text Therapeutics (CNTX) - 2023 Q4 - Annual Report

Preliminary Information Risk Factor Summary This section outlines material risks, including the company's lack of profitability, going concern doubts, dependence on CTIM-76 development, reliance on third parties, and challenges in regulation and intellectual property - The company has never been profitable and faces substantial doubt about its ability to continue as a going concern, requiring additional funding[38] - Business success is highly dependent on the development, regulatory approval, and commercialization of its therapeutic product candidate, CTIM-76, which is in early stages[38] - Significant risks are associated with reliance on third parties for research, development, and manufacturing, as well as potential disputes with licensees/licensors[38] - Regulatory approval processes are lengthy and complex, with risks including potential competition for biologics like CTIM-76 and challenges in obtaining multi-jurisdictional approvals[53] - Intellectual property risks include potential infringement claims by third parties and the need to adequately protect proprietary rights globally[53] Note Regarding Forward-Looking Statements This section clarifies that the report contains forward-looking statements based on management's beliefs and assumptions, involving known and unknown risks and uncertainties - Forward-looking statements relate to the timing, progress, and results of preclinical studies and clinical trials for CTIM-76 and other product candidates, including initiation, completion, and data availability[40] - Key areas of forward-looking statements include the ability to obtain and maintain regulatory approval, develop and advance product candidates, commercialization plans, and competitive positioning[41] - The company relies on third parties for clinical trials and manufacturing, and future financial performance depends on pricing, reimbursement, and the ability to secure additional financing[42][57] Market, Industry and Other Data This section includes industry, business, and market estimates from third-party and internal sources, cautioning that actual events may differ materially due to inherent uncertainties - Information regarding industry, business, and market for product candidates is derived from third-party reports, research, and internal estimates[44] - Readers are cautioned that estimates and projections are subject to uncertainties, and actual events may differ materially[44] - Scientific and clinical data presented are preliminary and subject to further quality checks and verification[352] Part I Item 1. Business The company is a biopharmaceutical firm focused on advancing medicines for solid tumors, prioritizing CTIM-76 development after discontinuing ONA-XR, with an IND filing expected by March 2024 - The company is a biopharmaceutical company focused on advancing medicines for solid tumors[61] - In March 2023, the company discontinued the ONA-XR program to focus on CTIM-76 development due to challenging market conditions and competitive landscape[88][530] - CTIM-76 is an anti-Claudin 6 (CLDN6) x anti-CD3 bispecific antibody (bsAb) targeting malignant cells expressing CLDN6, with an IND filing expected by end of March 2024 to support human clinical trials[45][526] Overview - The company is a biopharmaceutical company advancing medicines for solid tumors, with a focus on novel therapies[61] - On March 22, 2023, the company announced a portfolio prioritization, discontinuing ONA-XR development to focus on CTIM-76[88] - The company no longer primarily focuses on female cancers following the discontinuation of ONA-XR[88] Product Pipeline and Development - The company's primary preclinical program is CTIM-76, an anti-CLDN6 x anti-CD3 bispecific antibody[45][89] - IND-enabling studies for CTIM-76 are ongoing, with an IND filing expected by the end of March 2024 to support human clinical trials[45][526] - The company plans to initiate a Phase 1 trial for CLDN6-positive gynecologic and testicular cancers upon IND clearance[45][526] CLDN6xCD3 bispecific antibody program: CTIM-76 - CTIM-76 is designed to redirect T-cell-mediated lysis toward malignant cells expressing CLDN6, a protein found in multiple solid tumors but absent or low in healthy adult tissues[45][93][96] - Preclinical data for CTIM-76 shows excellent selectivity and specificity for CLDN6 over related proteins (CLDN3, CLDN4, CLDN9), with minimal activity against CLDN9-expressing cells[68][69][96] - Preclinical assays support a wide therapeutic window for CTIM-76, promoting cancer cell killing with manageable cytokine production, potentially reducing cytokine release syndrome risk[70] Comparison of CLDN6 Development Programs | | Context | Amgen | TORL | Xencor | BioNTech | |:---|:---|:---|:---|:---|:---| | Program | CTIM-76 | AMG794 | TORL-1-23 | XmAb541 | BNT211 | | Antibody Format | Bispecific CLDN6xCD3 | HLE BiTE CLDN6xCD3 | MMAE ADC | 2 x 1 Bispecific CLDN6xCD3 | CLDN6 CAR-T | | Stage | Preclinical | Phase 1 | Phase 1 | IND | Phase 1 | | Status | Active | Active | Active | Active | Active | | Selectivity CLDN6:9 | >1000x | >1000x | >1000x | 10x | 7x | | Tolerability | Well Tolerated | Poor | Moderate | Well Tolerated | Well Tolerated | PR antagonist program: ONA-XR - Prior to March 22, 2023, the company focused on developing ONA-XR for female cancers, with two Phase 2 trials and one Phase 1b/2 trial in metastatic breast and endometrial cancers[90] - Development of ONA-XR was discontinued by the end of 2023 due to challenging market conditions, competitive landscape, and recent study findings[88][90] Other preclinical programs - In addition to CTIM-76, the company is pursuing discovery-stage research programs leveraging its knowledge in solid tumors[91] - The company continues to evaluate new opportunities to expand its pipeline[62][91] Our collaboration and license agreements - The company has collaboration and license agreements with Tyligand Bioscience for ONA-XR and Integral Molecular for CTIM-76[77][133][134][357][690][694] - The Menarini Clinical Trial Collaboration and Supply Agreement for ONA-XR was mutually terminated on March 21, 2023[81] Collaboration Agreement with Tyligand Bioscience - In March 2020, the company entered into a process development agreement with Tyligand Bioscience for ONA-XR development, manufacturing, registration, and commercialization[77][690] - Tyligand was granted exclusive rights for ONA-XR development and commercialization in China, Hong Kong, and Macau, with the company retaining rights in the rest of the world[133][691] - The agreement includes potential payments to Tyligand upon completion of manufacturing scale-up milestones ($2.0M for 100kg, $3.0M for 300kg GMP-grade compound) and a 1% royalty on net sales[106][692] - Tyligand is required to pay the company a mid-single digit royalty on net sales of each product in the Territory[78][693] Collaboration and Licensing Agreement with Integral Molecular - In April 2021, the company entered into a collaboration and licensing agreement with Integral Molecular for the development of a CLDN6 bispecific antibody for cancer therapy[134][357][694] - The company holds exclusive worldwide rights for preclinical, clinical development, regulatory, and commercial activities for novel CLDN6 candidates[357][694] - The Integral License Agreement was amended on February 29, 2024, reducing aggregate development and regulatory milestone payments from $55 million to $15 million, and sales milestone payments from $130 million to $12.5 million[80][528][696] - The tiered royalty rate of 8-12% was reduced to a flat 6% on net sales, commencing no sooner than February 1, 2034[80][528][696] - The license grant was narrowed to cover only CTIM-76, and obligations to reimburse Integral for third-party research funding were removed[80][528][696] Menarini Clinical Trial Collaboration and Supply Agreement - On August 1, 2022, the company entered into a Clinical Trial Collaboration and Supply Agreement with Menarini for the use of elacestrant in combination with ONA-XR in a planned Phase 1/2 clinical trial[81] - Menarini agreed to provide elacestrant at no cost and cell-free nucleic acid analysis, while the company sponsored, funded, and conducted the study[81] - The agreement was mutually terminated on March 21, 2023, with parties agreeing to an orderly wind-down of the related clinical trial[81] Commercialization - The company currently lacks sales, marketing, or commercial product distribution capabilities and may seek partnerships with larger pharmaceutical organizations[139] - The company intends to build necessary infrastructure for the United States and other regions as product candidates advance[139] - Commercial plans and strategy are subject to change based on program advancement, market conditions, and clinical data[110] Manufacturing - The company relies on third-party contract manufacturers for active pharmaceutical ingredients (API) and drug product for preclinical and clinical testing, and expects to continue this strategy for commercial manufacture[112][140] - A Development and Manufacturing Services Agreement was entered with Lonza in November 2022 for CTIM-76 development and manufacture[141] - The company also entered a License Agreement with Lonza Sales AG for non-exclusive rights to use proprietary Lonza intellectual property for CTIM-76[143] - Royalties and annual payments to Lonza range from 0% to a low single-digit percentage on net sales, with potential annual payments up to less than $500,000[116] Competition - The pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products[119] - Competitors, including