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Item 1A. Risk Factors

2026-03-04 compared with 2025-03-05 · 261 added, 258 removed, 845 unchanged (38% of the section changed)

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Material risks that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to:

• we may need to raise substantial funds in the future to fund our operations.

These funds may not be available on acceptable terms or at all and our ability to fund the execution of our business objectives cannot be assured.

A failure to obtain this necessary capital when needed could force us to delay, limit, scale back or cease some or all operations.

• our ability to address the FDA's comments on and identified deficiencies in our NDA, including the concerns raised by the FDA in the Complete Response Letter dated January 30, 2026 issued to the Company for approval of Anaphylm;

• failure to generate sufficient clinical and other human factor data, including with respect to our submission of pharmacokinetic and pharmacodynamic (PK/PD) comparability data for FDA approval of Anaphylm;

• we need to raise substantial funds in the future to fund our operation, including to commercialize Anaphylm, if approved and begin making quarterly principal amortization payments on our 13.5% Notes starting in June 2026, unless we are able to refinance or amend the terms.

A failure to obtain this necessary capital when and how needed could force us to delay, limit, scale back or cease some or all operations.

• we have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability;

• we may fail to obtain regulatory approvals to market our products in the United States or in other countries;

• Libervant for ARS patients aged between two and five years being blocked from remaining in the U.S.

market due to a competitor’s orphan drug market exclusivity status;

• the development of pharmaceutical products involves a lengthy and expensive process, with an uncertain outcome.

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• any delays or changes to the timing, cost and success of clinical trials for Anaphylm and our other product candidates;

• failure to generate sufficient data in our PK and PD comparability submission for FDA approval of Anaphylm;

• we have entered into, and may enter into collaborations, licensing arrangements, joint ventures, strategic alliances or partnerships with third-parties that may not result in the development of commercially viable products or the generation of significant future revenues;

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• if we issue more shares of our Common Stock to raise capital, our current stockholders will incur substantial dilution;

• we may be subject to damages resulting from litigation matters currently pending against Aquestive;

• we may be subject to damages resulting from litigation matters currently pending or that may arise in the future against Aquestive;

• cybersecurity continues to affect businesses and could cause business interruption;

• adverse developments affecting the financial services industry which could adversely affect our current and projected business operations and our financial condition and results of operations.

Risks Related to Our Financial Condition and Need for Additional Capital

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

Some of our product candidates will require substantial additional development time and resources before we are able to receive regulatory approvals, implement commercialization infrastructure and strategies, or license product out to begin generating revenue from product sales or royalty streams.

Our current product candidates are still in their early stages, and we may not generate substantial revenue from sales or royalties of our product candidates in the near term, if ever.

We have devoted most of our financial resources to product development.

To date, we have financed our operations primarily through the sale of equity and debt securities, proceeds from our debt facilities, and from revenues from certain product licenses and collaborations.

The extent of future net losses will depend, in part, on the rate of future expenditures and our ability to generate revenue.

The development, regulatory approval process, and commercialization of drug candidates involve significant risk and significant uncertainty, including matters over which we have no control.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to fully predict the timing or amount of our expenses.

We expect to incur substantial expenses going forward, which we expect will increase as we expand our development activities and product portfolio.

Some of the expenses we expect to incur going forward include:

• conducting clinical trials of our product candidates;

• seeking regulatory approval for any of our product candidates that successfully complete clinical development;

• maintaining, expanding and protecting our intellectual property portfolio;

• acquiring or in-licensing new technologies or development-stage or approved products;

• activities related to pre-commercialization and commercialization of products;

• adding clinical, scientific, operational, financial, and management information systems personnel, including personnel to support our product development and to support our operations as a public company;

• experiencing incremental costs due to delays or encountering any issues with any of the above, including, but not limited to, failed or not fully successful trials, complex results, safety issues or other regulatory challenges.

We expect to continue to incur net losses for at least the next few years as we pursue the development efforts and commercialization of our product candidates.

Our net losses may fluctuate significantly from period to period, depending on regulatory approval developments concerning our product candidates, the timing of our planned clinical trials and expenditures on our other research and development.

We expect our expenses will continue to be substantial in 2025 and future periods as we continue to:

• clinically develop Anaphylm and provide supporting data needed for market approval from the FDA, anticipated NDA submission, pre-commercialization preparations including manufacturing and regulatory inspections and commercialization activities;

• seek licensing and other transactions of our product candidates;

• engage with the FDA to overcome the present stay on Libervant entering the U.S.

market due to a competitor’s orphan drug market exclusivity status:

• commercialize Libervant for ARS patients between two and five years of age;

• clinical development of our product candidate AQST-108.

