What changed in this filing

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Item 1A. Risk Factors

2025-03-31 compared with 2024-03-28 · 152 added, 111 removed, 772 unchanged (25% of the section changed)

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Any of these scenarios could impact the commercial prospects for one or more of our current or future product candidates.

The extensive regulation to which our product candidates are subject may be costly and time consuming, cause anticipated delays, and/or prevent the receipt of the required approvals for commercialization.

The extensive regulation to which our product candidates are subject may be costly and time consuming, cause anticipated or unanticipated delays, and/or prevent the receipt of the required approvals for commercialization.

The research and clinical development, testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of any product candidate, including our product candidates, is subject to

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In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the termination of a given development program or the denial of regulatory approval of a product candidate.

If any of our product candidates causes unacceptable adverse safety events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product, preventing us from generating revenue from such products’ sale.

If any of our product candidates causes unacceptable adverse safety events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product, if approved, preventing us from generating revenue from such products’ sale.

Alternatively, even if a product candidate is approved for marketing, future adverse events could lead to the withdrawal of such product from the market.

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Such restrictions may also prevent us from engaging in activities that could be beneficial to our business and our stockholders unless we repay the outstanding debt, which may not be desirable or possible.

On August 27, 2020, we entered into a $60 million senior secured credit agreement (the “Oaktree Agreement” and the debt thereunder, the “Oaktree Note”) with Oaktree Fund Administration, LLC and the lenders from time-to-time party thereto (collectively, “Oaktree”).

At December 31, 2023 the amount outstanding under the Oaktree Agreement was $50 million.

The Oaktree Agreement contains certain affirmative and negative covenants restricting our and certain of our subsidiaries’ abilities to take certain actions, especially as pertains indebtedness, liens, investments, affiliate transactions, acquisitions, mergers, dispositions, prepayment of other indebtedness, dividends and other distributions (subject in each case to exceptions).

The Oaktree Agreement also contains financial covenants obligating us to maintain a minimum liquidity amount and a minimum amount of revenue, in both cases subject to exceptions.

The breach of any such provisions (even, potentially, in an immaterial manner) could result in an event of default under the Oaktree Agreement, the announcement and impact of which could have a negative impact on the trading prices of our securities.

On July 25, 2024, we, as borrower, entered into a $50.0 million senior secured credit agreement (the “Oaktree Agreement”) with Oaktree Fund Administration, LLC and the lenders from time-to-time party thereto (collectively, “Oaktree”).

We borrowed $35.0 million under the Oaktree Agreement on the date of the agreement and are eligible to draw up to an additional $15.0 million with the lenders’ consent.

The Oaktree Agreement contains customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions.

In addition, the Oaktree Agreement contains certain financial covenants, including, (i) a requirement that we maintain a minimum liquidity of $7.0 million, which may be reduced or increased as described in the Oaktree Agreement, and (ii) that product net sales of Journey meet a consolidated minimum net sales amount of $50.0 million on a trailing 12-month basis, tested quarterly, which may be reduced or increased as described in the Oaktree Agreement (the “Minimum Net Sales Test”), subject to certain exclusions.

Failure by the Company to comply with the financial covenants will result in an event of default, subject to certain cure rights with respect to the Minimum Net Sales Test.

The Oaktree Agreement contains events of default that are customary for financings of this type, in certain circumstances subject to customary cure periods.

In addition, the Company is also required to (i) raise common equity, or receive in monetizations or distributions, by the end of each calendar year prior to the maturity date, in an aggregate amount equal to the greater of $20 million or 50% of an amount set forth in an annual budget delivered to the lenders and (ii) maintain a specified minimum equity stake in Journey.

The breach of any other such provisions (even, potentially, in an immaterial manner) could result in an event of default under the Oaktree Agreement, the announcement and impact of which could have a negative impact on the trading prices of our securities.

The restrictions imposed by such provisions may also inhibit our and certain of our subsidiaries and partner companies’ ability to enter into certain transactions or arrangements that management otherwise believes would be in our or such partner companies’ best interests, such as dispositions that would result in cash inflows to Fortress and/or our subsidiaries and partner companies, or acquisitions or financings that would promote future growth.

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We anticipate that our expenses will increase substantially if:

● one or more of our development-stage product candidates is approved for commercial sale and we decide to commercialize such product(s) ourselves, due to the need to establish the necessary commercial infrastructure to launch and commercialize this product without substantial delays, including hiring sales and marketing personnel

and contracting with third parties for manufacturing, testing, warehousing, distribution, cash collection and related commercial activities;

● we are required by the FDA or a foreign regulatory authority to perform studies in addition to those currently expected;

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Our ability to become profitable depends upon our ability to generate revenue.

To date, we have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue from such development-stage products.

To date, other than from Journey, we have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue from such development-stage products.

Our ability to generate revenue from such development-stage products depends on a number of factors, including, but not limited to, our ability to:

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Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, may affect our ability to make payments on our debt.