large pharmaceutical and biotechnology companies, often have greater financial resources, established market presence, and expertise[147] - For CTIM-76, several companies are developing anti-CLDN6 antibodies in various formats (naked antibody, ADC, bispecific, CAR-T, mRNA vaccine), with multiple products already in clinical development[148] - Key competitive factors for product success are efficacy, safety, and convenience[120] Intellectual property - The company protects its proprietary technology through patent applications in the U.S. and internationally, trade secrets, know-how, data exclusivity, market exclusivity, and patent term extensions[150] - As of March 1, 2024, the Integral patent portfolio for CTIM-76 includes one granted U.S. patent (expiring 2040), two pending U.S. non-provisional applications, and 31 pending foreign applications[123] - The ONA-XR patent portfolio includes four issued U.S. patents (expiring 2035-2037), three published PCT applications, and granted/pending foreign patents[151] - Patent positions are generally uncertain and involve complex legal and factual questions, with no consistent policy in oncology emerging in the U.S.[153] Government Regulation - CTIM-76 is expected to be regulated as a biologic by the FDA, requiring a Biologics License Application (BLA) for commercial introduction[155] - The regulatory approval pathway is uncertain, complex, expensive, and lengthy, with no guarantee of approval[27] - Ongoing FDA regulations include requirements for manufacturing processes (cGMPs), labeling, packaging, distribution, adverse event reporting, advertising, and promotion[7][156] - Failure to comply with regulatory requirements can result in severe enforcement actions, including product withdrawal, fines, clinical trial holds, and refusal of approvals[7][132][181] Human Capital - As of March 1, 2024, the company had five full-time employees and no part-time employees, none represented by labor unions[358] - The company emphasizes a culture focused on advancing medicines for solid tumors, supporting employees with competitive pay and benefits[173][198] Facilities - The principal office is located in Philadelphia, Pennsylvania, leasing approximately 3,500 square feet of office space[199] - The lease expires on November 30, 2024, with automatic three-month renewals unless terminated with 90 days' notice[199][517] Legal Proceedings - The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business, financial condition, or results of operations[222][518] Corporate Information - The company was incorporated in Delaware in April 2021, with its corporate office in Philadelphia, Pennsylvania[174] - SEC filings, including annual reports on Form 10-K, are available free of charge on the company's website[223] Item 1A. Risk Factors This section details risks including the company's losses and going concern issues, CTIM-76 development dependence, clinical trial challenges, third-party reliance, and complexities of regulatory approval and intellectual property - The company has never been profitable and expects to incur significant expenses and operating losses for the foreseeable future, with substantial doubt about its ability to continue as a going concern[202][205][225][228] - Success is highly dependent on the development, regulatory approval, and commercialization of CTIM-76, which is in early stages and may never occur[217][240] - Clinical trials are lengthy, expensive, and uncertain, with risks of delays, adverse events, and failure to demonstrate safety and efficacy[26][27][28][10][12][19][269][271] - Reliance on third parties for research, development, manufacturing, and clinical trials poses risks of non-performance, delays, and intellectual property misappropriation[38][300][301][333][340][344][346][39] - The regulatory approval process is complex, time-consuming, and subject to changes, with no guarantee of approval or market acceptance[26][27][19][268][242][43] - Intellectual property protection is uncertain, with risks of third-party infringement claims, challenges to patent validity, and difficulties in global enforcement[53][127][153][376][384][403][404][405][415][416][419][421][452] Risks Related to Our Business and Industry - The company has never been profitable and expects significant expenses and operating losses, with substantial doubt about its ability to continue as a going concern[202][205][225][228] - Additional funding is required for operations, clinical trials, R&D, and general/administrative expenses, which may not be available on acceptable terms, leading to potential delays or termination of development efforts[205][206][207][209][228][230] - The company has a limited operating history (founded 2015, focused on product candidates since 2018), making it difficult to evaluate future