We expect to continue to manage the timing and level of expenses in light of the declining Suboxone revenues, while focusing on the development and commercialization of Anaphylm.

We will need substantial additional capital to fund our operations, which may not be available on acceptable terms, if at all.

Our cash requirements for 2025 and beyond include expenses related to continuing development and clinical evaluation of our products, manufacture and supply costs, costs of regulatory filings, patent prosecution expenses and litigation expenses, expenses related to commercialization of our products, as well as costs to comply with the requirements of being a public company operating in a highly regulated industry.

As of December 31, 2024, we had $71.5 million of cash and cash equivalents.

Capital may be available under our ATM facility, which we initially established in 2019, and under which, from time to time, we may offer and sell shares of our Common Stock pursuant to the Amended Equity Distribution Agreement with Piper Sandler & Co..

On April 3, 2024, we filed a new shelf registration statement on Form S-3 (the "2024 Registration Statement"), which was declared effective by the SEC on April 23, 2024.

Included in the 2024 Registration Statement are:

(i) a base prospectus registering the offer, issuance and sale of up to $250,000 worth of Common Stock, preferred stock, debt securities, warrants, rights and units and (ii) the $100,000 ATM facility prospectus.

The remaining authorized balance of the ATM facility was $100,000 as of December 31, 2024.

For additional information regarding shares sold under the ATM facility subsequent to December 31, 2024, see Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources and Part II Item 8.

Financial Statements and Supplementary Data, Note 24, Subsequent Events.

In April 2022, we entered into a Purchase Agreement with Lincoln Park, under which, from time to time, we may cause Lincoln Park to purchase shares of our Common Stock.

The Purchase Agreement with Lincoln Park has approximately an equivalent to 6,486,623 shares available for purchase at December 31, 2024.

For the years ended December 31, 2024 and 2023, we did not sell shares in connection with the Lincoln Park Purchase Agreement.

We have no current intent to use the Lincoln Park facility and the Lincoln Park Purchase agreement will expire on April 12, 2025.

On November 1, 2023, we reduced our debt payment obligations when we issued (the “Offering”) $45,000 aggregate principal amount of our 13.5% Notes.

A portion of the net proceeds from the Offering was used to redeem all of the outstanding 12.5% Notes and to pay expenses relating to the Offering, with the balance of the proceeds to be used for general corporate purposes.

Interest on the 13.5% Notes accrues at a rate of 13.5% per annum and is payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (each, a “Payment Date”).

The 13.5% Notes are interest only until June 30, 2026, whereupon on such date and each Payment Date thereafter, we will also pay an installment of principal of the 13.5% Notes pursuant to a fixed amortization schedule, along with a portion of an Exit Fee determined as of the applicable date of prepayment, payment, acceleration, repurchase or redemption, as the case may be.

Until we become profitable, if ever, we expect to need to raise significant additional capital in the future through equity or debt issuances, or both, to continue to manage our expenses to extend our capital runway, in order to further the development, and regulatory approval of our products and product candidates, and to conduct our business.

We have no committed sources of additional capital, and there can be no assurance that such needed capital or debt financing will be available or available on favorable terms, or at all.

We may seek to obtain additional capital in the future through the issuance of our Common Stock, through other public or private equity or debt financings, through potential non-dilutive capital raising events that may result from royalty streams that may be realizable from our licensed products or licensed intellectual property, through collaborations or licensing arrangements with other companies, and through the sale of assets, including product, product candidates, plants or other tangible assets, or by other means, if available.

We may not be able to raise additional capital or other funding on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan and cause us to delay or curtail our operations until such funding is received.

To the extent that we raise additional funds by issuance of equity securities, our stockholders would experience dilution, and debt financings, if available (and subject to all of the existing restrictions and conditions under our debt instruments) may involve increased restrictive covenants and increased fixed payments or may otherwise further constrain our financial flexibility.

We also may seek outlicensing opportunities for our proprietary products and product candidate programs that we currently plan to self-commercialize, including for Libervant and Anaphylm, or explore other potential liquidity options or strategic opportunities.

Such strategic opportunities could include asset sales, outlicensing or other monetization opportunities of our proprietary products and product candidates, including Libervant and Anaphylm, although we cannot assure that any of these actions or opportunities would be available or available on available on terms acceptable to us.

While an outlicensing of our proprietary products and product candidates, if approved by the FDA, could limit our exposure to the costs of commercialization of the product and provide a potential source of royalty and milestone revenues, the benefit from the potential of additional future value that could result from our independent commercialization of these products and product candidates, assuming a successful launch of our proprietary products and product candidates, if approved by the FDA, would likely be limited.

To the extent that we raise additional funds through collaborative or licensing arrangements, it may be necessary to relinquish some rights to our intellectual property or grant licenses on terms that are not favorable to us.

