Source: sec
Source ID: 0001193125-26-339257
URL: https://www.sec.gov/Archives/edgar/data/1488039/000119312526339257/atos-20260630.htm
Symbol: (ATOS)
Published: 2026-08-07 08:30:33 EDT
Time precision: minute
Title: 10-Q 10-Q

12-31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
June 30,
2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
XXXXXXXX XX, XXXX
to
XXXXXXXX XX, XXXX
Commission File Number:
001-35610
ATOSSA THERAPEUTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
26-4753208
( State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1448 NW Market Street
,
Suite 500
Seattle
,
WA
98107
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (
206
)
588-0256
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, $0.18 par value
ATOS
The
Nasdaq
Capital Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
As of July 31, 2026, the registrant had
9,979,298
shares of common stock, $0.18 par value per share, outstanding.
ATOSSA THERAPEUTICS, INC.
QUARTERLY REPORT
FORM 10-Q
TABLE OF CONTENTS
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Condensed Consolidated Financial Statements - Unaudited
3
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Operations
4
Condensed Consolidated Statements of Stockholders' Equity
5
Condensed Consolidated Statements of Cash Flows
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
25
Item 4.
Controls and Procedures
25
PART II.
OTHER INFORMATION
27
Item 1.
Legal Proceedings
27
Item 1A.
Risk Factors
27
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
49
Item 3.
Defaults Upon Senior Securities
49
Item 4.
Mine Safety Disclosures
49
Item 5.
Other Information
49
Item 6.
Exhibits
50
Signatures
51
2
PART I—FINA
NCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINAN
CIAL STATEMENTS - UNAUDITED
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED B
ALANCE SHEETS
(amounts in thousands, except share and per share data)
(Unaudited)
June 30, 2026
December 31, 2025
Assets
Current assets
Cash and cash equivalents
$
26,094
$
41,299
Restricted cash
110
110
Prepaid materials
3,013
3,081
Prepaid expenses and other current assets
1,793
1,128
Total current assets
31,010
45,618
Other assets
1,271
1,990
Total assets
$
32,281
$
47,608
Liabilities and stockholders' equity
Current liabilities
Accounts payable
$
1,976
$
4,293
Accrued expenses
1,380
1,307
Payroll liabilities
972
1,558
Other current liabilities
1,123
1,097
Total current liabilities
5,451
8,255
Total liabilities
5,451
8,255
Commitments and contingencies (Note 12)
—
—
Stockholders' equity
Convertible preferred stock - $
0.001
par value;
10,000,000
shares authorized;
577
shares issued and outstanding as of June 30, 2026 and December 31, 2025
—
—
Common stock - $
0.18
par value;
350,000,000
shares authorized;
9,979,298
and
8,611,361
shares issued and outstanding as of June 30, 2026 and December 31,
2025, respectively
1,796
1,550
Additional paid-in capital
291,151
285,840
Treasury stock, at cost;
88,003
shares of common stock at June 30, 2026 and
December 31, 2025
(
1,475
)
(
1,475
)
Accumulated deficit
(
264,642
)
(
246,562
)
Total stockholders' equity
26,830
39,353
Total liabilities and stockholders' equity
$
32,281
$
47,608
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STAT
EMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
(Unaudited)
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
Operating expenses
Research and development
$
4,897
$
5,502
$
9,676
$
9,659
General and administrative
3,797
3,538
8,888
6,795
Total operating expenses
8,694
9,040
18,564
16,454
Operating loss
(
8,694
)
(
9,040
)
(
18,564
)
(
16,454
)
Interest income
227
645
536
1,365
Other expense, net
(
24
)
(
28
)
(
52
)
(
52
)
Loss before income taxes
(
8,491
)
(
8,423
)
(
18,080
)
(
15,141
)
Income tax benefit
—
—
—
—
Net loss
(
8,491
)
(
8,423
)
(
18,080
)
(
15,141
)
Net loss per share of common stock - basic and diluted
$
(
0.95
)
$
(
0.98
)
$
(
2.06
)
$
(
1.76
)
Weighted average shares outstanding used to compute net loss per share - basic and diluted
8,908,511
8,622,289
8,766,191
8,622,289
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENT
S OF STOCKHOLDERS' EQUITY
(amounts in thousands, except share data)
(Unaudited)
Convertible Preferred Stock
Common Stock
Additional
Treasury Stock
Accumulated
Total Stockholders'
Shares
Amount
Shares
Amount
Paid-in Capital
Amount
Deficit
Equity
Balance at December 31, 2024
582
$
—
8,611,266
$
1,550
$
283,194
$
(
1,475
)
$
(
211,792
)
$
71,477
Stock-based compensation
—
—
—
—
563
—
—
563
Net loss
—
—
—
—
—
—
(
6,718
)
(
6,718
)
Balance at March 31, 2025
582
$
—
8,611,266
$
1,550
$
283,757
$
(
1,475
)
$
(
218,510
)
$
65,322
Issuance of common stock upon Series B preferred stock conversion
(
5
)
—
95
—
—
—
—
—
Stock-based compensation
—
—
—
—
796
—
—
796
Net loss
—
—
—
—
—
—
(
8,423
)
(
8,423
)
Balance at June 30, 2025
577
$
—
8,611,361
$
1,550
$
284,553
$
(
1,475
)
$
(
226,933
)
$
57,695
Convertible Preferred Stock
Common Stock
Additional
Treasury Stock
Accumulated
Total Stockholders'
Shares
Amount
Shares
Amount
Paid-in Capital
Amount
Deficit
Equity
Balance at December 31, 2025
577
$
—
8,611,361
$
1,550
$
285,840
$
(
1,475
)
$
(
246,562
)
$
39,353
Stock-based compensation
—
—
—
—
722
—
—
722
Net loss
—
—
—
—
—
—
(
9,589
)
(
9,589
)
Balance at March 31, 2026
577
$
—
8,611,361
$
1,550
$
286,562
$
(
1,475
)
$
(
256,151
)
$
30,486
Stock-based compensation
—
—
—
—
815
—
—
815
Issuance of common stock under ATM program, net of issuance costs
—
—
4,300
1
20
—
—
21
Registered direct offering
—
—
1,363,637
245
4,255
—
—
4,500
Issuance costs relating to registered direct offering
—
—
—
—
(
501
)
—
—
(
501
)
Net loss
—
—
—
—
—
—
(
8,491
)
(
8,491
)
Balance at June 30, 2026
577
$
—
9,979,298
$
1,796
$
291,151
$
(
1,475
)
$
(
264,642
)
$
26,830
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
ATOSSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATE
MENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
For the Six Months Ended June 30,
2026
2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(
18,080
)
$
(
15,141
)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation
1,537
1,359
Depreciation
8
8
Changes in operating assets and liabilities:
Prepaid materials
68
(
1,377
)
Prepaid expenses and other current assets
(
665
)
90
Other assets
711
(
10
)
Accounts payable
(
2,317
)
1,331
Accrued expenses
73
1,281
Payroll liabilities
(
586
)
(
808
)
Other current liabilities
26
49
Net cash used in operating activities
(
19,225
)
(
13,218
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
—
(
9
)
Net cash used in investing activities
—
(
9
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock and warrants
4,500
—
Offering costs for common stock and warrant issuance
(
501
)
—
Proceeds from issuance of common stock under the ATM program, net of issuance costs
21
—
Net cash provided by financing activities
4,020
—
NET DECREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
(
15,205
)
(
13,227
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING
BALANCE
41,409
71,194
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING
BALANCE
$
26,204
$
57,967
RECONCILIATION OF CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH
Cash and cash equivalents
$
26,094
$
57,857
Restricted cash
110
110
Total cash, cash equivalents and restricted cash
$
26,204
$
57,967
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
ATOSSA THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: NATURE OF OPERATIONS
Atossa Therapeutics, Inc. (the Company) was incorporated on April 30, 2009, in the State of Delaware to develop and market medical devices, laboratory tests and therapeutics to address breast health conditions. The Company is focused on developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on breast cancer and other breast conditions, as well as other rare diseases.
NOTE 2: GOING CONCERN
The Company's Condensed Consolidated Financial Statements are prepared under the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2026, the Company recorded a net loss of $
18.1
million and used $
19.2
million of cash in operating activities. As of June 30, 2026, the Company had $
26.1
million in unrestricted cash and cash equivalents and working capital of $
25.6
million. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern.
In June 2026, the Company raised $
4.0
million in net proceeds through a registered direct offering of shares of common stock and warrants. Refer to Note 9 to these Condensed Consolidated Financial Statements. Although the Company received this infusion of capital, management maintains that in order to
alleviate the conditions that raise substantial doubt, the Company will need, among other things, additional capital resources. Management plans to obtain such resources for the Company include obtaining capital from the sale of its equity securities as well as short-term borrowings from banks, stockholders or other related parties if needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraphs and eventually to secure other sources of financing and attain profitable operations.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the SEC) and in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2025. The year-end Condensed Consolidated Balance Sheet presented in this report was derived from audited consolidated financial statements but does not include all annual disclosures required by GAAP.
In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included and have been prepared on the same basis as the annual consolidated financial statements. Operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include stock-based compensation expense, and prepaid or accrued clinical trial balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.
7
Reverse Stock Split
On February 2, 2026, the Company effected a
1-for-15
reverse stock split of its issued and outstanding common stock (the Reverse Stock Split). As a result of the Reverse Stock Split, each
15
shares of common stock issued and outstanding immediately prior to Februar
y 2, 2
026 was automatically converted into
one
share of common stock. The Reverse Stock Split affected all common stockholders uniformly and did not alter any stockholders' percentage interest in the Company's equity, except to the extent that the Reverse Stock Split would result in a stockholder owning a fractional share. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would be entitled to receive a fractional share instead were entitled to receive cash in lieu of such fractional share.
The Reverse Stock Split did not change the par value of the common stock or the authorized shares of common stock. The shares of common stock retain a par value of $
0.18
per share. Accordingly, an amount equal to the par value of the decreased shares resulting from the reverse stock split was reclassified from “Common stock” to “Additional paid-in capital”.
All common stock and per-share amounts in this Form 10-Q have been retroactively restated to reflect the effect of the Reverse Stock Split.
Cash
and Cash Equivalents
Cash and cash equivalents include unrestricted cash and all highly liquid instruments with original maturities of three months or less at the date of purchase. Cash equivalents consist primarily of amounts invested in money market accounts.
Restricted Cash
The Company’s restricted cash balance as of June 30, 2026 and December 31, 2025, consisted entirely of cash pledged as security for the Company’s issued commercial credit cards.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of deposits of cash and cash equivalents, including those deposited in money market deposit accounts. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any material losses in such accounts and believes it is not exposed to significant risk. The Company has invested its excess cash primarily in money market funds.
Clinical Trial and Preclinical Study Accruals
The Company makes estimates of its accrued expenses for clinical trial and preclinical study activities as of each balance sheet date in its financial statements based on the facts and circumstances known to the Company at that time. These accruals are based upon estimates of costs incurred and fees that may be associated with services provided by clinical trial investigational sites and Contract Research Organizations (CROs), and for other clinical trial-related activities. Payments under certain contracts with such parties depend on factors such as successful enrollment of patients, site initiation and progression through the various stages of the Company's clinical trials. In accruing for these services, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If possible, the Company obtains information regarding unbilled services directly from these service providers. However, the Company may be required to estimate these services based on other information available to it. If the Company underestimates or overestimates the activities or fees associated with a study or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, the Company's estimated accrued liabilities have approximated actual expense incurred. Subsequent changes in estimates may result in a material change in the Company's accruals.
Prepaid Materials
The
Company capitalizes the purchase of certain raw materials, active pharmaceutical ingredients and related supplies for use in the manufacturing of drug products for use in its preclinical and clinical development programs, as it has determined that these materials have alternative future use. The Company can use these raw materials and related supplies in multiple clinical drug products, and therefore has future use independent of the development status of any particular drug program until it is utilized in the manufacturing process. The Company expenses the cost of materials when used. The Company periodically reviews these capitalized materials for continued alternative future use and writes down the asset to its net realizable value in
8
the
period in which an impairment is identified. Prepaid materials not expected to be used within 12 months of the balance sheet date are presented in Other assets on the Condensed Consolidated Balance Sheets.
Other Assets
Other assets consist of property and equipment, prepaid materials and clinical deposits.
Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
The fair value hierarchy is broken down into the three input levels summarized below
:
•
Level 1: Quoted market prices in active markets for identical assets or liabilities;
•
Level 2: Other observable market-based inputs or unobservable inputs that are corroborated by market data; and
•
Level 3: Unobservable inputs that cannot be corroborated by market data that reflects the reporting entity's own assumptions.
