[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited condensed consolidated financial statements detail its financial position, operations, equity changes, and cash flows Condensed Consolidated Balance Sheets | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $6,791 | $8,863 | | Total current assets | $7,696 | $9,417 | | Total assets | $16,515 | $18,236 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $2,630 | $2,647 | | Warrant liability | $759 | $1,061 | | Liability related to sale of future payments | $6,499 | $6,527 | | Total liabilities | $9,888 | $10,235 | | Total stockholders' equity | $6,627 | $8,001 | | Total Liabilities and Stockholders' Equity | $16,515 | $18,236 | Condensed Consolidated Statements of Operations | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $— | $— | $27 | $— | | Research and development | $1,500 | $1,909 | $2,669 | $3,342 | | Selling, general and administrative | $2,193 | $2,361 | $3,967 | $5,165 | | Total operating costs and expenses | $3,693 | $4,270 | $6,636 | $8,507 | | Loss from operations | $(3,693) | $(4,270) | $(6,609) | $(8,507) | | Total other income, net | $204 | $443 | $454 | $726 | | Net loss from continuing operations | $(3,489) | $(3,827) | $(6,155) | $(7,781) | | Net income from discontinued operations | $— | $— | $73 | $— | | Net loss | $(3,489) | $(3,827) | $(6,082) | $(7,781) | | Basic and diluted loss per share | $(0.10) | $(0.15) | $(0.20) | $(0.31) | Condensed Consolidated Statements of Stockholders' Equity | (In thousands, except share data) | Balance as of January 1, 2025 | Stock-based compensation | Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes | Issuance of common stock upon ESPP purchase | Net proceeds from issuance of common stock and pre-funded warrants in connection with equity financing | Net loss | Balance as of June 30, 2025 | | :-------------------------------- | :---------------------------- | :----------------------- | :------------------------------------------------------------------------------------------------ | :-------------------------- | :------------------------------------------------------------------------------------------------------- | :------- | :-------------------------- | | Common Stock Shares | 17,029,469 | — | 61,715 | 26,353 | 3,405,118 | — | 20,522,655 | | Common Stock Amount | $17 | $— | $— | $— | $3 | $— | $20 | | Additional Paid-in Capital | $465,214 | $362 | $(21) | $13 | $4,351 | $— | $469,919 | | Accumulated Deficit | $(457,230) | $— | $— | $— | $— | $(6,082) | $(463,312) | | Total Stockholders' Equity | $8,001 | $362 | $(21) | $13 | $4,354 | $(6,082) | $6,627 | Condensed Consolidated Statements of Cash Flows | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,418) | $(7,493) | | Net cash provided by investing activities | $— | $3,181 | | Net cash provided by financing activities | $4,346 | $12,014 | | Net change in cash and cash equivalents | $(2,072) | $7,702 | | Cash and cash equivalents—End of period | $6,791 | $13,423 | Notes to Condensed Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies The company, a specialty pharmaceutical firm, faces going concern doubts due to recurring losses while developing its key therapies - Talphera, Inc is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for medically supervised settings, including Niyad™ (regional anticoagulant for dialysis) and LTX-608 (nafamostat formulation for direct IV infusion)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company has incurred **recurring operating losses and negative cash flows** since inception, raising substantial doubt about its ability to continue as a going concern, and expects to need additional capital within the next twelve months[28](index=28&type=chunk) - The company adopted ASU 2023-09 (Income Taxes) for the period beginning January 1, 2025, which will not have a material impact on its condensed consolidated financial statements[35](index=35&type=chunk) 2. Investments and Fair Value Measurement The company's warrant liability, a Level III fair value measurement, decreased to $0.759 million as of June 30, 2025 Cash and Cash Equivalents | (In thousands) | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Cash | $615 | $364 | | Money market funds | $404 | $2,632 | | U.S. government agency securities | $5,772 | $5,867 | | Total cash and cash equivalents | $6,791 | $8,863 | Warrant Liability | (In thousands) | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------- | :------------------ | :---------------------- | | Warrant liability | $759 | $1,061 | - The fair value of the Level III warrant liability **decreased by $0.302 million** for the six months ended June 30, 2025, from $1.061 million to $0.759 million[42](index=42&type=chunk) 3. Discontinued Operations The company recognized net income of $73 thousand from discontinued DSUVIA-related operations for the six months ended June 30, 2025 - The company acquired all assets related to DSUVIA by Alora Pharmaceuticals, LLC on April 3, 2023[44](index=44&type=chunk) Net Income from Discontinued Operations | (In thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net income from discontinued operations | $73 | $— | Current Liabilities of Discontinued Operations | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total current liabilities of discontinued operations | $650 | $723 | 4. Sale of Future Payments The company recognized no non-cash interest expense in 2025 related to the sale of future DSUVIA payments - In January 2024, the company sold its rights to certain DSUVIA payments to XOMA (US) LLC for **$8.0 million**, recognizing **$1.2 million in other income** from the sale of future commercial sales payments[47](index=47&type=chunk)[48](index=48&type=chunk) - Due to Alora Pharmaceuticals, LLC discontinuing DSUVIA sales efforts to non-DoD customers, the company estimates future payments under the Purchase Agreement will be less than the proceeds received, leading to **no recognition of non-cash interest expense** for the three and six months ended June 30, 2025[50](index=50&type=chunk)[51](index=51&type=chunk) Non-cash Interest Expense | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-cash interest expense on liability related to sale of future payments | $— | $(213) | $— | $(394) | 5. Commitments and Contingencies The company is defending against ongoing litigation, including an appealed securities class action and stayed shareholder derivative complaints - A securities class action complaint, alleging violations related to DSUVIA marketing, was dismissed with prejudice on May 7, 2024, but plaintiffs filed a notice of appeal on June 5, 2024, with oral argument held on June 12, 2025[52](index=52&type=chunk) - Multiple shareholder derivative complaints, based on the same alleged misstatements as the securities class action, have been consolidated and stayed pending the outcome of the securities class action[53](index=53&type=chunk)[54](index=54&type=chunk) - The company believes these lawsuits are without merit and intends to vigorously defend against them, but cannot estimate the reasonably possible loss or range of loss due to the uncertainty of litigation[54](index=54&type=chunk) 6. Stockholders' Equity A private placement in April 2025 generated approximately $4.9 million in gross proceeds, with two subsequent tranches contingent on milestones - On April 2, 2025, the first closing of the 2025 Private Placement resulted in the issuance of 3,405,118 shares of common stock and pre-funded warrants to purchase up to 4,999,316 shares, generating approximately **$4.9 million in gross proceeds**[56](index=56&type=chunk) - The second and third closings of the 2025 Private Placement are contingent on Niyad NEPHRO CRRT study enrollment milestones (17 and 35 patients, respectively) and the common stock's average volume weighted average price reaching at least $0.7325 per share for five trading days[57](index=57&type=chunk) - Each of the second and third closings is expected to generate approximately **$4.9 million in gross proceeds**, totaling approximately $9.8 million in aggregate[57](index=57&type=chunk) 7. Warrants As of June 30, 2025, the company had 34.5 million common stock warrants outstanding with a weighted average exercise price of $0.82 Common Stock Warrants Activity | | Common Stock Warrants | Weighted average Exercise Price (per share) | | :---------------------------------- | :-------------------- | :---------------------------------------- | | Outstanding at December 31, 2024 | 29,474,257 | $0.96 | | Granted | 4,999,316 | $0.001 | | Outstanding and exercisable at June 30, 2025 | 34,473,573 | $0.82 | - The 2025 Pre-Funded Warrants, issued in April 2025, allow purchasers to buy up to **4,999,316 shares** of common stock at an exercise price of $0.001 per share, are immediately exercisable, have an unlimited term, and are classified as a component of permanent equity[63](index=63&type=chunk)[64](index=64&type=chunk) 8. Stock-Based Compensation Total stock-based compensation expense decreased to $0.362 million for the six months ended June 30, 2025 Stock-Based Compensation Expense | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $55 | $85 | $132 | $192 | | Selling, general and administrative | $111 | $138 | $230 | $333 | | Total stock-based compensation expense | $166 | $223 | $362 | $525 | Restricted Stock Units Activity | | Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | | :---------------------------------- | :------------------------------- | :------------------------------------- | | Restricted stock units outstanding, January 1, 2025 | 212,923 | $1.59 | | Granted | 126,967 | $0.58 | | Vested | (93,606) | $2.18 | | Forfeited | (5,088) | $0.80 | | Restricted stock units outstanding, June 30, 2025 | 241,196 | $0.85 | Stock Options Activity | | Number of Stock Options Outstanding | Weighted Average Exercise Price | | :---------------------------------- | :------------------------------ | :------------------------------ | | January 1, 2025 | 1,786,900 | $12.48 | | Granted | 727,800 | $0.58 | | Forfeited | (32,490) | $0.91 | | Expired | (23,000) | $64.66 | | June 30, 2025 | 2,459,210 | $8.62 | - As of June 30, 2025, total stock-based compensation expense related to unvested options to be recognized in future periods was **$1.1 million**, expected to be recognized over a weighted-average period of 2.7 years[68](index=68&type=chunk) 9. Net Loss per Share of Common Stock Basic and diluted loss per share for the six months ended June 30, 2025 was $(0.20), with antidilutive securities excluded Basic and Diluted Loss Per Share | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic and diluted loss per share | $(0.10) | $(0.15) | $(0.20) | $(0.31) | Antidilutive Securities Excluded from Diluted EPS | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RSUs, stock options and ESPP to purchase common stock | 2,700,406 | 2,155,522 | 2,700,406 | 2,155,522 | | Common stock warrants | 20,265,576 | 20,265,576 | 20,265,576 | 20,265,576 | - Potential common shares from pre-funded warrants with de minimis exercise prices are considered outstanding common shares and are included in the calculation of basic and diluted net loss per share in all circumstances[69](index=69&type=chunk) 10. Segment Information The company operates as a single reportable segment, with a net loss of $(6.1) million for the six months ended June 30, 2025 - Talphera has one reportable segment: the development and commercialization of innovative therapies for use in medically supervised settings[71](index=71&type=chunk) Segment Net Loss | (In thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment and condensed consolidated net loss | $(3,489) | $(3,827) | $(6,082) | $(7,781) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, liquidity, and capital resources for the periods ended June 30, 2025 About Talphera, Inc. - Talphera, Inc is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for medically supervised settings, including Niyad (regional anticoagulant), LTX-608 (nafamostat formulation for IV infusion), and two ready-to-use pre-filled syringe product candidates (Fedsyra and phenylephrine)[78](index=78&type=chunk) - The company's strategy is focused on developing, obtaining approval, and commercializing Niyad, with intentions to expand its portfolio to include additional acute care therapies[79](index=79&type=chunk) General Trends and Outlook - The company does not believe inflation has materially impacted its business or operating results to date, but acknowledges potential future adverse effects from inflation and increased interest rates[80](index=80&type=chunk) - In March 2025, the FDA agreed to **reduce the size of the Niyad registrational study (NEPHRO CRRT) from 166 to 70 patients** and broaden clinical study inclusion criteria to allow enrollment of patients already on CRRT beyond 48 hours and heparin-tolerant patients[81](index=81&type=chunk)[82](index=82&type=chunk) Financial Overview Key Financial Metrics | Financial Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(3.5) million | $(3.8) million | $(6.1) million | $(7.8) million | | Financial Metric | As of June 30, 2025 | As of December 31, 2024 | | :----------------- | :------------------ | :---------------------- | | Accumulated deficit | $(463.3) million | $(457.2) million | | Cash and cash equivalents | $6.8 million | $8.9 million | Critical Accounting Estimates - There have been no significant changes to the company's critical accounting policies or significant judgments and estimates for the three and six months ended June 30, 2025, from those previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024[86](index=86&type=chunk) Recently Adopted Accounting Pronouncements - The company adopted ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' for the period beginning January 1, 2025, which will be applied prospectively and is not expected to have a material impact on its condensed consolidated financial statements[87](index=87&type=chunk) Recently Issued Accounting Pronouncements - The FASB issued ASU 2024-03, 'Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,' effective for the company's annual disclosures for 2027 and interim periods beginning in 2028 The company is currently evaluating its impact[88](index=88&type=chunk) Results of Operations Research and Development Expenses R&D expenses decreased by $0.7 million (20%) for the six months ended June 30, 2025, primarily due to reduced employee compensation Three-Month Period Comparison | (In thousands, except percentages) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------------------- | :--------------------- | | Research and development expenses | $1,500 | $1,909 | $(409) | (21)% | Six-Month Period Comparison | (In thousands, except percentages) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | :--------------------- | :--------------------- | | Research and development expenses | $2,669 | $3,342 | $(673) | (20)% | - The decrease in R&D expenses was primarily due to a reduction in employee compensation and related expenses resulting from a reduction in headcount[93](index=93&type=chunk) Selling, General and Administrative Expenses SG&A expenses decreased by $1.2 million (23%) for the six months ended June 30, 2025, due to lower consulting and employee costs Three-Month Period Comparison | (In thousands, except percentages) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------------------- | :--------------------- | | Selling, general and administrative expenses | $2,193 | $2,361 | $(168) | (7)% | Six-Month Period Comparison | (In thousands, except percentages) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------------------- | :--------------------- | | Selling, general and administrative expenses | $3,967 | $5,165 | $(1,198) | (23)% | - The decrease in SG&A expenses for the three months was primarily due to a **$0.2 million reduction in consulting fees** and a **$0.1 million reduction in board of director expenses**, partially offset by a $0.3 million increase in legal fees For the six months, the decrease was mainly due to a **$0.5 million reduction in employee compensation** (headcount), **$0.4 million in consulting fees**, and **$0.2 million in board of director expenses**, partially offset by a $0.2 million increase in legal fees[95](index=95&type=chunk)[96](index=96&type=chunk) Other Income (Expense) Total other income decreased primarily due to lower interest income and the non-recurrence of a gain on sale of future payments Three-Month Period Comparison | (In thousands, except percentages) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------------------- | :--------------------- | | Total other income (expense), net | $204 | $443 | $(239) | (54)% | Six-Month Period Comparison | (In thousands, except percentages) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change 2025 vs. 2024 | % Change 2025 vs. 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------------------- | :--------------------- | | Total other income (expense), net | $454 | $726 | $(272) | (37)% | - Interest income decreased primarily due to lower average cash balances in 2025 The **gain on sale of future payments of $1.2 million** was recognized in January 2024 and did not recur in 2025 The gain on change in fair value of warrant liability was $0.1 million and $0.3 million for the three and six months ended June 30, 2025, respectively, compared to a $0.5 million decrease and a $0.5 million increase in 2024[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Liquidity and Capital Resources Liquidity and Going Concern The company has substantial doubt about its ability to continue as a going concern and expects to need additional capital within twelve months Key Liquidity Metrics | Financial Metric | As of June 30, 2025 | As of December 31, 2024 | | :------------------------------------ | :------------------ | :---------------------- | | Cash, cash equivalents and investments | $6.8 million | $8.9 million | - The company has incurred losses and generated negative cash flows from operations, raising **substantial doubt about its ability to continue as a going concern**, and expects to need additional capital within the next twelve months[103](index=103&type=chunk) - Additional capital may be sought through public or private equity offerings, debt securities, a new debt facility, monetizing assets, or entering into product development, license, or distribution agreements[104](index=104&type=chunk) 2025 Private Placement A private placement in April 2025 generated $4.9 million, with two additional tranches contingent on clinical and stock price milestones - The first closing of the 2025 Private Placement on April 2, 2025, involved the issuance of 3,405,118 shares of common stock and pre-funded warrants for 4,999,316 shares, yielding approximately **$4.9 million in gross proceeds**[108](index=108&type=chunk) - The second and third closings, each expected to generate approximately **$4.9 million**, are contingent on Niyad NEPHRO CRRT study enrollment of at least 17 and 35 patients, respectively, and the common stock's average volume weighted average price reaching at least $0.7325 per share for five trading days[109](index=109&type=chunk) Nasdaq Compliance The company has until December 1, 2025, to regain compliance with Nasdaq's $1.00 minimum bid price requirement - On June 5, 2025, Talphera received a notice from Nasdaq granting an additional 180 days, **until December 1, 2025**, to regain compliance with the $1.00 minimum bid price requirement[111](index=111&type=chunk) - The company's common stock was transferred to The Nasdaq Capital Market on May 30, 2025, to be eligible for the second 180-day grace period[112](index=112&type=chunk) - Talphera intends to monitor its bid price and has provided written notice to Nasdaq of its intention to cure the deficiency by effecting a **reverse stock split**, if necessary[113](index=113&type=chunk) Cash Flows Net cash used in operations was $6.4 million for the six months ended June 30, 2025, while financing activities provided $4.3 million Cash Flow Summary | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(6,418) | $(7,493) | | Net cash provided by investing activities | $— | $3,181 | | Net cash provided by financing activities | $4,346 | $12,014 | - Cash used in operating activities **decreased by $1.075 million (14.3%)** from $7.5 million in 2024 to $6.4 million in 2025, reflecting a lower net loss and changes in operating assets and liabilities[114](index=114&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Cash provided by financing activities in 2025 was primarily due to net proceeds from the **2025 Private Placement ($4.354 million)**, while 2024 included net proceeds from the XOMA Purchase Agreement ($6.1 million) and the January 2024 private placement ($5.9 million)[120](index=120&type=chunk)[121](index=121&type=chunk) Capital Commitments and Capital Resources Existing capital is insufficient for long-term operations, necessitating additional funding for product development and other expenditures - The company's current operating plan includes expenditures related to the development and supply of its nafamostat product candidates[122](index=122&type=chunk) - Existing capital resources are **not sufficient to fund operations** until the company can generate sufficient revenues, requiring additional funds through equity securities, asset monetization, debt, or development and licensing arrangements[124](index=124&type=chunk) - Future capital requirements are highly variable and depend on factors such as the timely completion of the Niyad clinical trial, costs of other nafamostat candidates, regulatory application expenses, commercialization efforts, and potential litigation[123](index=123&type=chunk)[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Talphera, Inc is not required to provide these disclosures - Talphera, Inc is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025 - Management, including the Chief Executive Officer and Chief Financial Officer, concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level** as of June 30, 2025[128](index=128&type=chunk) - There have been **no changes in the company's internal control over financial reporting** that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to Note 5 in Part I, Item 1 for information regarding its legal proceedings - The company refers to Note 5, 'Commitments and Contingencies—Litigation,' in Part I, Item 1 for information on legal proceedings[130](index=130&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including going concern uncertainty, potential Nasdaq delisting, clinical trial delays, and reliance on third parties Summary Risk Factors - There is **substantial doubt regarding the company's ability to continue as a going concern**, requiring additional capital that may be difficult to raise, potentially forcing delays or elimination of product development programs[133](index=133&type=chunk) - The common stock may be **delisted from The Nasdaq Capital Market** if the company cannot regain compliance with Nasdaq's $1.00 minimum bid price requirement, which could limit future capital raising and investor transactions[133](index=133&type=chunk) - **Delays in clinical trials** are common and could increase costs, jeopardize regulatory approval, and delay product sales, particularly for the lead Niyad product candidate[133](index=133&type=chunk) - The company **relies on third-party manufacturers and suppliers** for product candidates, including single sources in Asia, and any disruptions could delay development[133](index=133&type=chunk) Risks Related to Our Financial Condition and Need for Additional Capital - Talphera has incurred **significant net losses and negative cash flows** since inception and expects to continue incurring losses, raising substantial doubt about its ability to continue as a going concern[135](index=135&type=chunk)[139](index=139&type=chunk) - The company requires **significant additional capital** to fund operations and product development, which may be sought through equity offerings (potentially diluting stockholders), debt securities (imposing restrictions), or strategic agreements, with no assurance of availability on acceptable terms[137](index=137&type=chunk)[138](index=138&type=chunk)[144](index=144&type=chunk) - Talphera has **not generated significant product revenue** and may never be profitable, with future revenue heavily dependent on successful development, regulatory approval, and commercialization of product candidates[145](index=145&type=chunk)[147](index=147&type=chunk) - Future sales of DSUVIA to the Department of Defense are unpredictable and may not meet expectations due to U.S government-related factors beyond the company's control, especially after Alora Pharmaceuticals discontinued sales to non-DoD customers[149](index=149&type=chunk) Risks Related to Drug Development and Commercialization - Failure to realize anticipated benefits from the Lowell Therapeutics acquisition, including difficulties integrating new markets and product candidates like Niyad and LTX-608, could adversely affect the stock price[150](index=150&type=chunk) - Clinical trials, such as the Niyad NEPHRO CRRT study, are **prone to delays** (e.g., slow patient enrollment, regulatory hurdles, manufacturing issues), which can increase costs and jeopardize regulatory approval and product sales[152](index=152&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - If product candidates fail to demonstrate safety and efficacy in clinical trials, or if serious adverse effects are identified, the company may incur additional costs, experience delays, or be unable to complete development and commercialization[158](index=158&type=chunk)[160](index=160&type=chunk)[164](index=164&type=chunk) - The process for obtaining **FDA approval (PMA or NDA) is time-consuming, costly, and subject to delays**, with no guarantee of approval, especially given the company's lack of prior PMA approval experience[167](index=167&type=chunk)[168](index=168&type=chunk) - Establishing and maintaining collaborative relationships for international sales and development is difficult and uncertain, as partners may terminate agreements, pursue alternatives, or fail to devote sufficient resources, limiting the company's commercialization ability[170](index=170&type=chunk)[171](index=171&type=chunk) - The U.S biotechnology and pharmaceutical industries are **intensely competitive**, with many competitors possessing greater resources and experience, potentially rendering Talphera's products obsolete or non-competitive[173](index=173&type=chunk)[174](index=174&type=chunk) - Commercialization success depends on obtaining **adequate coverage and reimbursement** from government and private payers, which is uncertain and subject to cost containment trends and healthcare reform measures, potentially making profitable sales difficult[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Improper promotion of **off-label uses** of products could lead to significant liability, regulatory actions, fines, and reputational harm, adversely affecting business and financial results[181](index=181&type=chunk) - Inability to establish and maintain relationships with **Group Purchasing Organizations (GPOs)** could negatively impact sales and revenues, as GPOs significantly influence purchasing decisions of end-users[182](index=182&type=chunk) Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters - Existing and future legislation, such as the **Affordable Care Act and the Inflation Reduction Act (IRA)**, may increase the difficulty and cost of commercializing products and affect pricing, potentially impacting reimbursement and profitability[183](index=183&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - The IRA's **Medicare Drug Price Negotiation Program** and inflation-based rebates, along with state-level pricing controls, could significantly reduce revenue from product sales[187](index=187&type=chunk) - Changes in FDA regulations, guidance, or interpretations, or failure to adapt to new requirements, could delay or prevent marketing approvals and adversely affect business[188](index=188&type=chunk)[189](index=189&type=chunk) Risks Related to Our Reliance on Third Parties - Reliance on third-party manufacturers for clinical and commercial supplies of product candidates entails risks such as inability to meet specifications, regulatory standards, procure raw materials, or expand manufacturing capacity, potentially leading to stock-outs, delays, or regulatory actions[190](index=190&type=chunk)[191](index=191&type=chunk)[194](index=194&type=chunk) - The company relies on **single sources of supply** for the active pharmaceutical ingredient (API) and finished product of its nafamostat-based candidates, with the CDMO for finished goods located in China, exposing it to supply disruptions, trade restrictions, and increased costs[192](index=192&type=chunk)[193](index=193&type=chunk) - Manufacturing issues during scale-up or failure of third-party facilities to meet FDA or foreign regulatory requirements (cGMP, QSR) could delay product development, regulatory approval, and increase operating expenses[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Reliance on **Contract Research Organizations (CROs)** for clinical trials means limited influence over their performance, and their failure to comply with cGCPs or meet contractual obligations could lead to delays, unreliable data, and increased costs[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) Risks Related to Our Business Operations and Industry - Relationships with healthcare professionals and partners are subject to **anti-kickback, fraud and abuse, and other healthcare laws**, and non-compliance could result in substantial fines, business interruptions, and exclusion from government healthcare programs[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - Significant disruptions of **information technology systems or data security incidents**, including those involving third-party vendors, could lead to financial, legal, regulatory, business, and reputational harm, and loss of sensitive information[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - **Business interruptions** from natural disasters (e.g., earthquakes in the San Francisco Bay Area), pandemics, or man-made incidents could severely disrupt operations and sales efforts, and the company may not have sufficient insurance coverage[208](index=208&type=chunk)[209](index=209&type=chunk) - The company's future success depends on **retaining key executives and attracting qualified personnel**, and the inability to do so, or workforce reductions, could impede research, development, and commercialization objectives[210](index=210&type=chunk) - Potential **product liability claims**, especially from past DSUVIA sales, could result in substantial liability, costs, and reputational damage, and current insurance coverage may be insufficient or contain exclusions[213](index=213&type=chunk)[214](index=214&type=chunk) - **Misconduct by employees, contractors, or partners**, including non-compliance with regulatory standards or fraud and abuse laws, could lead to significant civil, criminal, and administrative penalties, impacting business operations and financial results[215](index=215&type=chunk) Risks Related to Our Intellectual Property - The company's commercial success depends on defending existing patents and expanding its portfolio, but there's no assurance of success against third-party challenges or that pending applications will issue, especially given the uncertain and evolving nature of pharmaceutical patent law[217](index=217&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - **Intellectual property litigation is expensive and time-consuming**; claims of infringement or misappropriation by competitors could delay market entry, require substantial damages or licensing fees, or force the development of alternative technologies[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[227](index=227&type=chunk) - Protecting proprietary rights is difficult and costly, with no guarantee that patents will provide competitive advantages or withstand challenges, and failure to adequately protect IP could erode competitive advantage[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[232](index=232&type=chunk) - Reliance on **trade secrets is risky** as they are difficult to protect, and confidentiality agreements may not prevent disclosure or provide adequate remedies, potentially allowing competitors to use proprietary information[233](index=233&type=chunk) - Failure to pay periodic maintenance fees or comply with procedural requirements for patents and applications could result in the **loss of patent rights**, enabling competitors to enter the market[234](index=234&type=chunk) - **Enforcing intellectual property rights globally is challenging** due to varying laws and less robust legal systems in some foreign countries, potentially leading to substantial costs and inadequate protection[235](index=235&type=chunk)[236](index=236&type=chunk) - Failure to secure trademark registrations in all potential markets, or challenges to existing marks, could adversely affect the business[238](index=238&type=chunk) Risks Related to Ownership of Our Common Stock - The market price of Talphera's common stock has historically been, and is likely to remain, **highly volatile** due to factors such as clinical trial results, funding needs, regulatory decisions, competition, and broader market fluctuations[239](index=239&type=chunk)[240](index=240&type=chunk)[244](index=244&type=chunk) - The company received a Nasdaq notice for non-compliance with the **$1.00 minimum bid price rule** and has until December 1, 2025, to regain compliance, potentially requiring a reverse stock split; failure to comply could lead to delisting, reduced liquidity, and difficulty raising capital[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk) - Future sales of additional equity securities to fund operations will likely result in **dilution to existing stockholders** and could depress the common stock's market price[246](index=246&type=chunk) - Talphera **does not intend to pay dividends** on its common stock, and any returns will be limited to stock value, as all available funds are expected to be retained for operations and growth[247](index=247&type=chunk) - Provisions in the company's charter documents and Delaware law, such as authorized 'blank check' preferred stock, limited director removal, and a staggered Board, could make it more difficult or costly for a third party to acquire the company[248](index=248&type=chunk)[249](index=249&type=chunk) Risks of a General Nature - **Litigation**, including securities-related class action and derivative lawsuits, can substantially increase costs, divert management's attention, and harm the business, with no assurance of successful defense or adequate insurance coverage[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - **International trade policies**, including tariffs, sanctions, and trade barriers, particularly affecting suppliers in China and Japan, may adversely impact the business by increasing R&D expenses, disrupting supply chains, and creating regulatory compliance risks[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) - The ability to use **net operating loss carryforwards (NOLs)** and other tax attributes may be limited by future taxable income generation, expiration dates, and ownership changes under Sections 382 and 383 of the Internal Revenue Code[260](index=260&type=chunk) - The **effective tax rate may fluctuate** due to changes in profitability mix, tax audits, new tax laws (e.g., Inflation Reduction Act's excise tax on share buybacks, R&D capitalization), or changes in interpretation of existing laws, potentially leading to higher tax obligations[261](index=261&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities or use of proceeds[262](index=262&type=chunk) [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities for the period - There were no defaults upon senior securities[263](index=263&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to Talphera, Inc[264](index=264&type=chunk) [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) The company reports no other information for the period - There is no other information to report[265](index=265&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the company's Quarterly Report on Form 10-Q - The exhibits include amended and restated certificates of incorporation and bylaws, forms of securities purchase and registration rights agreements, pre-funded warrants, and certifications from the Principal Executive Officer and Principal Financial and Accounting Officer[266](index=266&type=chunk)

[Company Overview and Recent Developments](index=1&type=section&id=Company%20Overview%20and%20Recent%20Developments) [Second Quarter 2025 Highlights & Corporate Update](index=1&type=section&id=Second%20Quarter%202025%20Highlights%20%26%20Corporate%20Update) Talphera announced its second quarter 2025 financial results and provided a corporate update, highlighting significant progress in the NEPHRO clinical study with accelerated patient enrollment and a strategic financing round to support ongoing operations - **15 patients** have been enrolled in the NEPHRO clinical study, which remains on track for completion by the end of **2025**, with a planned PMA submission in the **first quarter of 2026**[1](index=1&type=chunk)[3](index=3&type=chunk) - Enrollment momentum has accelerated in the last six weeks due to new target profile clinical sites and study protocol changes, with new sites enrolling **90% of patients** to date[2](index=2&type=chunk) - Talphera announced the closing of the first tranche of **$4.9 million** of a three-tranche financing for up to **$14.8 million**, led by existing investors Nantahala Capital and Rosalind Advisors[3](index=3&type=chunk) [About Talphera, Inc.](index=3&type=section&id=About%20Talphera%2C%20Inc.) Talphera is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for use in medically supervised settings, with Niyad® (nafamostat) as its lead product candidate - Talphera, Inc. is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings[9](index=9&type=chunk) - Talphera's lead product candidate, **Niyad®**, is a lyophilized formulation of nafamostat, currently being studied under an investigational device exemption (IDE) as an anticoagulant for the extracorporeal circuit[9](index=9&type=chunk) - **Niyad®** has received Breakthrough Device Designation status from the U.S. Food and Drug Administration (FDA)[9](index=9&type=chunk) [Clinical Development](index=1&type=section&id=Clinical%20Development) [NEPHRO CRRT Study Progress](index=1&type=section&id=NEPHRO%20CRRT%20Study%20Progress) The NEPHRO clinical study is progressing well, with accelerated patient enrollment and strategic expansion of clinical sites, supporting the projected completion by year-end 2025 and a subsequent PMA submission in Q1 2026 - **15 patients** have been enrolled in the NEPHRO clinical study, supporting the expected completion timeline by the end of **2025**[1](index=1&type=chunk)[3](index=3&type=chunk) - Enrollment momentum has increased, with new target profile clinical sites enrolling **90% of patients** to date[2](index=2&type=chunk) - Talphera expects to add **six new clinical sites** by the end of the **third quarter**, bringing the total number of sites up to **13**, including **nine** with the target profile[2](index=2&type=chunk)[3](index=3&type=chunk) - A planned PMA submission is anticipated in the **first quarter of 2026**, assuming enrollment and site activation trends continue[3](index=3&type=chunk) [About Niyad and Nafamostat](index=3&type=section&id=About%20Niyad%20and%20Nafamostat) Nafamostat is a broad-spectrum synthetic serine protease inhibitor with anticoagulant, anti-inflammatory, and potential anti-viral activities. Niyad® is its lyophilized formulation, currently undergoing a registrational study (NEPHRO CRRT) as an anticoagulant for extracorporeal circuits, and has received Breakthrough Device Designation - **Nafamostat** is a broad-spectrum, synthetic serine protease inhibitor with anticoagulant, anti-inflammatory and potential anti-viral activities[11](index=11&type=chunk) - **Niyad®** is a lyophilized formulation of nafamostat, currently being studied under an IDE as an anticoagulant for the extracorporeal circuit, and has received Breakthrough Device Designation Status from the FDA[11](index=11&type=chunk) - The registrational study of **Niyad®** is named the **NEPHRO CRRT** (Nafamostat Efficacy in Phase 3 Registrational Continuous Renal Replacement Therapy) study[11](index=11&type=chunk) - An ICD-10 procedural code, **XY0YX37**, has been issued for the extracorporeal introduction of nafamostat, and **LTX-608** is a proprietary nafamostat formulation for direct IV infusion with other potential therapeutic targets[11](index=11&type=chunk) [About the NEPHRO CRRT Study Design](index=3&type=section&id=About%20the%20NEPHRO%20CRRT%20Study%20Design) The NEPHRO CRRT Study is a prospective, double-blinded trial designed to enroll 70 adult patients undergoing renal replacement therapy who are at risk for bleeding or cannot tolerate heparin, evaluating Niyad®'s efficacy as an anticoagulant - The **NEPHRO CRRT Study** is designed as a prospective, double-blinded trial to be conducted at up to **14 U.S. hospital intensive care units**[12](index=12&type=chunk) - The study will enroll and evaluate **70 adult patients** undergoing renal replacement therapy, who cannot tolerate heparin or are at risk for bleeding[12](index=12&type=chunk) - The primary endpoint of the study is mean post-filter activated clotting time using **Niyad** versus placebo over the **first 24 hours**[12](index=12&type=chunk) - Key secondary endpoints include mean post-filter activated clotting time over **72 hours**, filter lifespan, number of filter changes over **72 hours**, number of transfusions over **72 