In addition, payments made by potential collaborators or licensees generally will depend upon our achievement of negotiated

development, regulatory and sales milestones.

Failure to achieve these milestones may harm our future capital position.

In addition, in the event of any such asset sales or outlicensing transactions, the future growth of the Company would be dependent on continued successful development of our early stage product candidates and/or asset acquisitions or other strategic transactions for the Company.

If adequate funds are not available for our liquidity needs and cash requirements, as and when needed, from the sources referred to above or otherwise, or at all, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned research and development programs and clinical and other product development activities, or reducing our future commercialization efforts and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

We also may be required to evaluate additional licensing opportunities, if any become available, of our proprietary product candidate programs that we currently plan to self-commercialize or explore other potential liquidity opportunities or other alternatives or options or strategic alternatives, including asset sales, although we cannot assure that any of these actions would be available or available on reasonable terms.

If we do not have sufficient funds to continue operations, we could be required to seek bankruptcy protection or other alternatives that would likely result in our stockholders losing most, if not all, of their investment in Aquestive.

We may sell additional equity, incur debt or raise funds through licensing arrangements to fund our operations, which may result in dilution to our stockholders, impose restrictions on our business or require us to relinquish proprietary rights.

Aquestive has experienced a history of net losses and our accumulated deficits totaled $363.2 million as of December 31, 2024.

The net losses and accumulated deficits were partially offset by gross margins from sales of commercialized licensed and proprietary products, license fees, milestone and royalty payments from commercial licensees and co-development parties.

In November 2020, we began utilizing the ATM facility.

For the year ended December 31, 2024, we sold 4,557,220 shares which provided net proceeds of approximately $11.8 million, after deducting commissions and other transaction costs of $0.6 million.

On April 3, 2024, we filed the "2024 Registration Statement", which was declared effective by the SEC on April 23, 2024.

Included as part of the 2024 Registration Statement are:

The remaining authorized balance of the ATM facility was $100,000 as of December 31, 2024.

Financial Statements and Supplementary Data, Note 24, Subsequent Events .

Until such time, if ever, that we can generate sufficient revenue to fully fund our operations, we would need to seek additional capital and cash resources through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the stockholders' existing ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of existing stockholders.

Debt financings may be coupled with an equity component, such as warrants to purchase shares of our common stock, which could also result in dilution of existing stockholders’ ownership.

The incurrence of additional indebtedness would result in increased fixed payment obligations and could also result in certain increased restrictive covenants (most, if not all, of which currently exist under our existing debt facilities), such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights or sell assets, and other operating restrictions that could adversely impact our ability to conduct our business and continue to result in liens being placed on all of our assets and intellectual property.

If we were to default on such indebtedness, we could lose all such assets and intellectual property and our ability to operate our business.

If we raise additional funds through collaborations, or strategic alliance, marketing, distribution or licensing arrangements with third parties, we may need to relinquish valuable rights to our technologies, product candidates or future revenue streams or grant licenses on terms that are not favorable to us.

Even if we can generate revenues from our operations in the future, our revenues and operating income are likely to fluctuate significantly from year-to-year or quarter-to-quarter and create volatility in our stock price.

Even if we are able to generate future revenues, our results of operations would likely continue to vary significantly from year-to-year and quarter-to-quarter.

Variations may result from, among other factors:

• the timing of FDA or any other regulatory approval, delay in any FDA or other regulatory approvals, or failure to obtain any such FDA or other regulatory approvals;

• competitor’s product candidates obtaining FDA or other regulatory approval, which may include orphan drug market exclusivity for seven years in the U.S., before our product has received any such regulatory approval and/

or orphan drug exclusivity, or obtaining other FDA marketing exclusivity that blocks U.S.

market access for our product candidates;

• the timing of process validation for particular product candidates;

• the timing of addressing any additional data required to obtain FDA approval of Anaphylm and delays as a result thereof;

• changes in the timing of and the amount we spend to research, develop, acquire, license or promote new product candidates;

• the timing, amount we spend on, and outcome of our research, development, preclinical studies and clinical trial programs;

• serious or unexpected health or safety concerns related to our products or product candidates;

• the introduction of new branded and generic products by others that render our product candidates obsolete, subject to greater competition or noncompetitive;

• our ability to maintain selling prices and gross margins on our products;

• changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar government healthcare programs;

• our ability to comply with complex governmental regulations applicable to many aspects of our business;

• increases in the cost of raw materials used to manufacture our products and product candidates;

• manufacturing and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications or current Good Manufacturing Practices;

• timing of revenue recognition related to our collaboration agreements;

• our ability to fund the commercialization of, commence a commercial operation, and actually commercialize our proprietary products and product candidates, if approved by the FDA;

• our ability and the significant cost to protect our intellectual property and avoid infringing the intellectual property of others and any adverse developments in any related legal proceeding or in other legal proceedings of any nature;

• the outcome and cost of existing or possible future litigation with third parties.