The carrying amounts reflected in the accompanying Condensed Consolidated Balance Sheets for cash and cash equivalents, restricted cash, and accounts payable approximate their fair values due to their short-term nature. Refer to Note 8 to these Condensed Consolidated Financial Statements.
Research
and Development
Research and development (R&D) costs are expensed as incurred and consist of costs associated with research activities. R&D expenses include, for example, manufacturing expenses for the Company's drugs under development, expenses associated with preclinical studies and clinical trials, as well as R&D employee salaries, bonuses, stock-based compensation and benefits. R&D expenses also include an allocation of the Chief Executive Officer's salary and related benefits, including bonus and non-cash stock-based compensation expense, based on an estimate of his total hours spent on R&D activities. The Company's Chief Executive Officer is involved in the development of the Company's drug candidates and oversight of the related clinical trial activities and also acts as the Company's Chief Medical Officer
.
Stock-based Compensation
The Company measures and recognizes compensation expense for all stock-based awards made to employees, officers, non-employee directors, and other key persons providing services to the Company, currently comprised of stock options and restricted stock units (RSUs). For both stock options and RSUs, stock-based compensation is measured using the estimated grant date fair value and is recognized as an expense over the requisite service period, generally the vesting period. The Company has made a policy election to recognize forfeitures when they occur.
The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model, which requires assumptions regarding the expected volatility of the price of the Company's common stock, the expected life of the options, an expectation regarding future dividends on the Company’s common stock, and a risk-free interest rate. The Company’s expected common stock price volatility assumption is based upon the historical volatility of its stock price. The Company has limited exercise history and has elected the simplified method for the expected life assumption for stock option grants, which averages the contractual term of the options of
10
years with the vesting term, typically
one
to
four years
. The Company uses a dividend yield assumption of
zero
based upon the fact that it has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate assumption is based upon prevailing short-term interest rates over the expected life of the options as of the grant date. RSUs are valued using the closing market price of the Company’s stock on the date of grant multiplied by the number of RSUs granted.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company records any interest or penalties related to income taxes in income tax benefit in the Condensed Consolidated Statements of Operations.
9
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (the FASB) issued ASU No. 2024-03,
Disaggregation of Income Statement Expenses (Topic 220-40)
. This standard requires business entities to disclose in a tabular format, on an annual and interim basis, purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion for each income statement line item that contains those expenses. The guidance is effective for public business entities in annual reporting periods beginning after December 15, 2026, and in interim periods within annual reporting periods beginning after December 15, 2027. Entities may apply the guidance prospectively or retrospectively. The Company is currently assessing the potential impact of this ASU
.
10
NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
As of June 30,
As of December 31,
2026
2025
Prepaid pre-clinical and clinical trial deposits
$
1,225
$
410
Prepaid insurance
227
517
Prepaid professional services and other
341
201
Total prepaid expenses and other current assets
$
1,793
$
1,128
NOTE 5: ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
As of June 30,
As of December 31,
2026
2025
Accrued pre-clinical and clinical trial costs
$
1,109
$
661
Accrued professional services and other
271
646
Total accrued expenses
$
1,380
$
1,307
NOTE 6: PAYROLL LIABILITIES
Payroll liabilities consisted of the following (in thousands):
As of June 30,
As of December 31,
2026
2025
Accrued bonuses
$
585
$
680
Accrued vacation
216
213
Accrued payroll and benefits
171
665
Total payroll liabilities
$
972
$
1,558
NOTE 7: RESEARCH AND DEVELOPMENT TAX REBATE LIABILITY
In 2017, the Company formed a wholly owned subsidiary in Australia called Atossa Genetics AUS Pty Ltd. The purpose of this subsidiary is to perform R&D activities, including conducting certain of the Company's clinical trials. Australia offers R&D cash rebates on qualified R&D activities incurred in the country. The Australian R&D tax incentive program is a self-assessment program, and as such, the Australian Taxation Office (ATO) has the right to review the Company’s program and related expenditures for a period of four years following the tax return filing date. If a review were to occur, a qualified program and related expenditures could be disqualified by the ATO with interest and penalties on the cash rebates previously received. Based on the Company's evaluation of the ATO's taxpayer alert in December 2023, the Company believes that it is not reasonably assured that the full tax position would be sustained under audit. Accordingly, as of both June 30, 2026 and December 31, 2025, a liability of $
1.1
million was included in Other current liabilities in the Condensed Consolidated Balance Sheets.
NOTE 8: FAIR VALUE OF FINANCIAL INSTRUMENTS
The following tables present the Company’s fair value hierarchy for all its financial assets and liabilities, by major security type, that are measured at fair value on a recurring basis (in thousands):
June 30, 2026
Estimated Fair Value
Level 1
Level 2
Level 3
Assets:
Money market fund
$
22,392
$
22,392
$
—
$
—
11
December 31, 2025
Estimated Fair Value
Level 1
Level 2
Level 3
Assets:
Money market fund
$
40,367
$
40,367
$
—
$
—
NOTE 9: STOCKHOLDERS’ EQUITY
Common Stock
On June 27, 2024, the Company's stockholders approved an amendment of the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company's common stock, par value $
0.18
per share, from
175,000,000
to
350,000,000
.
June 2026 Registered Direct Offering
On June 10, 2026, the
Company entered into a securities purchase agreement (the Purchase Agreement) with institutional investors, which provided for the issuance and sale by the Company, in a registered direct offering (the Offering), of (i)
1,363,637
shares (the Shares) of the Company’s common stock and (ii) Series A warrants to purchase up to
1,363,637
shares of common stock and short-term Series B warrants to purchase up to
1,363,637
shares of common stock (such warrants, collectively, the Series Warrants). Each Share was offered and sold together with the Series Warrants at a combined offering price of $
3.30
per Share and Series Warrants. The Series Warrants are subject to certain ownership limitations and have an exercise price of $
4.40
per share, exercisable six months following the date of issuance. The Series A warrants will expire on the five and one-half year anniversary of the date of issuance. The short-term Series B warrants will expire on the two year anniversary of the date of issuance.
Additionally,
40,909
warrants to purchase shares of common stock were issued to Rodman & Renshaw, LLC (the Placement Agent) for services provided under the Offering. Upon cash exercise of the Series Warrants, the Company is required to issue to the Placement Agent, as compensation for services provided under the Offering, up to an additional
81,818
warrants. The Placement Agent’s warrants have an exercise price of $
4.125
per share and will expire on the five year anniversary of the date of issuance.
The Offering was made pursuant to a prospectus supplement dated June 10, 2026, and a base prospectus dated May 23, 2024, which is part of a registration statement on Form S-3 (File No. 333-279367) that was filed with the SEC on May 13, 2024, and became effective on May 23, 2024. The Series Warrants are not listed on any securities exchange.
The Offering closed on June 12, 2026. The Company received net proceeds from the Offering of $
4.0
million after deducting placement agent fees and offering expenses of $
0.5
million.
2026 At the Market Offering Facility
On February 20, 2026, the Company entered into an At the Market Offering Agreement, dated February 20, 2026 (the Sales Agreement), with Rodman & Renshaw LLC. Pursuant to the Sales Agreement, the Company may offer, from time to time, to sell, in an "at the market offering," shares of its common stock up to an aggregate offering price of $
50.0
million.
The Company sold a total of
4,300
shares of common stock and received net proceeds of $
21
thousand during the six months ended June 30, 2026.
Preferred Stock
The Company is authorized to issue a total of
10,000,000
shares of preferred stock, par value $
0.001
per share. The Company has designated
750,000
shares of Series A junior participating preferred stock, par value $
0.001
per share,
4,000
shares of Series A convertible preferred stock, par value $
0.001
per share,
25,000
shares of Series B convertible preferred stock, par value $
0.001
per share, and
20,000
shares of Series C convertible preferred stock, par value $
0.001
per share, through the filings of certificates of designation with the Delaware Secretary of State.
No
shares of Series A junior participating preferred stock, Series A convertible preferred stock, or Series C convertible preferred stock were outstanding as of June 30, 2026 and December 31, 2025.
Series B Convertible Preferred Stock
Conversion.
Each share of Series B convertible preferred stock is convertible at the Company's option at any time, or at the option of the holder at
any time, into the number of shares of the Company's common stock determined by dividing the $
1,000
stated value per share of the Series B convertible preferred stock by a conversion price of $
52.80
per share. In addition, the conversion price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications. Subject to limited exceptions, a holder of the Series B convertible preferred stock will not have the right to convert any portion of the Series B convertible preferred stock to the extent that, after giving effect to the conversion, the holder, together with its affiliates, would beneficially own in excess of
9.99
% of the number of shares of the Company's common stock outstanding immediately after giving effect to its conversion.
12
Rights.
Holders of the Series B convertible preferred stock have certain rights should certain future events occur, such as the right to receive shares of an acquiring corporation or other consideration that holders of shares of common stock are entitled to receive upon certain mergers, consolidations or sales of substantially all of the Company’s assets; the right to receive dividends in the same form as dividends paid on shares of common stock; and redemption rights upon the Company’s liquidation, dissolution or winding up, among others. Holders of Series B convertible preferred stock have no voting rights, and the Company is not obligated to redeem or repurchase any of the Series B convertible preferred stock.
During the three and six months ended June 30, 2026, there were no conversions of Series B convertible preferred stock
.
During the three and six months ended June 30, 2025, certain holders of the Series B convertible preferred stock converted an aggregate of
5
shares of Series B convertible preferred stock into
95
shares of the Company’s common stock. No cash was exchanged in connection with the conversion.
Warrants
On June 10, 2026, the Company issued warrants as described above.
As of June 30, 2026, the following warrants to purchase shares of the Company’s common stock were outstanding:
Outstanding
Warrants to
Purchase Shares
Exercise Price Per Warrant
Expiration Date
June 2026 Series A warrants
1,363,637
$
4.400
December 12, 2031
June 2026 Series B warrants
1,363,637
$
4.400
June 12, 2028
June 2026 Placement Agent warrants
40,909
$
4.125
June 12, 2031
2,768,183
There were
no
warrant exercises during the three and six months ended June 30, 2026 and 2025. On June 21, 2025,
187,500
warrants granted in
December 2020
expired. The following expired in 2025:
300,000
warrants granted in January 2021 expired on
July 8, 2025
; and
701,667
warrants granted in March 2021 expired on
September 22, 2025
.
Upon any exercise for cash of any June 2026 Series A warrants or June 2026 Series B warrants, the Company has agreed to pay the Placement Agent a cash fee equivalent to 7.0% of the aggregate gross exercise price of the warrants. In addition, the Company has agreed to issue to the Placement Agent or its designees,
upon any exercise for cash of any warrants issued hereby, warrants to purchase such number of shares of common stock equal to 3.0% of the aggregate number of such shares of common stock underlying any exercised warrants.
NOTE 10: NET LOSS PER SHARE
Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock that would have been outstanding during the period assuming the issuance of shares of common stock for all potentially dilutive shares of common stock outstanding. Potentially dilutive shares of common stock consist of outstanding stock options and RSUs, convertible preferred stock and common stock warrants. Because the inclusion of potential shares of common stock would be anti-dilutive for all periods presented, they have been excluded from the calculation.
The following table sets forth the weighted average number of shares of common stock excluded from the calculation of diluted net loss per share, because including them would be anti-dilutive:
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Options to purchase common stock
1,537,641
1,504,062
1,571,706
1,438,231
Restricted stock units
349,889
—
193,882
—
Warrants to purchase common stock
577,972
1,168,864
290,583
1,179,109
2,465,502
2,672,926
2,056,171
2,617,340
NOTE 11: INCOME TAXES
Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in
13
effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. Therefore,
no
income tax provision was recorded for the three and six months ended June 30, 2026 and 2025.
NOTE 12: COMMITMENTS AND CONTINGENCIES
Litigation and Contingencies
On April 3, 2025, Intas Pharmaceuticals Ltd. (Intas) filed a Petition for Post Grant Review (PGR) with the U.S. Patent and Trademark Office’s (USPTO) Patent Trial and Appeal Board (PTAB) (the 391 PGR Petition) seeking to invalidate one of the Company’s issued patents (U.S. Patent No. 12,071,391) titled “Methods for Making and Using Endoxifen” on the alleged grounds of anticipation, obviousness, lack of written description, and lack of enablement.
On April 3, 2025, Intas also filed a Petition for Inter Partes Review (IPR) with the USPTO’s PTAB (the 151 IPR Petition) seeking to invalidate one of the Company’s issued patents (U.S. Patent No. 11,261,151) titled “Methods for Making and Using Endoxifen” (together with U.S. Patent No. 12,071,391, the Patents) on the alleged grounds of anticipation and obviousness.