If we do not generate sufficient cash flow to satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital.

If we do not generate sufficient cash flow to satisfy our debt obligations,

we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital.

Alternatively, as we have done in the past, we may also elect to refinance certain of our debt, for example, to extend maturities.

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In addition, any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially

reasonable terms, or at all, could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms, or at all, could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

Repayment of our indebtedness is dependent in part on the generation of cash flow by Journey and its ability to make such cash available to us, by dividend, debt repayment or otherwise.

Journey may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness.

Each of our subsidiaries, including Journey, is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.

Each of our subsidiaries and partner companies, including Journey, is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries and partner companies.

Our ability to continue to reduce our indebtedness will depend upon factors including our future operating performance, our ability to access the capital markets to refinance existing debt and prevailing economic conditions and financial, business and other factors, many of which are beyond our control.

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Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance potential cash needs.

Under current SEC regulations, if at the time we file our Annual Report on Form 10-K our public float is less than $75 million, and for so long as our public float remains less than $75 million, the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float, which is referred to as the “baby shelf rules.” SEC regulations permit us to use the highest closing sales price of our common stock (or the average of the last bid and last ask prices of our common stock) on any day within 60 days of sales under the registration statement to calculate our public float.

As of the date of this Form 10-K, our public float was less than $75 million.

As a result, for sales following the date of this Form 10-K, and until we again have a public float with a value in exceeds of $75 million, if ever, we only have the capacity to sell shares up to one-third of our public float under shelf registration statements in any twelve-month period.

If our public float decreases, the amount of securities we may sell under our Form S-3 shelf registration statements will also decrease.

Our ability to obtain additional funding when needed, changes to our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our planned R&D activities, expenditures, acquisitions and growth strategy, increased expenses or other events may affect our need for additional capital in the future and require us to seek additional funding sooner or on different terms than anticipated.

In addition, if we are unable to raise additional capital when needed, we might have to delay, curtail or eliminate one or more of our R&D programs and commercialization efforts and potentially change our growth strategy, which would have a material adverse effect on our business, financial

condition, cash flows and results of operations and could cause the market value of our Securities to decline.

The terms of our existing debt arrangements, including that with Oaktree, have and will continue to inhibit our and our subsidiaries’ abilities to raise capital.

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In addition, if we raise additional funds through licensing or sublicensing arrangements, it may be necessary to relinquish potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.

We have paused dividend payments on our Series A Preferred Stock and may not be able to resume payment of dividends on our Series A Preferred Stock in the future if we have insufficient cash or available “surplus” as defined under Delaware law to make such dividend payments.

On July 5, 2024, our board of directors paused the payment of dividends on our Series A Preferred Stock until further notice.

However, dividends on our Series A Preferred Stock accrue daily, are payable monthly and will continue to accrue from the last date of payment.

Our board of directors deemed the foregoing to be in the best interests of the Company and its common stockholders in light of the Company’s current and anticipated financial condition and outlook, and after considering its fiduciary duties to the Company’s common stockholders and other relevant factors.

Our ability to pay cash dividends on our Series A Preferred Stock in the future requires us to have either net profits or positive net assets (total assets less total liabilities) over our capital, and that we have sufficient working capital in order to be able to pay our debts as they become due in the usual course of business.

Our ability to pay dividends may also be impaired if any of the risks described in this report were to occur.

Also, payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time.

We cannot assure you that we will have sufficient cash or “surplus” to resume payment of the cash dividends on the Series A Preferred Stock in a timely manner, or at all.

Because we have paused dividend payments on our Series A Preferred Stock, we are currently ineligible to file new short-form registration statements on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.

Form S-3 permits eligible issuers to conduct registered offerings using a short-form registration statement that allows the issuer to incorporate by reference its past and future filings and reports made under the Exchange Act.

In addition, Form S-3 enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415 of the Securities Act.

The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a registration statement on Form S-1.

As a result of our decision to pause dividend payments on our Series A Preferred Stock, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until we pay all accumulated dividends on our Series A Preferred Stock, resume payments of newly accruing dividends on our Series A Preferred Stock and enter a fiscal year during which we missed no such dividend payments.

Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and thereby potentially adversely affecting our financial condition.

We have never paid and currently do not intend to pay cash dividends in the near future, except for the dividend we previously paid on our Series A Preferred Stock.

As a result, capital appreciation, if any, will be the sole source of gain for our Common Stockholders.

We have never paid cash dividends on our Common Stock, or made stock dividends, except for the dividend we previously paid on shares of our Series A Preferred Stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our businesses, and retain our stock positions.

In addition, the terms of existing and future debt agreements may preclude us from paying cash or stock dividends.

Equally, each of our subsidiaries and partner companies is governed by its own board of directors with individual governance and decision-making regimes and mandates to oversee such entities in accordance with their respective fiduciary duties.

As a result, we alone cannot determine the acts that could maximize value to you of such partner companies and subsidiaries in which we maintain ownership positions, such as declaring cash or stock dividends.

As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for holders of our Common Stock for the foreseeable future.

We have historically relied in part on sales of our common stock and other securities to fund our operations, and our future ability to obtain additional capital through stock sales or other securities offerings may be more costly than in the past, or may not be available to us at all.

We have historically relied in part on sales of our common stock to fund our operations.

For example, we raised an aggregate of approximately $36.6 million in net proceeds in fiscal years 2023 and 2024 and $1.0 million in net proceeds in fiscal 2025 to date through the sale of shares of our common stock and other securities in offerings made under a Form S-3 “shelf” registration statement.

Using a shelf registration statement to conduct an equity offering to raise capital generally takes less time and is less expensive than other means, such as conducting an offering under a Form S-1 registration statement.

We are no longer eligible to file any new shelf registration statements due to non-payment of dividends on our Series A Preferred Stock since July 5, 2024 and because we have not resumed payment of dividends on our Series A Preferred Stock or paid all accumulated dividends, we have lost the ability to use our currently effective “shelf” registration statement on Form S-3.

Accordingly, we are only able to conduct additional offerings of our securities under an exemption from registration under the Securities Act or under a Form S-1 registration statement.

We would expect either of these alternatives to be a more expensive method of raising additional capital and more dilutive to our stockholders relative to using a Form S-3 shelf registration statement.

Risks Pertaining to Our Existing Revenue Stream from Journey Medical Corporation

Future revenue based on sales of our dermatology products, Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, Exelderm and Luxamend, may be lower than expected or lower than in previous periods.

Future revenue based on sales of our dermatology products, Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, Exelderm, Luxamend and Emrosi, may be lower than expected or lower than in previous periods.

The vast majority of our operating income for the foreseeable future is expected to come from the sale of our dermatology products through our partner company Journey.

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Also, a significant portion of Journey’s sales derive from products that are without patent protection and/or are or may become subject to third party generic competition;

the introduction of new competitor products, or increased market share of existing competitor products, could have a significant adverse effect on our operating income.

introduction of new competitor products, or increased market share of existing competitor products, could have a significant adverse effect on our operating income.

We face challenges as our products face generic competition and/or losses of exclusivity.

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In connection with these applications, the generic drug companies may seek to challenge the validity and enforceability of our patents through litigation.

covering certain of our products (if applicable) expire or are successfully challenged through litigation or in USPTO proceedings, if a generic company launches a competing product “at risk,” or when the regulatory or licensed exclusivity for our products (if applicable) expires or is otherwise lost, we may face generic competition as a result.

When patents covering certain of our products (if applicable) expire or are successfully challenged through litigation or in USPTO proceedings, if a generic company launches a competing product “at risk,” or when the regulatory or licensed exclusivity for our products (if applicable) expires or is otherwise lost, we may face generic competition as a result.

A significant portion of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse impact on our operating income.

Three of our marketed products, Qbrexza, Amzeeq and Zilxi, as well as one of our product candidates, DFD-29, currently have patent protection.

Three of our marketed products, Accutane, Targadox, and Exelderm, do not have patent protection or otherwise are not eligible for patent protection.

Four of our marketed products, Qbrexza, Amzeeq, Zilxi, and Emrosi, for which we recently received FDA approval, currently have patent protection.

Four of our marketed products, Accutane, Targadox, Luxamend and Exelderm, do not have patent protection or otherwise are not eligible for patent protection.

Accutane currently competes in the Isotretinoin market with five other therapeutically equivalent A/B rated products.

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Any disruptions to our relationship with such field sales force or the professional employer organization that employs our field sales force, could materially adversely affect our product sales.

Journey currently relies, and may continue to rely, on professional employer organizations and staffing organizations for the employment of its field sales force.

The establishment, development, and/or expansion of a field sales force, either by us or certain of our partners or vendors, or the establishment of a contract field sales force to market any products for which we may have or receive marketing approval is expensive and time-consuming and could delay any such product launch or compromise the successful commercialization of such products.

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Failure to be included in such formularies or to achieve favorable formulary status may negatively impact the utilization and market share of our products.

If our products are not included within an adequate number of formularies or adequate reimbursement levels are not provided, or if those policies increasingly favor generic products, this could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

If our products are not included within an adequate number of formularies or adequate reimbursement levels are not provided, or if those policies increasingly favor generic products, this could have a material adverse effect on our business and financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

Reimbursement for our products and product candidates may be limited or unavailable in certain market segments, which could make it difficult for us to sell our products profitably.

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If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

Additionally, while we may seek approval of our product candidates in combination with each other, there can be no guarantee that we will obtain coverage and reimbursement for any of our products together, or that such reimbursement will incentivize the use of our products in combination with each other as opposed to in combination with other agents which may be priced more favorably to the medical community.

Legislative and regulatory changes to the healthcare systems of the United States and certain foreign countries could impact our ability to sell our products profitably.