hours**, and dialysis efficacy over the **first 24 hours**[12](index=12&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) [Second Quarter 2025 Financial Information Overview](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Information%20Overview) Talphera reported a reduced net loss for Q2 2025 compared to Q2 2024, primarily due to lower personnel and general administrative expenses, and provided updated, reduced guidance for 2025 cash operating expenses - Cash and cash equivalents balance was **$6.8 million** as of **June 30, 2025**[7](index=7&type=chunk) - Net loss from continuing operations for the **second quarter of 2025** was **$3.5 million**, compared to **$3.8 million** for the **second quarter of 2024**, largely due to reductions in personnel expense and change in fair value of warrant liability[7](index=7&type=chunk) - Net loss attributable to common shareholders for **Q2 2025** was **$3.5 million**, or **$0.10 per basic and diluted share**, compared to **$3.8 million**, or **$0.15 per basic and diluted share**, for **Q2 2024**[7](index=7&type=chunk) [2025 Expense Guidance](index=2&type=section&id=2025%20Expense%20Guidance) - Cash operating expenses (selling, general and administrative, and research and development expenses, excluding stock-based compensation) are expected to be in the range of **$16 million to $17 million** in **2025**[5](index=5&type=chunk) - This **2025** guidance is a reduction from the previously provided range of **$17 million to $19 million**[5](index=5&type=chunk) [Key Financial Results (Q2 2025 vs Q2 2024)](index=2&type=section&id=Key%20Financial%20Results%20(Q2%202025%20vs%20Q2%202024)) Combined R&D and SG&A Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (YoY) | | :----------------------------------- | :--------------------- | :--------------------- | :----------- | | Combined R&D and SG&A expenses | $3,700 | $4,300 | -$600 | | Excluding non-cash stock-based compensation | $3,500 | $4,000 | -$500 | | Net loss from continuing operations | $3,489 | $3,827 | -$338 | | Net loss attributable to common shareholders | $3,489 | $3,827 | -$338 | | Basic and diluted loss per share | $0.10 | $0.15 | -$0.05 | - The decrease in combined R&D and SG&A expenses in **Q2 2025** was primarily due to reductions in personnel expense and other general and administrative expenses[7](index=7&type=chunk) - The divestment of DSUVIA represents a discontinued operation; all historical operating results for the business are reflected within discontinued operations, with no DSUVIA related expenses in **Q2 2025** or **Q2 2024**[7](index=7&type=chunk) [Selected Financial Data Tables](index=5&type=section&id=Selected%20Financial%20Data%20Tables) The selected financial data tables provide a detailed breakdown of the company's statement of operations for the three and six months ended June 30, 2025 and 2024, balance sheet data as of June 30, 2025 and December 31, 2024, and a reconciliation of non-GAAP operating expenses [Statement of Operations Data](index=5&type=section&id=Statement%20of%20Operations%20Data) Statement of Operations Data (in thousands, except per share data) | Statement of Operations Data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $ - | $ - | $ 27 | $ - | | Research and development | 1,500 | 1,909 | 2,669 | 3,342 | | Selling, general and administrative | 2,193 | 2,361 | 3,967 | 5,165 | | Total operating costs and expenses | 3,693 | 4,270 | 6,636 | 8,507 | | Loss from operations | (3,693) | (4,270) | (6,609) | (8,507) | | Interest income and other income, net | 83 | 201 | 152 | 421 | | Gain on sale of future payments | - | - | - | 1,246 | | Gain (loss) on change in fair value of warrant liability | 121 | 455 | 302 | (547) | | Non-cash interest expense on liability related to sale of future payments | - | (213) | - | (394) | | Total other income, net | 204 | 443 | 454 | 726 | | Net loss from continuing operations | (3,489) | (3,827) | (6,155) | (7,781) | | Net income from discontinued operations | - | - | 73 | - | | Net loss | $ (3,489) | $ (3,827) | $ (6,082) | $ (7,781) | | Basic and diluted loss per share, continuing operations | $ (0.10) | $ (0.15) | $ (0.20) | $ (0.31) | | Basic and diluted loss per share, discontinued operations | $ - | $ - | $ 0.00 | $ - | | Basic and diluted loss per share | $ (0.10) | $ (0.15) | $ (0.20) | $ (0.31) | | Shares used in computing net loss per share, basic and diluted | 34,530 | 26,202 | 30,422 | 25,462 | Non-Cash Stock-Based Compensation Expense (in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $ 55 | $ 85 | $ 132 | $ 192 | | Selling, general and administrative | 111 | 138 | 230 | 333 | | Total | $ 166 | $ 223 | $ 362 | $ 525 | [Selected Balance Sheet Data](index=6&type=section&id=Selected%20Balance%20Sheet%20Data) Selected Balance Sheet Data (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Unaudited) | | :----------------------------------- | :-------------------------- | :---------------------------- | | Cash, cash equivalents and investments | $ 6,791 | $ 8,863 | | Total assets | 16,515 | 18,236 | | Total liabilities | 9,888 | 10,235 | | Total stockholders' equity | 6,627 | 8,001 | [Reconciliation of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) Reconciliation of Non-GAAP Operating Expenses (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating expenses (GAAP): | | | | | | Research and development | $ 1,500 | $ 1,909 | $ 2,669 | $ 3,342 | | Selling, general and administrative | 2,193 | 2,361 | 3,967 | 5,165 | | Total operating expenses | 3,693 | 4,270 | 6,636 | 8,507 | | Less stock-based compensation expense | 166 | 223 | 362 | 525 | | Operating expenses (non-GAAP) | $ 3,527 | $ 4,047 | $ 6,274 | $ 7,982 | [Additional Information](index=2&type=section&id=Additional%20Information) [Conference Call and Webcast Information](index=2&type=section&id=Conference%20Call%20and%20Webcast%20Information) Talphera will host a conference call and webcast on August 14, 2025, to discuss the financial results and provide a business update, with details provided for participation and replay access - Talphera will hold a conference call and webcast on **Thursday, August 14, 2025**, at **4:30 p.m. Eastern Time/1:30 p.m. Pacific Time**[1](index=1&type=chunk)[6](index=6&type=chunk) - Investors can participate by dialing **1-800-836-8184** (North America) or **1-646-357-8785** (international), using conference ID **32530**[8](index=8&type=chunk) - A webcast, including a slide presentation, will be accessible via **www.talphera.com** and a replay will be available on the Talphera website for **90 days** following the event[8](index=8&type=chunk) [Forward-looking Statements](index=4&type=section&id=Forward-looking%20Statements) This press release contains forward-looking statements based on current expectations and assumptions, subject to risks and uncertainties that could cause actual results to differ materially, as detailed in the company's SEC filings - The press release contains forward-looking statements based upon Talphera's current expectations and assumptions, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of **1995**[13](index=13&type=chunk) - These statements involve risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied, including risks related to product development, regulatory approvals, commercialization, and liquidity[13](index=13&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of their original date, and are advised to consult Talphera's SEC reports for full details on risks[13](index=13&type=chunk) [Investor Contacts](index=4&type=section&id=Investor%20Contacts) Contact information for Talphera's Chief Financial Officer and LifeSci Advisors is provided for investor inquiries - Talphera Investor Contact: Raffi Asadorian, CFO, **650-216-3500**, investors@talphera.com[14](index=14&type=chunk) - LifeSci Advisors Contact: Kevin Gardner, **617-283-2856**, kgardner@lifesciadvisors.com[14](index=14&type=chunk)

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides Talphera's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Talphera, Inc.'s unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows for the periods ended March 31, 2025, and December 31, 2024 (or March 31, 2024 for income/cash flow statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024%20(unaudited)) This section presents Talphera's financial position, detailing assets, liabilities, and stockholders' equity as of March 31, 2025, and December 31, 2024 | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $5,388 | $8,863 | | Total current assets | $6,176 | $9,417 | | Total assets | $14,995 | $18,236 | | Total current liabilities | $1,989 | $2,647 | | Total liabilities | $9,396 | $10,235 | | Total stockholders' equity | $5,599 | $8,001 | - Total assets decreased by **$3.24 million (17.7%)** from December 31, 2024, to March 31, 2025[15](index=15&type=chunk) - Total stockholders' equity decreased by **$2.40 million (30.0%)** over the same period[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section outlines Talphera's financial performance, including revenue, operating expenses, and net loss for the three months ended March 31, 2025, and 2024 | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $27 | $— | | Research and development | $1,169 | $1,433 | | Selling, general and administrative | $1,774 | $2,804 | | Total operating costs and expenses | $2,943 | $4,237 | | Loss from operations | $(2,916) | $(4,237) | | Net loss from continuing operations | $(2,666) | $(3,954) | | Net income from discontinued operations | $73 | $— | | Net loss | $(2,593) | $(3,954) | | Basic and diluted loss per share | $(0.10) | $(0.16) | - Net loss decreased by **$1.36 million (34.4%)** from **$3.95 million** in Q1 2024 to **$2.59 million** in Q1 2025, primarily due to reduced operating costs and expenses and a gain from discontinued operations[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section details changes in Talphera's stockholders' equity, reflecting net loss, stock-based compensation, and common stock issuance for the three months ended March 31, 2025, and 2024 | Metric | Balance as of January 1, 2025 (in thousands) | Balance as of March 31, 2025 (in thousands) | | :------------------------------------------ | :----------------------------------------- | :---------------------------------------- | | Total Stockholders' Equity | $8,001 | $5,599 | | Net loss | — | $(2,593) | | Stock-based compensation | — | $196 | | Issuance of common stock (ESPP) | — | $13 | - Total stockholders' equity decreased from **$8.00 million** at January 1, 2025, to **$5.60 million** at March 31, 2025, primarily driven by the net loss of **$2.59 million**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024%20(unaudited)) This section reports Talphera's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(3,470) | $(2,883) | | Net cash used in investing activities | $— | $(2,730) | | Net cash (used in) provided by financing activities | $(5) | $12,014 | | Net change in cash and cash equivalents | $(3,475) | $6,401 | | Cash and cash equivalents—End of period | $5,388 | $12,122 | - Net cash used in operating activities increased by **$0.59 million (20.4%)** in Q1 2025 compared to Q1 2024[24](index=24&type=chunk) - Financing activities provided significantly less cash in Q1 2025 (**$5 thousand used**) compared to Q1 2024 (**$12.01 million provided**), which included proceeds from the XOMA Purchase Agreement and a private placement[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section includes detailed notes explaining significant accounting policies, financial instruments, discontinued operations, sale of future payments, commitments, stock-based compensation, net loss per share, segment information, and subsequent events [Note 1. Organization and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Talphera, Inc. is a specialty pharmaceutical company focused on developing innovative therapies, primarily Niyad™ (regional anticoagulant for dialysis) and LTX-608 (nafamostat formulation for IV infusion). The company's financial statements are prepared on a going concern basis, but recurring losses and negative cash flows raise substantial doubt about its ability to continue as a going concern, necessitating additional capital within the next 12 months. No significant changes to accounting policies were made, and recent accounting pronouncements are being evaluated for impact - Talphera, Inc. focuses on developing Niyad™ (regional anticoagulant for dialysis) and LTX-608 (nafamostat formulation for IV infusion) for various indications[28](index=28&type=chunk)[29](index=29&type=chunk) - The company has incurred recurring operating losses and negative cash flows since inception, raising substantial doubt about its ability to continue as a going concern[30](index=30&type=chunk) - Management expects to need additional capital within the next 12 months to fund planned operations and may seek funds through equity offerings, debt, asset monetization, or licensing agreements[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 2. Investments and Fair Value Measurement](index=12&type=section&id=2.%20Investments%20and%20Fair%20Value%20Measurement) This note details the company's investments, primarily cash and cash equivalents, classified as available-for-sale securities. It also outlines the fair value measurement hierarchy, with money market funds as Level I, U.S. government agency securities as Level II, and warrant liabilities as Level III, valued using the Black-Scholes Model | Asset Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------- | :---------------------------- | :---------------------------- | | Cash | $725 | $364 | | Money market funds | $1,755 | $2,632 | | U.S. government agency securities | $2,908 | $5,867 | | Total cash and cash equivalents | $5,388 | $8,863 | | Liability Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------- | :---------------------------- | :---------------------------- | | Warrant liability | $880 | $1,061 | - The warrant liability decreased by **$0.18 million** from **$1.06 million** at December 31, 2024, to **$0.88 million** at March 31, 2025, resulting in a gain on change in fair value[44](index=44&type=chunk) [Note 3. Discontinued Operations](index=13&type=section&id=3.%20Discontinued%20Operations) This note details the financial results of discontinued operations related to the DSUVIA product, which was sold to Alora Pharmaceuticals, LLC in April 2023. For the three months ended March 31, 2025, the company reported net income from discontinued operations of $73 thousand, compared to zero in the prior year | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Change in estimated net liabilities of discontinued operations | $73 | $— | | Net income from discontinued operations | $73 | $— | - Net income from discontinued operations was **$73 thousand** for the three months ended March 31, 2025, compared to zero in the same period of 2024[47](index=47&type=chunk) [Note 4. Sale of Future Payments](index=14&type=section&id=4.%20Sale%20of%20Future%20Payments) In January 2024, Talphera sold its rights to certain future DSUVIA payments to XOMA (US) LLC for $8.0 million. The company recognized $1.2 million in other income from the sale of commercial DSUVIA payment rights and recorded $6.6 million as a liability for the remaining payments. Due to Alora discontinuing DSUVIA sales to non-DoD customers in October 2024, the company estimates future payments will be less than proceeds, resulting in a 0% effective interest rate for Q1 2025, down from 13.3% in Q1 2024 - Talphera sold rights to future DSUVIA payments to XOMA for **$8.0 million** in January 2024, recognizing **$1.2 million** in other income[49](index=49&type=chunk)[50](index=50&type=chunk) - A liability of approximately **$6.6 million** was recorded for the sale of future payments, to be accreted as interest expense[51](index=51&type=chunk) - Due to Alora discontinuing DSUVIA sales to non-DoD customers, the estimated effective interest rate for the agreement was **0%** for Q1 2025, down from **13.3%** in Q1 2024[52](index=52&type=chunk) [Note 5. Commitments and Contingencies](index=15&type=section&id=5.%20Commitments%20and%20Contingencies) Talphera is involved in several securities class action and shareholder derivative lawsuits related to alleged false and misleading statements about DSUVIA marketing. While the company believes these lawsuits are without merit and intends to vigorously defend them, the outcome is uncertain, and an adverse result could materially affect its financial condition - Talphera is a defendant in securities class action and shareholder derivative lawsuits alleging false and misleading statements regarding DSUVIA marketing[54](index=54&type=chunk)[55](index=55&type=chunk) - The U.S. District Court for the Northern District of California granted motions to dismiss the securities class action complaint with prejudice, and plaintiffs filed a notice of appeal[54](index=54&type=chunk) - The company cannot estimate the reasonably possible loss from these actions, and an adverse outcome could materially affect its financial condition, results of operations, and cash flows[56](index=56&type=chunk) [Note 6. Stock-Based Compensation](index=15&type=section&id=6.%20Stock-Based%20Compensation) Stock-based compensation expense for the three months ended March 31, 2025, was $196 thousand, a decrease from $302 thousand in the prior year. This expense is allocated between research and development and selling, general and administrative activities. As of March 31, 2025, $0.9 million in unvested stock-based compensation expense is expected to be recognized over a weighted-average period of 2.4 years | Expense Category | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | | :----------------------- | :---------------------------- | :---------------------------- | | Research and development | $77 | $107 | | Selling, general and administrative | $119 | $195 | | Total | $196 | $302 | - Total stock-based compensation expense decreased by **$106 thousand (35.1%)** from Q1 2024 to Q1 2025[57](index=57&type=chunk) - As of March 31, 2025, **$0.9 million** of unvested stock-based compensation expense remains to be recognized over a weighted-average period of **2.4 years**[59](index=59&type=chunk) [Note 7. Net Loss per Share of Common Stock](index=16&type=section&id=7.%20Net%20Loss%20per%20Share%20of%20Common%20Stock) Basic and diluted net loss per share for continuing operations was $(0.10) for Q1 2025, an improvement from $(0.16) in Q1 2024. Common stock equivalents, including ESPP, RSUs, stock options, and common stock warrants, were excluded from diluted EPS calculation due to their antidilutive effect in periods of net loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Basic and diluted, continuing operations | $(0.10) | $(0.16) | | Basic and diluted loss per share | $(0.10) | $(0.16) | | Shares used in computing net loss per share | 26,268,209 | 24,721,964 | - Potential common shares from ESPP, RSUs, stock options, and common stock warrants (totaling **1,921,926** in 2025 and **1,850,012** in 2024, excluding common stock warrants) were excluded from diluted EPS calculations as they were antidilutive[61](index=61&type=chunk) [Note 8. Segment Information](index=18&type=section&id=8.%20Segment%20Information) Talphera operates as a single reportable segment focused on developing and commercializing innovative therapies. The Chief Operating Decision Maker (CODM) reviews consolidated net loss to assess performance and allocate resources. Segment net loss for Q1 2025 was $(2,593) thousand, an improvement from $(3,954) thousand in Q1 2024 - Talphera has one reportable segment: development and commercialization of innovative therapies for medically supervised settings[63](index=63&type=chunk) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Revenue | $(27) | $— | | Employee expense (not including stock-based compensation) | $1,338 | $1,868 | | Development and clinical trial expense | $458 | $523 | | Other general and administrative expense | $927 | $1,388 | | Other segment income, net | $(30) | $175 | | Discontinued operations | $(73) | $— | | Segment and condensed consolidated net loss | $(2,593) | $(3,954) | - Segment net loss improved by **$1.36 million (34.4%)** from Q1 2024 to Q1 2025, driven by reductions in employee, development, and general & administrative expenses[67](index=67&type=chunk) [Note 9. Subsequent Events](index=18&type=section&id=9.