On November 3, 2025, the PTAB released a Decision Granting Institution of PGR for U.S. Patent No. 12,071,391 and a Decision Granting Institution of IPR for U.S. Patent No. 11,261,151. On January 26, 2026, the Company submitted responses to the 391 PGR Petition and the 151 IPR Petition.
On April 13, 2026, the Company entered into a settlement agreement with Intas and Jina Pharmaceuticals, Inc. (the Agreement), which fully resolved the 391 PGR Petition and 151 IPR Petition. Pursuant to the Agreement, the parties subsequently terminated their respective PTAB proceedings as identified in the Agreement. Upon termination by the PTAB of the proceedings, the Company’s two issued patents titled, “Methods for Making and Using Endoxifen” (U.S. Patents Nos. 11,261,151 and 12,071,391), that are subject to such proceedings, remain issued and fully enforceable against other third parties.
The Agreement also includes mutual covenants pursuant to which the parties have agreed not to challenge, directly or indirectly, specified Endoxifen-related patents and patent applications owned or controlled by the other parties, subject to limited exceptions set forth in the Agreement. In addition, the Agreement preserves the Company’s ability to continue developing and commercializing Z-endoxifen base in the Company’s principal areas of focus of oncology, endocrine dysfunction disorders and muscular dystrophy-related diseases. The Agreement also establishes agreed allocations between the parties with respect to certain other Endoxifen-related fields and formulations.
From time to time, the Company is subject to other legal proceedings and claims that arise in the ordinary course of its business. The Company believes that these matters do not have a material effect, individually or in the aggregate, on its financial position, results of operations or cash flows.
Contractual Obligations
Contractual obligations represent the Company's future cash commitments and liabilities under agreements with third party clinical trial service providers. Apart from contracts with one third-party clinical trial service provider, such agreements are cancellable upon written notice by the Company. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contracts may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of June 30, 2026, the Company's estimated non-cancellable commitment for clinical trial enrollment costs was $
4.3
million.
NOTE 13: STOCK BASED COMPENSATION
On May 15, 2020, the stockholders of the Company approved the 2020 Stock Incentive Plan (the 2020 Plan) to provide for the grants of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. No awards may be granted under the 2020 Plan after June 27, 2034. An aggregate of
2,000,000
shares of common stock is reserved for issuance in connection with awards granted under the 2020 Plan. As of June 30, 2026,
325,980
shares were available for future grants under the 2020 Plan.
14
The Company recognized stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2026
2025
2026
2025
Research and development
$
273
$
157
$
498
$
288
General and administrative
542
639
1,039
1,071
Total stock-based compensation expense
$
815
$
796
$
1,537
$
1,359
The following table shows a summary of all RSU activity for the six months ended June 30, 2026:
Number of
Underlying
Shares
Outstanding as of January 1, 2026
—
Granted
380,683
Cancelled
—
Vested
—
Outstanding as of June 30, 2026
380,683
As of June 30, 2026, the unrecognized stock-based compensation expense associated with unvested RSUs was $
1.7
million.
The RSUs typically vest over a
one
to
three year
period and carry a
ten year term
.
The following table shows a summary of all stock option activity for the six months ended June 30, 2026:
Number of
Underlying
Shares
Weighted-
Average
Exercise Price
Per Share
Weighted-
Average
Contractual
Life
Remaining
in Years
Aggregate
Intrinsic Value
Outstanding as of January 1, 2026
1,565,272
$
21.86
Granted
63,334
9.05
Forfeited
(
90,535
)
22.22
Exercised
—
—
Expired
(
890
)
710.10
Outstanding as of June 30, 2026
1,537,181
$
20.92
5.86
$
—
Exercisable as of June 30, 2026
1,347,599
$
22.01
5.40
$
—
Vested and expected to vest
1,537,181
$
20.92
5.86
$
—
As of June 30, 2026, there were
189,582
unvested stock options outstanding, and the unrecognized stock-based compensation expense associated with unvested stock options was $
1.7
million. The associated stock-based compensation expense is expected to be recognized over a weighted-average period of
1.80
years.
NOTE 14: DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan to which employees of the Company may defer contributions for income tax purposes. Participants are eligible to receive employer matching contributions of up to
6
% of deferrals. Employees may also be eligible for a discretionary match over
6
%. Employer matching contributions under the defined contribution plan were $
50
thousand and $
103
thousand for the three and six months ended June 30, 2026, respectively, and $
63
thousand and $
138
thousand for the same periods in 2025, respectively.
NOTE 15: SEGMENTS
The Company operates as a
single
segment. Operating segments are identified as the components of an enterprise of which separate discrete financial information is available for evaluation by the Chief Operating Decision Maker (the CODM) in making decisions regarding resource allocation and assessing performance. The measure of segment assets is reported on the balance sheets as total assets. To date, the Company's CODM has made such decisions and assessed performance at the Company-level as a single segment using information at the condensed consolidated financial statement level
.
15
The CODM is
Steven C. Quay, M.D., Ph.D. Chairman, President and Chief Executive Officer
.
The CODM utilizes Net Loss from the Condensed Consolidated Statement of Operations for the measure of segment profit or loss.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND AN
ALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes included elsewhere in this report. This discussion contains forward-looking statements, which are based on assumptions about the future of our business. Actual results, outcomes and the timing of results or outcomes could differ materially from those contained in the forward-looking statements. Please read
“
Forward-Looking Statements
”
included below for additional information regarding forward-looking statements.
Forward-Looking Statements
All statements made in this Quarterly Report on Form 10-Q (this Quarterly Report) that are not statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). We have made these statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties, which could cause actual results, outcomes and the timing of results or outcomes, to differ materially from those projected or anticipated. Although we believe that our assumptions underlying our forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot assure you that the forward-looking statements set forth in this Quarterly Report will prove to be accurate. We may identify these forward-looking statements by the use of forward-looking terms, including, but not limited to, "expect," "potential," "continue," "may," "will," "should," "could," "would," "seek," "intend," "plan," "estimate," "anticipate," "future," "believe," "design," "predict," or the negative versions of these words or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
•
our ability to shorten our clinical development timelines and reduce future clinical development costs through an accelerated path to filing a New Drug Application, which is dependent on the timing and outcomes of submissions to and other interactions with the U.S. Food and Drug Administration (FDA);
•
the impact of general macroeconomic conditions, including the impact of inflation, high interest rates, general economic slowdown or a recession, the availability of credit, foreign exchange rate volatility, financial institution instability, changes in monetary policy, changes in trade policies, including tariffs or other trade restrictions or the threat of such actions, and increasing geopolitical instability, including the conflict in Ukraine, the conflict in the Middle East and rising tensions between China and Taiwan and the related volatility in the price of oil and other commodity prices, on our business, our ability to access capital markets, our operating costs and our supply chain;
•
our ability to raise capital;
•
the effects of natural disasters, pandemics, severe weather conditions and other events beyond our control;
•
whether we can obtain approval from the FDA, and foreign regulatory bodies, to continue our clinical trials, including our planned (Z)-endoxifen trials, and to sell, market and distribute our therapeutics under development;
•
our ability to identify and partner with organizations to commercialize any of our products once they are approved for marketing;
•
our ability to successfully initiate and complete clinical trials of our products under development, including our proprietary (Z)-endoxifen;
•
our ability to pursue a Duchenne muscular dystrophy (DMD) indication, McCune-Albright Syndrome (MAS) indication, or other indications for our lead program, (Z)-endoxifen;
•
the success, costs and timing of our development activities, such as clinical trials, including whether our studies using our (Z)-endoxifen therapies will enroll a sufficient number of subjects in a timely fashion or be completed in a timely fashion or at all;
•
our ability to continue as a going concern;
•
whether we will successfully complete our clinical trials of (Z)-endoxifen in women with breast cancer, and whether the studies will meet their objectives;
•
our ability to contract with third-party suppliers, manufacturers and service providers, including clinical research organizations, and their ability to perform adequately;
17
•
our ability to successfully develop and commercialize new therapeutics currently in development, or new therapeutics that we might identify in the future, and within the time frames we currently expect;
•
our ability to successfully deploy artificial intelligence (AI) in our or our collaborators’ product candidates;
•
our ability to successfully defend litigation and other similar complaints that may be brought in the future, in a timely manner and within the coverage, scope and limits of our insurance policies;
•
our ability to establish and maintain intellectual property rights covering our products, including our ability to obtain patent coverage for our product candidates;
•
our increased risk of theft or misappropriation of our intellectual property and other proprietary technology outside of the U.S.;
•
our expectations regarding, and our ability to satisfy, federal, state and foreign regulatory requirements, including evolving legal standards and regulations, including those concerning data protection, consumer privacy, sustainability and evolving labor standards;
•
our eligibility for, and any expected benefits of, any FDA programs or special designations, such as the Rare Pediatric Disease Priority Review Voucher (PRV) program and the orphan drug exclusivity designation;
•
our ability to receive orphan-drug exclusivity for (Z)-endoxifen for MAS;
•
our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market (Nasdaq);
•
the accuracy of our estimates of the size and characteristics of the markets that our products and services may address;
•
whether final study results will vary from preliminary study results that we may announce;
•
our expectations as to future financial performance, expense levels and capital sources;
•
our ability to attract and retain key personnel; and
•
other risks and uncertainties, including those discussed in the section titled "Risk Factors" herein.
This Quarterly Report also contains estimates and other statistical data provided by third parties and by us relating to market size and growth, and other industry data. These and other forward-looking statements made in this Quarterly Report, unless otherwise indicated, are presented as of the date of the filing of this Quarterly Report. We have discussed certain important factors, risks and uncertainties in the cautionary statements included in this Quarterly Report, particularly in the sections titled "PART II. ITEM 1A. RISK FACTORS," "PART I. ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," and elsewhere in this Quarterly Report that we believe could cause our actual results, events or outcomes, or the timing of these results or outcomes, to differ materially from our anticipated results, events or outcomes, or the anticipated timing of these results or outcomes, including any variation between interim or preliminary and final clinical results or analysis. Our forward-looking statements do not reflect the potential impact of any new information, future events or circumstances that may affect our business after the date of this Quarterly Report. Except as required by law, we expressly disclaim any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events, future circumstances or otherwise.
Company Overview
We are a clinical-stage biopharmaceutical company developing proprietary innovative medicines in areas of significant unmet medical need in oncology, with a focus on breast cancer and other breast conditions, as well as certain rare diseases. Our lead drug candidate is oral (Z)-endoxifen, a selective estrogen receptor modulator (SERM)/ selective estrogen receptor degrader currently in Phase 2 clinical development. The Company is evaluating potential indications for (Z)-endoxifen based on its pharmacologic profile, including its potential for both reducing the risk of and for the treatment of breast cancer, as well as in other therapeutic areas.
As of February 2, 2026, we have been granted seven U.S. and 16 international patents covering our proprietary (Z)-endoxifen, and we have numerous applications pending in the U.S. and in other major countries. We expect to have patent protection covering our proprietary (Z)-endoxifen in our principal areas of focus of oncology, endocrine dysfunction disorders and muscular dystrophy-related diseases through at least November 17, 2038. There have been no material changes to our patent portfolio in the three and six months ended June 30, 2026.
Our business strategy is to advance our programs through clinical studies, including with potential partners, and opportunistically add programs in areas of high unmet medical need through acquisition, minority investment, collaboration or internal development.
18
(Z)-endoxifen.
(Z)-endoxifen is the most active metabolite of Tamoxifen, an FDA approved drug to treat and prevent breast cancer in high-risk women, and it is substantially more potent as an estrogen receptor antagonist than Tamoxifen and other approved SERMs. Unlike Tamoxifen, which requires metabolic activation through CYP2D6 and other liver enzymes, (Z)-endoxifen does not require first-pass metabolism to achieve therapeutic concentrations. As a result, its activity is not dependent on patient-specific metabolic variability.
(Z)-endoxifen is a small-molecule oral agent designed to directly inhibit estrogen receptor signaling, induce estrogen receptor degradation, and promote apoptosis in estrogen receptor positive (ER+) breast cancer cells. Preclinical and clinical data suggest that (Z)-endoxifen may retain activity against clinically relevant ESR1-mutant ER+ breast cancer models associated with aromatase inhibitor resistance. In addition to direct ER antagonism, (Z)-endoxifen may inhibit protein kinase C beta one (PKCβ1), leading to reduced AKT pathway activation and suppression of downstream cell-cycle and survival signals. This is important because AKT signaling is a key pro-growth and pro-survival pathway that can contribute to endocrine resistance. Targeting this pathway may help inhibit tumor proliferation beyond estrogen-receptor blockade alone. We are evaluating (Z)-endoxifen across multiple settings within the ER+/human epidermal growth factor receptor 2 negative (HER2-) breast cancer treatment continuum, including neoadjuvant, adjuvant and breast density reduction indications.