Several federal agencies including FDA, CMS, DEA and HHS, in addition to state and local governments, regulate drug product development and marketing.

In particular, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”) changed the way Medicare covers and pays for pharmaceutical products by revising the payment methodology for many products reimbursed by Medicare, resulting in lower rates of reimbursement for many types of drugs, and added a prescription drug benefit to the Medicare program that involves commercial plans negotiating drug prices for their members.

In addition, this law provided authority for limiting the number of drugs that will be covered in any therapeutic class.

Cost reduction initiatives and other provisions

of this law and future laws could decrease the coverage and price that we will receive for any approved products.

While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates.

Therefore, any limitations in reimbursement that results from the MMA may result in reductions in payments from private payors.

Since 2003, there have been several other legislative and regulatory changes to the coverage and reimbursement landscape for pharmaceuticals.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the “Affordable Care Act” or “ACA,” was enacted and made significant changes to the United States’ healthcare system.

The ACA and any revisions or replacements of that Act, any substitute legislation, and other changes in the law or regulatory framework could have a material adverse effect on our business.

In the United States there is significant interest in containing healthcare costs and increasing the scrutiny of pharmaceutical pricing practices.

Congress has continually explored legislation intended to address the cost of prescription drugs.

Notably, the Inflation Reduction Act of 2022 contains substantial drug pricing reforms, including the establishment of a drug price negotiation program within the U.S.

Additionally, while we may

seek approval of our product candidates in combination with each other, there can be no guarantee that we will obtain coverage and reimbursement for any of our products together, or that such reimbursement will incentivize the use of our products in combination with each other as opposed to in combination with other agents which may be priced more favorably to the medical community.

Our products and future product candidates may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices or healthcare reform initiatives, which could harm our business.

Our ability to successfully commercialize our products, or any product candidate for which we receive marketing authorization, will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

A primary trend in the healthcare industry in the United States and elsewhere is cost containment.

It is currently unknown what impact, if any, proposed changes by the federal and state governments in the U.S.

and similar changes in foreign countries may have on pricing and reimbursement, particularly with respect to government programs such as Medicare and Medicaid.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system, including implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs.

In the United States, the Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the healthcare industry and impose additional health policy reforms.

There have been significant ongoing judicial, administrative, executive and legislative efforts to modify or eliminate the Affordable Care Act.

Changes to and under the Affordable Care Act remain possible but it is unknown what form any such changes or any law proposed to replace or revise the Affordable Care Act would take, and how or whether it may affect our business in the future.

We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry.

We also expect that the Affordable Care Act, as well as other healthcare reform measures that have and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for our products and any future product candidates, if approved.

Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers.

The Inflation Reduction Act of 2022 (the “IRA”) contains substantial drug pricing reforms, including the establishment of a drug price negotiation program within the U.S.

Department of Health and Human Services that would require manufacturers to charge a negotiated "maximum fair price" for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide discounts on Part D drugs.

Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the Inflation Reduction Act of 2022.

The Inflation Reduction Act of 2022 could have the effect of reducing the prices we can charge and reimbursement we receive for our products, if approved, thereby reducing our profitability, and could have a material adverse effect on our financial condition, results of operations and growth prospects.

The effect of Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet known.

While we cannot predict what additional proposals may ultimately become law, the elements under consideration could significantly change the landscape in which the pharmaceutical market operates.

State legislatures are similarly active in proposing and passing legislation and regulations aimed at controlling pharmaceutical and biological prices and drug cost transparency.

There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare products and services, including prescription drugs.

We cannot predict the initiatives that may be adopted in the future.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and prescription drugs may adversely affect:

● the demand for any products for which we may obtain regulatory approval;

● our ability to set a price that we believe is fair for our products;

● our ability to generate revenues and achieve or maintain profitability;

● the level of taxes that we are required to pay;

● the availability of capital.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the payment that we receive for any approved drug.

Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our product candidate, may be.

In addition, increased scrutiny by the U.S.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing conditions and other requirements.

Orphan drugs that treat only one rare disease are exempt from the IRA's drug negotiation program.

Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the IRA.

The effects of the IRA on the pharmaceutical industry in general are not yet known.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on our products or any future product candidates may be.

In addition, increased Congressional scrutiny of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

We do not know what actions will be taken by the new presidential administration.

Such actions may impact the development and commercialization of drug products and could materially harm our business and financial condition.

Risks Pertaining to our Business Strategy, Structure and Organization

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The failure to consummate any such transaction may impair the value of such companies and/or assets, and we may not be able to identify or execute alternative arrangements on favorable terms, if at all.

We have entered into and consummated several partnerships and/or contingent sales of our assets and subsidiaries, including an equity investment and contingent acquisition agreement between Caelum and AstraZeneca (the acquisition component of which has consummated) and a development funding and contingent asset purchase between Cyprium and Sentynl (the acquisition component of which has not yet consummated).

