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]

Acquisition and Product Development - The company acquired Lowell Therapeutics, Inc. for approximately $32.5 million, with up to $26.0 million in contingent consideration based on regulatory and sales milestones[17]. - Niyad™, a product candidate, has received FDA's Breakthrough Device Designation and is expected to begin patient enrollment in a registrational trial in Q1 2024, with a PMA application planned by the end of 2024[20][23]. - The NEPHRO CRRT Study will enroll 166 adult patients and aims to evaluate the efficacy of Niyad compared to placebo, with top-line data expected by Q3 2024[23]. - LTX-608, another product candidate, is being explored for indications such as antiviral treatment and acute respiratory distress syndrome, with initial studies showing potential benefits in COVID patients[30]. - The company plans to submit a PMA application for Niyad by the end of 2024 and expects to enroll the first patient in its registrational study in Q1 2024[38]. - The company is evaluating the second targeted indication for its nafamostat product development candidate, LTX-608, focusing on DIC and acute pancreatitis for initial development[50]. Financial Performance and Capital Needs - The company has not yet generated significant product revenue and anticipates continued losses in the future[9]. - The company has incurred significant losses since inception and may need to raise additional capital, which could dilute existing shareholders[9]. - The company will need to raise additional funds through equity sales, asset monetization, or debt issuance to sustain operations and development programs[338]. Regulatory and Approval Processes - The FDA approval process for product candidates is time-consuming and may involve unexpected delays and costs[9]. - Niyad is classified as a Class III medical device and is subject to the PMA application process, which is generally more costly and time-consuming than the 510(k) process[69]. - The FDA has 180 days to review a filed PMA application, although the review often takes significantly longer, and may request additional information during this period[72]. - The approval process for drug products requires substantial time and financial resources, and the company cannot be certain that approval will be granted on a timely basis[57]. - The Breakthrough Devices Program allows for expedited review of medical devices that address life-threatening conditions, with priority review for designated devices[76]. Market Potential and Sales Projections - The peak sales potential for Niyad, if approved for use in CRRT and IHD, may exceed $200 million annually in the United States, based on an estimated addressable population of 500,000 patients undergoing CRRT and 350,000 patients undergoing IHD[35]. - The company believes its two pre-filled syringe product candidates could have a peak sales potential of over $100 million, with a focus on eliminating the need for on-the-spot calculations and additional dilution steps[37]. - Nafamostat, if approved for regional anticoagulation in CRRT, may address safety concerns associated with current anticoagulants, as 29% of cases do not use any anticoagulant due to safety concerns[33]. - The incidence of bleeding during continuous hemofiltration with heparin was 66.7%, compared to only 4.3% with nafamostat, indicating a significant safety advantage[34]. Manufacturing and Supply Chain Risks - The company relies on third-party manufacturers and suppliers for its product candidates, which poses risks to the supply chain[10]. - The company relies on contract manufacturers for the production of its Niyad product, with a single contract manufacturer currently producing the nafamostat API and a separate one for the finished product[52]. - The company is in discussions with a back-up manufacturer for Niyad to ensure there is not a single source of supply[52]. - Unforeseen delays in drug manufacturing and supply chains may arise from regulatory compliance issues, potentially impacting product availability[81]. Compliance and Regulatory Challenges - The company must comply with extensive cGMP requirements throughout the manufacturing process, which require considerable ongoing investment[66]. - Manufacturers must comply with stringent FDA regulations, including quality assurance procedures and medical device reporting regulations[77]. - The Drug Supply Chain Security Act mandates tracking and tracing obligations for pharmaceutical manufacturers, including reporting counterfeit products[80]. - The company faces significant penalties for violations of health regulatory laws, which could adversely affect operations and financial results[91]. Market and Legislative Environment - Sales of approved products depend on third-party payer coverage and reimbursement, which are increasingly scrutinized for cost-effectiveness[92]. - The company may need to conduct pharmacoeconomic studies to demonstrate the cost-effectiveness of products for reimbursement approval[92]. - The company anticipates ongoing legislative and regulatory changes in the healthcare system that may impact product commercialization and profitability[93]. - In the U.S., the Affordable Care Act and subsequent reforms aim to broaden insurance access and reduce healthcare spending, with potential implications for drug pricing and reimbursement rates[98]. - The Inflation Reduction Act of 2022 extends enhanced subsidies for health insurance coverage through 2025 and introduces measures to lower out-of-pocket costs for Medicare beneficiaries[98]. - The company faces competition from lower-priced products in foreign markets due to varying drug pricing regulations, particularly in the European Union[95]. - Legislative proposals are being made to increase transparency in drug pricing and reform reimbursement methodologies, which could affect the company's pricing strategies[102]. Workforce and Employment - As of December 31, 2023, the company employed 15 full-time employees, with a commitment to pay equity and competitive benefits[104]. - The company is not currently required to provide certain financial disclosures as a smaller reporting company under the Securities Exchange Act[339].