%20Subsequent%20Events) On April 2, 2025, Talphera completed the first closing of a private placement, issuing common stock and pre-funded warrants for approximately $4.9 million in gross proceeds. Additional closings, totaling $9.8 million, are contingent on Niyad NEPHRO CRRT study patient enrollment milestones and stock price performance. This private placement released Nantahala Management, LLC from obligations related to a prior private placement - On April 2, 2025, Talphera completed the first closing of a private placement, raising approximately **$4.9 million** in gross proceeds through the issuance of common stock and pre-funded warrants[69](index=69&type=chunk)[101](index=101&type=chunk) - Two additional closings, each for approximately **$4.9 million** (totaling **$9.8 million**), are contingent on Niyad NEPHRO CRRT study patient enrollment milestones (17 and 35 patients) and the common stock's average volume weighted average price reaching at least **$0.7325** per share[70](index=70&type=chunk)[102](index=102&type=chunk) - The 2025 Private Placement released Nantahala Management, LLC from its obligations under the second tranche of the January 2024 Private Placement[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Talphera's financial condition and results of operations for the three months ended March 31, 2025, compared to 2024. It highlights the company's focus on developing Niyad and LTX-608, recent FDA agreements to reduce the Niyad study size, and the ongoing need for additional capital due to recurring losses and negative cash flows [About Talphera, Inc.](index=20&type=section&id=About%20Talphera%2C%20Inc.) This section provides an overview of Talphera's business, focusing on its specialty pharmaceutical development and commercialization strategy - Talphera is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for medically supervised settings[74](index=74&type=chunk) - The product development portfolio includes Niyad (regional anticoagulant for dialysis), LTX-608 (nafamostat formulation for IV infusion), and two ready-to-use pre-filled syringe product candidates (Fedsyra and phenylephrine)[74](index=74&type=chunk) - The company's strategy is focused on developing, obtaining approval, and commercializing Niyad, with intentions to expand into additional acute care therapies[75](index=75&type=chunk) [General Trends and Outlook](index=20&type=section&id=General%20Trends%20and%20Outlook) This section discusses general economic trends, including inflation and U.S. government tariffs, and their potential impact on the company's operations and financial results - Inflation has not materially impacted business or operating results during the periods presented, but may affect overhead and transportation costs, and interest rates in the future[76](index=76&type=chunk) - U.S. government tariffs imposed in March 2025 on biopharmaceutical products from China will increase costs until alternative sourcing is established[76](index=76&type=chunk) [Recent Developments](index=20&type=section&id=Recent%20Developments) This section highlights recent key events, including FDA agreements to reduce the Niyad study size and broaden patient inclusion criteria - In March 2025, the FDA agreed to reduce the size of the Niyad registrational study (NEPHRO CRRT) from **166 to 70 patients**[77](index=77&type=chunk) - In January 2025, the FDA also agreed to broaden clinical study inclusion criteria for Niyad, allowing enrollment of patients already on CRRT beyond 48 hours and heparin-tolerant patients[78](index=78&type=chunk) [Financial Overview](index=20&type=section&id=Financial%20Overview) This section summarizes Talphera's financial performance, including net loss, accumulated deficit, and cash position, emphasizing the need for additional capital | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------- | :--------------------------- | :---------------------------- | | Net loss (Q1) | $(2.6) | $(4.0) (Q1 2024) | | Accumulated deficit | $(459.8) | $(457.2) | | Cash and cash equivalents | $5.4 | $8.9 | - The company incurred net losses and negative cash flows from operations, with a net loss of **$2.6 million** for Q1 2025, down from **$4.0 million** in Q1 2024[79](index=79&type=chunk)[80](index=80&type=chunk) - Cash and cash equivalents decreased from **$8.9 million** at December 31, 2024, to **$5.4 million** at March 31, 2025[80](index=80&type=chunk) [Critical Accounting Estimates](index=20&type=section&id=Critical%20Accounting%20Estimates) This section identifies key accounting estimates and judgments, such as fair value measurements and going concern assessment, that significantly impact financial reporting - Key accounting estimates include fair value of warrants, impairment of long-lived assets, going concern assessment, revenue recognition, liability related to sale of future payments, and accrued clinical trial liabilities[35](index=35&type=chunk)[81](index=81&type=chunk) - No significant changes to critical accounting policies or estimates occurred during the three months ended March 31, 2025[82](index=82&type=chunk) [Recently Adopted Accounting Pronouncements](index=22&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) This section details the impact of recently adopted accounting standards on the company's financial statements - Talphera adopted ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective January 1, 2025, which is not expected to have a material impact on condensed consolidated financial statements[37](index=37&type=chunk)[83](index=83&type=chunk) [Recently Issued Accounting Pronouncements](index=22&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section discusses recently issued accounting pronouncements and their potential future impact on the company's financial reporting - The company is evaluating the impact of ASU 2024-03, 'Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures,' effective for annual disclosures in 2027 and interim periods in 2028[38](index=38&type=chunk)[84](index=84&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section analyzes Talphera's financial performance for the period, focusing on changes in revenue, operating expenses, and other income/expense [Research and Development Expenses](index=22&type=section&id=Research%20and%20Development%20Expenses) This section analyzes the changes in research and development expenses, attributing them to headcount reductions and other R&D activities | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | $ Change | % Change | | :----------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Research and development expenses | $1,169 | $1,433 | $(264) | (18)% | - Research and development expenses decreased by **$0.26 million (18%)** in Q1 2025 compared to Q1 2024, primarily due to a **$0.2 million** reduction in employee compensation and related expenses from headcount reduction, and a **$0.1 million** net reduction in other R&D expenses[89](index=89&type=chunk) [Selling, General and Administrative Expenses](index=23&type=section&id=Selling%20General%20and%20Administrative%20Expenses) This section analyzes the changes in selling, general and administrative expenses, detailing reductions in employee compensation, consulting fees, and board expenses | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | $ Change | % Change | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Selling, general and administrative expenses | $1,774 | $2,804 | $(1,030) | (37)% | - Selling, general and administrative expenses decreased by **$1.03 million (37%)** in Q1 2025 compared to Q1 2024, driven by a **$0.4 million** reduction in employee compensation, a **$0.4 million** reduction in consulting and legal fees, a **$0.1 million** decrease in stock-based compensation, and a **$0.1 million** reduction in board expenses[91](index=91&type=chunk) [Other Income (Expense)](index=23&type=section&id=Other%20Income%20(Expense)) This section analyzes changes in other income and expense, including interest income, gains on future payments, and warrant liability fair value adjustments | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | $ Change | % Change | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Interest income and other income, net | $69 | $220 | $(151) | (69)% | | Gain on sale of future payments | $— | $1,246 | $(1,246) | (100)% | | Gain (loss) on change in fair value of warrant liability | $181 | $(1,002) | $1,183 | (118)% | | Non-cash interest expense on liability related to sale of future payments | $— | $(181) | $181 | (100)% | | Total other income (expense), net | $250 | $283 | $(33) | (12)% | - Total other income (expense), net, decreased by **$33 thousand (12%)** in Q1 2025 compared to Q1 2024[92](index=92&type=chunk) - This was primarily due to the absence of a **$1.2 million** gain on sale of future payments in 2025, partially offset by a **$1.183 million** positive swing in the fair value of warrant liability (gain in 2025 vs. loss in 2024) and the absence of non-cash interest expense on the liability related to sale of future payments[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Talphera's financial liquidity, capital needs, and ability to fund future operations, including recent financing activities [Liquidity and Going Concern](index=24&type=section&id=Liquidity%20and%20Going%20Concern) This section assesses Talphera's current cash position and its ability to meet short-term and long-term obligations, highlighting going concern risks | Metric | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------- | :--------------------------- | :---------------------------- | | Cash, cash equivalents and investments | $5.4 | $8.9 | - Talphera had **$5.4 million** in cash, cash equivalents, and investments as of March 31, 2025, down from **$8.9 million** at December 31, 2024[96](index=96&type=chunk) - The company expects to need additional capital within the next twelve months to fund planned operations due to recurring losses and negative cash flows, raising substantial doubt about its ability to continue as a going concern[97](index=97&type=chunk)[99](index=99&type=chunk) [2025 Private Placement](index=24&type=section&id=2025%20Private%20Placement) This section details the recent private placement, including initial proceeds and contingent future closings tied to clinical trial milestones and stock performance - On April 2, 2025, Talphera completed the first closing of a private placement, issuing **3,405,118** shares of common stock and pre-funded warrants for **4,999,316** shares, generating approximately **$4.9 million** in gross proceeds[101](index=101&type=chunk) - Two additional closings, each expected to raise approximately **$4.9 million**, are contingent on Niyad NEPHRO CRRT study patient enrollment milestones (17 and 35 patients) and the common stock's average volume weighted average price reaching at least **$0.7325** per share[102](index=102&type=chunk) [Nasdaq Compliance](index=26&type=section&id=Nasdaq%20Compliance) This section addresses Talphera's compliance status with Nasdaq listing requirements, particularly regarding stockholders' equity and minimum bid price - Talphera received notices from Nasdaq for non-compliance with the Minimum Stockholders' Equity Requirement (**$10 million**) and the Minimum Bid Price Rule (**$1.00**)[104](index=104&type=chunk)[231](index=231&type=chunk) | Metric | March 31, 2025 (as reported, in thousands) | March 31, 2025 (as adjusted with 2025 Private Placement, in thousands) | | :------------------------------------------ | :----------------------------------------- | :------------------------------------------------------------------- | | Stockholders' equity | $5,599 | $10,042 | - The company believes it has achieved compliance with the Minimum Stockholders' Equity Requirement, with an adjusted equity of **$10.0 million** as of March 31, 2025, after accounting for the 2025 Private Placement[104](index=104&type=chunk)[232](index=232&type=chunk) [Cash Flows](index=26&type=section&id=Cash%20Flows) This section analyzes Talphera's cash flows from operating, investing, and financing activities, highlighting significant changes between periods | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(3,470) | $(2,883) | | Net cash used in investing activities | $— | $(2,730) | | Net cash (used in) provided by financing activities | $(5) | $12,014 | - Net cash used in operating activities increased to **$3.5 million** in Q1 2025 from **$2.9 million** in Q1 2024, primarily due to changes in operating assets and liabilities[107](index=107&type=chunk)[108](index=108&type=chunk) - Financing activities provided **$12.0 million** in Q1 2024 (from XOMA agreement and private placement) but used **$5 thousand** in Q1 2025[110](index=110&type=chunk) [Capital Commitments and Capital Resources](index=27&type=section&id=Capital%20Commitments%20and%20Capital%20Resources) This section outlines Talphera's future capital requirements for product development and the need for additional funding to support long-term operations - Talphera's current operating plan includes significant expenditures for product candidate development, particularly for nafamostat products[111](index=111&type=chunk) - Existing capital resources are insufficient to fund operations long-term, requiring additional funds through equity sales, asset monetization, debt, or licensing arrangements[113](index=113&type=chunk) - Future capital requirements are subject to numerous factors, including clinical trial success, regulatory approvals, commercialization costs, and intellectual property protection[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Talphera, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Talphera is a smaller reporting company and is exempt from providing quantitative and qualitative disclosures about market risk[114](index=114&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Talphera's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2025, concluding they were effective at a reasonable assurance level - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[116](index=116&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[117](index=117&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details legal proceedings, comprehensive risk factors, and other required disclosures including equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Talphera is involved in legal proceedings, including intellectual property, commercial, and employment matters, which are subject to uncertainty and could materially impact the business - Talphera is involved in various legal proceedings, including those related to intellectual property, commercial, and employment matters[118](index=118&type=chunk) - The outcome of these lawsuits is uncertain, and an adverse result could materially affect the company's business, results of operations, financial position, or cash flows[118](index=118&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks that could materially affect Talphera's future results, including substantial doubt about its ability to continue as a going concern, potential Nasdaq delisting, challenges in drug development and commercialization, reliance on third-party manufacturers, operational and industry-specific risks, intellectual property protection issues, and volatility in common stock ownership [Summary Risk Factors](index=29&type=section&id=Summary%20Risk%20Factors) This section provides a high-level overview of the most significant risks facing Talphera, including financial viability, regulatory compliance, and operational challenges - Substantial doubt exists regarding Talphera's ability to continue as a going concern due to the need for additional capital[121](index=121&type=chunk) - The company faces risks of delisting from The Nasdaq Global Market if it cannot regain compliance with listing requirements[121](index=121&type=chunk) - Key risks include potential failure to realize benefits from the Lowell Therapeutics acquisition, delays in clinical trials, inability to demonstrate product safety and efficacy, and challenges in patient enrollment[121](index=121&type=chunk) [Risks Related to Our Financial Condition and Need for Additional Capital](index=31&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Need%20for%20Additional%20Capital) This section details risks associated with Talphera's recurring losses, negative cash flows, and the critical need for additional capital to sustain operations - Talphera has incurred significant net losses and negative cash flows since inception and expects this to continue, raising substantial doubt about its ability to continue as a going concern[123](index=123&type=chunk)[127](index=127&type=chunk) - The company requires significant additional capital to fund operations and product development, which may be sought through equity offerings, debt, or strategic agreements, but such funding may not be available on acceptable terms or at all[126](index=126&type=chunk)[129](index=129&type=chunk)[132](index=132&type=chunk) - Failure to raise additional capital could force the company to reduce its workforce, delay or cease product development, or relinquish rights to technologies, potentially leading to an inability to continue operations[129](index=129&type=chunk)[130](index=130&type=chunk) [Risks Related to Drug Development and Commercialization](index=33&type=section&id=Risks%20Related%20to%20Drug%20Development%20and%20Commercialization) This section outlines risks inherent in the drug development process, including clinical trial delays, efficacy failures, and commercialization challenges - The company may fail to realize anticipated benefits from the Lowell Therapeutics acquisition, which could adversely affect its stock price[138](index=138&type=chunk) - Delays in clinical trials, such as the Niyad NEPHRO CRRT study, are common and can increase costs, jeopardize regulatory approval, and delay product sales[140](index=140&type=chunk)[141](index=141&type=chunk) - Failure of clinical trials to demonstrate safety and efficacy, or difficulties in patient enrollment, could lead to additional costs, delays, or an inability to commercialize product candidates[146](index=146&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) [Risks Related to Our Reliance on Third Parties](index=42&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section addresses risks arising from Talphera's dependence on third-party manufacturers and contract research organizations for product supply and clinical trials - Talphera relies on third-party manufacturers for clinical and commercial supplies of product candidates, facing risks such as inability to meet specifications, supply chain disruptions, and non-compliance with cGMP standards[178](index=178&type=chunk)[179](index=179&type=chunk) - The company has single sources of supply for API and finished products for nafamostat-based candidates, with the CDMO for finished goods located in China, exposing it to trade restrictions and supply chain risks[180](index=180&type=chunk)[181](index=181&type=chunk) - Reliance on CROs for clinical trials means limited influence over their performance, and their failure to comply with cGCPs or meet deadlines could delay regulatory approval and harm the business[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) [Risks Related to Our Business Operations and Industry](index=44&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations%20and%20Industry) This section covers operational and industry-specific risks, including regulatory compliance, IT security, personnel retention, and business interruptions - Relationships with healthcare professionals and partners are subject to anti-kickback, fraud and abuse, and other healthcare laws, which could lead to significant penalties if non-compliance is found[190](index=190&type=chunk)[193](index=193&type=chunk) - Significant disruptions to information technology systems or data security incidents could result in financial, legal, regulatory, business, and reputational harm[194](index=194&type=chunk)[195](index=195&type=chunk) - The company's future success depends on retaining key executives and attracting qualified personnel, and business interruptions from natural disasters or other events could delay operations[197](index=197&type=chunk)[199](index=199&type=chunk) [Risks Related to Our Intellectual Property](index=50&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) This section discusses risks related to protecting Talphera's intellectual property, including patent challenges, litigation, and global enforcement difficulties - Talphera's commercial success depends on defending existing patents and expanding its portfolio, but patents may be challenged, invalidated, or designed around by competitors[208](index=208&type=chunk)[210](index=210&type=chunk) - Litigation involving patents and other proprietary rights is expensive and time-consuming, potentially delaying market entry and interfering with business operations[211](index=211&type=chunk)[214](index=214&type=chunk) - Protecting proprietary rights globally is difficult and costly, as foreign laws may not offer the same extent of protection as the U.S., and trade secrets are vulnerable to independent discovery or unauthorized disclosure[217](index=217&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk) [Risks Related to Ownership of Our Common Stock](index=53&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) This section highlights risks for investors, including stock price volatility, potential Nasdaq delisting, and dilution from future equity offerings - The market price of Talphera's common stock has been, and is expected to remain, highly volatile due to various factors including development failures, funding issues, regulatory decisions, and market perceptions[227](index=227&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - The company faces potential delisting from The Nasdaq Global Market if it cannot regain compliance with minimum bid price and stockholders' equity requirements[231](index=231&type=chunk)[235](index=235&type=chunk) - Future sales of a substantial number of common shares, including through equity offerings, could depress the stock price and dilute existing stockholders[237](index=237&type=chunk) [Risks of a General Nature](index=59&type=section&id=Risks%20of%20a%20General%20Nature) This section covers broad risks such as litigation, international trade policies, and limitations on tax attributes that could impact the company's financial health - Litigation, including securities-related class action and derivative lawsuits, can substantially increase costs, divert management's attention, and harm the business[241](index=241&type=chunk)[243](index=243&type=chunk) - International trade policies, tariffs, sanctions, and trade barriers, particularly affecting suppliers in China, may adversely impact business, increase costs, and disrupt supply chains[244](index=244&type=chunk)[246](index=246&type=chunk)[248](index=248&type=chunk) - The company's ability to use net operating loss carryforwards and other tax attributes may be limited by ownership changes or changes in tax laws, potentially increasing future tax liability[249](index=249&type=chunk)[250](index=250&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported[251](index=251&type=chunk) [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported[252](index=252&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to Talphera, Inc - Mine safety disclosures are not applicable to the registrant[253](index=253&type=chunk) [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report for the period - No other information was reported[254](index=254&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, securities purchase agreements, registration rights agreements, pre-funded warrants, and certifications from executive officers - Exhibits include corporate governance documents (Amended and Restated Certificate of Incorporation, Bylaws), securities purchase and registration rights agreements related to the March 2025 private placement, pre-funded warrants, and certifications from the Principal Executive Officer and Principal Financial and Accounting Officer[255](index=255&type=chunk)