Each of these arrangements has been time-consuming and has diverted management’s attention.

We have entered into and consummated several partnerships and/or contingent sales of our assets and subsidiaries, including an agreement under which Checkpoint will be acquired by Sun Pharma, an equity investment and contingent acquisition agreement between Caelum and AstraZeneca and a development funding and contingent asset purchase between Cyprium and Sentynl, of which the acquisition components of each such transaction have not yet been consummated.

Each of these arrangements has been time-consuming and has diverted management’s attention, and there can be no assurance that any of these transactions closes in a timely manner, or at all.

With respect to the Checkpoint acquisition in particular, due to uncertainties as to the timing of the completion of the transaction, uncertainties as to whether Checkpoint’s stockholders will vote to approve the transaction, the possibility that competing offers will be made and the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction (or only grant approval subject to adverse conditions or limitations), Fortress may not realize the anticipated benefits of the proposed transaction in the time frame expected, or at all.

As a result of these consummated/contingent sales, as with other similar transactions that we may complete, we may experience a reduction in the size or scope of our business, our market share in particular markets, our opportunities with respect to certain markets, products or therapeutic categories or our ability to compete in certain markets and therapeutic categories.

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We act, and are likely to continue acting, as guarantor and/or indemnitor of the obligations, actions or inactions of certain of our subsidiaries and partner companies.

We have also entered into, and may again enter into, certain arrangements with our subsidiaries, partner companies and/or third parties pursuant to which a substantial number of shares of our Common Stock may be issued.

Depending on the terms of such arrangements, we may be contractually obligated to pay substantial amounts to third parties, or issue a substantially dilutive number of shares of our Common Stock, based on the actions or inactions of our subsidiaries and/or partner companies, regulatory agencies or other third parties.

Depending on the terms of such arrangements, we may be contractually obligated to pay substantial amounts to third parties, or issue a substantially dilutive number of shares of our capital stock, based on the actions or inactions of our subsidiaries and/or partner companies, regulatory agencies or other third parties.

We act, and are likely to continue acting, as indemnitor of potential losses or liabilities that may be experienced by one or more of our subsidiaries, partner companies and/or their partners or investors.

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Any terrorist attack, other act of violence or war, including military conflicts, could result in increased volatility in, or damage to, the worldwide financial markets and economy.

This includes Russia’s February 2022 invasion of Ukraine, the conflict between Israel and the Hamas and Hezbollah extremist groups, recent attacks by armed groups on cargo ships in the Red Sea, and tensions across the Taiwan Strait.

This includes Russia’s February 2022 invasion of Ukraine, the conflict between Israel and the Hamas and Hezbollah extremist groups, attacks by armed groups on cargo ships in the Red Sea, and tensions across the Taiwan Strait.

For instance, the United States or other countries may impose sanctions that restrict doing business in the effected countries and increased military conflict may affect third-party vendors and cause delays.

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Alternative sites to fully and timely compensate for clinical trial activities in these areas may not be available, and we may need to find other countries to conduct these clinical trials.

Clinical trial interruptions may delay our plans for clinical development and approvals for our product candidates, which could increase costs and jeopardize our ability to commence product sales and generate.

Additionally, trade policies and geopolitical disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect our business, particularly if these measures occur in regions where drug products are manufactured or raw materials are sourced.

With the new presidential administration in the U.S., additional and higher tariffs and sanctions may be imposed on goods imported from China and other countries which could increase the cost of goods needed to commercialize our products and continue development of our current and any future product candidates.

Further, such actions by the U.S.

could result in retaliatory action by those countries which could impact our ability to profitably commercialize our products in those jurisdictions.

As a result, our business, operations, and financial condition could be materially harmed.

Risks Pertaining to Reliance on Third Parties

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In addition, several of our currently commercialized products, sold through our partner company Journey, are produced by a single manufacturer, and, although we closely monitor inventory prophylactically, disruptions to such supply arrangements could adversely affect our ability to meet product demand and therefore diminish revenues.

Finally, in light of our partner company Mustang’s recent exit from its leased manufacturing facility and reduction in force in April 2024, we may increase our reliance at Mustang on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of one or more product candidates for which our collaborators or we obtain marketing approval.

We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms, and even if we are able to establish such agreements with third-party manufacturers, reliance entails additional risks.

We also rely on third-party manufacturers to purchase from third-party suppliers the raw materials and equipment necessary to produce product candidates for anticipated clinical trials.

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Moreover, we currently do not have any agreements for the commercial production of these raw materials since such agreements are entered into by our third-party manufacturers and their qualified suppliers.

Any significant delay in the supply of raw material components

related to an ongoing clinical trial could considerably delay completion of our clinical trials, product testing and potential regulatory approval.

Any significant delay in the supply of raw material components related to an ongoing clinical trial could considerably delay completion of our clinical trials, product testing and potential regulatory approval.