In an ongoing neoadjuvant clinical study, (Z)-endoxifen has demonstrated early signs of anti-tumor activity. Reported results include one pathological complete response and multiple responses, as well as substantial reductions in Ki-67 proliferation across dose levels. Suppression of Ki-67 during short-term endocrine treatment has been associated with endocrine responsiveness and with more favorable long-term prognosis in ER-positive breast cancer. Meaningful reductions in MRI-assessed functional tumor volume were observed, providing additional evidence of antitumor activity during therapy.
We are also supporting multiple collaborative and investigator-sponsored clinical studies evaluating (Z)-endoxifen in additional breast cancer settings. These studies are not fully funded by us and are intended to further characterize clinical activity, optimize endocrine therapy strategies, and inform future regulatory pathways.
Based on its mechanism of action, we are exploring the potential application of (Z)-endoxifen beyond breast cancer, including gynecological cancers, endocrine resistance driven by ESR1 mutations, as well as applications in other rare disease indications, including DMD, women carriers of DMD, and MAS in girls. In preclinical models of DMD, (Z)-endoxifen demonstrated muscle-protective, anti-inflammatory, and anti-fibrotic effects. We believe similar efficacy could potentially apply to women carriers of DMD. For MAS, we believe (Z)-endoxifen could potentially be an effective hormone blocker, significantly reducing the effects of early onset puberty in young girls. We have developed a proprietary manufacturing process for (Z)-endoxifen, including defined processes for the active pharmaceutical ingredient and drug product. The drug product is available in multiple dosage strengths and is supported by qualified suppliers and manufacturing redundancies.
Summary of Leading Oncology Programs
(Z)-endoxifen is currently being investigated in four Phase 2 trials:
Karisma-(Z)-endoxifen:
We are developing our proprietary oral (Z)-endoxifen as a potential therapy to help reduce mammographic breast density (MBD). In December 2021, we initiated the Karisma-(Z)-endoxifen study, a Phase 2, randomized, double-blind, placebo-controlled, dose-response study evaluating the effect of low-dose (Z)-endoxifen on MBD in healthy premenopausal women with measurable MBD.
The study was conducted in Stockholm, Sweden and enrolled 240 participants who were randomized to receive daily oral dosing for six months of either placebo, 1 mg of (Z)-endoxifen, or 2 mg of (Z)-endoxifen. The primary endpoint was dose-response reduction in MBD. Secondary endpoints included safety and tolerability, and an exploratory endpoint assessed durability of MBD changes over 24 months. The study was fully enrolled in November 2023 and concluded in June 2024 with database lock in September 2024. The follow up 24-month mammographic record review of participants was concluded as of March 31, 2026, and top-line durability data is expected to be received before the end of the third quarter of 2026.
The initial study data demonstrated that low-dose (Z)-endoxifen significantly reduced MBD compared to placebo. The 1 mg dose showed a mean MBD reduction of 17.3% (p<0.01) and the 2 mg dose showed a mean reduction of 23.5% (p<0.01), compared to a 0.27% change in the placebo group. Mean plasma concentrations were 4.8 ng/mL and 9.7 ng/mL in the 1 mg and 2 mg dose groups, respectively, indicating that substantial MBD reductions were achieved at relatively low systemic exposure. (Z)-endoxifen was generally well tolerated. No meaningful differences in adverse events were observed between the 1 mg dose group and placebo. The 2 mg dose group experienced higher rates of certain adverse events, including hot flashes, night sweats, and vaginal discharge.
We expect to report top-line durability data from the Karisma-(Z)-endoxifen study in the third quarter of 2026. Further development will depend on regulatory guidance, study outcomes, and available resources.
I-SPY 2 Endocrine Optimization Pilot (I-SPY):
(Z)-endoxifen is being evaluated as a neoadjuvant therapy in patients with ER+/HER2- early breast cancer as well as in combination with other partner drugs such as CDK4/6 inhibitors and ovarian
19
function suppression medications.
Results from the daily 10 mg dose demonstrated excellent tolerability, with approximately 95% of patients completing at least 75% of planned therapy and showing predominantly low-grade adverse events. Biologic activity was observed across multiple measures, including reductions in the Ki-67 proliferation index, median MRI functional tumor volume reduction of approximately 72%, and the clearance of circulating tumor DNA (ctDNA) in a majority of patients who were ctDNA-positive at baseline.
(Z)-endoxifen was well tolerated in this study with the most common side effects being mild, including hot flashes, insomnia and fatigue. At baseline, the average Ki-67% was 16% with a minimum of 2% and a maximum of 60%. At week 3, this decreased to an average of 10% with a minimum of 0% and a maximum of 35%. Ki-67 decreased below 10% in a majority of participants, including some patients with Ki-67 levels below 3%. At the time of surgery, the average Ki-67% remained at 10%, and the majority of patients maintained Ki-67 levels below 10%, including certain patients with Ki-67 levels that remained below 3%. Results were similar in the postmenopausal and premenopausal groups.
Based on these findings, the study was expanded to a 40 mg daily dose of (Z)-endoxifen in premenopausal and postmenopausal patients, targeting enhanced ERα antagonism and PKCβ1 inhibition, with combination therapy. For the expanded arms of this study, (Z)-endoxifen is being used in combination with two FDA approved drugs: 1) abemaciclib (VERZENIO®), a cyclin-dependent kinase (CDK) 4/6 inhibitor marketed by Eli Lilly and Company, and 2) elagolix (ORILISSA®), a prescription medicine used to treat moderate to severe pain associated with endometriosis marketed by AbbVie, Inc. More specifically, (Z)-endoxifen is being used in combination with abemaciclib in postmenopausal patients and in combination with elagolix for premenopausal patients where ovarian function suppression (OFS) treatment is required. Enrollment for all arms of this expanded study using (Z)-endoxifen as a combination therapy is complete, and we expect to begin receiving data throughout the second half of 2026.
RECAST DCIS (RECAST)
.
We are participating in RECAST, a multicenter platform study evaluating whether short-term endocrine therapy combined with MRI response assessment can identify patients with low-risk ductal carcinoma in situ (DCIS) who may safely avoid surgery and pursue long-term active surveillance.
(Z)-endoxifen is being investigated as part of this platform trial, which offers women with DCIS six months of neoadjuvant treatment with the intent of determining their suitability for long-term active surveillance without surgery. Approximately 100 patients are expected to be treated with (Z)-endoxifen. Early findings from RECAST suggest that this “window of opportunity” approach is feasible and well tolerated. The study incorporates both a neoadjuvant therapy phase, with patients at high risk for progression to invasive disease proceeding to surgery, followed by an extended surveillance phase for low-risk patients.
Enrollment in this study is ongoing, and a substantial proportion of patients have elected to continue active surveillance following initial treatment and imaging assessment. These early observations support the potential of the therapy and assessment to reduce the risk of over treatment in selected DCIS patients while maintaining oncologic safety.
Future efforts within RECAST are expected to focus on integrating advanced imaging modalities with molecular and transcriptomic biomarkers to help better predict progression risk, refine patient selection, and evaluate long-term outcomes, including invasive recurrence rates, durability of active surveillance, patient experience, and quality of life.
EVANGELINE:
EVANGELINE is a Phase 2 study evaluating (Z)-endoxifen plus OFS as a neoadjuvant therapy in premenopausal women with ER+/HER2- breast cancer.
We believe this study addresses a significant unmet need among premenopausal patients who experience poor tolerability with aromatase inhibitor-based regimens combined with OFS. Pharmacodynamic run-in data demonstrated strong early biologic activity, with approximately 86% of patients achieving a Ki-67 value of 10% or less at Week 4. These early data results supported the selection of 40 mg (Z)-endoxifen with OFS for the randomized Phase 2 portion of the study.
The EVANGELINE study utilizes a Simon two-stage design to assess whether the regimen meets or exceeds a predefined Ki-67 response threshold of 65%. Secondary endpoints include safety and tolerability, residual cancer burden, preoperative endocrine prognostic index score, and MRI-based tumor response. Enrollment in this study was complete as of June 30, 2026.
(Z)-Endoxifen in Rare diseases
In addition to the oncology related indications, we believe that (Z)-endoxifen has potentially broader utility as a therapeutic platform in serious and rare diseases, many of which have significant unmet medical need. The following underscore the growing scientific evidence supporting the potential role of estrogen signaling modulation in muscle preservation and inflammation and highlight the potential versatility of our proprietary molecule beyond oncology.
20
Duchenne muscular dystrophy:
DMD is a serious, progressive neuromuscular disease that primarily affects boys, leading to loss of muscle function, loss of ambulation, and life-threatening heart and respiratory complications. We believe that (Z)-endoxifen’s direct estrogen-receptor modulation, protein kinase C inhibition, and effects on key signaling pathways could be relevant in addressing various pathologies associated with DMD, including inflammation, fibrosis, and cardiomyopathy. Through its potential ability to upregulate utrophin, (Z)-endoxifen may help stabilize muscle health, including muscle growth, repair, and fibrosis. FDA engagement commenced in Q4 2025 and is ongoing.
In December 2025 and early in 2026, we received two FDA designations for (Z)-endoxifen for the treatment of DMD: 1) Rare Pediatric Disease designation and 2) Orphan Drug designation. We believe these designations provide us with several potential strategic benefits, including incentives, such as a potential PRV for future FDA applications, other regulatory support, and potential market exclusivity for a period of time. PRVs, which were recently reauthorized by legislation, could create significant value for the Company and could represent meaningful, non-dilutive value opportunities, either through use in another program or monetization through sale to third parties.
Symptomatic women carriers of DMD:
(Z)-endoxifen has also shown potential relevance in symptomatic female Duchenne and Becker muscular dystrophy carriers, an under-recognized population in which a subset may experience skeletal-muscle symptoms or develop dilated cardiomyopathy in adult life. The work done in 2025, including our manuscript entitled, “(Z)-Endoxifen as a Modulator of Utrophin Pathways in Duchenne Muscular Dystrophy,” will continue to inform our hypotheses and potential clinical trial protocols in the remainder of 2026. Additionally, we believe this condition meets the requirements of and could qualify for Orphan Drug designation, and we intend to pursue this designation.
McCune-Albright Syndrome:
MAS is a rare, non-inherited genetic disorder caused by a postzygotic activating mutation in GNAS, resulting in abnormal hormone signaling in affected tissues and involving bone, skin, and the endocrine system, with symptoms typically appearing in early childhood. In young girls (as early as 2 years old), early onset puberty can occur (Precocious Puberty) which can have a very significant effect on quality of life and limit growth. Because estrogen signaling contributes to peripheral precocious puberty in girls with MAS, we are evaluating whether (Z)-endoxifen could reduce estrogen-mediated manifestations, including recurrent vaginal bleeding, accelerated skeletal maturation and compromised adult height.
In May 2026, we received an additional FDA Rare Pediatric Disease designation for (Z)-endoxifen for the treatment of MAS. Additionally, given the relatively small size of this impacted population, we expect to seek Orphan Drug designation for MAS in the second half of 2026. Similarly with the potential PRV for DMD, we believe a potential PRV for MAS could provide us with several potential strategic benefits including meaningful, non-dilutive value opportunities, either through use in another program or monetization through sale to third parties.
Research and Development Phase
We are in the research and development phase and are not currently marketing any products. We do not anticipate generating revenue unless and until we develop and launch our pharmaceutical programs.
Reverse Stock Split
On February 2, 2026, the Company effected a 1-for-15 reverse stock split of its issued and outstanding common stock (the Reverse Stock Split). As a result of the Reverse Stock Split, each 15 shares of common stock issued and outstanding immediately prior to February 2, 2026 were automatically converted into one new share of common stock.
The Reverse Stock Split did not change the par value of the common stock or the authorized number of shares of common stock. Proportionate adjustments were made (i) in accordance with the terms of the Company’s equity plans, to the number of shares subject to outstanding equity awards, the per share exercise price, if any, with respect to those awards and the number of shares of common stock reserved for future issuance under such plans, and (ii) in accordance with the Certificate of Designation of Preferences, Rights and Limitation of the Series B Convertible Preferred Stock (Preferred Stock), to the conversion price of the Preferred Stock and the number of shares of common stock reserved for issuance pursuant to the Preferred Stock. All applicable common stock and per share amounts have been retrospectively restated to reflect the effect of the reverse stock split.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. We base our estimates on our historical experience, known trends and events, and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
21
There have been no material changes to our critical accounting estimates during the three and six months ended June 30, 2026 from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 25, 2026
.
Results of Operations
Comparison of Three and Six Months Ended June 30, 2026 and 2025
Revenue and Cost of Revenue.
