AcelRx Pharmaceuticals(ACRX) - 2024 Q2 - Quarterly Report

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 Presents Talphera's unaudited condensed consolidated financial statements, highlighting increased cash, new liabilities, and ongoing net losses Condensed Consolidated Balance Sheets 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] - 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] Condensed Consolidated Statements of Operations 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] - 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] Condensed Consolidated Statements of Stockholders' Equity 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] - 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] Condensed Consolidated Statements of Cash Flows 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] - 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] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting Talphera's condensed consolidated financial statements 1. Organization and Summary of Significant Accounting Policies 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][34] - 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][48][49][70][71][73] - 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][40][41][42] - 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][52] 2. Investments and Fair Value Measurement 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][54] - The Level III warrant liability was valued at approximately $2.3 million at June 30, 2024, using the Black-Scholes model[63] - 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] 3. Discontinued Operations 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][65] 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] 4. Sale of Future Payments 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] - Approximately $6.1 million (net of issuance costs) was recorded as a liability, amortized using an estimated effective interest rate of 13%[73][75] - The company recognized $1.2 million (net of issuance costs) as other income from the sale of future payments[73] - 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] 5. Long-Term Debt 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] 6. Commitments and Contingencies 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][79] - The securities class action was dismissed with prejudice on May 7, 2024, but plaintiffs filed a notice of appeal on June 5, 2024[78] - The company believes these lawsuits are without merit and intends to vigorously defend against them, but cannot estimate the reasonably possible loss[80] 7. Stockholders' Equity 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][82] - A second tranche, for up to an additional $12.0 million, is conditional on Niyad clinical trial endpoints and stock price performance[83] - Stockholders approved amendments to the 2020 Equity Incentive Plan and 2011 Employee Stock Purchase Plan in June 2024, increasing authorized shares for issuance[86][88] 8. Warrants 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][90] - 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] 9. Stock-Based Compensation 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] - During the six months ended June 30, 2024, 1,053,612 stock options and 176,768 restricted stock units were granted[91][97] 10. Net Loss per Share of Common Stock 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] - 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] 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 Analyzes Talphera's financial condition, results of operations, and liquidity, focusing on product development and capital needs About Talphera, Inc. 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] Our Portfolio Details Talphera's product candidates, including Niyad, LTX-608, and pre-filled syringe candidates, highlighting development status and regulatory considerations Nafamostat Product Candidates 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][105][106] - 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][111] Pre-filled Syringe (PFS) Product Candidates 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][109][112] - 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] Our Strategy 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] - 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] Recent Developments 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] - 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] General Trends and Outlook Discusses Talphera's management of global supply chain and the potential impact of inflation on future operating results Global Supply Chain 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] 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] - Inflation may in the future adversely affect operating results due to impacts on overhead costs, transportation costs, and interest rates[118] Financial Overview 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] 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 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 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] - 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] Recently Issued Accounting Pronouncements 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][125] Results of Operations 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 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] - 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] Research and Development Expenses 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] Selling, General and Administrative Expenses 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] - Specific reductions include employee compensation, legal fees, and stock-based compensation[130] Other Income (Expense), Net 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] - 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][135] Discontinued Operations 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] - There were no results from discontinued operations for the periods in 2024[137] Liquidity and Capital Resources 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 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] - 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][139][141][142] XOMA Purchase Agreement 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] January 2024 Private Placement 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] - A second tranche, for up to an additional $12.0 million, is conditional on Niyad clinical trial endpoints and stock price performance[144] Registration Statement on Form S-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] Cantor Controlled Equity OfferingSM Sales Agreement 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] - The ability to sell shares under the ATM Agreement is limited by SEC "baby shelf" limitations[146] Cash Flows 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 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] Cash Flows from Investing Activities 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] Cash Flows from Financing Activities 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] - This contrasts with $5.4 million used in financing activities in 6M 2023, primarily for long-term debt payments[152] Capital Commitments and Capital Resources 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] - 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][155] - Future capital requirements are subject to numerous factors, including clinical trial success, regulatory approvals, commercialization