Virios Therapeutics(VIRI) - 2024 Q4 - Annual Report

PART I Business Dogwood Therapeutics is a pre-revenue biopharmaceutical company developing pain and fatigue medicines, featuring Halneuron® and antiviral therapies - The company is a pre-revenue, development-stage biopharmaceutical firm focusing on pain and fatigue-related disorders[24] - The company's pipeline has two main pillars: Nav 1.7 modulation for pain (Halneuron®) and combination antiviral therapies for herpes virus-mediated illnesses (IMC-1, IMC-2)[25] - On October 7, 2024, the company acquired 100% of Pharmagesic (Holdings) Inc. through a Share Exchange Agreement, which included its subsidiaries and the Halneuron® program[179] Nav1.7 Non-Opioid Analgesic Program (Halneuron®) Halneuron®, a late-stage clinical candidate for chemotherapy-induced neuropathic pain (CINP), initiated Phase 2b trials in Q1 2025 - Halneuron®, the lead product candidate, is in late-stage clinical development for Chemotherapy-Induced Neuropathic Pain (CINP). Its active ingredient is highly purified Tetrodotoxin (TTX)[26] - The global CINP drug market is estimated at approximately $1.5 billion annually, with the broader cancer-related pain market reaching about $5 billion. Halneuron® has the potential to be the first FDA-approved treatment for CINP[36] - The HALT-CINP-203 Phase 2b clinical trial commenced in Q1 2025 to assess the efficacy and safety of Halneuron® in 200 patients with moderate to severe CINP. An interim analysis is planned for Q4 2025[43] Antiviral Program (IMC-1 and IMC-2) The antiviral program focuses on IMC-1 and IMC-2, fixed-dose combinations for Fibromyalgia and Long-COVID - IMC-1 and IMC-2 are fixed-dose combinations of an anti-herpes antiviral and celecoxib, designed to treat diseases like Fibromyalgia (FM) and Long-COVID (LC) by suppressing herpesvirus activation[50] - The FORTRESS Phase 2b study for IMC-1 in FM did not meet its primary endpoint overall (p=0.302). However, a post-hoc analysis of a specific patient cohort enrolled later in the trial showed statistically significant improvement in pain (p=0.03)[64][65] - The FDA has agreed to a Phase 3 program for IMC-1 in FM, which will include two pivotal trials. The company is currently exploring partnership opportunities to advance this program[68] - An exploratory study of IMC-2 in Long-COVID patients showed clinically meaningful improvements in fatigue and sleep disruption, though it was not statistically significant due to the small sample size. The company is seeking external financing to continue its development[84] Intellectual Property The company's IP strategy focuses on patent rights for Halneuron® and antiviral programs, with exclusivity extending to 2045 and 2033 - The Halneuron® patent portfolio includes 7 issued families in the U.S. and abroad, with patents related to manufacturing, formulation, and use. Exclusivity for issued patents expires between 2027-2030, with pending patents potentially extending to 2042 and 2045[96] - The antiviral portfolio includes 21 issued patents in the U.S. and abroad for IMC-1, including three Composition of Matter patents. Exclusivity for all these patents extends to 2033[102] Government Regulation The company's operations are subject to extensive FDA and global regulations, with fixed-dose combination products eligible for the 505(b)(2) pathway - The company's products are subject to extensive regulation by the FDA and other authorities, covering all stages from development to post-marketing[117][119] - The company's fixed-dose combination products, IMC-1 and IMC-2, are eligible for the FDA's 505(b)(2) approval pathway, allowing reliance on existing data for their individual approved components (famciclovir, celecoxib, valacyclovir)[85][161] - The FDA has granted Fast Track designation for IMC-1 for the treatment of Fibromyalgia, a program intended to expedite the development and review of drugs for serious conditions with unmet medical needs[134][136] Risk Factors The company faces significant risks including going concern doubt, high development uncertainty for clinical-stage products, and reliance on third parties - The company has recurring losses from operations, raising substantial doubt about its ability to continue as a going concern. The independent auditor's report includes an explanatory paragraph regarding this uncertainty[189][190] - The company is heavily dependent on the success of its three main product candidates: Halneuron®, IMC-1, and IMC-2, all of which are still in clinical development and face uncertain regulatory approval and commercialization[206] - The company relies on third-party contract manufacturing organizations (CMOs) for the production of its clinical supplies and intends to do so for commercial supply, which poses risks related to quality control, compliance, and supply chain stability[278] - The company faces potential early generic competition for its products, as the active ingredients in its candidates are already available. This could impact market exclusivity and profitability[250][252] Cybersecurity The company maintains a cyber-risk management program overseen by the Audit Committee, focusing on social engineering threats - The company's cybersecurity program is integrated into its overall enterprise risk management and is overseen by the Audit Committee[393][395] - The most significant identified cybersecurity risk is social engineering, and all employees receive training twice a year to mitigate this threat[396] - As a virtual company, Dogwood relies on the internal controls of its third-party vendors for data protection and reviews their SOC reports annually[398] Properties The company operates virtually in the U.S. and leases office space for its Canadian operations in British Columbia - The company