Our level of indebtedness and significant debt service obligations could constrain our ability to invest in our business and make it more difficult for us to fund our operations.

We have substantial debt and substantial debt service obligations.

At December 31, 2024, we had an aggregate principal amount of $45.0 million of outstanding indebtedness, represented by the 13.5% Notes.

In the future, we will need to raise additional funds.

Because of our indebtedness:

• we may have difficulty satisfying our obligations with respect to our existing indebtedness including the repayment of such indebtedness;

• we may have difficulty obtaining financing in the future (and we have substantial restrictions on incurring any additional indebtedness under our current debt instruments) for working capital, capital expenditures, acquisitions or other purposes;

• we will need to use a substantial portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities;

• we may be more vulnerable to general economic downturns and adverse industry conditions;

• if cash flow from revenues from licensed product or collaborative arrangements are insufficient to satisfy our obligations with respect to our existing indebtedness, we may be forced to seek to sell assets (subject to obtaining consent under the Indenture) or seek additional capital, which we may not be able to accomplish on favorable terms, if at all;

• we could be limited in our flexibility in planning for, or reacting to, changes in our business and in our industry in general;

• we could be placed at a competitive disadvantage compared to our competitors that have less debt, less debt restriction or less restrictive debt covenants;

• our failure to comply with the financial and other restrictive covenants in our debt instruments which, among other things, limits our ability to incur additional debt and sell or dispose of assets, could result in an event of default that, if not cured or waived, would have a material adverse effect on our business or prospects;

• our tangible and intangible assets, including our intellectual property, are subject to first priority liens and may be used to satisfy our outstanding debt.

We intend to satisfy our current and future debt service obligations with our existing cash and cash equivalents and potential access to other funding.

However, we may not have sufficient funds, and may be unable to arrange for additional financing, to pay the amounts due under the Indenture and 13.5% Notes or any other debt instruments we may enter into.

Failure to make required debt service payments or comply with other covenants under our existing debt facilities or such other debt instruments would result in an event of default and acceleration of amounts due, which would have a material adverse effect on our business, financial condition and results of operations.

We are dependent upon the commercial success of our licensed and proprietary products and other licensing activities to generate revenue for the near future.

Although we are in the process of testing and developing proprietary product candidates and may seek to acquire rights in other approved drugs, we anticipate that our ability to generate revenue and to become profitable in the near future will depend upon the continued commercial success of Sympazan, Suboxone and Azstarys in the U.S., the continued commercial success of Ondif in Brazil and Emylif in the EU, and our ability to commercialize our product Libervant for pediatric patients between two and five years of age.

Further, there is no assurance that we will become commercially successful to the extent necessary to become profitable.

If our current products are not commercially successful, our ability to generate manufacturing and sale margins and licensing or royalty revenues will be impaired.

Without those revenues, our ability to continue planned development initiatives and commercialization efforts would be limited.

Due to our dependence on the commercial success of our products, delays or setbacks in the commercial success of any of these products would likely materially adversely affect our business, prospects, results and operations and financial consideration.

A substantial portion of our revenues is derived from a single customer and license and any loss or material reduction in revenues from such significant customer would adversely affect our business.

Historically, a substantial portion of our revenues in each quarter and year has been derived from a single customer and this trend is expected to continue while we continue to develop, seek regulatory approval of and seek to commercialize our proprietary products and product candidates.

If revenues from such key customer were to decline significantly, it would materially adversely affect our business, financial condition and results of operations.

Indivior accounted for approximately 62% and 80% of our revenues for 2024 and 2023, respectively, and we believe in the future will continue to account for a substantial part of our revenues.

Further, the Indivior License Agreement under which we manufacture and supply Suboxone to Indivior on an exclusive basis, may be terminated should certain causes or events occur.

For example, either party to the Indivior License Agreement may terminate the relationship in connection with a material breach by the other party of its contractual obligations.

Indivior may also terminate the Indivior License Agreement if the FDA or other applicable regulatory authority declares our manufacturing site to no longer be suitable for the manufacture of Suboxone or Suboxone is no longer suitable to be manufactured due to health or safety reasons.

In addition, the Indivior Licensing Agreement currently has a one-year term, subject to automatic one-year renewals unless either party provides the other party with twelve months’ prior notice of non-renewal.

As a result, there can be no assurance that either party will not terminate the Indivior License Agreement either due to any future breach of obligation, other termination cause or event, or notice of non-renewal.