prospects and increasing investment risk[38][233][234] - Fluctuating foreign exchange rates, particularly due to manufacturing services with Lonza, could increase operating expenses and adversely affect results[38][214][238] Risks Related to Our Product Candidates - The business is dependent on the successful development, regulatory approval, and commercialization of CTIM-76, which is in early stages and may never occur[38][217][240] - The innovative therapy approach of redirecting T-cell-mediated lysis toward malignant cells is novel and unproven, exposing the company to unforeseen risks and making development time/cost unpredictable[246][247][267][268] - Preclinical and early clinical trial results may not be indicative of later-stage trials, and interim data are subject to change and verification[38][249][269][270] - Product candidates may cause serious adverse events or undesirable side effects, potentially delaying or preventing marketing approval, or leading to market withdrawal or safety warnings[38][251][252][254][271][272] - Failure to identify, develop, and commercialize products using proprietary technologies, or to achieve development milestones in expected timeframes, could harm the business[38][255][256][258][274][275][305] - The company faces inherent product liability and professional indemnity exposure from clinical trials and potential commercial sales, with insurance coverage potentially inadequate[259][260][278][279] Risks Related to Our Organization, Structure and Operations - Reliance on a small central team of five full-time employees and consultants for administrative, R&D, and other services presents operational challenges and may limit resource allocation[38][261][358] - Future success depends on retaining key executives (CEO Martin Lehr, CFO Jennifer Minai-Azary, CLO Alex Levit) and attracting/retaining qualified personnel, as the loss of such individuals could impede objectives[38][309][281][282][283][311][313] - The company will need to significantly expand its organization, and difficulties in managing this growth could disrupt operations, divert management attention, and lead to increased costs[284][285][312][314] - Insurance policies are expensive and may not cover all business risks, leaving the company exposed to significant uninsured liabilities, especially for biological/hazardous waste[286][288][315][317] - Adverse developments in the financial services industry (e.g., bank failures, liquidity issues) could impair funding access, lead to losses from suppliers/partners, and materially affect business operations[289][290][291][318][319][321] Risks Related to Our Reliance on Third Parties - The company depends on collaborations with third parties for research, development, and commercialization, facing risks such as competitive product development by collaborators, disputes, and insufficient funding/resources[38][293][294][295][322][323][324] - Disagreements or disputes with licensees, licensors, and other counterparties regarding obligations or intellectual property rights could be time-consuming, costly, and harm development efforts[38][297][298][326][327][339] - Reliance on CROs and other third parties to conduct clinical trials means many aspects are outside direct control, risking delays, compromised data quality, and non-compliance with regulatory requirements (GCPs)[38][300][301][328][329][330][340][342] - Dependence on third parties for raw materials and product manufacturing carries risks of supply disruptions, increased costs, and delays if alternative suppliers are needed or facilities fail regulatory approval[38][303][331][332][333][334][346][347] Risks Related to Government Regulation - The FDA regulatory approval process is lengthy, time-consuming, and uncertain, especially for novel product candidates like CTIM-76, which may face delays in clinical development and approval[26][27][40] - CTIM-76, expected to be regulated as a biologic, may face earlier-than-anticipated competition from biosimilar products due to the Biologics Price Competition and Innovation Act, despite potential 12-year exclusivity[13][14][15][53] - The FDA may disagree with the company's regulatory plan, potentially requiring additional comparative trials or impacting development timelines due to initiatives like Project Optimus[16][53] - Obtaining regulatory approval in one jurisdiction does not guarantee success in others, as procedures vary and may require additional studies or approvals for reimbursement and pricing[2][3][4][53] - Any regulatory approvals are subject to ongoing obligations and review, including post-marketing surveillance, REMS requirements, and compliance with cGMPs/GCPs, with penalties for non-compliance[6][7] - Changes in FDA or foreign regulatory policies, or new government regulations, could prevent, limit, or