For the three and six months ended June 30, 2026 and 2025, we had no source of revenue and no associated cost of revenue.
Operating Expenses.
Total operating expenses were $8.7 million and $18.6 million for the three and six months ended June 30, 2026, respectively, which was a decrease of $0.3 million and an increase of $2.1 million from total operating expenses for the three and six months ended June 30, 2025 of $9.0 million and $16.5 million, respectively. Factors contributing to the changes in operating expenses during the three and six months ended June 30, 2026 are explained below.
Research & Development (R&D) Expenses.
The following table provides a breakdown of major categories within R&D expenses for the three and six months ended June 30, 2026 and 2025, together with the dollar change and percentage change in those categories (dollars in thousands):
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
Increase (Decrease)
% Increase (Decrease)
2026
2025
Increase (Decrease)
% Increase (Decrease)
Research and Development Expense
Clinical and non-clinical trials
$
3,525
$
4,089
$
(564
)
(14)%
$
7,243
$
6,836
$
407
6%
Compensation
954
856
98
11%
1,888
1,736
152
9%
Professional fees and other
418
557
(139
)
(25)%
545
1,087
(542
)
(50)%
Research and Development Expense Total
$
4,897
$
5,502
$
(605
)
(11)%
$
9,676
$
9,659
$
17
0%
As (Z)-endoxifen is our only product candidate for which we currently incur R&D expenses, we have not further disaggregated R&D expenses by product candidate:
•
Clinical and non-clinical trial expenses decreased $0.6 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a decrease of $1.0 million in spend on preclinical trials that concluded in the prior period, partially offset by an increase in expense due to higher enrollment in clinical trials of $0.2 million and an increase in drug development costs of $0.3 million in the current period. Clinical and non-clinical trial expenses increased $0.4 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to an increase in expense related to clinical trial enrollments of $1.5 million and an increase in drug development costs of $0.7 million, partially offset by a $1.8 million decrease in expenses related to preclinical work completed in 2025.
•
The increase in R&D compensation expenses of $0.1 million and $0.2 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, was due primarily to increases in non-cash stock-based compensation expense of $0.1 million.
•
The decrease in R&D professional fees and other of $0.1 million and $0.5 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, was primarily attributable to a decrease in regulatory consulting fees in the 2026 periods related to our (Z)-endoxifen program as compared to the same periods in the prior year.
General and Administrative (G&A) Expenses.
The following table provides a breakdown of major categories within G&A expenses for the three and six months ended June 30, 2026 and 2025, together with the dollar change and percentage change in those categories (dollars in thousands):
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
Increase (Decrease)
% Increase (Decrease)
2026
2025
Increase (Decrease)
% Increase (Decrease)
General and Administrative Expense
Compensation
$
1,248
$
1,564
$
(316
)
(20)%
$
2,559
$
3,026
$
(467
)
(15)%
Professional fees and other
2,549
1,974
575
29%
6,329
3,769
2,560
68%
General and Administrative Expense Total
$
3,797
$
3,538
$
259
7%
$
8,888
$
6,795
$
2,093
31%
22
•
The decrease in G&A compensation expenses of $0.3 million and $0.5 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, was due primarily to a decrease in headcount in the current year periods compared to the same periods in the prior year.
•
The increase in G&A professional fees and other of $0.6 million and $2.6 million for the three and six months ended June 30, 2026, respectively, compared to the three and six months ended June 30, 2025, was due primarily to higher legal fees of $0.7 million and $2.5 million, for the three and six months ended June 30, 2026, respectively, related to our patent litigation matters, which have now been settled, as well as fees associated with management of our intellectual property portfolio and legal costs related to our SEC compliance and other stock administration matters incurred during the current year periods.
Interest Income.
Interest income was $0.2 million and $0.5 million for the three and six months ended June 30, 2026, respectively, and decreased $0.4 million and $0.8 million compared to the three and six months ended June 30, 2025, respectively. The decrease was due primarily to lower average cash balances invested in our money market account during the current year periods relative to the same periods in the prior year.
Income Taxes.
We did not record an income tax expense or benefit for the three and six months ended June 30, 2026 and 2025. We have incurred net losses since inception. Additionally, due to uncertainty regarding utilization of our net operating loss carryforwards and our history of losses, we maintain a full valuation allowance against our net deferred tax assets due to uncertainty regarding future taxable income.
Liquidity and Capital Resources
June 2026 Registered Direct Offering
On June 10, 2026, we entered into a securities purchase agreement (the Purchase Agreement) with institutional investors, which provided for the issuance and sale by the Company, in a registered direct offering (the Offering), of (i) 1,363,637 shares (the Shares) of the Company’s common stock and (ii) Series A warrants to purchase up to 1,363,637 shares of common stock and short-term Series B warrants to purchase up to 1,363,637 shares of common stock (such warrants, collectively, the Series Warrants). Each Share was offered and sold together with the Series Warrants at a combined offering price of $3.30 per Share and Series Warrants. The Series Warrants are subject to certain ownership limitations and have an exercise price of $4.40 per share, exercisable six months following the date of issuance. The Series A warrants will expire on the five and one-half year anniversary of the date of issuance. The short-term Series B warrants will expire on the two year anniversary of the date of issuance. We received net proceeds from the offering of $4.0 million after deducting placement agent fees and other offering expenses of $0.5 million.
2026 At-the-Market Offering
On February 20, 2026, we entered into an At-the-Market Offering Agreement (ATM), dated February 20, 2026 (the Agreement), with Rodman & Renshaw LLC (the Sales Agent). Pursuant to the Sales Agreement, we may offer, from time to time, to sell, in an "at-the-market offering," shares of our common stock up to an aggregate offering price of up to $50.0 million. For the three months ended June 30, 2026, we received net proceeds of $21 thousand and we issued 4,300 shares of common stock under the ATM.
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Cash Flows
The following table shows a summary of our cash flows for the periods indicated (in thousands):
For the Six Months Ended June 30,
2026
2025
(unaudited)
Net cash used in operating activities
$
(19,225
)
$
(13,218
)
Net cash used in investing activities
—
(9
)
Net cash provided by financing activities
4,020
—
Net decrease in cash, cash equivalents and restricted cash
$
(15,205
)
$
(13,227
)
We have incurred net losses and negative operating cash flows since inception. For the six months ended June 30, 2026, we recorded a net loss of $18.1 million and used $19.2 million of cash and cash equivalents in operating activities. As of June 30, 2026, we had $26.1 million in cash and cash equivalents and working capital of $25.6 million. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. We plan to obtain additional capital resources by selling our equity securities as well as short-term borrowing from banks, stockholders or other related parties, if needed. However, we cannot assure you that we will be successful in accomplishing any of these plans and, if we are unable to obtain adequate capital, we could be forced to cease operations or substantially curtail our activities. We do not anticipate any revenue until our pharmaceutical programs are developed, including receipt of all necessary regulatory approvals, and we successfully commercialize these programs. These conditions raise substantial doubt as to our ability to continue as a going concern. As of the date of filing this Quarterly Report, we expect our existing resources will likely be insufficient to fund our planned operations for the next twelve months, and additional capital resources will be needed to fund operations longer-term.
Net Cash Flows from Operating Activities.
During the six months ended June 30, 2026, compared to the same period in 2025, net cash used in operating activities increased $6.0 million due primarily to the following:
•
an increase of $1.5 million in cash used for clinical trials and pre-clinical activities, as well as investment in drug development, process validation, and stability costs;
•
an increase of $4.2 million in cash used related primarily to professional fees related to our settled patent litigation matters, as well as higher legal fees for intellectual property matters, SEC registrations and filings, and accounting fees, partially offset by decreases in investor relations fees and regulatory consulting fees;
•
a decrease of $0.5 million in net cash paid to employees due to fewer employees in the current year period, partially offset by employee severance payments. There were no severance related payments made during the same period in 2025; and
•
a decrease in interest income of $0.8 million resulting from lower interest income due to lower average amounts invested in our money market account during the current period when compared to the same period in the prior year.
Net Cash Flows from Investing Activities.
Our investment activity, including investments in capital equipment and other types of assets, were not material for the six months ended June 30, 2026 and 2025.
Net Cash Flows from Financing Activities.
During the six months ended June 30, 2026, we received net proceeds of $4.0 million related to our registered direct offering and $21 thousand for the sale of 4,300 shares of common stock under our ATM. There were no financing activities during the same period in the prior year.
Funding Requirements
We expect to incur ongoing operating losses for the foreseeable future as we continue to develop our planned therapeutic programs, including related clinical studies and other programs in the pipeline. Our future funding requirements will depend on many factors, including:
•
the costs of manufacturing drugs under development, the costs associated with clinical and non-clinical trials and associated salaries and benefits;
•
the extent to which we enter into contracts or invest in third parties in order to further develop our drug candidates;
•
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending other intellectual property-related claims; and
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•
the costs and fees associated with the discovery, acquisition or license of additional product candidates or technologies.
Substantial doubt exists about our ability to continue as a going concern. If we are unable to raise additional capital when needed on reasonable terms, if at all, we could be forced to cease operations or substantially curtail our activities. Our future capital uses and requirements will depend on the time and expenses needed to begin and continue clinical trials for our new drug developments.
Additional funding may not be available to us on acceptable terms or at all. Continued uncertain market and macroeconomic conditions, including due to inflationary pressures, high interest rates, general economic slowdown or a recession, foreign exchange rate volatility, financial institution instability, changes in monetary policy, changes in trade policies including tariffs and other trade restrictions or the threat of such actions, and increasing geopolitical instability, and the related volatility in the price of oil and other commodity prices, may limit our ability to access capital. In addition, the terms of any financing may adversely affect the holdings or the rights of our stockholders. For example, we may raise additional funds by issuing equity securities or by equity offerings, collaboration agreements, debt financings or licensing arrangements.
If adequate funds are not available, we may be required to terminate, significantly modify or delay our development programs, reduce our planned commercialization efforts, or obtain funds through collaborators that may require us to relinquish rights to our technologies or product candidates that we might otherwise seek to develop or commercialize independently. Further, we may elect to raise additional funds even before we need them if we believe the conditions for raising capital are favorable.
Contractual Obligations
Our contractual obligations represent our future cash commitments and liabilities under agreements with third-party clinical trial service providers. Apart from contracts with one third-party clinical trial service provider, such agreements are cancellable upon written notice by us. The non-cancellable contracts expire upon completion of the clinical trial and release of the final report, or the contract may be terminated by the clinical trial service provider, by the FDA or another governmental agency. As of June 30, 2026, our estimated non-cancellable commitment was $4.3 million, which will be paid over the term of the clinical trials.
Off-Balance Sheet Arrangements
We do not currently have, nor have we ever had, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts.
Recently Adopted Accounting Pronouncements
None.
Recently Issued Accounting Pronouncements
Refer to Note 3 of the Condensed Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALIT
ATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this item pursuant to Item 305(e) of Regulation S-K.
ITEM 4. CONTROLS AND P
ROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2026, pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act).
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or furnished under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or furnished under the Exchange Act is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives,
25
and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, our Principal Executive Officer and Principal Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are, and from time to time we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. For a discussion of our legal proceedings, refer to Note 12 to the Condensed Consolidated Financial Statements. We are not presently a party to any other legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our condensed consolidated results of operations, financial condition or cash flows.
ITEM 1A. RISK FACTORS
Summary of Risk Factors
Our business is subject to a number of risks and uncertainties, including risks and uncertainties that may prevent us from achieving our business objectives or may adversely affect our business, clinical and commercialization activities, the manufacturing of our product candidates, intellectual property, third party relationships, competitive environment, product and environmental liabilities, our ability to continue as a going concern and our common stock. Purchasing shares of common stock is an investment in our securities and involves a high degree of risk and uncertainty. You should carefully consider the following information about these risks and uncertainties, together with the other information contained in this
Quarterly Report on Form 10-Q for the three and six months ended June 30, 2026, before purchasing our securities. If any of the following risks and uncertainties actually occur, our business, financial condition and results of operations may suffer. In that case, the market price of our common stock could decline, and you may lose part or all of your investment in our Company. These risks and uncertainties are discussed more fully below and include, but are not limited to, risks related to
:
Risks Related to our Business
•
We have a history of operating losses and expect to continue to incur losses in the future.
•
We have not established sources of ongoing revenue to cover operating costs and allow us to continue as a going concern.
•
We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms.
•
We may expend our capital resources in ways that you do not agree or that do not produce stockholder value.
•
Any products we may develop may never achieve significant commercial market acceptance.
•
We may be unable to establish sales, marketing and commercial supply capabilities.
•
The loss of the services of our Chief Executive Officer could adversely affect our business.
•
Our acquisitions of, collaborations with, licenses with and investments in, other businesses may not yield expected benefits.