Any such termination would have a material adverse impact on our business, results of operations, capital position and prospects.

Although Suboxone has continued to retain meaningful market share, we expect erosion of this sunsetting branded product over time, which will further affect our total revenues and our results from operations.

Indivior is a party to a number of lawsuits alleging Indivior engaged in deceptive and misleading marketing and distribution practices in its distribution and sale of Suboxone and seeking a monetary relief.

We cannot assess whether this settlement and disposition will have a material adverse financial impact on our business, prospects, liquidity, financial condition and operating results.

Risks Related to Development and Commercialization of Our Products and Product Candidates

Our business could be adversely affected if Libervant market access for ARS patients between two and five years of age is blocked.

On August 30, 2022, the FDA provided an approvable letter for Libervant that stated that Libervant was not cleared for U.S.

market access until the orphan drug market exclusivity for Valtoco, a competing nasal spray product, ends in January 2027.

On April 29, 2024, we announced that the FDA approved U.S.

market access for Libervant in ARS patients between two to five years of age.

In May 2024, Neurelis, Inc., the maker of Valtoco, filed a complaint in the U.S.

District Court for the District of Columbia against the FDA, HHS, and certain government officials.

The complaint in this matter alleges that the defendants violated the Administrative Procedure Act by approving Aquestive’s NDA for Libervant® for ARS patients aged between two and five years, and asked the court to vacate that approval and enjoin the defendants from approving Libervant for this pediatric patient population until January 10, 2027, the scheduled date for the expiration of the ODE granted for Valtoco by the FDA.

Aquestive intervened in the litigation to defend the approval of Libervant for this pediatric patient population.

The Company's motion for a stay of the District Court's order granting Neurelis' motion for summary Judgment is pending.

The Company also filed an appeal of the District Court's order with the U.S.

District Court of Appeals for the District of Columbia.

The Company has also submitted a request to the FDA that the FDA determines that Libervant for ARS patients between the ages of two and five years is clinically superior to the existing FDA approved products.

For greater detail, s ee Part II Item 8.

Financial Statements and Supplementary Data, Note 23, Contingencies to our financial statement s and in Part I Item 1.

If Neurelis prevails on the appeal or the FDA does not make a determination of clinical superiority in favor of Libervant, we may be required to withdraw Libervant from the U.S.

market until such time as the ODE expires for Valtoco in January 2027.

This would result in significant changes to our business and delay in future revenues to the Company from Libervant.

We cannot be certain that we will be able to successfully develop our product candidates or obtain regulatory approval for our product candidates.

We cannot be certain that we will be able to successfully develop our product candidates or obtain regulatory approval for our product candidates, including following the CRL we received for Anaphylm.

Prior to receiving approval to commercialize any of our drug products, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA and/or other regulatory authorities in the U.S.

and other countries, that our particular product candidates are both safe and effective.

For each drug product, we must demonstrate its efficacy and monitor its safety throughout the process.

For each drug product, we must demonstrate its

efficacy and monitor its safety throughout the process.

If development within these parameters is unsuccessful, our business could be harmed, and our stock price could be adversely affected.

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If we fail to produce positive results in our planned preclinical studies or clinical trials of any of our product candidates, the development timeline and regulatory approval and commercialization prospects for our product candidates and, correspondingly, our business and financial prospects, would be materially adversely affected.

In addition, our product candidates rely on proper administration by patients or caregivers, and difficulties with product design, packaging, or user interface could interfere with regulatory approval or limit commercial success.

It is also possible that the FDA will not approve an application that we may submit, or our product candidates may not obtain appropriate regulatory approvals necessary for us to commence clinical trials for our product candidates.

Any delay or failure in obtaining required approvals could have a material adverse effect on our business.

For example, we recently received a CRL which resulted in a delay in the planned launch of Anaphylm.

We are working to address the issues raised in the CRL and although we believe that the issues can be addressed, additional human factors and a clinical trial will need to be completed and data submitted for FDA review.

There is no assurance that we will be able to satisfy the FDA's concerns.

This process from development to commercialization can take many years and will likely require the expenditure of substantial resources beyond the proceeds we currently have on hand, without any guarantee or assurance that we will be successful with regulatory approval, or commercial success, of such product candidate.

Even if we obtain approval from the FDA and comparable foreign regulatory authorities for our current and future product candidates, any approval might contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, or may be subject to burdensome post-approval study or risk management requirements.

If we are unable to obtain regulatory approval, or any approval contains significant limitations, we may not be

able to obtain sufficient funding or generate sufficient revenue to continue the development of that product candidate or any other product candidate that we may in-license, develop or acquire in the future.

If we do not obtain market exclusivity for certain of our products, including orphan drug exclusivity, our business may be harmed .

