Grace Therapeutics, lnc.(GRCE) - 2025 Q4 - Annual Report

PART I Business Grace Therapeutics develops rare disease treatments using novel drug delivery, prioritizing GTx-104 for aSAH with an NDA planned for H1 2025 - The company focuses on applying new proprietary formulations to approved compounds to enhance efficacy and compliance, primarily targeting rare and orphan diseases[20] - The development strategy utilizes the Section 505(b)(2) regulatory pathway, potentially shortening approval timelines by referencing existing FDA data[22] - All three clinical-stage drug candidates have received Orphan Drug Designation (ODD), potentially providing 7 years of market exclusivity upon approval[23] - The company completed domestication from Canada to Delaware in October 2024, changing its name from Acasti Pharma Inc. to Grace Therapeutics, Inc[156][412] Our Pipeline The company's pipeline includes three clinical-stage candidates, prioritizing GTx-104 while de-prioritizing GTx-102 and GTx-101 Clinical Pipeline Overview | Drug Candidate | Indication | Development Stage & Key Feature | | :--- | :--- | :--- | | GTx-104 | Aneurysmal Subarachnoid Hemorrhage (aSAH) | Lead candidate; novel injectable nimodipine. Phase 3 completed, NDA submission planned for H1 2025 | | GTx-102 | Ataxia-Telangiectasia (A-T) | Oral-mucosal betamethasone spray. Phase 1 PK study completed. Development de-prioritized | | GTx-101 | Postherpetic Neuralgia (PHN) | Topical bio-adhesive bupivacaine spray. Phase 1 studies completed. Development de-prioritized | Commercialization Strategy Grace Therapeutics plans U.S. commercialization of GTx-104 with a targeted sales force, considering partnerships for other assets - Plan to commercialize GTx-104 in the U.S. with a highly experienced and targeted hospital-based sales force if approved[83] - May seek commercial partnerships for GTx-104 in territories outside the U.S[83] - Considering out-licensing or selling GTx-102 and/or GTx-101 for U.S. and/or global markets[83] Manufacturing and Supply The company relies entirely on third-party Contract Manufacturing Organizations (CMOs) for all drug manufacturing under cGMP - The company does not own any manufacturing facilities and utilizes a network of third-party CMOs for manufacturing its drug candidates[84] - All lots of drug substance and drug product for clinical supply are manufactured under cGMP, and the company plans to continue relying on CMOs for commercial quantities if a product is approved[85] Intellectual Property Portfolio The company's IP strategy combines orphan drug exclusivity and over 40 patents globally to protect its drug candidates - The IP strategy includes orphan drug designation, which could result in 7 years of U.S. marketing exclusivity, and a patent estate of over 40 granted and pending patents globally[86] - The patent portfolio includes 8 U.S. issued patents and 4 filed U.S. patent applications, primarily focused on composition and method-of-use patents[86] Government Regulation The company is subject to extensive FDA regulation, pursuing the 505(b)(2) pathway, and navigating healthcare and data privacy laws - The company is pursuing the Section 505(b)(2) regulatory approval pathway for its candidates, which allows reliance on existing data for an approved reference drug, potentially shortening the development timeline[100] - All three clinical-stage product candidates have received Orphan Drug Designation (ODD), which provides benefits like tax credits, user fee waivers, and 7 years of market exclusivity upon approval[124][125] - The company is subject to various healthcare laws, including the Affordable Care Act (ACA), the Inflation Reduction Act (IRA) which impacts drug pricing and reimbursement, and data privacy laws like HIPAA and GDPR[126][130][132] Human Capital Resources As of March 31, 2025, Grace Therapeutics had six full-time employees, all located in the United States - As of March 31, 2025, the company had a total of six full-time employees, all located in the United States[153] Risk Factors The company faces significant risks including GTx-104 dependence, funding needs, development uncertainties, market acceptance, and third-party reliance - Business Risks: The company is heavily dependent on the success of its lead drug candidate, GTx-104, and requires additional funding to maintain operations and advance its programs. It has no history of commercializing drugs[162][164][166] - Development & Commercialization Risks: The company relies on the 505(b)(2) regulatory pathway, which is not guaranteed. Clinical development is lengthy and expensive with uncertain outcomes. Market success depends on physician and payor acceptance, and the company faces significant competition[187][191][247] - Third-Party Dependence Risks: The company relies on third-party CROs to conduct clinical trials and CMOs for all manufacturing, making it vulnerable to their performance, quality, and regulatory compliance[270][272] - Tax Risks: There is a significant risk that the company was classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes prior to its domestication, which could have adverse tax consequences for U.S. shareholders. The ability to use Net Operating Loss (NOL) carryforwards is also uncertain[282][286] Unresolved Staff Comments The company reports that there are no unresolved staff comments - Not applicable[301] Cybersecurity The company maintains a cybersecurity program overseen by an external IT consultant and Audit Committee, reporting no material incidents - The company's cybersecurity program is managed by an external IT consultant and overseen by the Audit Committee of the Board[304][305] - A Cybersecurity Incident Response Plan is in place to manage potential threats[303] - The company did not experience any material cybersecurity incidents or threats in the last reporting year[307] Properties The company's principal executive office and operations are located in Princeton, New Jersey - The company's principal executive office is located in Princeton, New Jersey[308] Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business - The company is not currently a party to any legal proceedings that management believes are likely to have a material adverse effect on the business[309] Mine Safety Disclosures This item is not applicable to the company - Not applicable[310] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Grace Therapeutics' common stock trades on Nasdaq under 'GRCE', with 32 holders of record; no cash dividends are anticipated - The company's common stock is traded on the Nasdaq Capital Market under the symbol "GRCE"[312] - As of June 18, 2025, there were 32 holders of record of the common stock[312] - The company does not anticipate paying any cash dividends in the foreseeable future[313] Management's Discussion and Analysis of Financial Condition and Results of Operation For FY2025, the company reported a net loss of $9.6 million, influenced by R&D increases and a positive change in derivative warrant liabilities, holding $22.1 million cash Results of Operations Net loss decreased to $9.6 million in FY2025 from $12.9 million in FY2024, primarily due to a positive change in derivative warrant liabilities and increased R&D expenses Comparison of Operations (in thousands) | | Year ended March 31, 2025 | Year ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Net loss | $ (9,568) | $ (12,853) | $ 3,285 | | Loss per share | $ (0.79) | $ (1.35) | $ 0.56 | | R&D expenses, net | $ 9,511 | $ 4,683 | $ (4,828) | | G&A expenses | $ 7,168 | $ 6,684 | $ (484) | | Restructuring costs | $ — | $ 1,485 | $ 1,485 | | Change in fair value of derivative warrant liabilities | $ 3,218 | $ (2,728) | $ 5,946 | - Research and development expenses increased by $4.8 million, primarily due to increased activities for the GTx-104 pivotal Phase 3 safety clinical trial[327] Liquidity and Capital Resources As of March 31, 2025, cash was $22.1 million; a $13.7 million private placement in February 2025 is expected to fund operations for at least 12 months Cash Position and Flows (in thousands) | | As of/Year Ended March 31, 2025 | As of/Year Ended March 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,133 | $23,005 | | Net cash used in operating activities | $(14,904) | $(12,333) | | Net cash provided by financing activities | $14,032 | $7,359 | - In February 2025, a private placement generated net proceeds of $13.7 million[339][345] - The company believes its existing cash will be sufficient to sustain planned operations through at least 12 months from the financial statement issuance date[321][339] Critical Accounting Policies Key accounting policies involve significant judgment, including expensing R&D costs and annually testing intangible assets and goodwill for impairment - Research and development costs are expensed as incurred, with accruals based on estimates of work performed by contractors[355] - In-process research and development (IPR&D) and goodwill, valued at $49.3 million (68% of total assets), are tested for impairment annually. Impairment assessment involves highly subjective assumptions[357][358] Quantitative and Qualitative Disclosure About Market Risk As a smaller reporting company, Grace Therapeutics is not required to provide this information - The company is not required to provide this information as it qualifies as a smaller reporting company[369] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY2025 and FY2024, including the auditor's report and notes Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on the financial statements, identifying the company's going concern ability as a critical audit matter - The auditor, KPMG LLP, issued an unqualified opinion on the financial statements[397] - A critical audit matter was identified regarding the assessment of the company's ability to continue as a going concern, due to the subjective nature of forecasting future expenses and cash flows[401][403] Consolidated Financial Statements The consolidated financial statements show total assets of $72.0 million and a net loss of $9.6 million for FY2025, with $14.9 million cash used in operations Key Financial Data (Year Ended March 31, 2025, in thousands) | Metric | FY 2025 | FY 2024 | | :--- | :--- | :--- | | Balance Sheet: | | | | Cash and cash equivalents | $22,133 | $23,005 | | Total Assets | $71,993 | $73,300 | | Total Liabilities | $5,383 | $11,557 | | Total Stockholders' Equity | $66,610 | $61,743 | | Income Statement: | | | | Net Loss | $(9,568) | $(12,853) | | Basic and Diluted Loss Per Share | $(0.79) | $(1.35) | | Cash Flow: | | | | Net cash used in operating activities | $(14,904) | $(12,333) | | Net cash provided by financing activities | $14,032 | $7,359 | Notes to the Consolidated Financial Statements The notes detail corporate changes, liquidity risks, accounting policies, intangible assets, and recent financing, including a $13.7 million private placement - (Note 1) The company completed its domestication from Canada to Delaware in October 2024. Management believes existing cash is sufficient for at least 12 months but will require additional capital beyond that[413][419] - (Note 6) Intangible assets (IPR&D) and goodwill totaled $49.3 million as of March 31, 2025, with no impairment recognized during the year[462] - (Note 8) The company raised $13.7 million in net proceeds from a private placement in February 2025. As of March 31, 2025, derivative warrant liabilities were valued at $1.1 million, a significant decrease from $4.4 million the prior year[467][481] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting principles or financial disclosure - None reported[371] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2025 - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective[371] - Management concluded that as of March 31, 2025, the company's internal control over financial reporting was effective, based on the COSO framework[372] - The company is a non-accelerated filer and is not required to provide an auditor attestation on internal controls[374] Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fourth fiscal quarter - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fourth fiscal quarter[375] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None[376] PART III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[379] Executive Compensation Information regarding executive and director compensation is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[380] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and equity compensation plans is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[381] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[382] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2025 Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting of stockholders[383] PART IV Exhibits, Financial Statement Schedules This section lists all exhibits filed with or incorporated by reference into the Form 10-K, including financial statements and corporate documents - This section contains the list of all exhibits filed with or incorporated by reference into the Form 10-K[386] Form 10-K Summary The company reports that there is no Form 10-K summary provided - None[391]