•
We may experience difficulty in locating, attracting and retaining experienced and qualified personnel, which could adversely affect our business.
•
Compounds and methods that appear promising in research and development may fail to reach later stages of development.
•
We may not obtain or maintain the regulatory approvals required to develop or commercialize some or all of our products.
•
Rare pediatric disease designation for any of our product candidates does not guarantee that the NDA for the product will qualify for a priority review voucher upon approval, and it does not lead to a faster development or regulatory review process, or increase the likelihood that our product candidates will receive marketing approval.
•
We may not enjoy the market exclusivity benefits of our orphan drug designations.
•
We are developing our products for patients who are severely ill, and patient deaths that occur in our clinical trials could negatively impact our business even if such deaths are not shown to be related to our drugs.
•
We are dependent on third-party service providers for a number of critical operational activities as well as for clinical trial activities.
•
We may encounter delays in our clinical trials or may not be able to conduct our trials in a timely manner.
•
Our clinical trials may fail to demonstrate adequately the efficacy and safety of our product candidates.
•
Our products and services may expose us to possible litigation and product liability claims.
•
The deployment of artificial intelligence (AI) in our or our collaborators’ product candidates could adversely affect our business, reputation or financial results.
•
Business disruptions, including natural disasters, severe weather, and pandemics, could seriously harm our future revenue and financial condition and increase our costs and expenses.
27
•
We maintain our cash at financial institutions, often in balances that exceed federally-insured limits.
•
Our ability to use net operating loss carryforwards and research tax credits to reduce future tax payments may be limited or restricted.
•
We, or our wholly-owned subsidiary, could lose our ability to operate in Australia, or our subsidiary may be unable to benefit from the past or future R&D tax rebates available under current Australian regulations.
Risks Related to our Intellectual Property
•
We may not be able to protect our proprietary technology.
•
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies.
•
Changes in U.S. patent law could diminish the value of patents in general.
•
We may not be able to protect our intellectual property rights throughout the world.
•
Our current patent portfolio may not include all patent rights needed for the full development and commercialization of our products. We cannot be sure that patent rights we may need in the future will be available for license on commercially reasonable terms, or at all.
•
Third-party claims alleging intellectual property infringement may prevent or delay our drug discovery and development efforts.
•
We cannot assure you that our current or future products will not infringe on existing or future patents.
•
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
•
We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
Risks Related to Our Industry
•
Legislative or regulatory reforms may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to manufacture, market and distribute our products after approval is obtained.
•
Disruptions at the FDA and other government agencies could negatively affect the review of our regulatory submissions, which could negatively impact our business.
•
Our inadvertent or unintentional failure to comply with the complex government regulations concerning patients' privacy, data subjects, and of medical records could subject us to fines and adversely affect our reputation.
•
Significant disruptions in our information technology systems or breaches of data security could adversely affect our business.
•
The failure to comply with complex federal and state laws and regulations related to submission of claims for services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs.
•
We face significant competition from other biotechnology and pharmaceutical companies.
•
Our employees and third-party partners may engage in misconduct or other improper activities.
•
Our business involves risk associated with handling hazardous and other dangerous materials.
Risks Related to the Securities Markets and Investment in our Securities.
•
Our shares of common stock are listed on the Nasdaq Capital Market, but we cannot guarantee that we will be able to maintain compliance with the continued listing standards or satisfy the continued listing standards going forward.
•
The sale of a substantial number of shares of our common stock into the market may cause substantial dilution.
•
The trading price of our common stock has been and is likely to continue to be volatile.
•
We have never paid dividends and we do not anticipate paying dividends in the future.
•
The ownership of our common stock may become concentrated among a small number of stockholders.
•
We may be unable to implement and maintain effective internal control over financial reporting.
•
The requirements of being a public company may strain our resources, result in litigation, and divert management's attention.
•
The anti-takeover provisions in our governing documents and Delaware law could delay or prevent a change in control which could reduce the market price of our common stock.
In evaluating our business, you should carefully consider the following discussion of material risks, events and uncertainties that make an investment in us speculative or risky in addition to the other information included in this Quarterly
28
Report. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business and operations, growth, reputation, prospects, operating and financial results, financial condition, cash flows, liquidity and stock price. Some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past. The risks and uncertainties described below are not the only ones we face. Our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our business. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.
Risks Related to our Business
We have a history of operating losses and expect to continue to incur losses in the future, and, as such, an investor cannot assess our profitability or performance based on past results.
Since December 2015, our business has primarily focused on the development of novel therapeutics for the treatment of breast cancer and other breast conditions. We have a limited operating history and have incurred net losses each year. Our net losses for the three and six months ended June 30, 2026 were $8.5 million and $18.1 million, respectively. We will continue to incur further losses in connection with costs for development of our programs, including ongoing and additional clinical studies.
Because of our limited operating history, particularly in the area of pharmaceutical development, our revenue and income potential is uncertain and cannot be based on prior results. Any evaluation of our business and prospects must be considered in light of these factors and the risks and uncertainties often encountered by companies in the development stage. Some of these risks and uncertainties include our ability to:
•
continue as a going concern;
•
commence, execute and obtain successful results from our clinical studies;
•
obtain regulatory approvals in the U.S. and elsewhere for our pharmaceuticals we are developing;
•
work with contract manufacturers to produce our pharmaceuticals under development in clinical and commercial quantities on acceptable terms and in accordance with required standards;
•
respond effectively to competition;
•
manage our growth in operations;
•
respond to changes in applicable government regulations and legislation;
•
access additional capital when required;
•
execute and successfully integrate strategic transactions, including potential acquisitions or investments; and
•
attract and retain key personnel.
We have not established sources of ongoing revenue to cover operating costs and allow us to continue as a going concern.
If we do not raise additional capital, we anticipate liquidity issues within the next twelve months and we may not continue as a going concern.
For the three and six months ended June 30, 2026, we incurred a net loss of $8.5 million and $18.1 million, respectively, and we had an accumulated deficit of $264.6 million since inception. As of the date of filing this Quarterly Report, we expect that our existing resources will likely be insufficient to fund our planned operations for the next 12 months, and additional capital resources will be needed to fund operations longer-term. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on obtaining adequate capital to fund operating losses until we become profitable. We plan to obtain additional capital resources by selling our equity securities as well as short-term borrowing from banks, stockholders or other related parties, if needed. However, we cannot assure you that we will be successful in accomplishing any of these plans and, if we are unable to obtain adequate capital on reasonable terms, if at all, we may be unable to develop and commercialize our product offerings or increase our geographic reach, and we could be forced to cease operations or substantially curtail our activities. We do not anticipate any revenue until our pharmaceutical programs are developed, including receipt of all necessary regulatory approvals, and we successfully commercialize these programs. These conditions raise substantial doubt as to our ability to continue as a going concern.
Macroeconomic factors could adversely impact our business and our ability to raise additional capital.
29
Our business and our ability to obtain adequate capital on reasonable terms, if at all, can be impacted by macroeconomic factors, such as high interest rates, the inflationary environment, recessionary fears, foreign exchange rate volatility, instability in financial institutions, government shutdowns, changes in monetary policy, changes in trade policies, including tariffs and other trade restrictions or the threat of such actions, and rising geopolitical instability including the conflicts in the Middle East and the related volatility in the price of oil and other commodity prices.
The United States has announced tariffs on imports from most countries, including significant tariffs on imports from Canada, Mexico and China, leading to increasing trade and political tensions. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. For example, in early April 2026, the U.S. Administration issued a proclamation under Section 232 of the Trade Expansion Act of 1962 determining that imports of certain pharmaceutical products, including patented pharmaceuticals, associated active pharmaceutical ingredients and related materials could threaten U.S. national security and authorized the imposition of tariffs of up to 100% on covered imports (the Pharmaceutical Tariffs). Imports of certain listed products from specific partner countries, including South Korea and the European Union, may be subject to reduced tariff rates. Certain tariff exemptions or zero-rate treatment may be available for products where all approved indications are designated as orphan, subject to applicable determinations, conditions and implementation guidance. There remains substantial uncertainty as to the implementation and potential impacts of such tariffs, the duration of existing tariffs, tariff levels, and whether additional tariffs or other retaliatory actions may be imposed, modified or suspended. For example, the U.S. Supreme Court ruled in February 2026 that certain tariffs imposed by the U.S. federal government under the International Emergency Economic Powers Act exceeded presidential authority and therefore are invalid. However, tariffs imposed under different statutes (including the Pharmaceutical Tariffs, if implemented) were not directly impacted by the decision and therefore remain in place. These actions and the related rising political tensions could negatively impact global macroeconomic conditions and the stability of global financial markets, which could have a material adverse effect on our business, financial condition and results of operations, including through increased supply chain costs.
We will need to raise substantial additional capital in the future to fund our operations and we may be unable to raise such funds when needed and on acceptable terms.
For the three and six months ended June 30, 2026, we incurred a net loss of $8.5 million and $18.1 million, respectively, and we had an accumulated deficit of $264.6 million since inception. As of June 30, 2026, we had cash and cash equivalents of $26.1 million. Because we have no current sources of revenue, substantial doubt exists about our ability to continue as a going concern and we expect that we will need to raise capital again in the future to continue to fund our operations. When we elect to raise additional funds or when additional funds are required, we may raise such funds through public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives. These financing arrangements may not be available on acceptable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be prevented from developing our pharmaceutical candidates, pursuing acquisitions, and investing in other companies, including as a sponsor or investor in special purpose acquisition companies, licensing, development and commercialization efforts, and our ability to continue our operations, generate revenues, and achieve or sustain profitability may be substantially harmed.
For example, our ability to raise capital in the public capital markets, including through “at the market” offerings pursuant to our Sales Agreement with the Sales Agent, may be limited by, among other things, SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 for primary offerings of securities. Although alternative public and private transaction structures may be available, these may require additional time and cost, may impose operational restrictions on us, and may not be available on attractive terms.
If we raise additional funds by selling or issuing equity securities or equity-linked securities, including through our Sales Agreement or through future registered direct offerings, our stockholders will experience dilution and it may have an adverse effect on the price of our common stock. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity, including securities convertible into or exercisable for equity securities, that we raise may contain terms, such as liquidation, conversion and other preferences, that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary for us to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely affected, and we may be unable to continue our operations.
We may expend our capital resources in ways that you do not agree or that do not produce stockholder value.
We intend to use our capital resources to execute on our business plan, which may include acquiring or in-licensing programs and may also include the internal development of additional programs that may or may not be related to oncology. We may also use our capital resources to invest directly or indirectly in business opportunities in healthcare or other industries, including through purchases of equity in other companies and as a sponsor or as an equity investor in special purpose acquisition companies, and we may not be able to realize the expected business or financial benefits of these investments.
30
In addition, our business plan may evolve to require more capital resources than currently contemplated either because our existing programs progress more quickly or at a greater cost than currently anticipated or because we may add additional programs. Stockholders may not agree with the ways in which we expend our capital resources and our capital deployment activities may not lead to increases in stockholder value.
Any products we may develop may never achieve significant commercial market acceptance.
We may not succeed in achieving commercial market acceptance of any of our products. In order to gain market acceptance for the drugs under development, we will need to demonstrate to physicians and other healthcare professionals the benefits of these therapies, including the clinical and economic application for their particular practice, the efficacy and safety and potential advantages compared to alternative therapies. Many physicians and healthcare professionals may be hesitant to introduce new services or techniques into their practice for many reasons, including lack of time and resources, the learning curve associated with the adoption of such new services or techniques into already established procedures, the product’s cost, convenience and ease of administration, the then-current standard of care, the strength of marketing and distribution support and the uncertainty of the applicability or reliability of the results of a new product. In addition, the availability of full or even partial payment for our products, whether by third party payors (e.g., insurance companies), by government payors or the patients themselves, will likely heavily influence physicians’ decisions to recommend or use our products.
We may be unable to establish sales, marketing and commercial supply capabilities.
We do not currently have, nor have we ever had, commercial pharmaceutical sales and marketing capabilities. If any of our product candidates become approved, we would need to build these capabilities in order to commercialize our approved product candidates. The process of establishing commercial capabilities will be expensive and time consuming, and may not be successful. Even if we are successful in building these capabilities, we may not be successful in commercializing any of our product candidates.
The loss of the services of our Chief Executive Officer could adversely affect our business.