We do not expect to have the resources or capacity to engage in our own commercial manufacturing of our product candidates, if they received marketing approval, and would likely continue to be heavily dependent upon third-party manufacturers.

Our dependence on third parties to manufacture and supply clinical trial materials, as well as our planned dependence on third party manufacturers for any products that may be approved, may adversely affect our ability to develop and commercialize products in a timely or cost-effective manner, or at all.

Our dependence on third parties to manufacture and supply clinical trial materials, as well as our planned dependence on third party manufacturers for any product candidates that may be approved, may adversely affect our ability to develop and commercialize products in a timely or cost-effective manner, or at all.

In addition to the manufacturing and supply functions they provide, third-party manufacturers also play a key role in our efforts to obtain marketing approval for our product candidates, by interacting with, providing important information to, and hosting inspections by, applicable regulatory authorities.

If a given contract development and manufacturing organization upon whom we rely in such a capacity is unwilling or unable to perform these activities on our behalf, the successful development and/or approval of the applicable product candidate could be delayed significantly.

In addition, because of the sometimes-limited number of third parties who specialize in the development, manufacture and/or supply of our clinical and preclinical materials, we are often compelled to accept contractual terms that we deem less than desirable, including without limitation as pertains representations and warranties, supply disruptions/failures, covenants and liability/indemnification.

In addition, because of the sometimes-limited number of third parties who specialize in the development, manufacture and/or supply of our clinical and preclinical materials, particularly in the development and manufacture of gene therapy products, we are often compelled to accept contractual terms that we deem less than desirable, including without limitation as pertains representations and warranties, supply disruptions/failures, covenants and liability/indemnification.

Especially as pertains liability and indemnification provisions, because of the frequent disparities in negotiating leverage, we are often compelled to agree to low caps on counterparty liability and/or indemnification language that could result in outsized liability to us in situations where we have zero or relatively little culpability.

New environmental laws or regulations in the various jurisdictions in which we operate may also impose additional requirements that impact the way our products and product candidates are manufactured or packaged.

Complying with such changes could be costly, and a failure to comply in a timely manner could lead to fines, penalties or the inability to pursue our development and commercialization activities in such jurisdictions, materially impacting our business and financial condition.

We rely heavily on third parties for the development and manufacturing of products and product candidates.

To date, we have engaged primarily in intellectual property acquisitions, and evaluative and R&D activities;

and we have not generated any revenues from product sales (except through Journey).

To date, we have engaged primarily in intellectual property acquisitions, and evaluative and R&D activities and have not generated any revenues from product sales (except through Journey).

We have incurred significant net losses since our inception.

As of December 31, 2023, we had an accumulated deficit of approximately $694.9 million.

As of December 31, 2024 and 2023, we had an accumulated deficit of approximately $740.9 million and $694.9 million, respectively.

We may need to rely on third parties for activities critical to the product candidate development process, including but not necessarily limited to:

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If any of the clinical trial sites terminates for any reason, we may lose follow-up information on patients enrolled in our ongoing clinical trials unless the care of those patients is transferred to another qualified clinical trial site.

In addition, principal investigators for our clinical trials may serve as scientific advisers or consultants to us from time to time and receive cash and/or equity compensation in connection with such services.

In addition, principal investigators for our clinical trials

may serve as scientific advisers or consultants to us from time to time and receive cash and/or equity compensation in connection with such services.

If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site, or the FDA’s willingness to accept such data, may be jeopardized.

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As part of our strategy to mitigate development risk, we generally intend on developing product candidates with previously validated mechanisms of action and seek to assess potential clinical efficacy early in the development process.

strategy necessarily relies upon clinical and pre-clinical data and other results produced or obtained by third parties, which may ultimately prove to be inaccurate or unreliable.

This strategy necessarily relies upon clinical and pre-clinical data and other results produced or obtained by third parties, which may ultimately prove to be inaccurate or unreliable.

If the third-party data and results we rely upon prove to be inaccurate, unreliable, not acceptable by regulatory authorities or not applicable to our product candidates or acquired products, we could make inaccurate assumptions and conclusions about our current or future product candidates and our research and development efforts could be compromised.

Collaborative relationships with third parties could cause us to expend significant resources and/or incur substantial business risk with no assurance of financial return.

We anticipate substantial reliance on strategic collaborations for marketing and commercializing our existing product candidates and we may rely even more on strategic collaborations for R&D of other product candidates.

We anticipate substantial reliance on strategic collaborations for marketing and commercializing our existing product candidates, if approved, and we may rely even more on strategic collaborations for R&D of other product candidates.

We may sell product offerings through strategic partnerships with pharmaceutical and biotechnology companies.

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If we enter into R&D collaborations during the early phases of drug development, success will, in part, depend on the performance of research collaborators.

We may not directly control the amount or timing of resources devoted by research collaborators to activities related to product candidates.

We may not directly control the amount or timing of resources devoted by research

collaborators to activities related to product candidates.