delay approval, impacting profitability if the company cannot adapt[8] Risks Related to Intellectual Property - Patent positions are highly uncertain and involve complex legal and factual questions, with risks that patents may be challenged, invalidated, or designed around, limiting protection against competitors[53][127][153][376][377][378][379][380][403][415][419] - Third parties may assert claims of patent infringement, leading to substantial costs, litigation, delays in development, or the need for expensive licenses, potentially impacting commercialization[53][384][385][386][388][389][404][405][406][408][409][410] - Inadequate protection of proprietary rights, including patents, trademarks, and trade secrets, could diminish competitive advantages and allow competitors to exploit technologies[53][412][413][414][422][423][426] - Failure to comply with obligations under intellectual property license agreements or disruptions with licensors could result in the loss of critical license rights[53][427][428][429][430][431][448] - Failure to obtain patent term extensions (e.g., under the Hatch-Waxman Act) could shorten the period of marketing exclusivity, reducing potential revenue[434][435][450][451] - Protecting intellectual property rights globally is challenging due to varying legal systems and enforcement strengths, potentially allowing competitors to use inventions in foreign jurisdictions[53][436][437][452] - Changes in U.S. and international patent laws could diminish the value of patents, weakening the ability to obtain new patents or enforce existing ones[454][455] Risks Related to the Market for Our Common Stock - The market price for the company's common stock is likely to be volatile due to factors such as operating results, competitive announcements, analyst coverage, and global economic conditions[54][456][457] - The company may not maintain compliance with Nasdaq listing requirements (e.g., minimum bid price), risking delisting and adverse effects on market liquidity and financing ability[54][458][459][461] - The company does not expect to pay dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns[55][464][465] - Future issuances of debt or equity securities could dilute stockholder interests, impose restrictive covenants, or include liquidation preferences, adversely affecting common stock value[55][466][467][468][480][487] - As an 'emerging growth company,' the company benefits from reduced reporting requirements, which may result in stockholders receiving less information and potentially impacting stock attractiveness or volatility[56][471][472][473][474][475] - Failure to maintain effective internal control over financial reporting could lead to inaccurate financial reports, fraud, loss of investor confidence, and potential sanctions[56][476][477][486] General Risk Factors - Operating as a public company incurs significant legal, accounting, and insurance expenses, and compliance with regulations like Sarbanes-Oxley Act adds costs and administrative burdens[481][489] - The company is subject to complex tax rules in the U.S. and Ireland, with risks of audits, disagreements with tax authorities, or changes in tax laws leading to additional liabilities[482][490][492] - System failures or security breaches (e.g., viruses, unauthorized access, data loss) could disrupt operations, delay R&D programs, incur liabilities, and damage reputation[493][494][495] - Natural or manmade disasters could severely disrupt operations, damage infrastructure, and delay R&D activities, with existing disaster recovery plans potentially inadequate[496][497][498] - The company may face claims that employees or consultants wrongfully used or disclosed confidential information or trade secrets of third parties or former employers, leading to litigation and potential loss of IP or personnel[499][500] - The company is susceptible to securities class action litigation, which could result in substantial costs and divert management attention[501] Item 1B. Unresolved Staff Comments This section confirms there are no unresolved staff comments from the SEC - There are no unresolved staff comments[503] Item 1C. Cybersecurity The company integrates robust cybersecurity measures into its risk management, with Board oversight and external expert evaluation, having encountered no material challenges to date - The company integrates cybersecurity risk management into its broader risk management framework to ensure company-wide awareness and decision-making[505] - External experts, including cybersecurity assessors, consultants, and auditors, are engaged for evaluating and testing risk management systems[506] - The Board of Directors oversees the cybersecurity program, receiving periodic assessments from independent third-party experts and immediate reports on potential