Our success is dependent in large part upon our ability to execute our business plan, manufacture our pharmaceutical drugs and attract and retain highly skilled professional personnel. In particular, due to the relatively early stage of our business, our future success is highly dependent on the services of Steven C. Quay, our Chairman, President, Chief Executive Officer and founder, who provides much of the necessary experience to execute our business plan. He currently also serves, in an unpaid capacity, as a Senior Fellow at the Hudson Institute, where he advises on national-security issues relating to the convergence of artificial intelligence and biotechnology. From time to time, he may be considered for, asked to serve in, or accept public-service, governmental, academic, scientific, advisory, policy, or other external roles. If he were to accept any such role, reduce his time commitment to us, resign, take a leave of absence, or become subject to government ethics, recusal, conflict-of-interest, confidentiality, or other service-related requirements, or if speculation regarding any such role were to affect investor perceptions, our operations, financing activities, business-development efforts, clinical programs, investor communications, and the market price of our common stock could be adversely affected.
Our acquisitions of, collaborations with, licenses with and investments in, other businesses may not yield expected benefits, and our inability to successfully integrate these transactions may negatively impact our business, financial condition, and results of operations.
We anticipate that we will make acquisitions of, collaborations with, licenses with or investments in businesses in the future. We may not realize the anticipated benefits, or any benefits, from these transactions. If we fail to properly evaluate, complete and execute acquisitions, our business may be seriously harmed and our stock price may decline. For us to realize the benefits of future transactions, we must successfully integrate the acquired businesses with ours. Some of the challenges to successful integration include:
•
unanticipated costs or liabilities resulting from our acquisitions;
•
inability to retain key employees from acquired businesses;
•
difficulties integrating acquired operations, personnel, and technologies;
•
diversion of management attention from existing business operations and strategy;
•
diversion of resources that are needed in other parts of our business;
•
potential write-offs of acquired assets;
•
inability to maintain relationship partners of the acquired business;
•
potential financial and credit risks associated with the acquired business;
•
the need to implement controls, procedures, and policies at the acquired company;
•
the need to comply with additional laws and regulations applicable to the acquired business; and
•
the indirect tax of any such acquisitions.
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Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and other transactions have in the past and could in the future cause us to fail to realize the anticipated benefits of such acquisitions and transactions, and result in higher than expected costs, the recording of asset impairment or restructuring charges and other actions which could negatively impact our business, financial condition, results of operations and our ability to execute on our strategic plan.
We may experience difficulty in locating, attracting and retaining experienced and qualified personnel, which could adversely affect our business.
We will need to attract, retain, and motivate experienced clinical development and other personnel, particularly in the greater Seattle area as we expand our pharmaceutical development activities. Personnel with the required skills and experience may be scarce or may not be available at all in this geographic region. In addition, competition for these skilled personnel is intense and recruiting and retaining skilled employees is difficult, particularly for a development-stage company such as ours. If we are unable to attract and retain qualified personnel, our development activities may be adversely affected. Even if we are successful in identifying and attracting qualified employees, recent market changes, including the labor shortage, and high inflation have increased employee-related costs substantially. As a result, our operating expenses may continue to increase in the current market environment.
Compounds and methods that appear promising in research and development may fail to reach later stages of development for a number of reasons, including, among others, that clinical trials may take longer to complete than expected or may not be completed at all, and interim, top-line or preliminary clinical trial data reports may ultimately differ from actual results once data are more fully evaluated
.
Successful development of pharmaceutical products is highly uncertain and obtaining regulatory approval to market drugs is expensive, difficult, and speculative. Compounds that appear promising in research and development may fail to reach later stages of development for several reasons, including, but not limited to:
•
an unacceptable safety profile;
•
lack of efficacy;
•
delay or failure in obtaining necessary U.S. and international regulatory approvals, or the imposition of a partial or full regulatory hold on a clinical trial;
•
difficulties in formulating a compound, scaling the manufacturing process, timely attaining process validation for particular drug products, and completing manufacturing to support clinical studies;
•
pricing or reimbursement issues or other factors that may make the product uneconomical to commercialize;
•
production problems, such as the inability to obtain raw materials or supplies satisfying acceptable standards for the manufacture of our products;
•
equipment obsolescence, malfunctions or failures, product quality/contamination problems or changes in regulations requiring manufacturing modifications;
•
inefficient cost structure of a compound, finished drug, or device compared to alternative treatments;
•
obstacles resulting from proprietary rights held by others, such as patent rights for a particular compound;
•
lower than anticipated rates of patient enrollment as a result of factors, such as the number of patients with the relevant conditions, the proximity of patients to clinical testing centers, perceived cost/benefit of participating in the study, eligibility criteria for tests, patient insurance approvals of trial participation, and competition with other clinical testing programs;
•
nonclinical or clinical testing requiring significantly more time than expected resources or expertise than originally expected and inadequate financing, which could cause clinical trials to be delayed or terminated;
•
failure of clinical testing to show potential products to be safe and efficacious, and failure to demonstrate desired safety and efficacy characteristics in human clinical trials;
•
suspension of a clinical trial at any time by us, an applicable collaboration partner or a regulatory authority on the basis that the participants are being exposed to unacceptable health risks or for other reasons;
•
delays in reaching or failing to reach agreement on acceptable terms with manufacturers or prospective Contract Research Organizations (CROs) and trial sites; and
•
failure of third parties, such as CROs, academic institutions, collaborators, cooperative groups, and/or investigator sponsors, to conduct, oversee, and monitor clinical trials and results.
In addition, from time to time we expect to report interim, top-line or "preliminary" data for clinical trials, including for example the results from our Karisma-(Z)-endoxifen study, a Phase 2, randomized, double-blind, placebo-controlled, dose-response study evaluating the effect of low-dose (Z)-endoxifen on MBD in healthy premenopausal women with measurable MBD. Such data are based on a preliminary analysis of then-available efficacy and safety data, and such findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial.
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Interim, top-line or preliminary data are based on important assumptions, estimations, calculations and information then available to us to the extent we have had, at the time of such reporting, an opportunity to fully and carefully evaluate such information in light of all surrounding facts, circumstances, recommendations and analyses. As a result, interim, top-line or "preliminary" results may differ from future/final results, or different conclusions or considerations may qualify such results once existing data have been more fully evaluated. In addition, third parties, including regulatory agencies, may not accept or agree with our assumptions, estimations, calculations or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the ability to obtain approvals, or commercialization of the particular compound and our business generally.
If the development of our products is delayed or fails, or if top-line or preliminary clinical trial data reported differ from actual results, our development costs may increase and our ability to commercialize our products may be harmed, which could harm our business, financial condition, operating results or prospects.
We may not obtain or maintain the regulatory approvals required to develop or commercialize some or all of our products.
We are subject to rigorous and extensive regulation by the FDA in the U.S. and by comparable agencies in other jurisdictions, including the European Medicines Agency (EMA) in the European Union (E.U.), the United Kingdom’s Medicines and Healthcare products Regulatory Agency and the Therapeutic Goods Administration (TGA) in Australia.
Our product candidates are currently in research or development, and we have not received marketing approval for our products. Our products may not be marketed in the U.S. until they have been approved by the FDA and may not be marketed in other jurisdictions until they have received approval from the appropriate foreign regulatory agencies. Each product candidate requires significant research, development and pre-clinical testing and extensive clinical investigation before submission of any regulatory application for marketing approval. As a result, the regulatory pathway for these products may be more complex and obtaining regulatory approvals may be more difficult.
Obtaining regulatory approval requires substantial time, effort and financial resources, and we may not be able to obtain approval of any of our products on a timely basis, or at all. The number, size, design, and focus of pre-clinical and clinical trials that will be required for approval by the FDA, the EMA, or any other foreign regulatory agency varies depending on the compound, the disease or condition that the products are designed to address and the regulations applicable to any particular products. Pre-clinical and clinical data can be interpreted in different ways, which could delay, limit or preclude regulatory approval. The FDA, the EMA, and other foreign regulatory agencies can delay, limit, or deny approval of a product for many reasons, including, but not limited to:
•
a product may not be shown to be safe or effective;
•
the clinical and other benefits of a product may not outweigh its safety risks;
•
clinical trial results may be negative or inconclusive, or adverse medical events may occur during a clinical trial;
•
the results of clinical trials may not meet the level of statistical significance required by regulatory agencies for approval;
•
regulatory agencies may interpret data from pre-clinical and clinical trials in different ways than we do;
•
regulatory agencies may not approve the manufacturing process or determine that the manufacturing is not in accordance with current good manufacturing practices;
•
a product may fail to comply with regulatory requirements; or
•
regulatory agencies might change their approval policies or adopt new regulations.
If our products are not approved at all or quickly enough to provide net revenues to defray our operating expenses, our business, financial condition, operating results and prospects could be harmed.
We have received Rare Pediatric Disease designations from the FDA for (Z)-endoxifen for both Duchenne Muscular Dystrophy and McCune-Albright Syndrome. However, Rare Pediatric Disease designation for any of our product candidates does not guarantee that the NDA for the product will qualify for a priority review voucher upon approval, and it does not lead to a faster development or regulatory review process, or increase the likelihood that our product candidates will receive marketing approval.
Under the Rare Pediatric Disease Priority Review Voucher program, upon the approval of a qualifying NDA for the treatment of a rare pediatric disease, the sponsor of such an application would be eligible for a rare pediatric disease PRV that can be used to obtain priority review for a subsequent BLA or NDA. Currently, a rare pediatric disease PRV may be issued only if the FDA approves the BLA or NDA on or before September 30, 2029. Designation of a drug for a rare pediatric disease does not guarantee that an NDA will meet the eligibility criteria for a rare pediatric disease PRV at the time the application is approved. A rare pediatric disease PRV may only be granted if a designated drug is approved or licensed by September 30, 2029, unless Congress further extends the program. If Congress does not extend this program, we may not meet the deadline for PRVs to be granted for our current programs given the expected timeline of development. Additionally, a rare pediatric
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disease designation does not lead to faster development or regulatory review of the product or increase the likelihood that it will receive marketing approval.
We may not enjoy the market exclusivity benefits of our orphan drug designations.
Although we may obtain orphan designations in the treatment of certain diseases our products are intended to treat, the designation may not be applicable to any particular product we might get approved and that product may not be the first product to receive approval for that indication. Under the Orphan Drug Act, the first approved product with an orphan designation receives market exclusivity, which prohibits the FDA from approving the “same” drug for the same indication. The FDA has stated that drugs can be the “same” even when they are not identical. It is possible that another drug that the FDA considers to be the “same” as (Z)-endoxifen could be approved for the treatment of a disease that one of our orphan products is intended to treat before our product is approved, which means that we may not obtain orphan drug exclusivity and could also potentially be blocked from approval until the first product’s orphan drug exclusivity period expires or we demonstrate, if we can, that our product is superior. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved and granted orphan drug exclusivity, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. Further, orphan drug exclusivity can be lost if the FDA later determines that the request for designation was materially defective or if the applicant is unable to assure the availability of sufficient quantities of the drug to meet the needs of patients with the same approved indication or use for which the drug was approved. Orphan Drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
We do not know if, when, or how the FDA, Congress, or future judicial challenges may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted. In view of the overturn of the
Chevron
doctrine in
Loper Bright Enterprises v. Raimondo
, this landmark Supreme Court decision may invite various stakeholders to bring lawsuits against the FDA to challenge longstanding decisions and policies, including regulatory exclusivities, which could lead to uncertainties in the industry. Further, changes in the leadership of the FDA and other federal agencies under the Trump administration may lead to new policies and changes in the regulations and operations of the FDA, which may impact our clinical development plans.
We are developing our products for patients who are severely ill, and patient deaths that occur in our clinical trials could negatively impact our business even if such deaths are not shown to be related to our drugs.
We have enrolled patients in studies of our drug candidates who may die while enrolled in our studies. Patients in our clinical trials may also experience adverse outcomes following treatment with our drug candidates, including patient death. These adverse outcomes, even if unrelated to our drugs, could expose us to lawsuits and liabilities and could diminish our ability to obtain regulatory approval and/or achieve commercial acceptance for the related drug and our business could be materially harmed.
We are dependent on third-party service providers for a number of critical operational activities including, in particular, for the manufacture and testing of our products and associated supply chain operations, as well as for clinical trial activities. Any failure or delay in these undertakings by third parties could harm our business.
Our business is dependent on the performance by third parties of their responsibilities under contractual relationships. In particular, we heavily rely on third parties for the manufacture and testing of our products. We do not have an internal analytical laboratory or manufacturing facilities to allow the testing or production of products in compliance with Good Manufacturing Practices (cGMP). As a result, we rely on third parties to supply us in a timely manner with manufactured product candidates. We may not be able to adequately manage and oversee the manufacturers we choose; they may not perform as agreed or they may terminate their agreements with us. In particular, we depend on third party manufacturers to conduct their operations in compliance with applicable requirements under current Good Laboratory Practices (GLP), cGMP, Good Clinical Practices (GCP) or similar standards imposed by the U.S. and/or applicable foreign regulatory authorities, including the FDA and EMA. Any of these regulatory authorities may take action against a contract manufacturer who violates cGMP. Failure of our manufacturers to comply with FDA, EMA or other applicable regulations may cause us to curtail or stop the manufacture of such products until we obtain regulatory compliance.
