What changed in this filing

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Item 1A. Risk Factors

2025-08-07 compared with 2025-05-07 · 56 added, 38 removed, 1128 unchanged (8% of the section changed)

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• We will need to raise additional capital or enter into strategic partnering relationships to fund our operations;

• We are a pre-commercial biotherapeutics company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future;

• We are a pre-commercial biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future;

• We depend on our existing collaborations and may depend on collaborations with additional third parties for the development and commercialization of certain of our product candidates.

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If we do not receive regulatory approvals for our product candidates, and even if we do obtain regulatory approvals, we may never generate significant revenues, if any, from commercial sales.

If we fail to successfully commercialize our therapeutic candidates, we may be

unable to generate sufficient revenues to sustain and grow our company, and our business, prospects, financial condition and results of operations will be adversely affected.

If we fail to successfully commercialize our therapeutic candidates, we may be unable to generate sufficient revenues to sustain and grow our company, and our business, prospects, financial condition and results of operations will be adversely affected.

There is no established FDA regulatory pathway for approval of a drug in pulmonary sarcoidosis.

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As a result, top-line data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our clinical studies.

From time to time, we may also disclose interim data from our clinical studies, such as our disclosure of an interim analysis of our Phase 2 EFZO-CONNECT study of efzofitimod in SSc-ILD in June 2025.

Disclosure of interim data from our clinical studies is subject to the same risks as the disclosure of preliminary or top-line data.

In addition, we may report interim analyses of only certain endpoints rather than all endpoints.

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In July 2024, we completed enrollment of the EFZO-FIT study with a total of 268 subjects in centers in the United States, Europe, Brazil, as well as centers in Japan where our partner Kyorin led the enrollment effort.

In July 2025, we completed the last patient visit of the EFZO-FIT study.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data is generally subject to certain conditions.

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During 2024, we initiated preparatory work with the CDMO on three process performance qualification batches that will be required as part of our potential BLA submission for efzofitimod.

During the first quarter of 2025, the first upstream batch did not meet process performance qualification specifications, and will be replaced by the CDMO.

The deviation of this first batch was due to operational errors at the CDMO and not related to the underlying process nor the drug substance.

Future operational errors in these batches could negatively impact the timing of our potential BLA submission and could require additional funding.

During the first quarter of 2025, the first upstream batch did not meet process performance qualification specifications, and was replaced by the CDMO, and we have now successfully completed the required three upstream batches.

During the third quarter of 2025, we initiated the required three downstream batches.

The first downstream batch experienced deviations which we are currently assessing.

Certain deviations in this batch and the remaining batches could potentially impact the timing of our potential BLA submission.

The deviations in these batches were due to operational errors at the CDMO and not related to the underlying process nor the drug substance.

In addition, the U.S.

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Any additional adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product which could delay the development of our product candidates, the timing of our potential BLA submission for efzofitimod and could require significant additional funding.

We may also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications or expires, undertake costly remediation efforts, or seek more costly manufacturing alternatives.

We may also have to write off inventory, incur other charges and expenses for supply of drug substance and drug product that fails to meet specifications or expires, undertake costly remediation efforts, or seek more costly manufacturing alternatives.

Any manufacturing stoppage or delay, or any inability to consistently manufacture adequate supplies of our product candidates for our clinical trials or on a commercial scale will harm our business, prospects, financial condition and results of operations.

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

As of March 31, 2025, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $78.8 million.

As of June 30, 2025, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $83.2 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.

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In addition, any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

We are a pre-commercial biotherapeutics company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*

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 $14.9 million for the three months ended March 31, 2025.

As of March 31, 2025, we had an accumulated deficit of $546.9 million.

We are a pre-commercial biotechnology company and have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*

We are a pre-commercial biotechnology 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 $34.4 million for the six months ended June 30, 2025.

As of June 30, 2025, we had an accumulated deficit of $566.5 million.

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

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Full quality release testing has been completed and all release specifications were met, supporting the new CDMO's ability to produce bulk drug substance of efzofitimod for commercial purposes if we receive regulatory approval for efzofitimod.