Core Viewpoint - AcelRx Pharmaceuticals, Inc. has rebranded to Talphera, Inc. to reflect its new mission of developing innovative therapies for medically supervised settings, moving beyond its original focus on acute pain [1][2]. Company Overview - Talphera, Inc. is a specialty pharmaceutical company focused on innovative therapies for medically supervised settings, with its lead product candidate being Niyad, a formulation of nafamostat [6][7]. - The name "Talphera" is derived from "Talisman," symbolizing a strong leader and a new pharmaceutical era for the company [2]. Product Development - Talphera's lead product candidate, Niyad, has received FDA Breakthrough Designation and is being studied as an anticoagulant for the extracorporeal circuit [3][6]. - The company plans to initiate the NEPHRO CRRT (Nafamostat Efficacy in Phase 3 Registrational Continuous Renal Replacement Therapy) Study, which has received IRB approval and will evaluate 166 adult patients [4][5]. Regulatory and Market Strategy - A PMA submission for Niyad is expected to be filed with the FDA in the second half of 2024 [5]. - The first patient for the NEPHRO study is anticipated to be enrolled in the first quarter of 2024 [5].

Financial Performance - Total current assets decreased from $24,566,000 as of December 31, 2022 to $14,420,000 as of September 30, 2023, representing a decline of approximately 41.3%[22] - Royalty revenue for the three months ended September 30, 2023 was $117,000, compared to $0 for the same period in 2022, indicating a significant increase[25] - Research and development expenses increased to $1,178,000 for the three months ended September 30, 2023, up from $799,000 in the same period of 2022, reflecting a rise of approximately 47.5%[25] - Selling, general and administrative expenses decreased from $3,724,000 in Q3 2022 to $2,248,000 in Q3 2023, a reduction of about 39.6%[25] - The net loss attributable to common shareholders for the three months ended September 30, 2023 was $1,357,000, compared to a net loss of $6,936,000 for the same period in 2022, showing an improvement of approximately 80.5%[25] - The company reported a net income from discontinued operations of $61,000 for the three months ended September 30, 2023, compared to a loss of $2,111,000 in the same period in 2022[25] - The total stockholders' equity decreased from $21,814,000 as of December 31, 2022 to $18,307,000 as of September 30, 2023, a decline of approximately 16.5%[22] - The company incurred a net loss of $13,880,000 for the nine months ended September 30, 2023, compared to a net income of $55,239,000 in the same period of the previous year[33] - The company reported a balance of 10,994,102 shares as of June 30, 2023, increasing to 16,952,269 shares by September 30, 2023[30] - The total stock-based compensation expense for the nine months ended September 30, 2023, was $1.418 million, compared to $2.237 million for the same period in 2022[106] - The net loss attributable to common shareholders for the three months ended September 30, 2023, was $1.357 million, resulting in a basic net loss per share of $0.08[115] - For the nine months ended September 30, 2023, the net loss attributable to common shareholders was $13,880,000, compared to a net income of $49,073,000 for the same period in 2022[116] - The basic net income (loss) per share from continuing operations was $(0.45) for 2023, down from $8.03 in 2022[116] Assets and Liabilities - Total liabilities decreased from $25,673,000 as of December 31, 2022 to $4,954,000 as of September 30, 2023, a reduction of approximately 80.7%[22] - As of September 30, 2023, total cash and cash equivalents amounted to $13,389,000, a decrease from $20,770,000 as of December 31, 2022[58] - The accrued balance due under the Loan Agreement with Oxford was $0, down from $5.4 million at the end of 2022[85] - The total liabilities of discontinued operations as of September 30, 2023, were $8,615,000, compared to $7,252,000 in net assets[78] - As of September 30, 2023, AcelRx had 21,682,049 outstanding warrants with a weighted average exercise price of $1.40 per share[97] - The fair value of the warrant liability was estimated at $1,380,000, down from $7,098,000 as of December 31, 2022[61] Cash Flow and Financing - The company reported a net cash used in operating activities of $13,543,000 for the three months ended September 30, 2023[33] - Cash provided by investing activities was $3.1 million for the nine months ended September 30, 2023, primarily from the sale of DSUVIA to Alora[188] - Cash provided by financing activities was $3.5 million for the nine months ended September 30, 2023, mainly due to $8.9 million in net proceeds from equity financing[189] - The company raised $10.0 million in July 2023 through a