Fulcrum Therapeutics(FULC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and position, including detailed statements and explanatory notes Item 1. Financial Statements This section presents unaudited consolidated financial statements, including balance sheets, operations, equity, and cash flows, with detailed notes - The company is a clinical-stage biopharmaceutical company focused on genetically-defined rare diseases, incorporated on August 18, 2015[27] - The company has incurred recurring losses and negative cash flows from operations since inception, with an accumulated deficit of $554.3 million as of June 30, 2025[31] - Current cash, cash equivalents, and marketable securities are expected to fund operations for at least 12 months from the financial statement issuance date[32] Consolidated Balance Sheets This section details the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Cash and cash equivalents | $42,588 | $58,212 | $(15,624) | | Marketable securities | $171,523 | $182,809 | $(11,286) | | Total current assets | $219,373 | $249,923 | $(30,550) | | Total assets | $228,838 | $260,718 | $(31,880) | | Total current liabilities | $8,985 | $11,044 | $(2,059) | | Total liabilities | $14,460 | $17,684 | $(3,224) | | Total stockholders' equity | $214,378 | $243,034 | $(28,656) | | Accumulated deficit | $(554,349) | $(519,398) | $(34,951) | Consolidated Statements of Operations and Comprehensive (Loss) Income This section presents the company's financial performance, detailing revenues, expenses, and net loss or income for the specified periods | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Collaboration revenue | $0 | $80,000 | $0 | $80,000 | | Research and development | $12,987 | $17,261 | $26,391 | $37,034 | | General and administrative | $6,828 | $10,247 | $13,827 | $20,308 | | Total operating expenses | $19,815 | $27,508 | $40,218 | $57,342 | | Net (loss) income | $(17,296) | $55,409 | $(34,951) | $28,539 | | Net (loss) income per share, basic | $(0.28) | $0.89 | $(0.56) | $0.46 | | Net (loss) income per share, diluted | $(0.28) | $0.87 | $(0.56) | $0.45 | Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including additional paid-in capital, accumulated deficit, and comprehensive gain | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Additional Paid-In Capital | $762,248 | $768,591 | | Accumulated Other Comprehensive Gain | $130 | $82 | | Accumulated Deficit | $(519,398) | $(554,349) | | Total Stockholders' Equity | $243,034 | $214,378 | | Net Loss (Six Months Ended June 30, 2025) | N/A | $(34,951) | | Stock-based compensation expense (Six Months Ended June 30, 2025) | N/A | $6,042 | | Issuance of common stock under employee benefit plans (Six Months Ended June 30, 2025) | N/A | $301 | Consolidated Statements of Cash Flows This section details the company's cash flows from operating, investing, and financing activities for the specified periods | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | | Net cash (used in) provided by operating activities | $(29,077) | $33,615 | $(62,692) | | Net cash provided by investing activities | $13,156 | $25,620 | $(12,464) | | Net cash provided by financing activities | $301 | $2,028 | $(1,727) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(15,620) | $61,263 | $(76,883) | | Cash, cash equivalents, and restricted cash, end of period | $43,793 | $87,918 | $(44,125) | Notes to Consolidated Financial Statements This section provides detailed explanatory notes to the consolidated financial statements, offering context on accounting policies and financial instruments Nature of the Business and Basis of Presentation This note describes the company's business, incorporation details, and the basis for presenting its consolidated financial statements - Fulcrum Therapeutics, Inc. was incorporated on August 18, 2015, focusing on small molecules for genetically-defined rare diseases[27] - The company has incurred significant losses and negative cash flows since inception, with an accumulated deficit of $554.3 million as of June 30, 2025[31] - Current cash, cash equivalents, and marketable securities are expected to fund operations for at least 12 months from the financial statement issuance date[32] Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including consolidation, use of estimates, and risk management practices - The company's consolidated financial statements include its wholly-owned subsidiary, Fulcrum Therapeutics Securities Corp., and eliminate all intercompany transactions[33] - Key estimates in financial statement preparation include collaborative arrangements, revenue from contracts with customers, accrued expenses, stock-based compensation, and income taxes[35] - The company has no significant off-balance sheet risk and manages credit risk by depositing cash and equivalents in large financial institutions and diversifying marketable securities[36] Fair Value Measurements This note details the fair value measurements of financial assets and liabilities, categorized by valuation inputs into Level 1, 2, and 3 | Asset (in thousands) | Total (June 30, 2025) | Level 1 | Level 2 | Level 3 | | :------------------- | :-------------------- | :------ | :------ | :------ | | Money market funds | $42,588 | $42,588 | $0 | $0 | | U.S. Treasury securities | $9,990 | $0 | $9,990 | $0 | | Government agency securities | $13,786 | $0 | $13,786 | $0 | | Corporate bonds | $147,747 | $0 | $147,747 | $0 | | Total | $214,111 | $42,588 | $171,523 | $0 | Cash Equivalents and Marketable Securities This note provides a breakdown of cash equivalents and marketable securities, including their fair values and unrealized loss positions | Asset (in thousands) | Fair Value (June 30, 2025) | Fair Value (December 31, 2024) | | :------------------- | :------------------------- | :----------------------------- | | Money market funds | $42,588 | $45,722 | | U.S. Treasury securities | $9,990 | $14,986 | | Government agency securities | $13,786 | $11,282 | | Corporate bonds | $147,747 | $169,031 | | Total | $214,111 | $241,021 | - As of June 30, 2025, the company held 18 debt securities in an unrealized loss position for less than 12 months, with an aggregate fair value of $75.5 million[41] Property and Equipment, Net This note details the company's property and equipment, net of accumulated depreciation, and related depreciation expenses | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total property and equipment | $18,222 | $18,157 | | Less: accumulated depreciation | $(14,953) | $(14,257) | | Property and equipment, net | $3,269 | $3,900 | - Depreciation expense for the six months ended June 30, 2025, was $0.7 million, down from $0.9 million in the same period of 2024[43] Additional Balance Sheet Detail This note provides additional detail on specific balance sheet accounts, including prepaid expenses and accrued liabilities | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Prepaid expenses and other current assets | $5,262 | $6,806 | | Accrued expenses and other current liabilities | $4,941 | $7,694 | Preferred Stock This note describes the company's authorized preferred stock, confirming no shares were issued or outstanding during the periods - 5,000,000 shares of preferred stock are authorized, but none were issued or outstanding as of June 30, 2025, or December 31, 2024[46] - No dividends have been declared since inception[47] Common Stock This note details common stock activity, including shares issued, outstanding, and reserved for employee benefit plans and warrants | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Shares issued and outstanding | 54,091,588 | 53,968,303 | | Shares reserved for exercises of outstanding stock options | 12,082,312 | 9,354,699 | | Shares reserved for vesting of restricted stock units | 70,669 | 43,072 | | Shares reserved for future issuance under 2019 Stock Incentive Plan | 4,445,551 | 5,207,362 | | Shares reserved for future issuance under 2019 Employee Stock Purchase Plan | 2,052,030 | 1,671,843 | | Shares reserved for future issuance under 2022 Inducement Stock Incentive Plan | 1,827,909 | 1,896,209 | | Shares reserved for future issuance for pre-funded warrants | 8,500,000 | 8,500,000 | | Total Shares Reserved | 28,978,471 | 26,673,185 | - In August 2024, the company entered into exchange agreements with RA Capital and another institutional stockholder, exchanging 9,350,000 shares of common stock for pre-funded warrants, which were subsequently retired[51] - Pre-funded warrants have an exercise price of $0.001 per share, are immediately exercisable, have no expiration date, and are classified as equity[52][54] Stock-based Compensation Expense This note details stock-based compensation expense recognized across general and administrative and research and development functions | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | General and administrative | $2,320 | $2,681 | $4,503 | $5,268 | | Research and development | $555 | $1,663 | $1,539 | $2,992 | | Total stock-based compensation expense | $2,875 | $4,344 | $6,042 | $8,260 | - As of June 30, 2025, unrecognized stock-based compensation expense totaled $26.1 million, expected to be recognized over a weighted average period of 2.56 years[65] | Stock Option Activity (Six Months Ended June 30, 2025) | Number of Shares | Weighted Average Exercise Price | | :----------------------------------------------------- | :--------------- | :------------------------------ | | Outstanding at December 31, 2024 | 9,354,699 | $7.46 | | Granted | 3,603,573 | $4.54 | | Exercised | (55,396) | $3.21 | | Cancelled | (820,564) | $7.58 | | Outstanding at June 30, 2025 | 12,082,312 | $6.60 | License and Collaboration Agreements This note describes key license and collaboration agreements, including the termination of the Sanofi agreement and details of the CAMP4 Agreement - The Sanofi collaboration and license agreement for losmapimod was terminated effective April 17, 2025, after the Phase 3 REACH trial did not meet its primary endpoint[67][68] - The company recognized $80.0 million in upfront license payment revenue from Sanofi in Q2 2024, with no revenue recognized in Q2 2025[72] - The CAMP4 Agreement, signed in July 2023, provides a worldwide exclusive license for a Diamond-Blackfan Anemia (DBA) program, with potential development and regulatory milestone payments up to $35.0 million and