does not own or lease real property in the U.S. and operates virtually. It leases office space in Vancouver, B.C., Canada[401] Legal Proceedings The company is not currently party to any pending material litigation, though claims may arise in the ordinary course of business - As of the report date, the company does not have any pending litigation that is considered material[402] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'DWTX', faced compliance issues, and does not pay cash dividends on common stock - The company's stock symbol changed from 'VIRI' to 'DWTX' on October 9, 2024, following the business combination and name change[404] - The company received a notice from Nasdaq in November 2024 for falling below the minimum stockholders' equity requirement of $2.5 million. It was granted an extension until May 14, 2025, which it estimates it achieved as of March 14, 2025[408] - The company has never paid cash dividends on its common stock and does not plan to. However, Series A Preferred Stock accrues a 5.0% annual payment-in-kind dividend[410][411] Management's Discussion and Analysis of Financial Condition and Results of Operations The pre-revenue company reported a $12.3 million net loss in 2024, secured $19.5 million in debt and $4.25 million from an offering, with cash funding operations through Q1 2026 - The company is pre-revenue and its operations are funded through equity and debt financings[416][461] - In October 2024, the company entered into a $19.5 million loan agreement with Conjoint Inc., an affiliate of CKLS. This debt was subsequently converted into Series A-1 Preferred Stock in March 2025[422][430] - In March 2025, the company raised approximately $4.25 million in net proceeds from a registered direct offering of common stock[431] - Management anticipates that cash on hand as of December 31, 2024, plus proceeds from recent financing activities, will fund operations through the first quarter of 2026. Additional financing will be required thereafter[467] Results of Operations For 2024, the company reported a $12.3 million net loss, up from $5.3 million in 2023, primarily due to $4.9 million in non-recurring transaction costs Comparison of Operating Expenses and Other Income (Expense) | | Year Ended December 31, (in USD) | | | :--- | :--- | :--- | | | 2024 | 2023 | | Operating expenses: | | | | Research and development | $ 3,530,913 | $ 1,728,078 | | General and administrative | 8,696,335 | 3,718,841 | | Total operating expenses | $ 12,227,248 | $ 5,446,919 | | Other (expense) income, net | $ (122,979) | $ 150,904 | | Loss before income taxes | $ (12,350,227) | $ (5,296,015) | - Research and development expenses increased by $1.8 million in 2024, mainly due to a $1.0 million increase in clinical trial expenses and a $0.4 million increase in drug development and manufacturing costs[457] - General and administrative expenses increased by $5.0 million in 2024, primarily due to $4.9 million in nonrecurring transaction costs related to the Combination[458] Liquidity and Capital Resources As of December 31, 2024, the company had $14.8 million in cash, with financing activities providing $16.7 million in 2024, but additional capital is needed Summary of Cash Flows | | Years Ended December 31, (in USD) | | | :--- | :--- | :--- | | | 2024 | 2023 | | Net cash used in operating activities | $ (8,790,805) | $ (4,870,489) | | Net cash provided by investing activities | $ 3,761,936 | $ — | | Net cash provided by financing activities | $ 16,704,464 | $ 1,156,443 | - As of December 31, 2024, the company's principal source of liquidity was cash totaling $14.8 million[461] - The company will need to secure additional financing to fund operations beyond the first quarter of 2026, and substantial doubt exists about its ability to continue as a going concern[467] Financial Statements and Supplementary Data Consolidated financial statements for 2024 and 2023 are presented, with the auditor's report expressing substantial doubt about going concern due to recurring losses - The independent auditor's report expresses substantial doubt about the Company's ability to continue as a going concern due to its accumulated deficit and lack of revenue[486] Consolidated Balance Sheet Highlights (as of Dec 31) | | 2024 (in USD) | 2023 (in USD) | | :--- | :--- | :--- | | Total Assets | $94,308,246 | $4,165,442 | | Goodwill | $11,812,476 | $— | | Intangible assets | $65,710,527 | $— | | Total Liabilities | $30,027,223 | $358,548 | | Debt with related party, net | $15,381,077 | $— | | Total stockholders' (deficit) equity | $(10,124,339) | $3,806,894 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | | 2024 (in USD) | 2023 (in USD) | | :--- | :--- | :--- | | Total operating expenses | $12,227,248 | $5,446,919 | | Net loss | $(12,349,724) | $(5,296,015) | | Net loss per common share | $(12.52) | $(7.05) | Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[621] - Management concluded that internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework[623] - The company is currently integrating the legacy Pharmagesic business into its system of internal control, which may result in future changes[625] PART III Directors, Executive Officers, Corporate Governance, Compensation, and Accountant Fees Information for Items 10-14 regarding directors, executive officers, corporate governance, compensation, and accountant fees is incorporated by reference - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the forthcoming 2025 definitive proxy statement[628][630][631][632][633] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits filed with the Annual Report, with financial statement schedules omitted - This section provides an index of all financial statements and exhibits filed with the Annual Report[635][636][637]