private placement of common stock and warrants, with an additional potential $16.3 million upon the exercise of common warrants[41] - The company closed a private placement of common stock on July 20, 2023, raising gross proceeds of $10.0 million, with an additional potential $16.3 million upon the exercise of common warrants[150] - The company has a liquidity concern, expecting to need additional capital to fund operations within the next twelve months[41] - The company expects to need additional capital to fund operations for at least the next twelve months due to incurred losses and negative cash flows[177] - Current capital levels are insufficient to fund operations for the next twelve months without raising additional capital[212] Business Operations and Strategy - The company is focused on advancing the development of its product candidates, including Niyad™, and aims to secure regulatory approval for commercialization[16] - The company has ongoing development for Niyad™, a regional anticoagulant, which has received Breakthrough Device Designation status from the FDA[39] - The company plans to commercialize an ephedrine pre-filled syringe and a phenylephrine pre-filled syringe, pending FDA approval[40] - The company is preparing New Drug Applications for its ephedrine and phenylephrine pre-filled syringe product candidates, which are already approved in the European Union[134][136] - The company plans to initiate a registrational trial for its product candidate Niyad in 2023 and submit a Premarket Approval application to the FDA in the second half of 2024[121] - The company has pending patent applications for nafamostat in various indications, including ARDS and DIC, which are already approved in Japan and South Korea[137] - The company has no plans to further develop any sufentanil sublingual product candidates following the divestment of DSUVIA[143] - The company is focused on reducing operating costs while maximizing the value of its remaining product candidates[143] Risks and Compliance - The company has identified risks including the ability to manage operating costs and reduce cash burn, which could impact future performance[16] - The company faces risks related to delays in clinical trials, which could increase costs and jeopardize regulatory approvals[205] - The company is dependent on the successful commercialization of DSUVIA by Alora Pharmaceuticals to receive royalties, which poses a risk to financial performance[205] - A material weakness in internal control over financial reporting was previously identified, leading to a restatement of financial statements for certain periods[198] - The company has implemented remediation measures to address the identified material weakness, resulting in an improved internal control environment as of June 30, 2023[200] - The company received a notice from Nasdaq regarding non-compliance with the Minimum Bid Price Rule, which may affect future capital raising efforts[177] Discontinued Operations - The DSUVIA business was classified as discontinued operations as of March 31, 2023, affecting the financial statements for all periods presented[58] - The company closed a transaction with Alora Pharmaceuticals on April 3, 2023, for the divestment of its DSUVIA product, which includes a 15% royalty on net product sales[139] - The impairment of net assets held for sale was $6,853,000 for the nine months ended September 30, 2023, compared to $0 in 2022[72] - The net loss from discontinued operations for the nine months ended September 30, 2023, was $8,098,000, an improvement from a loss of $9,822,000 in 2022[72] - The company recognized a net income from discontinued operations of $0.1 million for Q3 2023, compared to a net loss of $2.1 million in Q3 2022[176] - The company continues to act as an agent in relation to DSUVIA sales to the DoD, recognizing revenue when the DoD obtains control of the product[55] Market and Future Outlook - The company has not yet generated significant product revenue and may never achieve profitability, raising concerns about its ability to continue as a going concern[208] - The company expects to continue incurring substantial losses in 2023 and may face negative cash flows from operations in the future[208] - Future capital requirements may vary significantly due to factors such as regulatory submissions, commercialization expenditures, and business development costs[191] - The company may require additional capital to sustain operations, which could delay or eliminate commercialization efforts and product development programs[210] - There is substantial doubt about the company's ability to continue as a going concern based on current operating expenses[212] - The unaudited financial statements for the quarter ended September 30, 2023, were prepared on the basis of a going concern[212] - Financial statements do not include adjustments that may be necessary if the company cannot continue as a going concern[212]