sales milestone payments up to $35.0 million, plus mid-single digit to low-double digit royalties on net sales[74][75] Leases This note outlines the company's lease commitments, including its corporate headquarters lease and associated operating and variable lease expenses - The company's corporate headquarters lease at 26 Landsdowne Street, Cambridge, MA, ends June 30, 2028, with a five-year extension option[79] | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------- | :------------------------------- | :------------------------------- | | Operating lease expense | ~$500 | ~$1,000 | | Variable lease expense | ~$300 | ~$600 | Commitments and Contingencies This note describes the company's indemnification obligations and confirms the absence of material legal proceedings as of the reporting date - The company provides indemnification to various parties, including directors and officers, with potentially unlimited future payment amounts, but has not incurred material costs from these obligations as of June 30, 2025[81] - No material legal proceedings are currently pending; costs related to a securities action closed on March 28, 2025[82] Defined Contribution Plan This note details the company's contributions to its 401(k) defined contribution plan for the specified reporting periods | 401(k) Contributions (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Company contributions | $0.1 | $0.2 | $0.2 | $0.4 | Net (Loss) Income per Share This note presents the calculation of basic and diluted net loss or income per share, including the treatment of common stock equivalents | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net (loss) income, basic and diluted | $(17,296) | $55,409 | $(34,951) | $28,539 | | Weighted-average common shares outstanding, basic | 62,544 | 62,205 | 62,506 | 62,095 | | Weighted-average common shares outstanding, diluted | 62,544 | 63,587 | 62,506 | 63,684 | | Net (loss) income per share, basic | $(0.28) | $0.89 | $(0.56) | $0.46 | | Net (loss) income per share, diluted | $(0.28) | $0.87 | $(0.56) | $0.45 | - Common stock equivalents, including stock options and restricted stock units, were excluded from diluted EPS calculations in periods of net loss due to their anti-dilutive effect[84][85] Restructuring Activities This note details the company's restructuring plan, including workforce reductions and the associated accrued and paid charges - In September 2024, the company initiated a restructuring plan, reducing its workforce from 80 to 51 full-time employees to reprioritize R&D activities[86] | Accrued Restructuring Charges (in thousands) | Amount | | :------------------------------------------- | :----- | | As of December 31, 2024 | $377 | | Incurred during the period (Q2 2025) | $0 | | Paid during the period (Q2 2025) | $(377) | | As of June 30, 2025 | $0 | Related-Party Transactions This note describes related-party transactions, specifically an exchange of common stock for pre-funded warrants with a principal stockholder - In August 2024, RA Capital, a principal stockholder, exchanged 8,500,000 shares of common stock for pre-funded warrants, with no cash involved[88] Segment Information This note confirms the company operates as a single operating segment, focusing on genetically-defined rare diseases, with revenue and expense details - The company operates as a single operating segment, with its chief executive officer acting as the chief operating decision maker[89] - The company's primary focus is on developing small molecules for genetically-defined rare diseases[89] | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Collaboration Revenue | $0 | $80,000 | $0 | $80,000 | | Research and development | $12,987 | $17,261 | $26,391 | $37,034 | | General and administrative | $6,828 | $10,247 | $13,827 | $20,308 | | Net (loss) income | $(17,296) | $55,409 | $(34,951) | $28,539 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial condition and results of operations, focusing on net losses, decreased expenses, and future funding needs - The company experienced a significant shift from net income to net loss in Q2 2025 and for the six months ended June 30, 2025, primarily due to the absence of the $80.0 million Sanofi collaboration revenue recognized in Q2 2024[121][127][128] - Operating expenses, both R&D and G&A, decreased due to headcount reductions and the suspension of the losmapimod program[124][129][132][133] - The company expects continued operating losses and needs substantial additional funding, projecting current resources to last into 2028, but acknowledges this estimate is based on assumptions that may prove wrong[98][103][143] Overview This section provides an overview of Fulcrum Therapeutics, its lead product candidate, and its financial performance - Fulcrum Therapeutics is a clinical-stage biopharmaceutical company developing small molecules for genetically defined rare diseases, with pociredir for sickle cell disease (SCD) as its lead clinical-stage product candidate[92] - Phase 1b clinical trial results for pociredir (12 mg dose cohort) in SCD showed a mean absolute HbF increase of 8.6% (from 7.6% to 16.2%) at 12 weeks, with 7 of 16 patients achieving