We have received orphan drug market exclusivity for our drug candidate Libervant for ARS patients aged between two and five years, and may in the future seek market exclusivity for other product candidates, including orphan drug market exclusivity.

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphan drugs.

Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States.

Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of market exclusivity, which precludes the FDA from approving another marketing application for the same drug for the same disease for seven years.

Orphan drug exclusivity may be lost if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.

Orphan drug designation must be requested before submitting an application for marketing approval.

A company that first obtains FDA approval for a designated orphan drug for the designated rare disease or condition receives orphan drug market exclusivity for that drug for the designated disease for a period of seven years in the United States.

This orphan drug exclusivity prevents the FDA from approving another application to market a drug containing the same active moiety for the same orphan indication, except in very limited circumstances, including when the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care within the meaning of FDA regulations and guidance.

In addition, a designated orphan drug may not receive orphan drug market exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.

Even if we receive orphan drug designation for one or more of our drug candidates, we may not be the first to obtain marketing approval for the orphan-designated indication due to the uncertainties associated with developing product candidates.

If any of these other pharmaceutical companies obtains approval of an NDA before we are able to receive approval for one or more of our drug candidates with the same active moiety for the same indication, we would be barred from marketing that product in the United States during the seven-year orphan drug exclusivity period, unless we could demonstrate that such drug candidate is clinically superior to the approved products or satisfies one of the other limited exceptions to such orphan drug exclusivity.

Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition or a drug with the same active moiety can be approved for a different indication as currently permitted pursuant to FDA regulations in the United States.

Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

In addition, even if we intend to seek orphan drug designation for any of our product candidates or indications, we may never receive such designations or obtain orphan drug exclusivity.

See Part II, Item 8.

Financial Statements and Supplementary Data, Note 23, Contingencies.

Also, overcoming a grant of orphan drug market exclusivity is difficult to establish, with limited precedent.

In April 2024 the FDA approved Libervant® (diazepam) Buccal Film, 5 mg, 7.5 mg, 10 mg, 12.5 mg, and 15 mg, for ARS patients between the ages of two and five years.

This FDA approval was recently determined to be granted in error by the U.S.

District Court for the District of Columbia in a lawsuit brought by Neurelis, Inc., and there can be no assurance that the Company will be successful in its appeal of this court ruling or that the FDA will grant our current request seeking an FDA determination that Libervant for this young patient population is clinically superior to other FDA approved ARS drugs in order to maintain the exclusive approval of Libervant in this age and indication.

Even if we maintain our market access approval of Libervant for this age group in this indication, if we fail to receive U.S.

orphan drug market exclusivity for Libervant for this age group in this indication, our ability to prevent competitors from manufacturing, marketing and selling competing products will be materially impaired, and our results of operations and financial condition may be significantly adversely affected.

If we are unable to obtain regulatory approval, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue the development of that product candidate or any other product candidate that we may in-license, develop or acquire in the future.

C linical trials may be delayed, suspended or terminated for many reasons, which will increase our expenses and delay the time it takes to develop our product candidates.

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With the license of Sympazan to Assertio in October 2022, we scaled back many of our commercial operations, including elimination of our sales and marketing force.

However, in April 2024, we launched Libervant for ARS patients between two and five years of age.

In April 2024 we launched Libervant for ARS patients between two and five years of age, however a year later the commercial efforts ceased due to marketing authorization being converted to tentative approval by the FDA because of a legal decision.

In 2025 we were working towards a potential launch of Anaphylm, if approved by the FDA.

Given our limited history of direct experience in commercializing product candidates, and current limited commercial operations, we have no long-term experience upon which to measure our ability or success in commercializing future product candidates, if approved, or our ability to make predictions about financial results or prospects of any future launches of product candidates, if approved.

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It is possible that we may not complete development of our product candidates or obtain regulatory approval for those product candidates.

Even if we do complete development and obtain regulatory approval for our product candidates, our product candidates may not gain market acceptance among patients, physicians, nurses, pharmacists, the medical community or third-party payors, which is critical to commercial success.

third-party payors, which is critical to commercial success.

Market acceptance of our products and any product candidate for which we receive approval depends on a number of factors, including:

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We could incur substantial costs and disruption to our business and delays in the launch of our product candidates if our competitors and/or collaborators bring legal actions against us, which could harm our business and operating results.

We cannot predict whether our competitors or potential competitors, some of whom we collaborate with, may bring legal action against us based on our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, claiming, among other things, infringement of their intellectual property rights, breach of contract, false or disparaging statements about another company’s products or product candidates, or other legal theories.

To date we have been subject to a number of claims of this nature.

