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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-14 · 88 added, 82 removed, 193 unchanged (47% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 26, 2025 (the “Annual Report”) and our unaudited interim condensed consolidated financial statements and related notes appearing in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to the Company’s plans and strategy for its business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.

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As a result of many factors, including those factors set forth in Part I, Item 1A of the Annual Report under the heading “Risk Factors”, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

The following discussion should be read in conjunction with our Annual Report and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK ® .

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and internationally for PEDMARK ® .

Additionally, on May 27, 2025, we were granted US 12,311,026 (the “US ‘026 Patent”) covering a method of using pharmaceutical compositions comprising sodium thiosulfate and specific stabilizers to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

The US ‘026 Patent has an expiration date of July 2039.

PEDMARK ® Product Overview

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Furthermore, digital materials, a digital speaker bureau to engage pediatric oncologists, audiologists, nurses, and pharmacists, along with a patient access services hub and ongoing support from advocacy groups, are all integral components of the strategy.

and Europe, it is estimated that more than 10,000 pediatric may receive platinum-based chemotherapy on an annual basis.

and Europe, it is estimated that more than 10,000 pediatric patients may receive platinum-based chemotherapy on an annual basis.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

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for the prevention of ototoxicity (hearing loss) induced by cisplatin chemotherapy in patients 1 month to < 18 years of age with localized, non-metastatic solid tumors.

Most recently, in December 2024, PEDMARQSI received positive final draft guidance from the National Institute for Health and Care Excellence (NICE).

Further, in early 2025, Norgine announced the launch of PEDMARQSI in Germany.

In early 2025, Norgine announced the launch of PEDMARQSI in Germany and the U.K.

In addition, the U.S.

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Results of Operations

Three months ended March 31, 2025 versus three months ended March 31, 2024:

Three months ended June 30, 2025 versus three months ended June 30, 2024:

Three Months Ended

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In thousands of U.S.

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

PEDMARK product sales, net

Operating expenses:

Cost of product sales

Research and development

Selling and marketing

General and administration

Total operating expense

Loss from operations

Unrealized loss on securities

Amortization expense

Interest expense

Unrealized foreign exchange gain/(loss)

Interest income

● The Company recorded net product sales of $9,652 in the second quarter of 2025 compared to $7,262 in 2024 as the Company increased market penetration and access for PEDMARK and as the Company expanded its focus to the adolescent and young adult (AYA) population.

Further, the Company recorded $243 related to the Norgine royalties in 2025.

● Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages commissions and out-of-pocket expenses.

We recorded $4,354 in selling and marketing expenses for the three-month period ended June 30, 2025, as compared to $4,672 for 2024.

The decrease is largely related to the elimination of European pre commercial activities in 2024 which were completed after the Norgine transaction offset by select increased commercial and marketing activities.

● There was a $92 increase in general and administrative expenses for the three-month period ended June 30, 2025 compared to 2024.

● The value of our Processa shares declined by $1 for the three-month period ended June 30, 2025.

● Amortization expense decreased by $10 for the three-month period ended June 30, 2025 as compared to the same period in 2024.

● Interest expense decreased by $450 for the three-month period ended June 30, 2025 compared to the same period in 2024.

The decrease was driven mainly by lower long-term debt due to Company’s debt paydown of $13,000 in December 2024.

● Interest income decreased in the three-month period ended June 30, 2025 as compared to the same period in 2024 by $399, due to lower average cash balances in money market accounts for the comparable periods.

Six months ended June 30, 2025, versus six months ended June 30, 2024:

Six Months Ended

In thousands of U.S.

June 30, 2025

June 30, 2024

PEDMARK product sales, net

Licensing revenue

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General and administration

Total operating expense

Total operating expenses

(Loss) / income from operations

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Interest expense

Unrealized foreign exchange loss

Unrealized foreign exchange gain/(loss)

Interest income

Net (loss) / income from operations

● The Company recorded net product sales of $8,751 in the first quarter of 2025 compared to $7,419 in 2024 as the Company increased market penetration and access for PEDMARK and as the Company expanded its focus to the adolescent and young adult (AYA) population.

Net (loss) / income

● The Company recorded net product sales of $18,403 in the first half of 2025 compared to $14,681 in 2024 as the Company increased market penetration and access for PEDMARK and as the Company expanded its focus to the adolescent and young adult (AYA) population.

Further, the Company recorded $17,958 in licensing revenue related to the Norgine transaction in 2024.

● Research and development expense increased by $91 for the three-month period ended March 31, 2025, as compared to the same period in 2024.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials and the global named patient program.

● Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages commissions and out-of-pocket expenses.

We recorded $2,947 in selling and marketing expenses for the three-month period ended March 31, 2025, as compared to $5,209 for 2024.

We recorded $7,301 in selling and marketing expenses for the six-month period ended June 30, 2025, as compared to $9,881 for 2024.

The decrease is largely related to the elimination of European pre commercial activities in 2024 which were completed after the Norgine transaction.

● There was a $273 increase in general and administrative expenses for the three-month period ended March 31, 2025 compared to 2024.

There was an increase in consulting and professional costs compared to the same period in 2024 which is largely attributable to intellectual property expenses related to ongoing litigation.

● The value of our Processa shares declined by $1 for the three-month period ended March 31, 2025.

● There was a $365 increase in general and administrative expenses for the six-month period ended June 30, 2025 compared to 2024.

There was an increase in the following expense categories:

salaries with increased headcount;

consulting and professional costs;

and intellectual property expenses related to ongoing litigation.

● The value of our Processa shares declined by $2 for the six-month period ended June 30, 2025.

For the same period in 2024, there was a loss of $11.

● Amortization expense decreased $7 for the three-month period ended March 31, 2025 as compared to the same period in 2024.

● Interest expense decreased by $442 for the three-month period ended March 31, 2025 compared to the same period in 2024.

● Amortization expense decreased by $17 for the six-month period ended June 30, 2025 as compared to the same period in 2024.

● Interest expense decreased by $892 for the six-month period ended June 30, 2025 compared to the same period in 2024.

The decrease was driven mainly by lower debt balance on long-term debt due to Company’s debt paydown of $13,000 in December 2024.

● Interest income increased in the three-month period ended March 31, 2025 as compared to the same period in 2024 by $39, due to higher average cash balances and higher rates on money market accounts for the comparable periods.

● Interest income decreased in the six-month period ended June 30, 2025 as compared to the same period in 2024 by $360, due to lower average cash balances in money market accounts for the comparable periods.

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

March 31, 2025

June 30, 2025

December 31, 2024

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Stockholders’ deficit

● There was a $3,959 net decrease in cash and cash equivalents between March 31, 2025, and December 31, 2024.

The net decrease was primarily the result of seasonally higher cash operating expenses in the first quarter and the timing of working capital collections.

● The increase in other current assets of $5,444 between March 31, 2025, and December 31, 2024, primarily relates to an increase in accounts receivable.

● Current liabilities at March 31, 2025 increased $2,163 million compared to December 31, 2024.

● Working capital decreased by $678 between March 31, 2025, and December 31, 2024.

The following table illustrates a summary of cash flows data for the three-month periods of March 31, 2025 and 2024:

● There was a $7,929 net decrease in cash and cash equivalents between June 30, 2025, and December 31, 2024.

The net decrease was primarily the result of seasonally higher cash operating expenses in the first half and the timing of working capital collections as the Company’s net sales increased.

● The increase in other current assets of $4,599 between June 30, 2025, and December 31, 2024, primarily relates to an increase in accounts receivable from increased net product sales during the period.

● Current liabilities at June 30, 2025, increased $1,495 compared to December 31, 2024.

● Working capital decreased by $4,825 between June 30, 2025, and December 31, 2024.

The following table illustrates a summary of cash flows data for the six-month periods of June 30, 2025 and 2024:

Selected Cash Flow Data

Three Months Ended

Six Months Ended June 30,

(dollars and shares in thousands)

March 31, 2025

March 31, 2024

Net cash (used in) / provided by operating activities

Net cash provided by investing activities

Net cash provided by / (used in) financing activities

Net cash flow

The net cash used in operating activities for the three-month period ended March 31, 2025 was approximately $4,318 as compared to $39,047 net cash provided by operating activities during the same period in 2024.

There was a increase in net loss of $14,713 in the three-month period ended March 31, 2025, as compared to the same period in 2024.

The comparable decrease in net cash flow is primarily a result of the proceeds received from the Norgine transaction.

The net cash used in operating activities for the six-month period ended June 30, 2025 was approximately $8,004 as compared to $30,660 net cash provided by operating activities during the same period in 2024.

There was a increase in net loss of $12,244 in the six-month period ended June 30, 2025, as compared to the same period in 2024.

The comparable decrease in net cash flow is primarily a result of the proceeds received from the Norgine transaction during the first six months of 2024.

We continue to pursue various strategic alternatives including collaborations with other pharmaceutical and biotechnology companies.