HbF > 20%[94] - The company incurred a net loss of $35.0 million for the six months ended June 30, 2025, and expects continued operating losses, with an accumulated deficit of $554.3 million, requiring substantial additional funding[98] Components of Results of Operations This section details the individual components contributing to the company's results of operations, including revenue and operating expenses Revenue This section discusses the company's revenue sources, primarily collaboration revenue, and the absence of product sales - No revenue from product sales has been generated, and none is expected for several years[104] - $80.0 million in collaboration revenue was recognized in Q2 2024 from the Sanofi agreement, which was terminated in April 2025, ceasing future revenue from this collaboration[105][106] Operating Expenses This section outlines the composition of research and development and general and administrative expenses - Research and development expenses include external costs (CROs, CMOs, consultants) and internal costs (salaries, benefits, stock-based compensation, lab supplies, facilities)[108][113] - General and administrative expenses cover personnel, legal, accounting, consulting, and facility costs for executive, finance, HR, and other administrative functions[117] - Both R&D and G&A expenses are expected to increase in future periods to support continued development, regulatory activities, and potential commercialization[116][118] Other Income, Net This section describes the primary components of other income, net, for the company - Other income, net, primarily consists of interest income from cash equivalents and marketable securities[119] Results of Operations This section provides a comparative analysis of the company's financial performance for the three and six months ended June 30, 2025 and 2024 Comparison of the Three Months ended June 30, 2025 and 2024 This section compares the company's financial results for the three-month periods ended June 30, 2025, and 2024 | Metric (in thousands) | June 30, 2025 | June 30, 2024 | Change ($) | | :-------------------- | :------------ | :------------ | :--------- | | Collaboration revenue | $0 | $80,000 | $(80,000) | | Research and development | $12,987 | $17,261 | $(4,274) | | General and administrative | $6,828 | $10,247 | $(3,419) | | Net (loss) income | $(17,296) | $55,409 | $(72,705) | - R&D expense decreased by $4.3 million, driven by a $2.7 million decrease in employee compensation (including $1.1 million in stock-based compensation) and a $2.1 million decrease in external R&D costs due to the losmapimod program suspension, partially offset by increased pociredir development[123][124] - G&A expenses decreased by $3.4 million, primarily due to a $2.0 million decrease in professional services and a $1.2 million decrease in employee compensation (including $0.4 million in stock-based compensation)[125][129] Comparison of the Six Months ended June 30, 2025 and 2024 This section compares the company's financial results for the six-month periods ended June 30, 2025, and 2024 | Metric (in thousands) | June 30, 2025 | June 30, 2024 | Change ($) | | :-------------------- | :------------ | :------------ | :--------- | | Collaboration revenue | $0 | $80,000 | $(80,000) | | Research and development | $26,391 | $37,034 | $(10,643) | | General and administrative | $13,827 | $20,308 | $(6,481) | | Net (loss) income | $(34,951) | $28,539 | $(63,490) | - R&D expense decreased by $10.6 million, primarily due to a $7.0 million decrease in external R&D (losmapimod suspension, Sanofi reimbursement) and a $4.3 million decrease in employee compensation (including $1.5 million in stock-based compensation)[130][132] - G&A expenses decreased by $6.5 million, mainly due to a $3.1 million decrease in professional services and a $2.7 million decrease in employee compensation (including $0.8 million in stock-based compensation)[131][133] Liquidity and Capital Resources This section discusses the company's liquidity, capital resources, cash flow activities, and future funding requirements Sources of Liquidity This section identifies the primary sources of the company's liquidity since its inception - Since inception, operations have been funded by $792.5 million from capital stock sales and upfront collaboration payments[135] - As of June 30, 2025, the company had $214.1 million in cash, cash equivalents, and marketable securities[135] - An at-the-market offering program for up to $100.0 million was established in February 2024, but no shares have been issued or sold under it as of June 30, 2025[136] Cash Flows This section analyzes the company's cash flow activities from operating, investing, and financing for the specified periods | Cash Flow (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | | :----------------------- | :------------------------------- | :------------------------------- | :--------- | | Net cash (used in) provided by operating activities | $(29,077) | $33,615 | $(62,692) | | Net cash provided by investing activities | $13,156 | $25,620 | $(12,464) | | Net cash provided by financing activities | $301 | $2,028 | $(1,727) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(15,620) | $61,263 | $(76,883) | - The shift in operating cash flow was primarily due to the $80.0 million upfront license payment from the Sanofi collaboration agreement in Q2 2024, which was absent in Q2 2025[138] Funding Requirements This section outlines the company's anticipated funding needs and potential sources for future capital - Expenses are expected to increase substantially due to ongoing R&D, clinical trials, and potential commercialization efforts, leading to continued operating losses and negative cash flows[142] - Current cash, cash equivalents, and marketable securities are estimated to fund operations into 2028, but this estimate is based on assumptions that may prove incorrect[143] - Future funding will likely come from equity offerings, debt financings, or collaboration arrangements, which could dilute stockholders, impose restrictive covenants, or require relinquishing rights to technologies[146][148] Critical Accounting Policies and Estimates This section discusses the critical accounting policies and estimates that require significant management judgment in preparing financial statements - Financial statements are prepared using GAAP, requiring management judgments and estimates for collaborative arrangements, revenue, accrued expenses, stock-based compensation, and income taxes[149] - No material changes to critical accounting policies were made during the three months ended June 30, 2025[149] Recently Issued Accounting Pronouncements This section provides information on recently issued accounting pronouncements and their potential impact on the company's financial statements - The company is evaluating ASU No. 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures," effective for fiscal years beginning after December 15, 2026[37] - The adoption of ASU No. 2023-07, "Segment Reporting," effective January 1, 2025, did not have a material impact on the company's financial position or results of operations[38] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Fulcrum Therapeutics is not required to provide quantitative and qualitative disclosures about market risk for this reporting period - As a smaller reporting company, Fulcrum Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk[151] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[152] - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report on Form 10-Q[153] Evaluation of Disclosure Controls and Procedures This section details management's evaluation of the effectiveness of the company's disclosure controls and procedures - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[152] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the period covered by this Quarterly Report on Form 10-Q[153] PART II. OTHER INFORMATION This section covers other required information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[155] Item 1A. Risk Factors This section outlines significant risks related to financial position, drug development, commercialization, intellectual property, regulatory compliance, and employee matters - The company has incurred significant losses since inception ($35.0 million for six months ended June 30, 2025; accumulated deficit of $554.3 million) and expects to continue incurring losses, requiring substantial additional funding[157] - Clinical drug development is lengthy, expensive, and uncertain, with high risk of failure (e.g., losmapimod Phase 3 trial failure), and preclinical/early clinical results may not predict future success[187][189] - Commercial success is uncertain even with marketing approval, depending on market acceptance, competition (e.g., approved gene therapies for SCD), pricing, and reimbursement[208][217][232] Risks Related to our Financial Position and Need for Additional Capital This section details risks associated with the company's financial position, including its history of losses and ongoing need for substantial additional capital - The company has incurred significant operating losses since inception, with a net loss of $35.0 million for the six months ended June 30, 2025, and an accumulated deficit of $554.3 million[157] - Substantial additional funding is required to support ongoing and planned activities, including clinical development of pociredir and other product candidates[160] - Raising additional capital through equity or convertible debt securities will dilute stockholders' ownership, and debt financing may impose restrictive covenants[165][170] Risks Related to the Discovery and Development of our Product Candidates This section outlines risks inherent in the discovery and development of product candidates, including clinical trial uncertainties and potential adverse events - The company has only one product candidate, pociredir for SCD, in active clinical development after suspending losmapimod development due to a failed Phase 3 trial[182][187] - Clinical drug development is a lengthy, expensive, and uncertain process, with preclinical and early clinical results not always predictive of future success[187][189] - Serious adverse events (e.g., hematological malignancies with EED inhibitors like pociredir) or unacceptable side effects