material incidents[508] - The SVP of Operations informs the Board of Directors on cybersecurity risks at least annually, covering threats, initiatives, and compliance[509] - The company has not encountered cybersecurity challenges that have materially impaired its business strategy, results of operations, or financial condition[507] Item 2. Properties The company's corporate headquarters are in Philadelphia, Pennsylvania, leasing approximately 3,500 square feet, with the lease expiring November 30, 2024, subject to renewals - Corporate headquarters are in Philadelphia, Pennsylvania, occupying approximately 3,500 square feet of office space[517] - The lease was amended in March 2024, with an expiration date of November 30, 2024, and automatic three-month renewals[517] - The company believes its current facility is adequate and alternative space would be readily available if needed[199] Item 3. Legal Proceedings The company is not currently involved in any material legal proceedings that could significantly impact its business, financial condition, or results of operations - The company is not presently a party to any material legal proceedings[518] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[519] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities The company's common stock trades on Nasdaq under 'CNTX' since October 2021, with 15.9 million shares outstanding as of March 2024, and no anticipated cash dividends - Common stock has been traded on The Nasdaq Stock Market under 'CNTX' since October 20, 2021[520] - As of March 15, 2024, there were 15,966,053 shares of common stock outstanding, held by 52 record holders[48][521] - The company has not paid cash dividends and does not anticipate paying any in the near term, intending to retain earnings for business development and expansion[465][516] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews the company's financial condition and operational results, focusing on CTIM-76 development, history of losses, cash position, and need for additional funding - The company is a biopharmaceutical company advancing medicines for solid tumors, with CTIM-76 as its preclinical program[525] - The company has incurred recurring losses and negative cash flows from operations since inception, with a net loss of $24.0 million for 2023 and an accumulated deficit of $68.1 million[532] - As of December 31, 2023, cash and cash equivalents were $14.4 million, expected to fund operations into late 2024, but substantial doubt exists about the company's ability to continue as a going concern[535][555][556] - The company will require substantial additional funding through equity offerings, debt financings, collaborations, or licensing arrangements to support ongoing operations and growth strategy[536][537][561][568] Overview - The company's primary focus is on CTIM-76, an anti-CLDN6 x anti-CD3 bsAb for solid tumors, with IND-enabling studies ongoing and a Phase 1 trial planned upon FDA clearance[525][526] - The Integral License Agreement for CTIM-76 was amended on February 29, 2024, reducing milestone payments and narrowing the license grant[527][528][529] - The company discontinued the ONA-XR program in March 2023 to prioritize CTIM-76 development[530] - The company has incurred a net loss of $24.0 million for 2023 and an accumulated deficit of $68.1 million, with cash and cash equivalents of $14.4 million as of December 31, 2023[532][535] Components of Our Results of Operations - Operating expenses include acquired in-process research and development (IPR&D), research and development (R&D), and general and administrative (G&A) expenses[538][539][541][545] - IPR&D consists of upfront and milestone payments for licensed products/technologies not meeting business definition[538] - R&D expenses are expensed as incurred and include discovery work, preclinical/clinical trials, personnel, third-party research, and manufacturing costs[539][543] - G&A expenses primarily cover personnel, corporate facility costs, legal fees, and accounting/consulting services[545] - Other income primarily consists of interest earned on cash and foreign currency gains/losses[546][547] Results of Operations Operating Results Comparison (2023 vs. 2022) | Operating Expenses | 2023 | 2022 | $ Change | % Change | |:---|:---|:---|:---|:---|\n| Acquired in-process research and development | $ — | $ 500,000 | $ (500,000) | (100)% | | Research and development | $ 17,782,731 | $ 7,091,163 | $ 10,691,568 | 151 % | | General and administrative | $ 7,289,885 | $ 7,790,040 | $ (500,155) | (6)% | | Loss from operations | $ (25,072,616) | $ (15,381,203) | $ (9,691,413) | 63 % | | Interest income | $ 1,163,975 | $ 547,268 | $ 616,707 | 113 % | | Other expense | $ (55,570) | $ (2,004) | $ (53,566) | 2673 % | | Net loss | $ (23,964,211) | $ (14,835,939) | $ (9,128,272) | 62 % | - Acquired IPR&D decreased by $0.5 million (100%) due to no development milestone recognized in 2023, compared to $0.5 million in 2022 for the Integral License Agreement[548] - Research and development expenses increased by $10.7 million (151%) YoY, driven by a $13.6 million increase in CTIM-76 expenditures (contract manufacturing, preclinical costs) offset by a $2.8 million decrease in ONA-XR expenses (discontinuation)[550][551] - General and administrative expenses decreased by $0.5 million (6%) YoY, primarily due to lower insurance and other administrative costs, partially offset by increased professional fees[552] - Interest income increased by $0.6 million (113%) YoY due to higher interest rates on cash and cash equivalents[553] - Other expense increased by $54,000 (2673%) YoY, mainly due to higher foreign currency losses[554] Liquidity and Capital Resources - The company has incurred operating losses and negative cash flows since inception, with no product revenue generated to date[555] - As of December 31, 2023, cash and cash equivalents were $14.4 million, which is not sufficient to fund projected operations for at least 12 months from the issuance date, raising substantial doubt about going concern[535][555][556][658] - Future funding requirements are substantial and depend on the scope and timing of R&D, clinical trials, manufacturing, intellectual property costs, and potential acquisitions[559] - The company plans to finance operations through equity offerings, debt financings, collaborations, or licensing arrangements, with no assurance of availability or acceptable terms[536][561][568][659] Cash Flows Summary (2023 vs. 2022) | Cash Flow Activity | Year ended December 31, 2023 | Year ended December 31, 2022 | |:---|:---|:---|\n| Operating activities | $ (21,047,618) | $ (13,549,234) | | Investing activities | $ — | $ (536,836) | | Financing activities | $ — | $ (102,071) | | Net decrease in cash and cash equivalents | $ (21,047,618) | $ (14,188,141) | - Cash used in operating activities increased to $21.0 million in 2023 from $13.5 million in 2022, reflecting higher net loss partially offset by non-cash share-based compensation and changes in operating assets/liabilities[602][603] - No cash flows from investing or financing activities occurred in 2023, compared to $0.5 million used in investing (development milestone) and $0.1 million used in financing (offering costs) in 2022[604][605] - The company does not engage in off-balance sheet arrangements or non-exchange traded contracts[606] Critical Accounting Policies and Estimates - Critical accounting policies involve significant estimates and judgments, particularly for prepaid/accrued research and development expenses and share-based compensation[608][609] - R&D expenses are accrued based on estimates of work completed, contracts, and discussions with vendors, subject to adjustment[610][611][612] - Share-based compensation expense is measured at grant-date fair value using the Black-Scholes option pricing model, with subjective assumptions for volatility and expected term[613][614] Recent Accounting Pronouncements - The company is evaluating the effect of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Taxes) on its disclosures, effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively[566][567] Emerging Growth Company and Smaller Reporting Company Status - The company is an 'emerging growth company' under the JOBS Act, electing to use the extended transition period for new accounting standards, which may make its financial statements not comparable to other public companies[572][617] - The company will remain an emerging growth company until October 19, 2026, or earlier if certain revenue or market capitalization thresholds are met[474][618] - The company is also a 'smaller reporting company,' allowing for reduced disclosure obligations, such as presenting only two years of audited financial statements[619] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This item is not required for the company, as it qualifies as a smaller reporting company - This item is not required for smaller reporting companies[620] Item 8. Financial Statements and Supplementary Data This section presents audited consolidated financial statements for 2023 and 2022, including balance sheets, statements of operations, equity, and cash flows, along with the auditor's report noting going concern uncertainty - The consolidated financial statements include the balance sheets, statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 2023 and 2022[623] - The independent auditor's report expresses an opinion that the financial statements are presented fairly, but notes substantial doubt about the company's ability to continue as a going concern[628][629] Consolidated Balance Sheets (as of December 