June 30, 2026 and 2025
Total research and development expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $1.3$1.2 million and $0.2$0.5 million, respectively. The increase of $1.1$0.7 million was primarily driven by higher personnel‑relatedcontracted costsresearch and development expenses of approximately $0.3$0.4 millionmillion, dueprincipally toconsisting of increased full‑time equivalent headcount, higher consultantconsulting costs of approximately $0.3 million related to the SP‑102‑5 study, and increased clinical development costs of approximately $0.2 millionactivities associated with the initiationSP-102 ofprogram. thePersonnel-related SP‑102‑5costs studyincreased inby theapproximately fourth$0.2 quartermillion, ofprimarily 2025.driven by higher stock-based compensation and employee-related costs. Other research and development expenses increased by approximately $0.1 million, primarily due to higher allocated overhead, travel, and other supporting research activities.
Total research and development expenses for the six months ended June 30, 2026 and 2025 were $2.5 million and $0.7 million, respectively. The increase of $1.8 million was primarily driven by higher contracted research and development expenses of approximately $1.1 million, mainly related to increased consulting and clinical development costs associated with the SP-102 program. Personnel-related costs increased by approximately $0.5 million, primarily due to higher salaries, employee-related expenses, and stock-based compensation. Other research and development expenses increased by approximately $0.2 million, largely attributable to higher allocated overhead, travel, and other research support costs.
Total general and administrative expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $3.3$3.0 million and $0.5 million, respectively. The increase of $2.8$2.5 million was primarily attributable to higher personnel‑relatedpersonnel-related costscosts, ofincluding approximatelysalaries, $2.1stock-based million resulting from increased full‑time equivalent headcountcompensation, and higheremployee-related allocated personnel costs.expenses. The increase was also driven by higher legalconsulting, legal, professional, insurance, and professionalcorporate feessupport ofcosts approximatelyassociated $0.3with millionoperating relatedas toa servicespublic provided by external legal counselcompany and patentsupporting servicebusiness providers.growth initiatives.
Total general and administrative expenses for the six months ended June 30, 2026 and 2025 were $6.2 million and $0.9 million, respectively. The increase of $5.3 million was primarily attributable to higher personnel-related costs, including salaries, stock-based compensation, and employee-related expenses. The increase was also driven by higher consulting, legal, professional, insurance, board-related, and corporate support costs incurred to support the Company's growth and public company operations.
Other Expense
Other expense for the three and six months ended June 30, 2026 was $0.1 million, compared to nil for the three and six months ended June 30, 2025. The increase was attributable to interest expense incurred on promissory notes outstanding as of June 30, 2026.
As of MarchJune 31,30, 2026, we had cash and cash equivalents of $0.1$39.0 millionthousand and accumulated deficit of $280.4$284.7 million. During the threesix months ended MarchJune 31,30, 2026, we had operating losses of $4.6$8.8 million and negative cash flows from operations of $2.7$4.8 million. We are dependent upon Scilex and its affiliates to provide services and funding to support our operations until, at least, such time as external financing is obtained. We expect to incur significant expenses and operating losses for the foreseeable future as we continue our efforts to develop and seek regulatory approval for SP-102.
In connection with the Transition Services Agreement with Scilex,TSA, we expect to receive approximately $2.0 million of continued support from Scilex, inclusive of fees, in the twelve months following the Business Combination. The continued support from Scilex is expected to consist of (a) clinical support to run the planned Phase 3 trial for approximately $0.8 million, (b) CMC manufacturing support for approximately $0.7 million, (c) general and administrative support, such as human resources, legal and accounting, for approximately $0.4 million and (d) IT support for approximately $0.1 million. Semnur and Scilex continue to review and discuss additional support that may be provided under the TSA based on Semnur’s ongoing operational needs. Accordingly, the scope and value of services provided under the TSA may exceed the currently estimated $2.0 million.
We cannot be certain that we will be able to secure additional sources of funds to support our operations on acceptable terms, or at all, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs. These conditions, among others, raise substantial doubt about our ability to continue as a going concern. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholderstockholders or increased fixed payment obligations. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term, but we may have to relinquish valuable rights to our product candidate or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition and results of operations. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay, scale back or discontinue the development of our product candidate.
As of MarchJune 31,30, 2026, we have promissory notes totaling $2.7$2.1 million, all of which are due in less than a year.
As of MarchJune 31,30, 2026, we have a long-term related party loan totaling $16.9$20.9 million due to Scilex.
Net cash used in operating activities increased by $2.3$4.7 million during the threesix months ended MarchJune 31,30, 20262026, compared to the threecorresponding monthsperiod ended March 31,in 2025. The increase iswas primarily relatedattributable to a higher net loss driven by increased research and development and general and administrative expenses primarilyas duethe toCompany anexpanded its operations. The increase inwas headcount,partially anoffset increaseby higher non-cash stock-based compensation expense of approximately $2.8 million and favorable changes in clinicalworking developmentcapital, activitiesincluding increases in accounts payable and anaccrued increased in general costs associated with managing a public company.expenses.
Net cash provided by financing activities increased by $2.4$4.6 million for the threesix months ended MarchJune 31,30, 20262026, compared to the corresponding period in 2025. The increase was primarily attributable to higher proceeds from related‑party loans during the quarter.period. These inflows were partially offset by repayments of promissory notes during the period.
Our accounting policies are more fully described in Note 2 of the condensed consolidated financial statements to this Quarterly Report. As disclosed in Note 2, the preparation of condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Actual results could differ significantly from those estimates. We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
Semnur qualifies and will remain as an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of the initial public offering, (b) in which Semnur has a total annual gross revenue of at least $1.235 billion, or (c) in which Semnur is deemed to be a large accelerated filer, which means the market value of the common equity of Semnur that is held by non-affiliates equals or exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which Semnur has issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
SMNR insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. 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 |
|---|---|---|---|---|---|
| 2026-06-15 | Scilex, Inc. |
Other | 7,034,737 | — | — |
Well-known investors holding SMNR (13F)
None of the 59 investors we track reported a position in their latest 13F.