[Executive Summary & Corporate Update](index=1&type=section&id=Executive%20Summary%20%26%20Corporate%20Update) [Q1 2025 Key Highlights](index=1&type=section&id=Q1%202025%20Key%20Highlights) Talphera announced Q1 2025 financial results and corporate updates, with adjusted cash and investments of $9.8 million as of March 31, 2025, and activated three new clinical research sites - As of March 31, 2025, adjusted cash and investments (including the first tranche of private placement financing on April 2) totaled **$9.8 million**[1](index=1&type=chunk) - Three new clinical research sites have been activated and are screening patients year-to-date in 2025, with five more expected by mid-year, totaling 13[1](index=1&type=chunk) [CEO Commentary on Clinical Progress](index=1&type=section&id=CEO%20Commentary%20on%20Clinical%20Progress) CEO Vince Angotti reported good progress in activating new research sites, expecting to complete 70 patients by year-end, with increased site engagement boosting confidence in Niyad - The company expects to complete clinical studies for **70 patients** by the end of 2025[2](index=2&type=chunk) - Higher engagement from new clinical research sites is accelerating patient recruitment[2](index=2&type=chunk) - Demand for the Niyad product candidate continues to grow, with the next recruitment update provided upon enrolling **17 patients**[2](index=2&type=chunk) [Recent Regulatory & Financing Milestones](index=1&type=section&id=Recent%20Regulatory%20%26%20Financing%20Milestones) Talphera achieved significant regulatory and financing milestones in Q1 2025, including FDA approval for reduced patient numbers and broadened enrollment criteria for the NEPHRO CRRT study, and closing the first tranche of a private placement financing [FDA Approvals & Study Protocol Changes](index=1&type=section&id=FDA%20Approvals%20%26%20Study%20Protocol%20Changes) The FDA approved protocol amendments for the NEPHRO CRRT clinical study, reducing patient numbers from 166 to 70 and broadening enrollment criteria to include patients on CRRT for over 48 hours and heparin-intolerant patients - FDA approved reducing the NEPHRO CRRT clinical study patient count from **166 to 70**, with **90% power** for the primary endpoint[3](index=3&type=chunk) - FDA agreed to broaden clinical study enrollment criteria, allowing recruitment of patients who have received continuous renal replacement therapy (CRRT) for over **48 hours** and heparin-intolerant patients[3](index=3&type=chunk) [Private Placement Financing](index=2&type=section&id=Private%20Placement%20Financing) Talphera secured a financing agreement up to $14.8 million, led by existing investors Nantahala Capital and Rosalind Advisors, including management, with the first tranche of $4.4 million net proceeds closed on April 2, 2025 - The company secured a financing agreement up to **$14.8 million**, structured in two tranches contingent on **25% and 50% patient enrollment milestones** and stock price conditions[4](index=4&type=chunk) - The first tranche of financing closed on April 2, 2025, with net proceeds of **$4.4 million**[4](index=4&type=chunk) [Financial Performance & Outlook](index=2&type=section&id=Financial%20Performance%20%26%20Outlook) [First Quarter 2025 Financial Results](index=2&type=section&id=First%20Quarter%202025%20Financial%20Results) Talphera significantly narrowed its net loss in Q1 2025 to $2.6 million from $4.0 million in Q1 2024, primarily due to reduced personnel and general administrative expenses, with cash and cash equivalents at $5.4 million - In Q1 2025, the company's net loss from continuing operations was **$2.7 million**, a reduction from **$4.0 million** in Q1 2024[8](index=8&type=chunk) - Net loss attributable to common stockholders in Q1 2025 was **$2.6 million**, or **$0.10 per basic and diluted share**, an improvement from **$4.0 million** (or **$0.16 per share**) in Q1 2024[8](index=8&type=chunk) - As of March 31, 2025, cash and cash equivalents balance was **$5.4 million**[8](index=8&type=chunk) [Statement of Operations](index=5&type=section&id=Statement%20of%20Operations) In Q1 2025, the company reported revenue of $27 thousand, compared to zero in Q1 2024, with combined R&D and SG&A expenses decreasing from $4.237 million in Q1 2024 to $2.943 million in Q1 2025, leading to a narrower operating loss Q1 2025 Statement of Operations Data (Summary) | Metric | Three Months Ended March 31, 2025 ($'000) | Three Months Ended March 31, 2024 ($'000) | | :--------------------------------- | :----------------------- | :----------------------- | | Revenue | $27 | $- | | R&D Expenses | $1,169 | $1,433 | | Sales, General & Administrative Expenses | $1,774 | $2,804 | | Total Operating Costs and Expenses | $2,943 | $4,237 | | Operating Loss | $(2,916) | $(4,237) | | Net Loss from Continuing Operations | $(2,666) | $(3,954) | | Net Income from Discontinued Operations | $73 | $- | | Net Loss | $(2,593) | $(3,954) | | Basic and Diluted Loss Per Share | $(0.10) | $(0.16) | [Balance Sheet](index=6&type=section&id=Balance%20Sheet) As of March 31, 2025, the company reported cash, cash equivalents, and investments of $5.388 million, total assets of $14.995 million, total liabilities of $9.396 million, and total stockholders' equity of $5.599 million Balance Sheet Data (Summary) | Metric | March 31, 2025 ($'000) | December 31, 2024 ($'000) | | :-------------------- | :------------- | :------------- | | Cash, Cash Equivalents and Investments | $5,388 | $8,863 | | Total Assets | $14,995 | $18,236 | | Total Liabilities | $9,396 | $10,235 | | Total Stockholders' Equity | $5,599 | $8,001 | [Non-GAAP Operating Expenses](index=6&type=section&id=Non-GAAP%20Operating%20Expenses) Non-GAAP operating expenses, excluding stock-based compensation, were $2.747 million in Q1 2025, down from $3.935 million in Q1 2024, reflecting efforts to control operating costs Non-GAAP Operating Expense Reconciliation (Summary) | Metric | Three Months Ended March 31, 2025 ($'000) | Three Months Ended March 31, 2024 ($'000) | | :--------------------------------- | :----------------------- | :----------------------- | | R&D Expenses (GAAP) | $1,169 | $1,433 | | Sales, General & Administrative Expenses (GAAP) | $1,774 | $2,804 | | Total Operating Expenses (GAAP) | $2,943 | $4,237 | | Less: Stock-Based Compensation Expense | $196 | $302 | | Operating Expenses (Non-GAAP) | $2,747 | $3,935 | [2025 Expense Guidance](index=2&type=section&id=2025%20Expense%20Guidance) Talphera projects 2025 cash operating expenses (excluding stock-based compensation) to be between $17 million and $19 million, covering costs for executing and completing the NEPHRO CRRT registration trial - Cash operating expenses (SG&A and R&D, excluding stock-based compensation) for 2025 are projected to be between **$17 million and $19 million**[6](index=6&type=chunk) - This expense guidance includes costs for executing and completing the NEPHRO CRRT registration trial by year-end[6](index=6&type=chunk) [Product & Clinical Development](index=3&type=section&id=Product%20%26%20Clinical%20Development) [About Talphera & Niyad](index=3&type=section&id=About%20Talphera%20%26%20Niyad) Talphera is a specialty pharmaceutical company focused on developing and commercializing innovative therapies in medically supervised settings, with Niyad® (nafamostat) as its lead candidate for extracorporeal circuit anticoagulation, holding FDA Breakthrough Device Designation - Talphera is a specialty pharmaceutical company focused on developing and commercializing innovative therapies in medically supervised settings[10](index=10&type=chunk) - Niyad® is a lyophilized formulation of nafamostat, under investigation as an extracorporeal circuit anticoagulant, and has received FDA Breakthrough Device Designation[10](index=10&type=chunk)[12](index=12&type=chunk) - Nafamostat is a broad-spectrum synthetic serine protease inhibitor with anticoagulant, anti-inflammatory, and potential antiviral activities[12](index=12&type=chunk) [NEPHRO CRRT Study Details](index=3&type=section&id=NEPHRO%20CRRT%20Study%20Details) The NEPHRO CRRT study is a prospective, double-blind trial across up to 14 US hospital ICUs, evaluating 70 adult patients receiving renal replacement therapy who are heparin-intolerant or at bleeding risk, with the primary endpoint being mean post-filter activated clotting time over the initial 24 hours - The NEPHRO CRRT study is a prospective, double-blind trial to be conducted in up to **14 US hospital intensive care units**[13](index=13&type=chunk) - The study will enroll and evaluate **70 adult patients** receiving renal replacement therapy who are heparin-intolerant or at risk of bleeding[13](index=13&type=chunk) - The primary endpoint is the mean post-filter activated clotting time over the initial **24 hours** for Niyad versus placebo[13](index=13&type=chunk) [Corporate Information](index=2&type=section&id=Corporate%20Information) [Conference Call & Webcast Details](index=2&type=section&id=Conference%20Call%20%26%20Webcast%20Details) Talphera will host a conference call and webcast on May 14, 2025, at 4:30 PM ET to discuss Q1 results and provide business updates, with investor participation via phone or company website - The conference call and webcast will be held on May 14, 2025, at **4:30 PM ET**[7](index=7&type=chunk) - North American investors can dial **1-800-836-8184**, international investors **1-646-357-8785**, with conference ID **58894**[9](index=9&type=chunk) - The webcast will be accessible on the Talphera website under Investors/News & Events/Upcoming Events, with a **90-day replay** available[9](index=9&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements based on Talphera's current expectations and assumptions, protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, involving risks related to clinical studies, regulatory approvals, and liquidity - Forward-looking statements are based on Talphera's current expectations and assumptions, protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[14](index=14&type=chunk) - Risks and uncertainties include product development activities, clinical study results, regulatory approvals, commercialization capabilities, and company liquidity[14](index=14&type=chunk) - The company undertakes no obligation to publicly revise these forward-looking statements to reflect new information, events, or circumstances, unless required by law[14](index=14&type=chunk) [Investor Contacts](index=4&type=section&id=Investor%20Contacts) Investor contact information for Talphera and LifeSci Advisors is provided, including names, phone numbers, and email addresses - Talphera Investor Contact: CFO Raffi Asadorian, Phone: **650-216-3500**, Email: investors@talphera.com[15](index=15&type=chunk) - LifeSci Advisors Contact: Kevin Gardner, Phone: **617-283-2856**, Email: kgardner@lifesciadvisors.com[15](index=15&type=chunk)

Financial Performance - Total revenue for the three months ended September 30, 2024, was $117,000, compared to $370,000 for the same period in 2023, representing a decrease of 68.4%[13] - The net loss for the three months ended September 30, 2024, was $3,353,000, compared to a net loss of $1,357,000 for the same period in 2023, indicating a deterioration of 146.5%[13] - Basic and diluted loss per share for continuing operations was $(0.13) for the three months ended September 30, 2024, compared to $(0.08) for the same period in 2023[13] - As of September 30, 2023, the company reported a net loss of $1,357,000, with total equity amounting to $18,307,000[15] - The company recognized a net loss from discontinued operations of $8,098 thousand for the nine months ended September 30, 2023, with total revenues from discontinued operations at $501 thousand[47] Expenses and Costs - Research and development expenses for the three months ended September 30, 2024, were $2,053,000, an increase of 74.4% from $1,178,000 in the same period of 2023[13] - Total operating costs and expenses for the three months ended September 30, 2024, were $3,749,000, compared to $3,426,000 for the same period in 2023, reflecting an increase of 9.4%[13] - The Company recorded total stock-based compensation expense of $234,000 for the three months ended September 30, 2024, compared to $378,000 for the same period in 2023[79] - The total stock-based compensation expense for the nine months ended September 30, 2024, was $759,000, down from $1,418,000 for the same period in 2023[79] Equity and Liabilities - Total stockholders' equity decreased to $9,641,000 as of September 30, 2024, down from $14,105,000 as of December 31, 2023[10] - The accumulated deficit increased to $(455,360,000) as of September 30, 2024, compared to $(444,226,000) as of December 31, 2023[10] - The company reported total liabilities and stockholders' equity of $21,014,000 as of September 30, 2024, compared to $20,395,000 as of December 31, 2023[10] Cash Flow and Financing - The company experienced a net cash used in operating activities of $10,429,000 for the nine months ended September 30, 2023, compared to $13,543,000 for the same period in the previous year[16] - The company had cash and cash equivalents of $11,117,000 at the end of the reporting period, down from $13,389,000 at the beginning of the period[16] - The company raised $5,884,000 from the issuance of common stock related to the exercise of prefunded warrants during the reporting period[16] - Management plans to seek additional capital through various means, including public or private equity offerings and potential asset monetization[24] Product Development and Strategy - The company is focused on advancing the development of its lead product candidate, Niyad™, and aims to secure regulatory approval and commercialization[6] - The company is focused on developing innovative therapies, including Niyad™ and LTX-608, targeting conditions such as acute respiratory distress syndrome and disseminated intravascular coagulation[18] - The company has a product development pipeline that includes a license agreement for ephedrine and phenylephrine pre-filled syringes, pending FDA approval[22] Risks and Concerns - The company faces significant risks including market volatility, supply chain disruptions, and the ability to obtain necessary financing for operations[6] - The company has incurred recurring operating losses and negative cash flows since inception, raising concerns about its ability to continue as a going concern[23] - The Company may need to reduce its workforce or delay clinical trials if adequate funds are not available[25] Accounting and Financial Reporting - The Company is evaluating the impact of new accounting standards, including ASU 2023-07 and ASU 2023-09, but does not expect them to materially affect financial statements[34][35] - The Company has reclassified certain prior year amounts in its financial statements to conform to current year presentation[29] - The Company believes its most significant accounting estimates relate to revenue recognition and impairment of long-lived assets[28] Stock and Warrants - As of September 30, 2024, the Company had 29,474,257 warrants outstanding, with a weighted average exercise price of $0.96 per share[75] - The Company amended its 2020 Equity Incentive Plan to increase the number of authorized shares by 1,171,395, bringing the total to 3,161,395 shares[72] - The Company amended its 2011 Employee Stock Purchase Plan to increase the number of authorized shares by 100,000, totaling 345,000 shares[74] - The basic net loss per share of common stock is calculated by dividing the net loss by the weighted average number of shares outstanding for the period[83] - A total of 2,096,052 common stock equivalents were excluded from the computation of diluted net loss per share for the three months ended September 30, 2024, due to antidilutive effects[84]

Financial Performance - Net loss from continuing operations for Q3 2024 was $3.4 million, compared to a net loss of $1.4 million in Q3 2023[7]. - Net loss attributable to common shareholders for Q3 2024 was $3.4 million, or $0.13 per share, compared to a net loss of $1.4 million, or $0.08 per share, in Q3 2023[8]. - Talphera's total operating costs and expenses for Q3 2024 were $3.7 million, compared to $3.4 million in Q3 2023[6]. - Total operating expenses for the three months ended September 30, 2024, were $3,749,000, slightly up from $3,426,000 in the same period last year[21]. - The company reported a total of $12,256,000 in operating expenses for the nine months ended September 30, 2024, compared to $12,976,000 for the same period in 2023[21]. Research and Development - Combined R&D and SG&A expenses for Q3 2024 were $3.7 million, up from $3.4 million in Q3 2023, primarily due to NEPHRO study costs[6]. - Research and development expenses for the three months ended September 30, 2024, were $2,053,000, up from $1,178,000 for the same period in 2023, representing a 74% increase[21]. - The NEPHRO CRRT study aims to enroll 166 patients across up to 14 clinical sites in the U.S.[4]. - The first patient was enrolled in the NEPHRO CRRT study in August 2024[3]. - The study's primary endpoint is the mean post-filter activated clotting time for circuits infused with nafamostat compared to placebo over the first 24 hours[4]. - Talphera anticipates completing the NEPHRO study by the end of 2025 with improved enrollment rates[2]. Financial Position - Cash and investments totaled $11.1 million as of September 30, 2024[5]. - Cash, cash equivalents, and investments increased to $11,117,000 as of September 30, 2024, up from $9,381,000 at December 31, 2023[20]. - Total assets rose to $21,014,000, compared to $20,395,000 at the end of 2023[20]. - Total liabilities increased significantly to $11,373,000 from $6,290,000[20]. - Total stockholders' equity decreased to $9,641,000, down from $14,105,000[20]. Operating Expenses - Selling, general, and administrative expenses decreased to $1,696,000 for the three months ended September 30, 2024, from $2,248,000 in the prior year[21]. - Non-GAAP operating expenses for the three months ended September 30, 2024, were $3,515,000, compared to $3,048,000 in the prior year[21]. - Stock-based compensation expense for the three months ended September 30, 2024, was $234,000, down from $378,000 in the same period last year[21]. Regulatory Status - The company has received Breakthrough Device Designation status from the FDA for its lead product candidate, Niyad™[11].