Financial Data and Key Metrics Changes - The company ended Q3 2023 with $13.4 million in cash and short-term investments, including $26 million from a financing round [16] - Revenues for Q3 were $0.1 million, primarily from royalties on DSUVIA sales, with a 75% royalty from the Department of Defense [16] - Combined R&D and SG&A expenses totaled $3.4 million in Q3, down from $4.5 million the previous year, with expectations for an increase in Q4 due to the upcoming clinical study [17] Business Line Data and Key Metrics Changes - The lead product candidate, Niyad, is a novel anticoagulant for dialysis, with a peak annual sales potential of over $200 million in the US, based on modest market penetration estimates [6][11] - The transition of DSUVIA to Alora Pharmaceuticals is ongoing, with AcelRx supporting Alora during this process [13] - DSUVIA demand from the Department of Defense remained stable, although revenue recognition was affected by shipment timing [14] Market Data and Key Metrics Changes - The market opportunity for Niyad is significant, with estimates suggesting a 20% share of the in-hospital CRRT market and 6% of the outpatient dialysis market [6] - The company is engaging with key opinion leaders in nephrology to discuss the NEPHRO study protocol, reinforcing the urgent medical need for alternatives in anticoagulation during dialysis [7][8] Company Strategy and Development Direction - AcelRx is focusing on unmet medical needs in dialysis, transitioning from acute pain management to developing Niyad for use in continuous renal replacement therapy [4] - The company is preparing for a PMA submission for Niyad in the second half of 2024, with potential launch in the first half of 2025 [11] - AcelRx is also evaluating the timing for NDA submission for its pre-filled syringe candidate, Fedsyra [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the success of the Niyad study, citing the favorable safety profile of nafamostat, which has been used in other markets [11] - The company anticipates robust enrollment for the NEPHRO CRRT study, with top-line data expected by mid-2024 [10][21] - Management highlighted the importance of the upcoming KOL panel discussion to further engage with the nephrology community [8] Other Important Information - The company received an ICD-10 CMS procedural code to facilitate reimbursement for Niyad [11] - AcelRx continues to lead its relationship with the Department of Defense, which is a significant customer for DSUVIA [14] Q&A Session Summary Question: Timeline for NEPHRO CRRT study enrollment and potential holiday impact - Management indicated that holiday periods do not significantly affect enrollment due to the nature of ICU patients [21] Question: Attributes for site selection in the NEPHRO CRRT study - Sites selected are major academic centers with expertise in nephrology and critical care, many of whom are advisors for the study [23] Question: Components of the PMA for Niyad beyond the registrational study data - Additional components include preclinical toxicology studies and stability data, which are being generated concurrently with the clinical trials [26] Question: Market opportunity against heparin and citrate - Management noted that while heparin is standard care, there is potential to capture market share from both citrate and patients receiving no anticoagulation [30][34] Question: Opportunities in intermittent hemodialysis - Management acknowledged that intermittent hemodialysis presents a larger market opportunity, although patients are generally less sick and may tolerate heparin better [36] Question: Future development opportunities beyond pre-filled syringes - The company is exploring development opportunities with LTX-608 for indications such as acute pancreatitis and disseminated intravascular coagulation [40]

AcelRx Pharmaceuticals, Inc. (NASDAQ:ACRX) Q2 2023 Earnings Conference Call August 10, 2023 4:30 PM ET Company Participants Raffi Asadorian – Chief Financial Officer Vince Angotti – Chief Executive Officer Pam Palmer – Founder and Chief Medical Officer Conference Call Participants Thomas Yip – H.C. Wainwright Laura Suriel – Alliance Global Operator Welcome to the AcelRx Second Quarter 2023 Financial Results Conference Call. This call is being webcast live via the Events page of the Investors section of Acel ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 2023 or ☐ TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to Commission File Number: 001-35068 ACELRX PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 41-2193603 (State or other jurisdiction ...