Because the change in CDMO has been introduced at an advanced stage of development of efzofitimod, the FDA will require a comparability assessment, including additional nonclinical or clinical studies utilizing the product manufactured by the new CDMO.

These requirements could result in substantial delays and additional costs for clinical development, and commercialization of efzofitimod, or our inability to obtain approval for efzofitimod.

We have completed a comparability study and are awaiting regulatory feedback.

Because the change in CDMO has been introduced at an advanced stage of development of efzofitimod, the FDA will require a comparability assessment, which may include additional nonclinical or clinical studies utilizing the product manufactured by the new CDMO.

We have completed an analytical comparability assessment.

The FDA has reviewed this analytical comparability assessment and no additional data was requested.

We rely, and expect to continue to rely, on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.

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These developments have created a dynamic and unpredictable trade landscape, which may adversely impact our business, results of operations, financial condition and prospects.

Additionally, the Bureau of Industry and Security, U.S.

Department of Commerce, has initiated an investigation to determine whether pharmaceutical ingredients, including finished drug product, manufactured outside the United States pose a national security risk and should be subject to additional tariffs.

Trade disputes, tariffs, restrictions and other political tensions between the United States and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns.

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If the new CDMO experiences additional issues in validating the manufacturing process, particularly delays in producing efzofitimod in compliance with cGMP regulations, we could be forced to delay future clinical trials or the submission of regulatory approval applications to the FDA.

In addition, due to the fact that all prior cGMP batches of efzofitimod, including those that we intend to use in the EFZO-FIT study, have been produced by our prior CDMO, we will be required to complete comparability studies prior to using efzofitimod produced at the new CDMO’s facilities in subsequent clinical trials or submitting regulatory approval applications to the FDA.

If we are unable to demonstrate such comparability to the satisfaction of the FDA, it may result in delays to future clinical trials or a deficiency in future regulatory applications.

We have completed a comparability study and are awaiting regulatory feedback.

or our CDMOs are unable to scale the manufacturing process to produce commercial quantities of our product candidates, or our CDMOs do not pass required regulatory pre-approval inspections, our commercialization efforts will be harmed.

If we or our CDMOs are unable to scale the manufacturing process to produce commercial quantities of our product candidates, or our CDMOs do not pass required regulatory pre-approval inspections, our commercialization efforts will be harmed.

In addition, any significant disruption in our relationships with our CDMOs could harm our business.

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There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products.

In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.

In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid

Services (CMS), as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.

Private payors often follow CMS with respect to coverage policy and payment limitations in setting their own reimbursement policies.

difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

It is difficult to predict what CMS will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

One third-party payor’s determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate.

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It is unclear how any such challenges and the healthcare reform measures of the current administration will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

For example, on July 4, 2025, the annual reconciliation bill, the “One Big Beautiful Bill Act” (OBBBA) was signed into law, which is expected to reduce Medicaid spending and enrollment by implementing work requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program.

OBBBA also narrows access to ACA marketplace exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, set to expire in 2025, which, among other provisions in the law, are anticipated to reduce the number of Americans with health insurance.

In addition, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics.

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Further, on December 8, 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights.

While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional health reform measures.

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These actions, presently directed by executive orders or memoranda from the Office of Management and Budget, may propose policy changes that create additional uncertainty for our business.

These actions may include, for example, directives to reduce agency workforce, program cuts, rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation (CMMI) to consider new payment and healthcare models to limit drug spending and eliminating the Biden administration’s executive order that directed HHS to establish an AI task force and developing a strategic plan, and directing certain federal agencies to enforce existing law regarding hospital and price plan transparency and by standardizing prices across hospitals and health plans.

These actions and proposals include, for example, (1) directives to reducing agency workforce, program cuts;

(2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation (CMMI) to consider new payment and healthcare models to limit drug spending;

(3) eliminating the Biden administration’s executive order that directed HHS to establish an AI task force and to develop a strategic plan;

(4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products;

(5) imposing tariffs on imported pharmaceutical products;

and (6) directing certain federal agencies to enforce existing law regarding hospital and price plan transparency and by standardizing prices across hospitals and health plans.