Financial Performance - The cash, cash equivalents, and investments balance was $14.0 million as of June 30, 2024, an increase from $9.4 million at the end of 2023[22]. - Combined R&D and SG&A expenses for Q2 2024 totaled $4.3 million, slightly up from $4.2 million in Q2 2023, primarily due to increased costs associated with Niyad development[7]. - The net loss from continuing operations for Q2 2024 was $3.8 million, an improvement from a net loss of $4.4 million in Q2 2023[8]. - Net loss attributable to common shareholders for Q2 2024 was $3.8 million, or $0.15 per share, compared to a net loss of $4.4 million, or $0.40 per share, in Q2 2023[9]. - The company recognized a change in fair value of the warrant liability, contributing to the net loss reduction in Q2 2024[8]. - Talphera's total assets increased to $24.9 million as of June 30, 2024, compared to $20.4 million at the end of 2023[22]. Clinical Development - Talphera initiated patient screening at multiple clinical sites for the NEPHRO CRRT registrational study, which will enroll 166 patients across up to 14 sites[5]. - Talphera received FDA approval to increase the maximum number of study sites for the NEPHRO study from 10 to 14, which is expected to expedite the study's completion[2]. - The primary endpoint of the NEPHRO study is the mean post-filter activated clotting time for circuits infused with nafamostat compared to placebo over the first 24 hours[5]. - Talphera's lead product candidate, Niyad™, is being studied as an anticoagulant for the extracorporeal circuit and has received Breakthrough Device Designation from the FDA[11].

PART I. FINANCIAL INFORMATION This section provides Talphera's unaudited financial statements and management's discussion of financial condition and operations [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents Talphera's unaudited condensed consolidated financial statements, highlighting increased cash, new liabilities, and ongoing net losses [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Overview of Talphera's financial position, detailing changes in assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets | Metric | Dec 31, 2023 (in thousands) | Jun 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $5,721 | $13,423 | $7,702 | 134.6% | | Short-term investments | $3,660 | $600 | $(3,060) | -83.6% | | Total current assets | $11,576 | $16,037 | $4,461 | 38.5% | | Total assets | $20,395 | $24,856 | $4,461 | 21.9% | | Total current liabilities | $4,512 | $3,274 | $(1,238) | -27.4% | | Warrant liability | $1,778 | $2,325 | $547 | 30.8% | | Liability related to sale of future payments | $— | $6,527 | $6,527 | N/A | | Total liabilities | $6,290 | $12,126 | $5,836 | 92.8% | | Total stockholders' equity | $14,105 | $12,730 | $(1,375) | -9.8% | - Current assets increased significantly from **$11.576 million** at December 31, 2023, to **$16.037 million** at June 30, 2024, primarily driven by an increase in cash and cash equivalents[20](index=20&type=chunk) - Total liabilities rose substantially from **$6.290 million** to **$12.126 million**, mainly due to a new liability related to the sale of future payments[20](index=20&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents Talphera's financial performance, including revenue, expenses, and net loss for the reporting periods Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | Q2 2024 | Q2 2023 | 6M 2024 | 6M 2023 | | :-------------------- | :------ | :------ | :------ | :------ | | Revenue | $— | $253 | $— | $253 | | R&D Expenses | $1,909 | $1,552 | $3,342 | $2,599 | | SG&A Expenses | $2,361 | $2,670 | $5,165 | $6,951 | | Loss from operations | $(4,270) | $(3,969) | $(8,507) | $(9,297) | | Net loss from continuing operations | $(3,827) | $(4,428) | $(7,781) | $(4,364) | | Net loss | $(3,827) | $(4,371) | $(7,781) | $(12,523) | | Basic and diluted loss per share | $(0.15) | $(0.40) | $(0.31) | $(1.15) | - Net loss from continuing operations improved to **$(3.827) million** for Q2 2024 from **$(4.428) million** in Q2 2023, and to **$(7.781) million** for 6M 2024 from **$(4.364) million** in 6M 2023[23](index=23&type=chunk) - Revenue from continuing operations was **zero** for both the three and six months ended June 30, 2024, compared to **$0.253 million** in the prior year periods[23](index=23&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Details changes in Talphera's stockholders' equity, reflecting net losses and financing activities Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Jan 1, 2024 | Mar 31, 2024 | Jun 30, 2024 | | :-------------------- | :---------- | :----------- | :----------- | | Total Stockholders' Equity | $14,105 | $16,334 | $12,730 | | Net proceeds from issuance of prefunded warrants | N/A | $5,884 | N/A | | Net loss (Q1 2024) | N/A | $(3,954) | N/A | | Net loss (Q2 2024) | N/A | N/A | $(3,827) | - Total stockholders' equity decreased from **$14.105 million** at January 1, 2024, to **$12.730 million** at June 30, 2024[27](index=27&type=chunk) - The decrease was primarily due to net losses of **$3.954 million** (Q1 2024) and **$3.827 million** (Q2 2024), partially offset by **$5.884 million** in net proceeds from the issuance of prefunded warrants[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes Talphera's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(7,493) | $(10,583) | | Net cash provided by investing activities | $3,181 | $3,123 | | Net cash provided by (used in) financing activities | $12,014 | $(5,405) | | Net change in cash and cash equivalents | $7,702 | $(12,865) | | Cash and cash equivalents—End of period | $13,423 | $7,410 | - Net cash provided by financing activities significantly increased to **$12.014 million** for the six months ended June 30, 2024, compared to **$5.405 million** used in the prior year[29](index=29&type=chunk) - This resulted in a net increase in cash and cash equivalents of **$7.702 million**, bringing the total to **$13.423 million** at June 30, 2024[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting Talphera's condensed consolidated financial statements [1. Organization and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Details Talphera's corporate structure, product focus, accounting policies, and ongoing going concern risks - Talphera, Inc. changed its name from AcelRx Pharmaceuticals, Inc. on **January 9, 2024**. The company is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for medically supervised settings, with a product development portfolio featuring Niyad™ and LTX-608[33](index=33&type=chunk)[34](index=34&type=chunk) - On **January 12, 2024**, Talphera sold its right to certain future DSUVIA payments to XOMA (US) LLC for **$8.0 million**, retaining a **50%** interest in specific payments after XOMA receives **$20.0 million**[35](index=35&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) - The company has incurred recurring operating losses and negative cash flows since inception, raising **substantial doubt** about its ability to continue as a going concern. Management expects to need additional capital within the next **12 months**[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Talphera is evaluating ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) but does not expect a **material impact** on its consolidated financial statements[51](index=51&type=chunk)[52](index=52&type=chunk) [2. Investments and Fair Value Measurement](index=13&type=section&id=2.%20Investments%20and%20Fair%20Value%20Measurement) Describes Talphera's investment portfolio, fair value measurements of financial instruments, and warrant liability valuation Fair Value of Financial Instruments (in thousands) | Financial Instrument (in thousands) | Fair Value (Jun 30, 2024) | Fair Value (Dec 31, 2023) | | :---------------------------------- | :------------------------ | :------------------------ | | Money market funds | $43 | $90 | | U.S. government agency securities | $12,517 | $5,258 | | Commercial paper | $600 | $2,691 | | Warrant liability (Level III) | $2,325 | $1,778 | - As of **June 30, 2024**, total cash, cash equivalents, and short-term investments were **$14.023 million**[53](index=53&type=chunk)[54](index=54&type=chunk) - The Level III warrant liability was valued at approximately **$2.3 million** at **June 30, 2024**, using the Black-Scholes model[63](index=63&type=chunk) - The change in fair value of warrant liability was a **$0.455 million** gain for Q2 2024 and a **$(0.547) million** loss for 6M 2024[61](index=61&type=chunk) [3. Discontinued Operations](index=16&type=section&id=3.%20Discontinued%20Operations) Reports financial results related to Talphera's divested DSUVIA business, noting no operations in 2024 and prior year impairment charges - The DSUVIA business was divested to Alora Pharmaceuticals, LLC on **April 3, 2023**[36](index=36&type=chunk)[65](index=65&type=chunk) Results of Discontinued Operations (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) from discontinued operations | $— | $57 | $— | $(8,159) | - The net loss from discontinued operations for 6M 2023 included impairment charges of **$6.935 million** for net assets held for sale and **$1.065 million** for fixed assets[69](index=69&type=chunk) [4. Sale of Future Payments](index=18&type=section&id=4.%20Sale%20of%20Future%20Payments) Explains the accounting for Talphera's sale of future DSUVIA payments to XOMA, including liability recording and interest expense - In **January 2024**, Talphera sold its right to certain future DSUVIA payments to XOMA for **$8.0 million**[70](index=70&type=chunk) - Approximately **$6.1 million** (net of issuance costs) was recorded as a liability, amortized using an estimated effective interest rate of **13%**[73](index=73&type=chunk)[75](index=75&type=chunk) - The company recognized **$1.2 million** (net of issuance costs) as other income from the sale of future payments[73](index=73&type=chunk) - Non-cash interest expense on the liability related to the sale of future payments was **$0.2 million** for Q2 2024 and **$0.4 million** for 6M 2024[75](index=75&type=chunk) [5. Long-Term Debt](index=19&type=section&id=5.%20Long-Term%20Debt) Details the repayment and termination of Talphera's loan agreement with Oxford Finance LLC - Talphera fully repaid its Loan Agreement with Oxford Finance LLC in **April 2023**, terminating the debt obligation[77](index=77&type=chunk) [6. Commitments and Contingencies](index=20&type=section&id=6.%20Commitments%20and%20Contingencies) Outlines Talphera's legal proceedings and potential financial obligations - Talphera is involved in ongoing securities class action and shareholder derivative complaints related to alleged misstatements concerning DSUVIA marketing[78](index=78&type=chunk)[79](index=79&type=chunk) - The securities class action was dismissed with prejudice on **May 7, 2024**, but plaintiffs filed a notice of appeal on **June 5, 2024**[78](index=78&type=chunk) - The company believes these lawsuits are without merit and intends to vigorously defend against them, but cannot estimate the reasonably possible loss[80](index=80&type=chunk) [7. Stockholders' Equity](index=20&type=section&id=7.%20Stockholders%27%20Equity) Describes changes in Talphera's equity, including private placements and share plan amendments - In **January 2024**, Talphera completed the first tranche of a private placement, raising approximately **$6.0 million** gross proceeds from pre-funded warrants[81](index=81&type=chunk)[82](index=82&type=chunk) - A second tranche, for up to an additional **$12.0 million**, is conditional on Niyad clinical trial endpoints and stock price performance[83](index=83&type=chunk) - Stockholders approved amendments to the 2020 Equity Incentive Plan and 2011 Employee Stock Purchase Plan in **June 2024**, increasing authorized shares for issuance[86](index=86&type=chunk)[88](index=88&type=chunk) [8. Warrants](index=22&type=section&id=8.%20Warrants) Provides details on Talphera's outstanding warrants and their impact on equity Warrant Activity | Metric | Dec 31, 2023 | Jun 30, 2024 | | :-------------------------------- | :----------- | :----------- | | Warrants Outstanding | 21,682,049 | 29,474,257 | | Weighted-average Exercise Price | $1.40 | $0.96 | - The **January 2024 Pre-Funded Warrants** are immediately exercisable, have an unlimited term, and are classified as a component of permanent equity[89](index=89&type=chunk)[90](index=90&type=chunk) - The exercise price of **5,882,356** prior warrants was reduced from **$1.11** to **$0.77** per share, resulting in a **$0.3 million** increase in fair value recorded as equity issuance costs[91](index=91&type=chunk) [9. Stock-Based Compensation](index=23&type=section&id=9.%20Stock-Based%20Compensation) Reports Talphera's stock-based compensation expense and unrecognized amounts Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $85 | $80 | $192 | $173 | | Selling, general and administrative | $138 | $391 | $333 | $848 | | Discontinued operations | $— | $— | $— | $19 | | Total | $223 | $471 | $525 | $1,040 | - As of **June 30, 2024**, total unrecognized stock-based compensation expense related to unvested options was **$1.4 million**, to be recognized over a weighted-average period of **2.8 years**[97](index=97&type=chunk) - During the six months ended **June 30, 2024**, **1,053,612** stock options and **176,768** restricted stock units were granted[91](index=91&type=chunk)[97](index=97&type=chunk) [10. Net Loss per Share of Common Stock](index=24&type=section&id=10.%20Net%20Loss%20per%20Share%20of%20Common%20Stock) Explains the calculation of Talphera's basic and diluted net loss per common share - Basic and diluted net loss per share are calculated by dividing net loss by the weighted average number of common shares outstanding[98](index=98&type=chunk) - Potential common stock equivalents are excluded from diluted EPS during net loss periods if antidilutive, but pre-funded warrants with de minimis exercise prices are included in both basic and diluted EPS[98](index=98&type=chunk) Antidilutive Common Stock Equivalents Excluded from Diluted EPS | Common Stock Equivalents | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | RSUs, stock options and ESPP | 2,155,522 | 975,120 | 2,155,522 | 975,120 | | Common stock warrants | 20,265,576 | 5,192,035 | 20,265,576 | 5,192,035 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Talphera's financial condition, results of operations, and liquidity, focusing on product development and capital needs [About Talphera, Inc.](index=26&type=section&id=About%20Talphera,%20Inc.) Introduces Talphera, Inc. as a specialty pharmaceutical company focused on innovative therapies - Talphera, Inc. is a specialty pharmaceutical company focused on developing and commercializing innovative therapies for use in medically supervised settings[102](index=102&type=chunk) [Our Portfolio](index=26&type=section&id=Our%20Portfolio) Details Talphera's product candidates, including Niyad, LTX-608, and pre-filled syringe candidates, highlighting development status and regulatory considerations [Nafamostat Product Candidates](index=26&type=section&id=Nafamostat%20Product%20Candidates) Details Talphera's lead product candidates, Niyad and LTX-608, and their development status - Niyad™ is being developed as the first FDA-approved regional anticoagulant for dialysis circuits in acute kidney injury and chronic kidney disease patients, holding Breakthrough Device Designation and currently in a registrational trial (NEPHRO CRRT Study)[101](index=101&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) - LTX-608 is a nafamostat formulation for direct IV infusion, being explored for indications such as disseminated intravascular coagulation (DIC), acute respiratory distress syndrome (ARDS), acute pancreatitis, or as an anti-viral treatment, with IND submission planned following toxicology evaluation[101](index=101&type=chunk)[111](index=111&type=chunk) [Pre-filled Syringe (PFS) Product Candidates](index=27&type=section&id=Pre-filled%20Syringe%20(PFS)%20Product%20Candidates) Describes Talphera's PFS candidates, Fedsyra and Phenylephrine, and NDA submission timing - Fedsyra™ (ephedrine) and Phenylephrine are pre-filled syringe product candidates for clinically important hypotension in anesthesia, licensed from Aguettant[107](index=107&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk) - The company is evaluating the timing of NDA submission for its ephedrine pre-filled syringe due to two other FDA-approved products recently made available on the market[112](index=112&type=chunk) [Our Strategy](index=27&type=section&id=Our%20Strategy) Talphera's core strategy focuses on developing and commercializing Niyad, following the DSUVIA divestment - Talphera's core strategy is focused on developing, obtaining approval, and commercializing Niyad[113](index=113&type=chunk) - This strategy led to the divestment of DSUVIA to Vertical Pharmaceuticals, LLC (a wholly owned subsidiary of Alora Pharmaceuticals, LLC) in **April 2023**, with Talphera retaining sales-based milestone and other payments[113](index=113&type=chunk) [Recent Developments](index=29&type=section&id=Recent%20Developments) Highlights recent corporate actions, including the XOMA Agreement for DSUVIA payments - In **January 2024**, Talphera entered into the XOMA Agreement, selling its right to certain future DSUVIA payments from Alora for **$8.0 million**[116](index=116&type=chunk) - Talphera retains **50%** of payments from net sales of DSUVIA to the DoD, potential sales-based milestones, and associated license/acquisition payments after XOMA receives **$20.0 million**[116](index=116&type=chunk) [General Trends and Outlook](index=29&type=section&id=General%20Trends%20and%20Outlook) Discusses Talphera's management of global supply chain and the potential impact of inflation on future operating results [Global Supply Chain](index=29&type=section&id=Global%20Supply%20Chain) Discusses Talphera's efforts to manage supply chain disruptions and anticipated impacts - The company is engaging with its supply chain to manage potential disruptions but anticipates further impacts on manufacturing and supply due to global events[117](index=117&type=chunk) [Inflation](index=29&type=section&id=Inflation) Assesses the impact of inflation on Talphera's business and potential future effects - Inflation has not had a **material impact** on business or operating results during the periods presented[118](index=118&type=chunk) - Inflation may in the future adversely affect operating results due to impacts on overhead costs, transportation costs, and interest rates[118](index=118&type=chunk) [Financial Overview](index=29&type=section&id=Financial%20Overview) Summarizes Talphera's financial performance, including net losses and cash position - Talphera has incurred net losses and negative cash flows from operations and expects to continue incurring losses[119](index=119&type=chunk) Net Loss (in millions) | Metric (in millions) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :------------------- | :-------------------------- | :-------------------------- | | Net loss | $(7.8) | $(12.5) | Cash, Cash Equivalents and Short-term Investments (in millions) | Metric (in millions) | Jun 30, 2024 | Dec 31, 2023 | | :------------------- | :----------- | :----------- | | Cash, cash equivalents and short-term investments | $14.0 | $9.4 | [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) Outlines Talphera's key accounting estimates, including fair value of warrants, going concern assessment, and the liability from future payment sales [Sale of Future Payments](index=30&type=section&id=Sale%20of%20Future%20Payments_MD%26A) Explains the accounting for the XOMA Purchase Agreement and its impact on the effective interest rate - The liability related to the sale of future payments from the XOMA Purchase Agreement is amortized using the effective interest rate method, based on estimates of future DoD sales and milestone probabilities[123](index=123&type=chunk) - A significant change in the inputs for estimating future payments could result in a **material increase or decrease** to the effective interest rate of the liability[123](index=123&type=chunk) [Recently Issued Accounting Pronouncements](index=30&type=section&id=Recently%20Issued%20Accounting%20Pronouncements_MD%26A) Discusses Talphera's evaluation of new FASB ASUs and their expected impact - Talphera is evaluating ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) but does not expect a **material impact** on its consolidated financial statements upon adoption[124](index=124&type=chunk)[125](index=125&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Analyzes Talphera's revenue, R&D, SG&A, and net loss for Q2 and 6M 2024, noting the impact of Niyad development and DSUVIA divestment [Revenue](index=30&type=section&id=Revenue_MD%26A) Analyzes Talphera's revenue from continuing operations for the reporting periods Revenue from Continuing Operations (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $— | $253 | $— | $253 | - Talphera recognized **no revenue** from continuing operations for the three and six months ended **June 30, 2024**[126](index=126&type=chunk) - For the same periods in **2023**, the company recognized **$0.3 million** in revenue related to the DSUVIA Agreement with Alora for sales to the DoD[126](index=126&type=chunk) [Research and Development Expenses](index=31&type=section&id=Research%20and%20Development%20Expenses_MD%26A) Examines changes in Talphera's R&D expenses, primarily due to Niyad development Research and Development Expenses (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | R&D Expenses | $1,909 | $1,552 | 23% | $3,342 | $2,599 | 29% | - Research and development expenses increased by **23%** for Q2 2024 and by **29%** for 6M 2024, primarily due to increased costs associated with Niyad development[128](index=128&type=chunk) [Selling, General and Administrative Expenses](index=31&type=section&id=Selling,%20General%20and%20Administrative%20Expenses_MD%26A) Reviews changes in Talphera's SG&A expenses, influenced by the DSUVIA divestment Selling, General and Administrative Expenses (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | SG&A Expenses | $2,361 | $2,670 | (12)% | $5,165 | $6,951 | (26)% | - Selling, general and administrative (SG&A) expenses decreased by **12%** for Q2 2024 and by **26%** for 6M 2024, primarily due to the divestment of DSUVIA[129](index=129&type=chunk) - Specific reductions include employee compensation, legal fees, and stock-based compensation[130](index=130&type=chunk) [Other Income (Expense), Net](index=33&type=section&id=Other%20Income%20(Expense),%20Net) Details Talphera's other income and expenses, including warrant liability and future payments Other Income (Expense), Net (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------- | :-------------------------- | :-------------------------- | :------- | :-------------------------- | :-------------------------- | :------- | | Total other income (expense), net | $443 | $(456) | (197)% | $726 | $4,936 | (85)% | | Gain on sale of future payments | $— | $— | —% | $1,246 | $— | —% | | Change in fair value of warrant liability | $455 | $(1,299) | (135)% | $(547) | $4,012 | (114)% | | Non-cash interest expense on liability related to sale of future payments | $(213) | $— | —% | $(394) | $— | —% | - Total other income (expense), net, shifted from an expense of **$0.456 million** in Q2 2023 to income of **$0.443 million** in Q2 2024[133](index=133&type=chunk) - For 6M 2024, total other income (expense), net, was **$0.726 million**, down from **$4.936 million** in 6M 2023, primarily due to a **$1.246 million** gain on sale of future payments and changes in warrant liability fair value[133](index=133&type=chunk)[135](index=135&type=chunk) [Discontinued Operations](index=33&type=section&id=Discontinued%20Operations_MD%26A) Reports the financial results from Talphera's divested DSUVIA business Net Income (Loss) from Discontinued Operations (in thousands) | Metric (in thousands) | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) from discontinued operations | $— | $57 | $— | $(8,159) | - For the three months ended **June 30, 2023**, Talphera recognized net income from discontinued operations of **$0.1 million**, while for the six months ended **June 30, 2023**, it recognized a net loss of **$8.2 million**[137](index=137&type=chunk) - There were **no results** from discontinued operations for the periods in **2024**[137](index=137&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses Talphera's cash position, capital needs, and ability to fund ongoing operations, highlighting going concern risks and recent financing efforts [Liquidity and Going Concern](index=33&type=section&id=Liquidity%20and%20Going%20Concern_MD%26A) Assesses Talphera's cash position and the substantial doubt about its ability to continue as a going concern Cash, Cash Equivalents and Investments (in millions) | Metric (in millions) | Jun 30, 2024 | Dec 31, 2023 | | :------------------- | :----------- | :----------- | | Cash, cash equivalents and investments | $14.0 | $9.4 | - Talphera's cash, cash equivalents, and investments increased to **$14.0 million** as of **June 30, 2024**, from **$9.4 million** at **December 31, 2023**[138](index=138&type=chunk) - Recurring losses and negative cash flows raise **substantial doubt** about the company's ability to continue as a going concern, requiring additional capital within the next **12 months**[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [XOMA Purchase Agreement](index=35&type=section&id=XOMA%20Purchase%20Agreement_MD%26A) Details the terms and financial impact of Talphera's agreement with XOMA for DSUVIA payments - In **January 2024**, Talphera entered into the XOMA Purchase Agreement, selling its right to certain future DSUVIA payments for **$8.0 million**, with the company retaining a share of payments after XOMA reaches a **$20.0 million** threshold[143](index=143&type=chunk) [January 2024 Private Placement](index=35&type=section&id=January%202024%20Private%20Placement_MD%26A) Describes the proceeds and conditions of Talphera's recent private placement of pre-funded warrants - The first tranche of a **January 2024** private placement generated approximately **$6.0 million** in gross proceeds from the issuance of pre-funded warrants[143](index=143&type=chunk) - A second tranche, for up to an additional **$12.0 million**, is conditional on Niyad clinical trial endpoints and stock price performance[144](index=144&type=chunk) [Registration Statement on Form S-3](index=35&type=section&id=Registration%20Statement%20on%20Form%20S-3) Explains Talphera's Form S-3 registration statement and limitations on securities offerings - Talphera has an effective Form S-3 registration statement allowing it to offer up to **$150 million** in various securities, but its ability to sell these securities is currently limited by SEC "baby shelf" limitations[145](index=145&type=chunk) [Cantor Controlled Equity OfferingSM Sales Agreement](index=35&type=section&id=Cantor%20Controlled%20Equity%20OfferingSM%20Sales%20Agreement) Reports on sales activity under Talphera's ATM Agreement with Cantor Fitzgerald & Co - No sales were made under the ATM Agreement with Cantor Fitzgerald & Co. for the three and six months ended **June 30, 2024** or **2023**[146](index=146&type=chunk) - The ability to sell shares under the ATM Agreement is limited by SEC "baby shelf" limitations[146](index=146&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) Details Talphera's cash flows for 6M 2024, showing operating cash usage offset by investing and financing activities, driven by recent agreements [Cash Flows from Operating Activities](index=37&type=section&id=Cash%20Flows%20from%20Operating%20Activities) Analyzes Talphera's cash used in operating activities, including net loss and non-cash charges Cash Flows from Operating Activities (in thousands) | Metric (in thousands) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(7,493) | $(10,583) | | Net loss | $(7,781) | $(12,523) | | Non-cash charges | $1,000 | $3,100 | | Net change in operating assets and liabilities | $(1,300) | $(1,200) | - Cash used in operating activities for 6M 2024 was **$7.5 million**, reflecting a net loss of **$7.8 million**, partially offset by **$1.0 million** in non-cash charges and a **$1.3 million** net change in operating assets and liabilities[149](index=149&type=chunk) [Cash Flows from Investing Activities](index=37&type=section&id=Cash%20Flows%20from%20Investing%20Activities) Details Talphera's cash flows from investing activities, primarily from investment maturities and purchases Cash Flows from Investing Activities (in thousands) | Metric (in thousands) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by investing activities | $3,181 | $3,123 | | Proceeds from maturities of investments | $8,160 | $500 | | Purchase of investments | $(4,979) | $— | - Cash provided by investing activities for 6M 2024 was **$3.2 million**, primarily from **$8.2 million** in proceeds from maturities of investments, partially offset by **$5.0 million** in purchases of investments[151](index=151&type=chunk) [Cash Flows from Financing Activities](index=37&type=section&id=Cash%20Flows%20from%20Financing%20Activities) Summarizes Talphera's cash flows from financing activities, including proceeds from XOMA and private placement Cash Flows from Financing Activities (in thousands) | Metric (in thousands) | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2023 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by (used in) financing activities | $12,014 | $(5,405) | | Net proceeds from XOMA Purchase Agreement | $6,100 | $— | | Net proceeds from January 2024 private placement | $5,884 | $— | | Payment of long-term debt | $— | $(5,416) | - Cash provided by financing activities for 6M 2024 was **$12.0 million**, mainly from **$6.1 million** in net proceeds from the XOMA Purchase Agreement and **$5.9 million** from the January 2024 private placement[152](index=152&type=chunk) - This contrasts with **$5.4 million** used in financing activities in 6M 2023, primarily for long-term debt payments[152](index=152&type=chunk) [Capital Commitments and Capital Resources](index=38&type=section&id=Capital%20Commitments%20and%20Capital%20Resources) Outlines Talphera's planned expenditures and the need for additional capital to fund operations - Talphera's operating plan includes significant expenditures related to the development of its product candidates, particularly nafamostat[153](index=153&type=chunk) - The company expects to need additional capital within the next **twelve months** to fund planned operations, as existing capital resources are insufficient for long-term sustainability[153](index=153&type=chunk)[155](index=155&type=chunk) - Future capital requirements are subject to numerous factors, including clinical trial success, regulatory approvals, commercialization costs, and potential litigation[154](index=154&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Talphera is not required to provide quantitative and qualitative disclosures about market risk - Talphera is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded Talphera's disclosure controls were effective, with no material changes in internal control over financial reporting - As of **June 30, 2024**, Talphera's disclosure controls and procedures were effective at the reasonable assurance level[158](index=158&type=chunk) - There have been **no material changes** in internal control over financial reporting during the period[158](index=158&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures for Talphera [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Talphera is involved in ongoing legal proceedings, including a securities class action and shareholder derivative complaints, with potential for increased costs - Talphera is involved in ongoing securities class action and shareholder derivative complaints related to alleged misstatements concerning DSUVIA marketing[159](index=159&type=chunk) - The securities class action was dismissed with prejudice on **May 7, 2024**, but plaintiffs filed a notice of appeal on **June 5, 2024**[78](index=78&type=chunk) - The company believes these lawsuits are without merit and intends to vigorously defend against them, but they could substantially increase costs and harm the business[80](index=80&type=chunk)[159](index=159&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) Talphera faces numerous significant risks, including capital needs, clinical trial delays, regulatory hurdles, reliance on third parties, and market volatility [Summary Risk Factors](index=39&type=section&id=Summary%20Risk%20Factors) Provides a high-level overview of Talphera's most significant financial and operational risks - The company requires additional capital and may be unable to raise it, potentially forcing delays or cessation of commercialization and product development, and raising going concern issues[160](index=160&type=chunk) - Failure to realize expected benefits from the Lowell Therapeutics, Inc. acquisition could adversely affect stock price[160](index=160&type=chunk) - Delays in clinical trials are common and could increase costs, jeopardize, or delay regulatory approval and product sales[160](index=160&type=chunk) [Risks Related to Our Financial Condition and Need for Additional Capital](index=43&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Need%20for%20Additional%20Capital) Addresses Talphera's ongoing losses, capital requirements, and going concern uncertainties - Talphera has incurred significant net losses and negative cash flows from operations since inception, raising **substantial doubt** about its ability to continue as a going concern[164](index=164&type=chunk)[168](index=168&type=chunk) - The company requires significant additional capital to fund operations and product development, which may be sought through equity offerings, debt, or strategic agreements[166](index=166&type=chunk)[167](index=167&type=chunk)[173](index=173&type=chunk) - Failure to raise additional capital could force the company to reduce its workforce, delay product development, or relinquish rights to technologies/product candidates[169](index=169&type=chunk)[171](index=171&type=chunk) - Future sales of equity securities may result in **dilution** to existing stockholders, and debt securities could impose restrictive covenants[174](index=174&type=chunk) - The company has not yet generated significant product revenue and may never be profitable, with success dependent on regulatory approvals and commercialization[175](index=175&type=chunk)[178](index=178&type=chunk) - Future sales of DSUVIA to the DoD are unpredictable and may not meet expectations, potentially impacting future revenue from retained interests[180](index=180&type=chunk)[181](index=181&type=chunk) [Risks Related to Drug Development and Commercialization](index=46&type=section&id=Risks%20Related%20to%20Drug%20Development%20and%20Commercialization) Covers risks associated with clinical trials, product development, and commercialization success - Failure to realize anticipated benefits from the Lowell acquisition could adversely affect Talphera's stock price and business[182](index=182&type=chunk)[183](index=183&type=chunk) - Commercial success of DSUVIA, and Talphera's retained payments, depends on Alora's ability to market, sell, and distribute the product effectively[184](index=184&type=chunk)[185](index=185&type=chunk) - Delays in clinical trials are common due to various factors (e.g., funding, regulatory approval, patient enrollment) and can increase costs, delay regulatory approval, and harm commercialization[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Development efforts may not generate successful product candidates, and clinical trials could fail to demonstrate safety and efficacy, leading to additional costs, delays, or program abandonment[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Delays in patient enrollment for clinical trials could delay or prevent necessary regulatory approvals[196](index=196&type=chunk)[197](index=197&type=chunk) - Identification of serious adverse effects or