costs, and potential litigation[154] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - There have been no material changes in internal control over financial reporting during the period[158] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other required disclosures for Talphera Item 1. Legal Proceedings 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] - The securities class action was dismissed with prejudice on May 7, 2024, but plaintiffs filed a notice of appeal on June 5, 2024[78] - 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][159] Item 1A. Risk Factors Talphera faces numerous significant risks, including capital needs, clinical trial delays, regulatory hurdles, reliance on third parties, and market volatility Summary Risk Factors 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] - Failure to realize expected benefits from the Lowell Therapeutics, Inc. acquisition could adversely affect stock price[160] - Delays in clinical trials are common and could increase costs, jeopardize, or delay regulatory approval and product sales[160] Risks Related to Our Financial Condition and Need for Additional Capital 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][168] - The company requires significant additional capital to fund operations and product development, which may be sought through equity offerings, debt, or strategic agreements[166][167][173] - Failure to raise additional capital could force the company to reduce its workforce, delay product development, or relinquish rights to technologies/product candidates[169][171] - Future sales of equity securities may result in dilution to existing stockholders, and debt securities could impose restrictive covenants[174] - The company has not yet generated significant product revenue and may never be profitable, with success dependent on regulatory approvals and commercialization[175][178] - Future sales of DSUVIA to the DoD are unpredictable and may not meet expectations, potentially impacting future revenue from retained interests[180][181] Risks Related to Drug Development and Commercialization 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][183] - Commercial success of DSUVIA, and Talphera's retained payments, depends on Alora's ability to market, sell, and distribute the product effectively[184][185] - 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][187][188] - 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][190][191][192] - Delays in patient enrollment for clinical trials could delay or prevent necessary regulatory approvals[196][197] - Identification of serious adverse effects or unexpected characteristics of product candidates during development could lead to abandonment or limitation of development[198] - Limited resources may lead the company to pursue less profitable or less likely-to-succeed product candidates or indications[199] Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters 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][201] - Talphera's expectations for FDA approvability of product candidates may be inaccurate, potentially requiring additional manufacturing, nonclinical, or clinical development work[202][203][204] - Establishing and maintaining collaborative relationships for international sales, marketing, and distribution is difficult and critical for product commercialization[204][205][208][209] - 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][245][246][247][248] - 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][217][218][222][223][224][226][228] - The FDA and other regulatory agencies actively enforce laws prohibiting the promotion of off-label uses, which could lead to significant liability[219] - Inability to establish and maintain relationships with group purchasing organizations (GPOs) could jeopardize future revenues and profitability[220][221] Risks Related to Our Reliance on Third Parties 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][230][232] - 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][234] - Manufacturing issues during scale-up or non-compliance with cGMP by third-party manufacturers could delay product development and regulatory approval[235][236][237][238][240] - 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][242][243] Risks Related to Our Business Operations and Industry 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][250][251][252] - Business interruptions from natural disasters or other events could delay operations and sales efforts[253][254] - Future success depends on retaining key executives and attracting, retaining, and motivating qualified personnel, which is challenging due to intense competition[255] - Acquisitions, investments, or strategic transactions could divert management's attention and incur various costs and expenses[257][258][259] - Potential product liability claims, particularly from past DSUVIA sales, could result in substantial liability and costs, potentially exceeding insurance coverage[259][260] - Misconduct by employees, contractors, or partners, including non-compliance with regulatory standards and insider trading, could expose the company to significant penalties[262][263] Risks Related to Our Intellectual Property 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][265][266][267][268] - Patent litigation is expensive, time-consuming, and could lead to delays in market entry, substantial damages, or the inability to obtain necessary licenses[269][270][271][272][273][274][275][278] - Protecting trade secrets is difficult, and confidentiality agreements may not prevent unauthorized disclosure or independent discovery[281] - Failure to pay periodic maintenance fees or comply with procedural requirements for patents and applications could result in loss of patent rights[282][283] - Enforcing intellectual property rights globally is challenging due to varying legal protections and enforcement difficulties in foreign countries[284][285] - Failure to secure trademark registrations in all potential markets could adversely affect the business[286][287] Risks Related to Ownership of Our Common Stock 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][290] - 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][292] - 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] - Talphera does not intend to pay dividends on its common stock, so returns will be limited to the value of the stock[294] - 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][296] Risks of a General Nature 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][298][299] - 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] - 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][302] - Macroeconomic uncertainties, including inflationary pressures, supply chain disruptions, labor shortages, and recession risks, have and may continue to adversely affect the business[162] - Past material weaknesses in internal control over financial reporting indicate a risk of future material errors or failure to meet reporting obligations[162] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[304] Item 4. Mine Safety Disclosures This item is not applicable to Talphera - Mine Safety Disclosures are not applicable to Talphera[304] Item 5. Other Information No other information is required to be reported under this item - No other information to report[304] Item 6. Exhibits 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][308][309][310][311][312] - Certifications from the Principal Executive Officer and Principal Financial and Accounting Officer are included, along with Inline XBRL financial information[313][314][315][316][317]