In defending such lawsuits, whether or not they are with or without merit or are ultimately determined in our favor, we would continue to face costly litigation and diversion of

technical and management personnel.

We cannot predict whether our competitors or potential competitors may bring legal action against us based on our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, claiming, among other things, infringement of their intellectual property rights, breach of contract, false or disparaging statements about another company’s products or product candidates, or other legal theories.

To date we have been

subject to a number of claims of this nature.

In defending such lawsuits, whether or not they are with or without merit or are ultimately determined in our favor, we would continue to face costly litigation and diversion of technical and management personnel.

These lawsuits could hinder our ability to enter the market early with our product candidates and thereby hinder our ability to influence usage patterns when fewer, if any, of our potential competitors have entered the market, which could adversely impact our potential revenue from such product candidates.

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We expect to have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and universities and other research institutions.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations.

Many of our competitors have substantially greater financial, technical and other resources, such as larger R&D staff and experienced marketing and manufacturing organizations.

Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors.

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Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug administration technologies that are more effective than our products or product candidates.

In addition, our competitors may file citizen petitions with the FDA in an attempt to persuade the FDA that our product candidates, or the clinical studies that support their approval, contain deficiencies.

In addition, our competitors may submit citizen petitions with the FDA in an attempt to persuade the FDA that our product candidates, or the clinical studies that support their approval, contain deficiencies.

Such actions by our competitors could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2) or other filing pathways.

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In addition, the biopharmaceutical industry is characterized by rapid technological change.

Because we have limited research and development capabilities, it may be difficult for us to stay abreast of the rapid changes in

each technology.

Because we have limited R&D capabilities, it may be difficult for us to stay abreast of the rapid changes in each technology.

If we fail to stay at the forefront of technological change, we may be unable to compete effectively.

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The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and the provisions are open to a variety of interpretations.

Moreover the industry is adapting with use of technology and direct-to-patient access for medications and government initiatives are supportive of the DTC model, though this guidance is nascent and does not address the full scope of potential issues.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.

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Subsequent legislation, including the BBA, extended the 2% reduction, on average, to 2032, subject to additional Congressional action.

Sequestration may result in additional reductions in Medicare and other healthcare funding and, if we obtain regulatory approvals, may otherwise affect the prices we may obtain for our product candidates or the frequency with which our product candidates may be prescribed or used if approved.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for

physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

Sequestration may result in additional reductions in Medicare and other healthcare funding and, if we obtain regulatory approvals, may otherwise affect the prices we may obtain for our product

candidates or the frequency with which our product candidates may be prescribed or used if approved.

Due to the Statutory Pay-As-You-Go Act of 2010, estimated budget deficit increases resulting from the American Rescue Plan Act of 2021 and subsequent legislation, Medicare payments to providers are subject to further reductions in 2025.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).

The introduction of the Medicare quality payment program has shifted the focus of physician reimbursement from volume to value, encouraging higher quality and more cost-effective care.

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Shortly thereafter, the BBA amended the PPACA to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” The Inflation Reduction Act of 2022, which was signed into law by President Biden, has since eliminated the coverage gap and replaced it with a $2,000 annual cap on out-of-pocket spending for covered drugs.

As the second Trump presidency has commenced, we will continue to evaluate the impact of the PPACA on our business, and the potential for its further repeal or replacement.

We will continue to evaluate the impact of the PPACA on our business, and the potential for its further repeal or replacement.

The costs of prescription pharmaceuticals in the United States have also been the subject of considerable discussion in the United States, and members of Congress and the administration have stated that they will address such costs through new legislative and administrative measures.

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In 2022, the Biden administration signed into law the Inflation Reduction Act, which included a number of significant drug pricing reforms, including the establishment of a drug price negotiation program within the HHS that, starting in 2026, will require manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance;

the establishment, beginning in 2023, of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation;

and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs, beginning in 2025.

the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation;

and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs.

Additionally, President Biden issued a subsequent Executive Order directing the Secretary of the HHS consider whether new payment and delivery models would lower drug costs, though, on the first day of his second term, President Trump repealed that Executive Order.

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If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired.

Changes in U.S.

government policies, including those with respect to China, increased tariffs, and reductions in federal research funding, could adversely affect our business.

Significant political, trade, or regulatory developments in the jurisdictions in which we may sell our products, such as those stemming from the change in U.S.

federal administration, are difficult to predict and may have a material adverse effect on us.

Similarly, changes in U.S.

federal policy that affect the geopolitical landscape could give rise to circumstances outside our control that could have negative impacts on our business operations.

For example, policy actions by the current presidential administration, including the imposition of new tariffs on imported materials and goods from certain foreign countries,

including Canada, Mexico, and China, and the temporary freeze on federal grants and loans, may have an adverse impact on our business.

In April 2025, the current presidential administration imposed a baseline ten percent tariff on imports from all nations importing goods to the United States, with that baseline supplemented in certain cases by additional tariffs that vary by nation, product, or industry.

Retaliatory tariffs on U.S.

goods have been imposed by, among others, China, Canada, and the European Union, or the EU, which could impact inflation rate, increase the cost of goods, and adversely affect our business.

While tariffs with certain countries have been temporarily reduced, the underlying trade tensions and the potential reimposition of elevated tariffs may continue to pose risks to global supply chains and economic relations.

Historically, tariffs have led to increased political tensions, between not only the United States and China, but also between the United States and other countries in the international community.

Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets.

Any changes in political, trade, regulatory, and economic conditions, including, but not limited to, U.S.

and China trade policies, could have a material adverse effect on our financial condition or results of operations.

In addition, increased tariffs on critical raw materials, components, and finished goods could raise our production costs and disrupt our supply chain, which could adversely affect our clinical development activities.

Additionally, reduction in or suspension of certain federal research grants may negatively affect our industry.

Any prolonged reductions in such funding could slow innovation, delay collaborations, and limit the adoption of new technologies that contribute to our business growth.

If these or similar policy changes continue or expand, we may face increased costs.

Although we cannot predict the full extent of these impacts, any prolonged disruption could adversely affect our business, financial condition, and results of operations.

Risks Related to Our Financial Condition and Need for Additional Capital

We will need substantial additional capital to fund our operations, including to commercialize Anaphylm if approved and begin making quarterly principal payments on our 13.5% Notes starting in June 2026, unless we are able to refinance or amend their terms.

This additional capital may not be available on acceptable terms, if at all.

Our cash requirements for 2026 and beyond include expenses related to continuing development and clinical evaluation of our products, manufacture and supply costs, costs of regulatory filings, patent prosecution expenses and litigation expenses, expenses related to commercialization of our products, including the substantial costs of commercializing Anaphylm if approved by the FDA, begin making quarterly principal payments on our 13.5% Notes, as well as costs to comply with the requirements of being a public company operating in a highly regulated industry.

As of December 31, 2025, we had $121,169 of cash and cash equivalents.

While we currently have significant cash and cash equivalents, successful commercialization of Anaphylm, if approved, and making quarterly principal payments on our 13.5% Notes will require substantial additional capital to fund the costs of launching and maintain a commercial infrastructure, including sales force development and deployment, marketing programs distribution networks and ongoing post-approval regulatory obligations.

On April 3, 2024, we filed a new shelf registration statement on Form S-3 (the "2024 Registration Statement"), which was declared effective by the SEC on April 23, 2024.

Included in the 2024 Registration Statement are:

(i) a base prospectus registering the offer, issuance and sale of up to $25 million worth of Common Stock, preferred stock, debt securities, warrants, rights and units and (ii) the $100 million ATM facility prospectus.

The remaining authorized balance of the ATM facility was $78 million as of December 31, 2025.

On November 1, 2023, we reduced our debt payment obligations when we issued (the “Offering”) $45 million aggregate principal amount of our 13.5% Notes.

Interest on the 13.5% Notes accrues at a rate of 13.5% per annum and is payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year (each, a “Payment Date”).

These quarterly principal payments beginning in June 2026 will significantly reduce our available cash unless we are able to successfully refinance or renegotiate the terms of our debt obligations.

There can be no assurance that any such refinancing or amendment will be available on terms acceptable to us, or at all, and the commencement of these payments would materially impact our liquidity and ability to fund our operations and commercialization activities.

development, and regulatory approval of our products and product candidates, to fund the commercialization of Anaphylm if approved, and to conduct our business.

The capital required to successfully commercialize Anaphylm, if approved, is expected to be substantial and will likely significantly exceed our current cash reserves requiring us to obtain additional financing.

We have no committed sources of additional capital, and there can be no assurance that such needed capital or debt financing will be available or available on favorable terms, or at all.

In addition, payments made by potential collaborators or licensees generally will depend upon our achievement of negotiated development, regulatory and sales milestones.

Failure to achieve these milestones may harm our future capital position.

If adequate funds are not available for our liquidity needs and cash requirements, as and when needed, from the sources referred to above or otherwise, or at all, we would be required to engage in expense management activities such as reducing staff, delaying, significantly scaling back, or even discontinuing some or all of our current or planned R&D programs and clinical and other product development activities, or reducing our future commercialization efforts and otherwise significantly reducing our other spending and adjusting our operating plan, and we would need to seek to take other steps intended to improve our liquidity.

Our inability to meet our debt obligations could result in an event of default under our 13.5% Notes, which could lead to acceleration of all amounts due.