unexpected characteristics of product candidates during development could lead to abandonment or limitation of development[198](index=198&type=chunk) - Limited resources may lead the company to pursue less profitable or less likely-to-succeed product candidates or indications[199](index=199&type=chunk) [Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters](index=50&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20of%20Our%20Product%20Candidates%20and%20Other%20Legal%20Compliance%20Matters) Highlights challenges in obtaining regulatory approvals and complying with healthcare laws - The PMA or NDA approval process is time-consuming, subject to unanticipated delays and costs, and requires substantial resources[200](index=200&type=chunk)[201](index=201&type=chunk) - Talphera's expectations for FDA approvability of product candidates may be inaccurate, potentially requiring additional manufacturing, nonclinical, or clinical development work[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - Establishing and maintaining collaborative relationships for international sales, marketing, and distribution is difficult and critical for product commercialization[204](index=204&type=chunk)[205](index=205&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Talphera's relationships with healthcare professionals and other partners are subject to anti-kickback, fraud and abuse, and other healthcare laws, with potential for **significant penalties** for non-compliance[244](index=244&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk) - Existing and future legislation (e.g., Affordable Care Act, Inflation Reduction Act) may increase the difficulty and cost of commercializing products and affect pricing and reimbursement[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[226](index=226&type=chunk)[228](index=228&type=chunk) - The FDA and other regulatory agencies actively enforce laws prohibiting the promotion of off-label uses, which could lead to **significant liability**[219](index=219&type=chunk) - Inability to establish and maintain relationships with group purchasing organizations (GPOs) could jeopardize future revenues and profitability[220](index=220&type=chunk)[221](index=221&type=chunk) [Risks Related to Our Reliance on Third Parties](index=56&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) Examines risks from dependence on third-party manufacturers and contract research organizations - Talphera relies on third-party manufacturers for clinical and commercial supplies, facing risks like quality issues, supply chain disruptions, and manufacturing capacity limitations[229](index=229&type=chunk)[230](index=230&type=chunk)[232](index=232&type=chunk) - The company relies on single sources of supply for nafamostat API and finished product, with the CDMO for finished goods located in China, posing risks from trade restrictions and supply interruptions[233](index=233&type=chunk)[234](index=234&type=chunk) - Manufacturing issues during scale-up or non-compliance with cGMP by third-party manufacturers could delay product development and regulatory approval[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[240](index=240&type=chunk) - Reliance on CROs for clinical trials means limited influence over their performance, and their failure to comply with cGCPs or contractual obligations could delay or terminate development programs[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) [Risks Related to Our Business Operations and Industry](index=60&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations%20and%20Industry) Discusses operational risks including IT security, business interruptions, and personnel retention - Significant disruptions of information technology systems or data security incidents could result in financial, legal, regulatory, business, and reputational harm[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Business interruptions from natural disasters or other events could delay operations and sales efforts[253](index=253&type=chunk)[254](index=254&type=chunk) - Future success depends on retaining key executives and attracting, retaining, and motivating qualified personnel, which is challenging due to intense competition[255](index=255&type=chunk) - Acquisitions, investments, or strategic transactions could divert management's attention and incur various costs and expenses[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Potential product liability claims, particularly from past DSUVIA sales, could result in substantial liability and costs, potentially exceeding insurance coverage[259](index=259&type=chunk)[260](index=260&type=chunk) - Misconduct by employees, contractors, or partners, including non-compliance with regulatory standards and insider trading, could expose the company to **significant penalties**[262](index=262&type=chunk)[263](index=263&type=chunk) [Risks Related to Our Intellectual Property](index=65&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Focuses on challenges in protecting and enforcing Talphera's patents and trade secrets - Commercial success depends on defending issued patents and expanding the patent portfolio, with risks that pending applications may not issue or issued patents may be challenged or invalidated[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - Patent litigation is expensive, time-consuming, and could lead to delays in market entry, substantial damages, or the inability to obtain necessary licenses[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk)[278](index=278&type=chunk) - Protecting trade secrets is difficult, and confidentiality agreements may not prevent unauthorized disclosure or independent discovery[281](index=281&type=chunk) - Failure to pay periodic maintenance fees or comply with procedural requirements for patents and applications could result in loss of patent rights[282](index=282&type=chunk)[283](index=283&type=chunk) - Enforcing intellectual property rights globally is challenging due to varying legal protections and enforcement difficulties in foreign countries[284](index=284&type=chunk)[285](index=285&type=chunk) - Failure to secure trademark registrations in all potential markets could adversely affect the business[286](index=286&type=chunk)[287](index=287&type=chunk) [Risks Related to Ownership of Our Common Stock](index=70&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Addresses risks concerning stock price volatility, delisting, dilution, and corporate governance - The market price of Talphera's common stock has been and may continue to be **highly volatile**, influenced by factors such as clinical trial results, funding needs, regulatory decisions, and competition[289](index=289&type=chunk)[290](index=290&type=chunk) - Failure to maintain compliance with Nasdaq's listing requirements could result in delisting, limiting investor transactions and making it more difficult to raise capital[291](index=291&type=chunk)[292](index=292&type=chunk) - Future equity offerings or sales of substantial numbers of common stock by the company or its stockholders could cause dilution and depress the market price[293](index=293&type=chunk) - Talphera does not intend to pay dividends on its common stock, so returns will be limited to the value of the stock[294](index=294&type=chunk) - Provisions in the company's charter documents and Delaware law could make it more difficult or costly for a third party to acquire the company[295](index=295&type=chunk)[296](index=296&type=chunk) [Risks of a General Nature](index=72&type=section&id=Risks%20of%20a%20General%20Nature) Covers broader risks such as litigation, tax implications, macroeconomic uncertainties, and internal controls - Litigation, including securities-related class action and derivative lawsuits, can substantially increase costs, divert resources, and harm the business[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk) - The ability to use net operating loss carryforwards and other tax attributes may be limited by ownership changes or expiration, potentially increasing future tax liability[300](index=300&type=chunk) - The effective tax rate may fluctuate due to changes in profitability mix, tax law changes (e.g., Inflation Reduction Act, R&D capitalization), and audit results, potentially leading to obligations exceeding accrued amounts[301](index=301&type=chunk)[302](index=302&type=chunk) - Macroeconomic uncertainties, including inflationary pressures, supply chain disruptions, labor shortages, and recession risks, have and may continue to adversely affect the business[162](index=162&type=chunk) - Past material weaknesses in internal control over financial reporting indicate a risk of future material errors or failure to meet reporting obligations[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[304](index=304&type=chunk) [Item 3. Defaults Upon Senior Securities](index=75&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[304](index=304&type=chunk) [Item 4. Mine Safety Disclosures](index=75&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Talphera - Mine Safety Disclosures are not applicable to Talphera[304](index=304&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205.%20Other%20Information) No other information is required to be reported under this item - No other information to report[304](index=304&type=chunk) [Item 6. Exhibits](index=76&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, equity plans, and officer certifications - The exhibits include amendments to the Certificate of Incorporation and Bylaws, Amended and Restated 2020 Equity Incentive Plan, and Amended and Restated 2011 Employee Stock Purchase Plan[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial and Accounting Officer are included, along with Inline XBRL financial information[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk)

Financial Performance - Total current assets increased to $19,953,000 as of March 31, 2024, compared to $11,576,000 as of December 31, 2023, representing a 72% increase[21]. - The net loss for Q1 2024 was $3,954,000, a decrease from a net loss of $8,152,000 in Q1 2023, reflecting a 51% improvement[24]. - Cash and cash equivalents rose to $12,122,000 at the end of Q1 2024, compared to $5,721,000 at the beginning of the period, marking a 112% increase[31]. - Total liabilities increased to $12,438,000 as of March 31, 2024, from $6,290,000 as of December 31, 2023, representing a 98% increase[21]. - The company’s accumulated deficit reached $448,180,000 as of March 31, 2024, compared to $444,226,000 at the end of 2023[21]. - The Company recorded approximately $6.1 million as a liability from the sale of future payments related to DSUVIA, with $1.2 million recognized as other income[52]. - Total other income (expense), net for Q1 2024 was $283,000, a decrease of 95% compared to $5.4 million in Q1 2023[132]. - Interest income and other income, net for Q1 2024 was $220,000, up 10% from $200,000 in Q1 2023[133]. - Cash used in operating activities for Q1 2024 was $2.9 million, reflecting a net loss of $4.0 million[146]. - Cash provided by financing activities for Q1 2024 was $12.0 million, primarily due to net proceeds from the XOMA Purchase Agreement and the January 2024 private placement[150]. Research and Development - Research and development expenses for Q1 2024 were $1,433,000, up from $1,047,000 in Q1 2023, indicating a 37% increase year-over-year[23]. - The company is focused on developing Niyad™, a regional anticoagulant for the dialysis circuit, and other product candidates for various medical indications[37]. - The company plans to begin enrollment in a registrational trial for Niyad in the second quarter of 2024, which has received FDA Breakthrough Device Designation[99][106]. - The NEPHRO CRRT study will evaluate 166 adult patients and aims to submit a Premarket Approval application to the FDA upon completion of the trial[106]. - The company is developing LTX-608 for various medical conditions and plans to submit an IND following toxicology evaluation[100][101]. - The company expects to submit Investigational New Drug applications for LTX-608, but unexpected findings in nonclinical studies could delay this process[207]. - The company has entered into a PFS Agreement with Aguettant for the development of ephedrine and phenylephrine pre-filled syringes, with expectations for FDA approval without additional changes[208]. Capital and Funding - Management expects to need additional capital to fund operations within the next twelve months due to ongoing losses and cash flow issues[43]. - The company plans to raise additional capital through various means, including public or private equity offerings and potential collaborations[44]. - The company raised approximately $6.0 million in gross proceeds from a private placement on January 22, 2024, with additional potential proceeds of $10.0 million and $2.0 million contingent on clinical trial results and stock price performance, respectively[79][80][81]. - The first tranche of the January 2024 private placement resulted in gross proceeds of approximately $6.0 million, with pre-funded warrants issued for up to 7,792,208 shares[139]. - The second tranche of the January 2024 private placement could provide additional gross proceeds of approximately $10.0 million, contingent on achieving specific clinical trial endpoints[140]. - The company expects to incur significant losses in 2024 and may require additional capital to fund operations within the next twelve months[136]. - The company has financed its operations primarily through equity securities issuance, borrowings, and payments from partners, including a recent agreement to monetize future payments related to DSUVIA sales[167]. Acquisitions and Agreements - On April 3, 2023, the Company completed the DSUVIA Agreement with Alora Pharmaceuticals, acquiring certain assets related to the sufentanil sublingual tablet product[39]. - The Company acquired Lowell Therapeutics, Inc. on January 7, 2022, gaining the Niyad™ product, which has received Breakthrough Device Designation from the FDA[40]. - Talphera entered into a Payment Interest Purchase Agreement with XOMA for $8 million related to certain receivables from the DSUVIA Agreement[38]. - The Company entered into an Asset Purchase Agreement with Alora for the acquisition of assets related to DSUVIA, with a total consideration of $1.1 million and potential sales-based milestones of up to $116.5 million[65]. - In January 2024, the Company sold certain receivables to XOMA for $8.0 million, with proceeds from the sale of future payments amounting to $6.133 million as of March 31, 2024[67]. Operational Challenges - The company has incurred recurring operating losses and negative cash flows since inception, raising substantial doubt about its ability to continue as a going concern[42]. - The company has ongoing litigation risks that may materially adversely affect its financial condition and results of operations[78]. - The company has identified risks related to potential delays in clinical trials and regulatory approvals, which could increase costs and jeopardize product development[163]. - The company may experience significant disruptions in financial markets, impacting its ability to obtain additional capital on favorable terms[174]. - The company may face difficulties in raising additional capital, which could force it to scale back or discontinue product development and commercialization efforts[173]. - The company has a material weakness in its internal control over financial reporting, which may result in errors in financial statements[164]. - Global supply chain disruptions may adversely impact the company's ability to develop and supply its product candidates[115]. Future Outlook - The company expects significant additional capital will be needed in the future to continue planned operations and capital requirements[176]. - The company may need to relinquish or license its rights to technologies or products under unfavorable terms if it cannot secure sufficient funding[173]. - The ability to generate future revenues from product sales depends heavily on successful clinical trials and regulatory approvals[188]. - The approval process for PMA or NDA is lengthy and may incur unexpected delays and costs, impacting the company's financial condition[203]. - The FDA's rejection of clinical data could adversely affect the company's ability to obtain marketing authorization for its product candidates[204]. - The company may need to conduct additional clinical development work to obtain FDA approval, which would increase expenses and delay revenue[205]. - The company may face unexpected liabilities from the acquisition of Lowell, which could adversely affect its financial condition[184].

Financial Position - Cash and investments totaled $18.6 million as of March 31, 2024[1] - Total assets as of March 31, 2024, were $28.8 million, with total liabilities of $12.4 million[19] - The company announced a total of $26 million in committed capital, including $8 million from DSUVIA royalties and $18 million in equity from existing investors[4] Expenses and Losses - Combined R&D and SG&A expenses for Q1 2024 were $4.2 million, down from $5.3 million in Q1 2023, primarily due to reduced headcount[6] - Net loss from continuing operations for Q1 2024 was $4.0 million, or $0.16 per share, compared to a net income of $0.1 million in Q1 2023[7] Product Development - Talphera's lead product candidate, Niyad, is currently under investigation as an anticoagulant and has received Breakthrough Device Designation from the FDA[9] - Talphera expects to enroll the first patients in the NEPHRO CRRT registrational study in Q2 2024, with the trial's primary endpoint measured at 24 hours[2] - The NEPHRO study will enroll 166 adult patients and evaluate the efficacy of Niyad compared to placebo[11] Leadership Changes - Dr. Shakil Aslam will join Talphera as Chief Development Officer on May 20, 2024, bringing over 20 years of nephrology expertise[5] Company Rebranding - The company underwent a rebranding from AcelRx Pharmaceuticals, Inc. to Talphera, Inc. in January 2024[3]