Research collaborators may not commit sufficient resources to our R&D programs.

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Also, some such agreements are “adhesion contracts” under which our contractual counterparties refuse to entertain any modifications to their template documentation.

One area where service providers often have and exert leverage over us is the negotiation of liability language – specifically in broadly-scoped indemnification by us of service providers and/or the application of liability damages “caps” to certain of

such service providers’ indemnification obligations.

In any circumstance where we’ve been compelled to agree to such language, it is conceivable that we will be liable to third parties for liabilities in excess of such caps that are attributable to the actions, forbearances and/or culpability of such service providers and their indemnitees (and not to those of us and our personnel).

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Our success depends, in large part, on our ability to obtain patent protection for our product candidates and their formulations and uses.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in obtaining patents or what the scope of an issued patent may ultimately be.

The patent application process is subject to numerous risks and uncertainties, and there can be no

assurance that we will be successful in obtaining patents or what the scope of an issued patent may ultimately be.

These risks and uncertainties include, but are not necessarily limited to, the following:

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Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

On September 16, 2011, the Leahy-Smith America

Invents Act, or the Leahy-Smith Act, was signed into law.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law.

The Leahy-Smith Act includes a number of significant changes to United States patent law.

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The formation of the Patent Trial and Appeal Board now provides a less burdensome, quicker and less expensive process for challenging issued patents.

The PTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first inventor-to-file provisions, only became effective on March 16, 2013.

The PTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first inventor-to-file provisions, only became effective on March 16, 2013.

Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business.

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Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage.

Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

We also may rely on the regulatory period of market exclusivity for any of our biologic product candidates that are successfully developed and approved for commercialization.

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To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.

Any claims we assert against accused infringers could provoke these parties to assert counterclaims against us alleging invalidity of our or our licensors’ patents or that we infringe their patents;

Any claims we assert against accused infringers

could provoke these parties to assert counterclaims against us alleging invalidity of our or our licensors’ patents or that we infringe their patents;

or provoke those parties to petition the PTO to institute inter partes review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid.

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Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.

Risks Pertaining to the Commercialization of Product Candidates

Risks Pertaining to the Commercialization of Product Candidates, if Approved

If any of our product candidates are successfully developed and receive regulatory approval but do not achieve broad market acceptance among physicians, patients, healthcare payors and the medical community, the revenues that any such product candidates, if approved, generate from sales will be limited.

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● reduced resources of our management to pursue our business strategy;

● the ability to commercialize our product candidate or future product candidates, if approved.

● the ability to commercialize our product candidate or future product candidates.

We will obtain limited product liability insurance coverage for all of our upcoming clinical trials.

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When needed we intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for one or more of our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing.

On occasion, large judgments have been awarded in

class action lawsuits based on drugs that had unanticipated side effects.

On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects.

A successful product liability claim or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.

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● adverse publicity.

and if any of them are approved, resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

If we or our suppliers, third-party contractors, clinical investigators or collaborators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements or policies, we or our collaborators may be subject to the actions listed above, including losing marketing approval for product candidates when and if any of them are approved, resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.

We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.

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the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● the federal Open Payments program, which requires manufacturers of certain drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to “payments or other transfers of value” made to “covered recipients,” which include physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals) and applicable manufacturers.

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The SUPPORT for Patients and Communities Act added to the definition of covered recipient practitioners including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-midwives effective in 2022;

Foreign Corrupt Practices Act, or FCPA, which prohibit us and third parties working on our behalf from making payments to foreign government officials to assist in obtaining or retaining business.

Specifically, the anti- bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing

of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person;

enforcement actions may be brought by the Department of Justice or the SEC;

legislation has expanded the SEC’s power to seek disgorgement in all FCPA cases filed in federal court and extended the statute of limitations in SEC enforcement actions in intent-based claims, such as those under the FCPA, from five years to ten years;

● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers;

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If we do become subject to the Investment Company Act, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs in the future.

Supreme Court decisions could create uncertainty in the life sciences space that could negatively impact our business.

Three decisions from the U.S.

Supreme Court in July 2024 may lead to an increase in litigation against regulatory agencies that could create uncertainty and thus negatively impact our business.

The first decision overturned established precedent that required courts to defer to regulatory agencies’ interpretations of ambiguous statutory language.

The second decision overturned regulatory agencies’ ability to impose civil penalties in administrative proceedings.

The third decision extended the statute of limitations within which entities may challenge agency actions.

These cases may result in increased litigation by industry against regulatory agencies and impact how such agencies choose to pursue enforcement and compliance actions.

However, the specific, lasting effects of these decisions, which may vary within different judicial districts and circuits, is unknown.

We also cannot predict the extent to which FDA and SEC regulations, policies, and decisions may become subject to increasing legal challenges, delays, and changes.

General and Other Risks

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The matter was reported to the Federal Bureau of Investigation and does not appear to have compromised any personally identifiable information or protected health information.