could lead to abandonment or limited development of product candidates[199][200] Risks Related to the Commercialization of our Product Candidates This section addresses risks associated with the commercialization of product candidates, including market acceptance, manufacturing, and pricing - Market acceptance of approved product candidates is uncertain, depending on efficacy, safety, cost, and competition, potentially limiting revenue and profitability[208][209] - The company lacks internal sales and marketing infrastructure and relies on third-party CMOs for manufacturing, posing risks of supply delays, quality issues, and increased costs[210][222][227] - Unfavorable pricing regulations, inadequate third-party coverage, or healthcare reform initiatives (e.g., Inflation Reduction Act) could adversely affect product revenues and commercial viability[232][233][343] Risks Related to our Intellectual Property This section covers risks concerning the company's intellectual property, including patent protection, infringement claims, and license obligations - Obtaining and maintaining patent protection is expensive, time-consuming, and uncertain, with risks of patent applications not issuing or issued patents being challenged, narrowed, or invalidated[255][256][257] - Third parties may allege infringement of their intellectual property rights, leading to costly litigation, substantial damages, or the need to obtain licenses on unfavorable terms[276][281] - Failure to comply with obligations under intellectual property licenses or funding arrangements could result in termination of agreements and loss of rights to important intellectual property[287] Risks Related to Regulatory Approval of our Product Candidates and Other Legal Compliance Matters This section addresses risks related to regulatory approval processes, compliance with healthcare laws, and evolving privacy regulations - Marketing approval is an expensive, time-consuming, and uncertain process, with no guarantee of success, and approvals may be limited or subject to restrictions[303][306] - Disruptions at regulatory agencies (e.g., FDA, SEC) due to funding shortages or policy changes (e.g., new presidential administration) could delay product review and approval timelines[309][312] - Post-marketing restrictions, non-compliance with healthcare fraud and abuse laws, and evolving global privacy regulations (GDPR, CCPA) could lead to substantial penalties, reputational harm, and operational disruptions[328][333][336][341] Risks Related to Employee Matters and Managing Growth This section discusses risks concerning employee retention, management of growth, and the challenges of attracting qualified personnel - The company's future success is highly dependent on retaining key executives and attracting, retaining, and motivating qualified scientific, clinical, and management personnel[359][360] - Past executive transitions and workforce reductions (e.g., September 2024) highlight the challenges in maintaining stable leadership and attracting talent in a competitive industry[361] - Anticipated growth in employees and operations will require improved managerial, operational, and financial systems, as well as recruitment and training of additional personnel, which may be difficult with limited resources[362] Risks Related to our Common Stock This section outlines risks associated with the company's common stock, including ownership concentration, corporate governance, and stock price volatility - Executive officers, directors, and principal stockholders collectively own approximately 74.9% of capital stock, enabling them to control or significantly influence matters submitted to stockholders[363] - Corporate charter documents and Delaware law contain provisions that could discourage, delay, or prevent mergers, acquisitions, or changes in control, potentially limiting the stock price[365][366] - The common stock price is volatile, influenced by clinical trial results, competitive products, regulatory developments, and general market conditions, potentially leading to substantial losses for stockholders[368][370] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for this reporting period - This section is not applicable[384] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for this reporting period - This section is not applicable[385] Item 4. Mine Safety Disclosures This item is not applicable to the company for this reporting period - This section is not applicable[386] Item 5. Other Information This item indicates that there is no other information to report under sub-sections (a), (b), and (c) - No other information is reported under sub-sections (a), (b), and (c)[387][388][389] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and Inline XBRL documents - The exhibits include corporate governance documents (Restated Certificate of Incorporation, Amended and Restated Bylaws), certifications from the CEO and CFO, and Inline XBRL documents[391] Signatures The report is signed by the President and CEO, and the CFO, on July 29, 2025, certifying its submission - The report is signed by Alex C. Sapir (President and CEO) and Alan Musso (CFO) on July 29, 2025[397]