If Most-Favored-Nation drug pricing is implemented, the U.S.

list price of products that are also being commercialized outside of the U.S.

could be substantially reduced, which could negatively impact U.S.

product sale revenues and the overall U.S.

market opportunity.

Additionally, in its June 2024 decision in Loper Bright Enterprises v.

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The Loper Bright decision could result in additional legal challenges to current regulations and guidance issued by federal agencies applicable to our operations, including those issued by the FDA.

Congress may introduce and ultimately pass health care related legislation that could impact the drug approval process and make changes to the Medicare Drug Price Negotiation Program created under the IRA.

Congress may introduce and ultimately pass health care related legislation that could, among others, impact the drug approval process and modify the Medicare Drug Price Negotiation Program created under the IRA and expand the orphan drug exclusion in the IRA.

We cannot predict which additional measures may be adopted or the impact of current and additional measures on the marketing, pricing and demand for our products, if approved, which could have a material adverse effect on our business, financial condition and results of operations.

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health plans, healthcare clearinghouses and certain healthcare providers, as well as their business associates and covered subcontractors that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

• analogous state and foreign laws and regulations.

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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, 2024 through May 2, 2025 the closing price of our common stock has ranged between $1.42 and $4.43 per share.

From January 1, 2024 through August 1, 2025 the closing price of our common stock has ranged between $1.42 and $6.61 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 May 2, 2025, 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 33.6% of our voting stock.

As of August 1, 2025, 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 31.2% 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.

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The total net proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program, (the Jefferies ATM Offering Program).

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies implementing the Jefferies ATM Offering Program.

In December 2024, we amended the Jefferies ATM Offering Program.

Under the Jefferies ATM Offering Program we may offer and sell, from time to time and at our option, up to an aggregate of $215.0 million of shares of our common stock (inclusive of $65.0 million of sales made prior to the amendment) through Jefferies, acting as sales agent.

Under the Jefferies ATM Offering Program we may offer and sell, from time to time and at our option, up to an aggregate of $215.0 million of shares of our common stock (inclusive of

$65.0 million of sales made prior to the amendment) through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program.

During the year ended December 31, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $2.02 per share for proceeds of approximately $40.3 million under the Jefferies ATM Offering Program, net of offering costs.

During the three months ended March 31, 2025, we sold an aggregate of 4,941,895 shares of common stock at a weighted-average price of $3.93 per share for proceeds of approximately $18.8 million under the Jefferies ATM Offering Program, net of offering costs.

During the year ended December 31, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $2.02 per share for net proceeds of approximately $40.3 million under the Jefferies ATM Offering Program.

During the six months ended June 30, 2025, we sold an aggregate of 8,771,725 shares of common stock at a weighted-average price of $4.32 per share for net proceeds of approximately $36.7 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.

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As a result, once registered, these shares can be freely sold in the public market upon issuance, subject to restrictions under the securities laws.

In addition, our directors and executive officers may establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934 (Exchange Act) for the purpose of effecting sales of our common stock.

In addition, our directors and executive officers have established and may establish in the future programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934 (Exchange Act) for the purpose of effecting sales of our common stock.

If any of these events cause a large number of our shares to be sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

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Our financial statements could fail to reflect adequate reserves to cover such a contingency.

Similarly, a taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

taxing authority could assert that we are subject to tax in a jurisdiction where we believe we have not established a taxable connection, often referred to as a “permanent establishment” under international tax treaties, and such an assertion, if successful, could increase our expected tax liability in one or more jurisdictions.

We do not intend to pay dividends on our common stock, and therefore any returns will be limited to the value of our stock.

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Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Furthermore, we may discover security issues that were not found during due diligence of such

acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We use third parties, including service providers and subprocessors, to help us operate our business and engage in Processing or otherwise share Sensitive Information with our partners or other third parties in conjunction with our business.

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Such disclosures and related actions can be costly, and the disclosures or the failure to comply with such applicable 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.

inspections, additional reporting requirements and/or oversight, restrictions on Processing Sensitive Information, indemnification 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.

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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.

In addition to experiencing a security incident, third parties may gather, collect, or infer Sensitive Information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to

undermine our competitive advantage or market position.

Additionally, Sensitive Information of the Company could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI technologies.

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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