What changed in this filing

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Item 1A. Risk Factors

2024-11-07 compared with 2024-08-13 · 26 added, 23 removed, 1110 unchanged (4% of the section changed)

307 unchanged sentences

The development of therapeutic product candidates is expensive, and we expect our research and development expenses to fluctuate.

As of June 30, 2024, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $81.4 million.

As of September 30, 2024, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $68.9 million.

We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments, will be sufficient to meet our material cash requirements for known contractual and other obligations for a period of at least one year from the date of this Quarterly Report.

5 unchanged sentences

• cost increases related to the manufacturing of preclinical study and clinical trial materials, including cost increases related to technology transfers to additional CDMOs and any delays in the manufacturing of study drug;

• cost increases as a result of global geopolitical tension, armed conflicts, potential future health pandemics, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets,

labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts and tightening of credit markets;

shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts and tightening of credit markets;

• the number and characteristics of product candidates that we pursue;

29 unchanged sentences

We are a pre-commercial biotherapeutics company, and we have not yet generated any revenues from product sales.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $31.8 million for the six months ended June 30, 2024.

As of June 30, 2024, we had an accumulated deficit of $499.8 million.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $49.1 million for the nine months ended September 30, 2024.

As of September 30, 2024, we had an accumulated deficit of $517.1 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities.

305 unchanged sentences

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

For example, based on analysis from an independent consultant that we engaged during 2022 and our own modeling, we estimate that there is a $2-3 billion dollar market opportunity in pulmonary sarcoidosis and SSc-ILD.

For example, based upon analyses from independent consultants that we have engaged and our own modeling, we estimate that there is a $2-5 billion dollar market opportunity in pulmonary sarcoidosis and SSc-ILD.

Depending on the accuracy of this estimate, we may not be most efficiently allocating resources toward the advancement of efzofitimod versus the advancement of other development efforts.

234 unchanged sentences

Further, the IRA, among other things, (1) directs the HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions take effect progressively starting in fiscal year 2023.

On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges.

HHS has and will continue to issue and update guidance as these programs are implemented.

It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry.

These provisions took effect progressively starting in fiscal year 2023.

On August 15, 2024, HHS announced the agreed-upon reimbursement prices of the first ten drugs that were subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges.

HHS will select up to fifteen additional drugs covered under Part D for price negotiation in 2025.

In addition, in response to the Biden administration's October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care.

59 unchanged sentences

In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance.

From January 1, 2023 through August 9, 2024 the closing price of our common stock has ranged between $1.11 and $2.57 per share.

From January 1, 2023 through November 5, 2024 the closing price of our common stock has ranged between $1.11 and $3.35 per share.

Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Our executive officers, directors, 5% holders and their affiliates currently own a significant percentage of our stock and will be able to exert significant control over matters submitted to stockholders for approval .*

As of August 9, 2024, based on the latest information available to us, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates own approximately 27.0% of our voting stock.

As of November 5, 2024, based on the latest information available to us, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates own approximately 37.5% of our voting stock.

Therefore, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates will have the ability to influence us through their ownership positions and may be able to determine all matters requiring stockholder approval.

8 unchanged sentences

During 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $1.82 per share for net proceeds of approximately $18.4 million under the Jefferies ATM Offering Program.

During the six months ended June 30, 2024, we sold an aggregate of 12,448,319 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.3 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2024, we sold an aggregate of 12,463,407 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.4 million under the Jefferies ATM Offering Program.

These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations, and may require us to relinquish rights to some of our technologies, intellectual property or product candidates, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us.

87 unchanged sentences

attacks enhanced or facilitated by AI;

and other similar issues.

and other similar threats.

Particularly, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions, delays, or outages in our operations, disruption of clinical trials, loss of data (including data related to clinical trials), and other Material Adverse Impacts (as defined above).

To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws or regulations prohibit such payments).

It may be difficult and/or costly to detect, investigate, mitigate, contain and remediate a security incident.

Our efforts to do so may not be successful.

Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain and remediate a security incident could result in outages, data losses and disruptions of our business.

Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.

Additionally, remote work has become more common and has increased the risk to our information technology assets and data, as more of our employees utilize network connections, computers and devices outside of our premises and networks, including working at home, while in transit and public locations.

10 unchanged sentences

We may expend significant resources, fundamentally change our business activities and practices, or modify our operations, including our clinical trial activities, or information technology in an effort to protect against security incidents and to mitigate, detect, and remediate actual and potential vulnerabilities.

Applicable Data Protection Requirements (as defined above) may require us to implement specific security measures or use industry-standard or reasonable measures to protect against security incidents.

Applicable Data Protection Requirements (as defined above) may require us to implement specific security measures to protect against security incidents.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that we, or the third parties with whom we work, will be successful in preventing a security incident or mitigating their effects.

3 unchanged sentences

Vulnerabilities could be exploited and result in a security incident.

Furthermore, applicable Data Protection Requirements may require us to notify relevant stakeholders of security incidents.

Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to Material Adverse Impacts.

If we or the third parties with whom we work experience or in the future experience (or are perceived to have experienced) any security incident(s), we could suffer reputational harm, face litigation or adverse regulatory actions, fines, other penalties, audits, inspections, additional reporting requirements and/or oversight, restrictions on Processing Sensitive Information, indemnification obligations, negative publicity, business interruptions, and diversion of funds.

These vulnerabilities, bugs, errors or defects alone, or a combination of them, could pose material risks to our business.

Furthermore, applicable Data Protection Requirements may require us, or we may voluntarily choose, to notify relevant stakeholders of security incidents, or take other actions, such as providing credit monitoring and identity theft protection services.

Such disclosures can be costly, and the disclosures or the failure to comply with such applicable requirements could lead to Material Adverse Impacts.

obligations, negative publicity, business interruptions, and diversion of funds.

For example, the loss of data from completed clinical trials for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs.

1 unchanged sentence

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

Furthermore, we cannot be sure that our insurance coverage, will be adequate or otherwise protect us from or adequately

mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or Material Adverse Impacts arising out of our Processing operations, data privacy and security practices, or security incidents we may experience.

Furthermore, we cannot be sure that our insurance coverage, will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or Material Adverse Impacts arising out of our Processing operations, data privacy and security practices, or security incidents we may experience.

The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large excess or deductible or co-insurance requirements), could have a Material Adverse Impact.

24 unchanged sentences

In the past, securities class action litigation has often been brought against companies following a decline in the market price of their securities.

This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price volatility.

This risk is especially relevant for us because pharmaceutical companies have experienced significant stock price

If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and cause our stock price to decline.

2 unchanged sentences

We expect to use our existing cash to fund research and development activities and for working capital and general corporate purposes, including funding the costs of operating as a public company.

In addition, pending their use, we may invest our existing cash in certain

short-term investments, including but not limited to investment-grade, interest-bearing securities.

In addition, pending their use, we may invest our existing cash in certain short-term investments, including but not limited to investment-grade, interest-bearing securities.

Historically, investment in these securities has been highly liquid and has experienced only very limited defaults.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors