AcelRx Pharmaceuticals(ACRX) - 2025 Q1 - Quarterly Report

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