The federal government has been able to seize a significant amount of cryptocurrency assets associated with the breach.

Once the cryptocurrency has been converted back into U.S.

dollars, Journey expects to receive a notification letter to initiate the return of the cash.

This process could take as long as six months or more to complete.

Fortress and Journey may incur additional expenses and losses as a result of this cybersecurity incident, including those related to investigation fees and remediation costs.

The federal government was able to trace and seize the fraudulently transferred cryptocurrency associated with the breach.

On September 19, 2024, the United Stated District Court Southern District of New York through the United States Marshalls notified the Company that it has recovered and would be returning to the Company a portion of the misappropriated cash, and in December of 2024 Journey received $4.6 million in connection with the recovery of funds related to the cybersecurity incident.

In addition, the loss or corruption of, or other damage to, clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

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Almost all of our outstanding shares of our Common Stock, inclusive of outstanding equity awards, are available for sale in the public market, either pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), or an effective registration statement.

In addition, pursuant to our current shelf registration statements on Form S-3, from time to time we may issue and sell shares of our Common Stock or Series A Preferred Stock having an aggregate offering price of up to $100.1 million as of December 31, 2023.

Any sale of a substantial number of shares of our Common Stock or our Series A Preferred Stock could cause a drop in the trading price of our Common Stock or Series A Preferred Stock on the Nasdaq Stock Market.

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We may, from time to time, carry net operating loss carryforwards (“NOLs”) as deferred tax assets on our balance sheet.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage- point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use all of its pre-change NOLs and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an

“ownership change” (generally defined as a greater than 50-percentage- point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use all of its pre-change NOLs and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited.

We may experience ownership changes in the future as a result of shifts in our stock ownership, some of which changes are outside our control.

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We do not maintain insurance for environmental liability or toxic tort claims that may be asserted in connection with the storage or disposal of biological or hazardous materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, including climate-related initiatives.

These current or future laws and regulations may impair our research, development or production efforts.

Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

We have never paid and currently do not intend to pay cash dividends in the near future, except for the dividend we pay on our Series A Preferred Stock.

As a result, capital appreciation, if any, will be the sole source of gain for our Common Stockholders.

We have never paid cash dividends on our Common Stock, or made stock dividends, except for the dividend we pay on shares of our Series A Preferred Stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our businesses, and retain our stock positions.

In addition, the terms of existing and future debt agreements may preclude us from paying cash or stock dividends.

As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for holders of our Common Stock for the foreseeable future.

The use of artificial intelligence in the healthcare industry and challenges with properly managing its use could adversely affect our business.

We may incorporate artificial intelligence (“AI”) solutions into our business, and applications of AI may become important in our operations over time.

Our competitors or other third parties may incorporate AI into their businesses more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

There are also significant risks involved in developing and deploying AI, and there can be no assurance that the usage of AI will enhance our products or the development of our product candidates or be beneficial to our business, including our efficiency or profitability.

For example, any AI-related efforts, particularly those related to generative AI, could subject us to risks related to harmful content, inaccuracies, bias, discrimination, intellectual property infringement or misappropriation, defamation, data privacy, cybersecurity, and sanctions and export controls, among others.

It is also uncertain how various laws will apply to content generated by AI.

We are subject to the risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns, negative consumer perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results.

AI’s rapid development is the subject of evolving review by various U.S.

governmental and regulatory agencies, and other foreign jurisdictions are applying, or are considering applying, their intellectual property, cybersecurity, data protection and other laws to AI, and/or are considering general legal frameworks on AI.

We may not be able to timely comply with these frameworks and, if such regulatory actions are contrary to our use of AI, would require us to expend our limited resources to adjust our use accordingly.

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business or the business of our partners.

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In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

We do not know what impact any changes by the new presidential administration will have on our business or the business of our partners.

Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business or the business of our partners.

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Provisions in our certificate of incorporation, our bylaws and Delaware law might discourage, delay or prevent a change in control of our Company or changes in our management and, therefore, depress the trading price of our Common Stock or other Securities.

Provisions of our certificate of incorporation, our bylaws and Delaware law may have the effect of deterring unsolicited takeovers and/or delaying or preventing a change in control of our Company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices.

transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices.

In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests.

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Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S.

Fluctuations in interest rates may negatively impact the rate of return that we realize on the investment securities that we hold.

We customarily invest a significant portion of our cash in Insured Cash Sweeps (“ICS”) and/or Certificate of Deposit Account Registry Service (“CDARS”) accounts, each of which bear interest income to us that fluctuates according to adjustments in the target federal funds rate effected by the U.S.

Federal Reserve’s Federal Open Market Committee (“FOMC”).

The FOMC recently lowered the target federal funds rate and is anticipated by some to effect further decreases over the coming weeks and months, actions which have decreased, and could further decrease the amount of interest income that we generate on our ICS, CDARS, and other short-term cash equivalent investment securities that we may hold.

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-K

Item 1A. Risk Factors