31) | Assets/Liabilities | 2023 | 2022 | |:---|:---|:---|\n| Cash and cash equivalents | $ 14,449,827 | $ 35,497,445 | | Total current assets | $ 16,047,211 | $ 37,853,658 | | Total assets | $ 16,062,735 | $ 37,965,943 | | Accounts payable | $ 2,383,016 | $ 936,330 | | Accrued expenses and other current liabilities | $ 1,808,699 | $ 2,216,169 | | Total current liabilities | $ 4,191,715 | $ 3,207,577 | | Total liabilities | $ 4,191,715 | $ 3,207,577 | | Total stockholders' equity | $ 11,871,020 | $ 34,758,366 | Consolidated Statements of Operations (Year ended December 31) | Operating Expenses | 2023 | 2022 | |:---|:---|:---|\n| Acquired in-process research and development | $ — | $ 500,000 | | Research and development | $ 17,782,731 | $ 7,091,163 | | General and administrative | $ 7,289,885 | $ 7,790,040 | | Loss from operations | $ (25,072,616) | $ (15,381,203) | | Interest income | $ 1,163,975 | $ 547,268 | | Other expense | $ (55,570) | $ (2,004) | | Net loss | $ (23,964,211) | $ (14,835,939) | | Net loss per common share, basic and diluted | $ (1.50) | $ (0.93) | Consolidated Statements of Cash Flows (Year ended December 31) | Cash Flows from | 2023 | 2022 | |:---|:---|:---|\n| Operating activities | $ (21,047,618) | $ (13,549,234) | | Investing activities | $ — | $ (536,836) | | Financing activities | $ — | $ (102,071) | | Net decrease in cash, cash equivalents and restricted cash | $ (21,047,618) | $ (14,188,141) | | Cash and cash equivalents at end of year | $ 14,449,827 | $ 35,497,445 | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This section confirms no changes in or disagreements with accountants on accounting and financial disclosure - There have been no changes in or disagreements with accountants on accounting and financial disclosure[719] Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with the company exempt from auditor attestation - Disclosure controls and procedures were evaluated and deemed effective as of December 31, 2023[720] - Management assessed internal control over financial reporting as effective based on the COSO Internal Control-Integrated Framework (2013) as of December 31, 2023[721][722] - The company is exempt from providing an auditor attestation report on internal control over financial reporting due to its emerging growth company status[723] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2023[724] Item 9B. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q4 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during Q4 2023[726] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This item is not applicable[727] Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance, including the code of business conduct, is incorporated by reference from the 2024 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the 2024 Annual Meeting Proxy Statement[730] - The company has adopted a code of business conduct and ethics applicable to all employees, officers, contractors, consultants, and agents, available on its website[731] Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the 2024 Annual Meeting Proxy Statement[732] Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters Information on security ownership of beneficial owners and management, and related stockholder matters, is incorporated by reference from the 2024 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the 2024 Annual Meeting Proxy Statement[733] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the 2024 Annual Meeting Proxy Statement[734] Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2024 Annual Meeting Proxy Statement - Information for this item is incorporated by reference from the 2024 Annual Meeting Proxy Statement[735] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements from Item 8 and provides a comprehensive table of exhibits filed with the Form 10-K, including organizational documents, agreements, and certifications - Financial statements are included in Item 8[391] - All schedules are omitted as information is inapplicable or presented in financial statements and notes[391] - A detailed list of exhibits, including corporate governance documents, agreements, and certifications, is provided[392][393][395][439] Item 16. Form 10-K Summary This section provides a summary of the Form 10-K - This section provides a summary of the Form 10-K[441] Signatures This section contains the signatures of the company's principal executive officer, principal financial and accounting officer, and directors, certifying the report's submission - The report is signed by the Chief Executive Officer (Martin Lehr) and Chief Financial Officer (Jennifer Minai-Azary) on March 21, 2024[400][443][446] - Directors Richard Berman, Linda West, Philip Kantoff, and Jennifer Evans Stacey also signed the report on March 21, 2024[401][402][444][445]