We may not be able to obtain sufficient quantities of our products if we are unable to secure manufacturers when needed, or if our designated manufacturers do not have the capacity or otherwise fail to manufacture compounds according to our schedule and specifications or fail to comply with cGMP regulations. Furthermore, in order to ultimately obtain and maintain applicable regulatory approvals, any manufacturers we utilize are required to consistently produce the respective products in commercial quantities and of specified quality or execute fill-finish services on a repeated basis and document their ability to do so, which is referred to as process validation. In order to obtain and maintain regulatory approval of a compound, the applicable regulatory authority must consider the result of the applicable process validation to be satisfactory and must otherwise approve of the manufacturing process. Even if our compound manufacturing processes obtain regulatory
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approval and sufficient supply is available to complete clinical trials necessary for regulatory approval, there are no guarantees we will be able to supply the quantities necessary to effect a commercial launch of the applicable drug, or once launched, to satisfy ongoing demand. Any product shortage could also impair our ability to deliver contractually required supply quantities to applicable collaborators, as well as to complete any additional planned clinical trials.
We also rely on third party service providers for certain warehousing and transportation. With regard to the distribution of our drugs, we depend on third party distributors to act in accordance with Good Distribution Practice (GDP), and the distribution process and facilities are subject to continuing regulation by applicable regulatory authorities with respect to the distribution and storage of products.
In addition, we depend on medical institutions and CROs (together with their respective agents) to conduct clinical trials and associated activities in compliance with GCP and data privacy standards such as defined under the Health Insurance Portability and Accountability Act (HIPAA), General Data Protection Regulation (GDPR) and UK GDPR, and in accordance with our timelines, expectations and requirements. We are substantially dependent on the organizations conducting our clinical trials. To the extent any such third parties are delayed in achieving or fail to meet our clinical trial enrollment expectations, fail to conduct our trials in accordance with GCP, patient and data privacy standards such as HIPAA or study protocol or otherwise take actions outside of our control or without our consent, our business may be harmed. Furthermore, we conduct clinical trials in foreign countries, subjecting us to additional risks and challenges, including, patient and data privacy standards, such as GDPR and UK GDPR and in particular, as a result of the engagement of foreign medical institutions and foreign CROs, who may be less experienced with regard to regulatory matters applicable to us and may have different standards of medical care.
With regard to certain of the foregoing clinical trial operations and stages in the manufacturing and distribution chain of our compounds, we rely on vendors. In most cases we use a primary vendor and have identified, in some cases, secondary vendors. In particular, our current business structure contemplates, at least in the foreseeable future, use of a primary commercial supplier for the (Z)-endoxifen drug substance. The use of primary vendors for core operational activities, such as, manufacturing, and the resulting lack of diversification, exposes us to the risk of a material interruption in service related to these primary, outside vendors. As a result, our exposure to this concentration risk could harm our business.
In addition, our employees and personnel or our vendors or partners may use AI, including generative AI, technologies to perform their work or in their operations, and the disclosure and use of personal information in AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating AI, controlling for data bias and anti-discrimination. Any use of this technology could result in additional compliance costs, regulatory investigations and actions, and consumer lawsuits.
We also rely on a third-party information technology vendor to oversee our information technology systems, including our mechanisms, controls, technologies, systems, and other processes designed to help prevent or mitigate data loss, theft, misuse, or other security incidents or vulnerabilities affecting our data and to help maintain a stable information technology environment. As a result, our cybersecurity systems and processes are dependent upon the performance of our information technology vendor.
Although we monitor the compliance of our third-party service providers performing the aforementioned services, we cannot be certain that such service providers will consistently comply with applicable regulatory requirements or that they will otherwise timely satisfy their obligations to us. We and our third-party service providers may be subject to inspections by FDA and other regulatory authorities. Any such failure by us or by our third party service providers to comply with applicable legal or regulatory requirements and/or any failure by us to monitor their services or to plan for and manage our short- and long-term requirements underlying such services could result in shortage of the required compound, delays in or cessation of clinical trials, failure to obtain or revocation of product approvals or authorizations, product recalls, withdrawal, administrative detention, seizure of products, suspension of an applicable wholesale distribution authorization, and/or distribution of products, operating restrictions, injunctions, suspension of licenses, other administrative or judicial sanctions (including warning or untitled letters, import alerts, civil penalties and/or criminal prosecution), and/or unanticipated related expenditures to resolve shortcomings.
Such consequences could have a significant impact on our business, financial condition, operating results, or prospects.
We may encounter delays in our clinical trials or may not be able to conduct our trials in a timely manner.
Clinical trials are expensive and subject to regulatory approvals. Potential trial delays may arise from, but are not limited to:
•
supply chain disruptions, or lack of availability or increased costs of materials for our product candidates, including as a result of changes in trade policies, including tariffs or other trade restrictions or the threat of such actions;
•
outbreaks of disease, pandemics or epidemics, which could limit access to clinical trial sites, divert healthcare resources and limit the availability of medical facilities for our clinical trials;
•
failure to obtain on a timely basis, or at all, approval from the applicable regulatory agencies, institutional review board or ethics committee to open a clinical study;
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•
lower than anticipated patient enrollment or delays in patient enrollment, including due to the size and nature of the patient population, existing conditions, patient eligibility criteria defined in the protocol, proximity of patients to trial sites, the design of the trial, our ability to recruit clinical trial investigators with the appropriate competencies and expertise, competing clinical trials for similar or alternate therapeutic treatments, clinicians’ and patients’ perception of a lack of benefit to enroll in the study for whatever reason, our ability to obtain and maintain patient consents and patients dropping out of the trial;
•
delays in reaching agreements on acceptable terms with prospective CRO or vendors;
•
failure of CROs or other third parties to effectively and timely monitor, oversee, and maintain the clinical trials;
•
the imposition of partial or full clinical holds by FDA, or the pausing or termination of our clinical trials by institutional review boards or ethics committees;
•
complying with design protocols of any applicable special protocol assessment we receive from the FDA;
•
severe or unexpected drug-related side effects experienced by patients in clinical trials;
•
availability of materials provided by third parties necessary to manufacture our product candidates; and
•
changes in regulatory requirements, or additional regulatory requirements.
Our clinical trials may fail to demonstrate adequately the efficacy and safety of our product candidates, which would prevent or delay regulatory approval and commercialization.
Even if our clinical trials are completed as planned, we cannot be certain that their results will support our product candidate claims or that the FDA or foreign authorities will agree with our conclusions. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our product candidates are safe and effective for the proposed indicated uses. If the FDA concludes that our clinical trials have failed to demonstrate safety and effectiveness, we would not receive FDA approval to market that product candidate in the U.S. for the indications sought. In addition, it could cause us to abandon the product candidate and might delay development of other product candidates. Any delay or termination of our clinical trials would delay or preclude the filing of any submissions with the FDA and, ultimately, our ability to commercialize our product candidates and generate revenues. It is also possible that patients enrolled in clinical trials could experience adverse side effects that are not currently part of a product candidate's profile.
Our products and services may expose us to possible litigation and product liability claims.
Our business may expose us to potential product liability risks inherent in the testing, marketing, and processing personalized medical products, particularly those products and services we offered prior to shifting our focus on pharmaceutical development. Product liability risks may arise from, but are not limited to:
•
death of severely ill patients participating in our studies; and
•
adverse events related to drugs and therapies we are developing.
A successful product liability claim, or the costs and time commitment involved in defending against a product liability claim, could have a material adverse effect on our business. Regardless of the merit or outcome of a claim, it may result in decreased demand for our product candidates, reputational harm, withdrawal of clinical trial participants, investigations by regulators, withdrawal of prior governmental approvals, substantial monetary awards to patients, loss of revenue and the inability to commercialize our product candidates. Although we currently carry clinical trial insurance and product liability insurance which we believe to be reasonable, it may not be adequate to cover all liability that we may incur. An inability to renew our policies or to obtain sufficient insurance at an acceptable cost and on commercially desirable or reasonable terms, if at all, including due to a successful product liability claim, could prevent or inhibit the commercialization of our products.
The deployment of AI in our or our collaborators' product candidates could adversely affect our business, reputation or financial results.
We or our collaborators may integrate AI, including generative AI, and machine learning tools in connection with drug discovery efforts and the development of our product candidates. As a rapidly evolving technology, the use of AI is subject to numerous risks and uncertainties, including operational, technical, legal, compliance, privacy, data security, ethical, competitive and reputational risks. Machine learning and predictive analytics may produce flawed, biased, incomplete, overbroad or inaccurate results, which could negatively impact the development of our or our collaborators’ product candidates and expose us to competitive and reputational harm. Developing, testing and deploying resource-intensive AI systems, or supporting our collaborator’s development of such systems, including our sponsorship of the Phase 2 SMART study seeking to validate an AI-driven breast cancer risk assessment model, may require significant investment and increase our costs, and there is no guarantee that any such investment will lead to the discovery of new product candidates, eventual regulatory approval or commercialization of any product candidates, or acceleration of, or reduction in, costs associated with the drug discovery, development or approval timeline. Our inability, or our collaborators' inability, to successfully use
36
AI-enabled tools in the discovery or development of product candidates, or lack of public acceptance of such products, could adversely affect our business, reputation and financial results.
Business disruptions, including natural disasters, severe weather and pandemics, could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations are based primarily in Seattle, Washington. These operations could be subject to power shortages, telecommunications failures, water shortages, floods, earthquakes, fires and wildfires, extreme weather conditions, pandemics or epidemics and other natural or man-made disasters or business interruptions, for which we maintain customary insurance policies that we believe are appropriate. In addition, outbreaks of viruses, infectious diseases or pandemics, terrorist acts or acts of war, or geopolitical tensions, could cause damage or cause disruptions to us, our employees, facilities, contractors and collaborators, which could have a material adverse effect on our business, financial condition and results of operations. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our ability to manufacture clinical supplies of our product candidates could be disrupted if our suppliers are affected by any of the above events. We may have limited recourse against third parties if the non-compliance is due to factors outside of the manufacturer’s control.
We maintain our cash at financial institutions, often in balances that exceed federally-insured limits. The failure of financial institutions could adversely affect our ability to pay our operational expenses or make other payments.
Our cash is held at banking institutions in non-interest-bearing and interest-bearing accounts in amounts that exceed the Federal Deposit Insurance Corporation (FDIC) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. Any material loss that we may experience in the future or inability for a material time period to access our cash and cash equivalents could have an adverse effect on our ability to pay our operational expenses or make other payments, which could adversely affect our business.
Our ability to use net operating loss carryforwards and research tax credits to reduce future tax payments may be limited or restricted.
We have generated significant net operating loss carryforwards (NOLs), and research and development tax credits (R&D credits) as a result of our incurrence of losses and our conduct of research activities since inception. We generally are able to carry NOLs and R&D credits forward to reduce our tax liability in future years. However, our ability to utilize the NOLs and R&D credits is subject to the rules of Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), respectively. Those sections generally restrict the use of NOLs and R&D credits after an "ownership change." An ownership change occurs if, among other things, the stockholders (or specified groups of stockholders) who own or have owned, directly or indirectly, 5% or more of a corporation’s common stock or are otherwise treated as 5% stockholders under Section 382 of the Code and the U.S. Treasury Department regulations promulgated thereunder increase their aggregate percentage ownership of that corporation’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders over the applicable testing period. In the event of an ownership change, Section 382 of the Code imposes an annual limitation on the amount of taxable income a corporation may offset with NOL carry forwards and Section 383 of the Code imposes an annual limitation on the amount of tax a corporation may offset with business credit (including R&D credits) carryforwards.
We have experienced ownership changes in the past, and there can be no assurance that we will not experience ownership changes in the future. As a result, our NOLs and business credits (including R&D credits) may be subject to limitations, and we may be required to pay taxes earlier and in larger amounts than would be the case if our NOLs or R&D credits were freely usable.
If we, or our wholly-owned subsidiary, lose our ability to operate in Australia, or if our subsidiary is unable to benefit from the past or future R&D tax rebates available under current Australian regulations, our business and results of operations could be harmed.
Through our wholly-owned subsidiary in Australia, Atossa Genetics AUS Pty Ltd., we conduct certain R&D activities, including some of our clinical trials. Current Australian tax regulations provide for a R&D cash rebate on qualified R&D activities incurred in the country. The Australian R&D tax incentive program is a self-assessment program, and as such, the Australian Taxation Office (ATO) has the right to review our program and our related expenditures for a period of four years following the tax return filing date. If we are ineligible or unable to receive the anticip