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our ability to enter into collaborations that provide us with up-front payments, milestones or other payments;

results of our research and development activities;

progress or lack of progress in our preclinical studies or clinical trials;

unfavorable toxicology in our clinical programs, our drug substance requirements to support clinical programs;

unfavorable toxicology in our clinical programs;

our drug substance requirements to support clinical programs;

change in the focus, direction, or costs of our research and development programs;

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the potential need to develop, acquire or license new technologies and products;

development activities;

our business development activities;

new regulatory requirements implemented by regulatory authorities;

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Outstanding Share Information

Our outstanding share data as of March 31, 2025 and December 31, 2024 was as follows (in thousands):

Our outstanding share data as of June 30, 2025 and December 31, 2024 was as follows (in thousands):

Outstanding Share Type

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We invest excess cash and cash equivalents in high credit quality investments held by financial institutions in accordance with our investment policy designed to protect the principal investment.

As of March 31, 2025, we had approximately $1,618 in our cash accounts and $21,057 in savings and money market accounts.

At June 30, 2025, we had approximately $1,984 in our cash accounts and $16,721 in savings and money market accounts.

While we have never experienced any loss or write down of our money market investments since our inception, the amounts we hold in money market accounts are substantially above the $250 amount insured by the FDIC and may lose value.

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A summary of our critical accounting policies and use of estimates are presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report.

There have been no material changes to our critical accounting policies and use of estimates during the three months ended March 31, 2025.

There have been no material changes to our critical accounting policies and use of estimates during the six months ended June 30, 2025.

Credit Losses

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Revenue Recognition

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company determines it expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

(i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).

As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, we recognizes revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we determine we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

As part of the accounting for these arrangements, we must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

License Agreements

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Milestone payments that are not within the Company's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the

performance obligations under the contract are satisfied.

At the end of each reporting period, the Company re-evaluates the probability of achieving development or sales-based milestone payments that may not be subject to a material reversal and, if necessary, adjust the estimate of the overall transaction price.

The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied.

At the end of each reporting period, the Company re-evaluates the probability of achieving development or sales-based milestone payments that may not be subject to a material reversal

and, if necessary, adjust the estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

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We also used historical data to estimate forfeiture experience.

In valuing options granted in the three-month period ended March 31, 2025, we used the following weighted average assumptions:

Valuation Assumptions

In valuing options granted in the periods ended June 30, 2025, we used the following weighted average assumptions:

Black-Scholes Model Assumptions

March 31, 2025

June 30, 2025

Expected dividend

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Expected volatility

71.04- 161.67

Expected life

Performance-Based Units

In May 2025, the Board of Directors approved a performance-based unit, or PSU, grant whereby vesting depends on certain revenue performance milestones over the next year.

The Company estimates the likelihood of achievement of performance milestones for all PSU awards at the end of each reporting period.

To the extent those awards or portions thereof are considered probable of being achieved, such awards or portions thereof are expensed over the performance period.

As of June 30, 2025, the Company deems the achievement of a portion of the performance milestones to be probable.

Common shares and warrants

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Newly Adopted and Recent Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (ASU) No.

2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

This guidance will be effective for annual periods beginning the year ended December 31, 2025.

The Company is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses,” which requires disclosure of additional disaggregated information about significant expenses within relevant income statement captions, such as purchases of inventory, employee compensation, depreciation, amortization and depletion.

The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027.

We are currently evaluating the impact of this standard on our consolidated financial statements.

Controls and Procedures .

(a) Evaluation of Disclosure Controls and Procedures .

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of March 31, 2025.

The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports the Company files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures.

In designing and evaluating our disclosure controls and procedures, the Company’s management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met.

Our disclosure controls and procedures have been designed to meet reasonable assurance standards.

In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints that require the Company’s management to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, the Company's disclosure controls and procedures were effective.

Management's Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

The Company's management evaluated the effectiveness of its internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on that evaluation, the Company’s management has concluded that, as of March 31, 2025, our internal controls over financial reporting were effective.

Changes in Internal Control over Financial Reporting

There were no changes to the Company’s internal control over financial reporting during the fourth quarter of 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Inherent Limitation on the Effectiveness of Internal Controls

The effectiveness of any system of internal control over financial reporting is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely.

Accordingly, any system of internal control over financial reporting can only provide reasonable, not absolute, assurances.

In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure that such improvements will be sufficient to provide us with effective internal control over financial reporting.

OTHER INFORMATION

Refer to Note 2, “Significant Accounting Policies - Recent Accounting Pronouncements” to our condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

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 2. Management’s Discussion and Analysis