Pasithea Therapeutics Corp. 10-K

ITEM 1. BUSINESS Overview We are a clinical-stage biotechnology company focused on the discovery, research and development of innovative treatments for RASopathies, MAPK pathway-driven tumors, and other diseases, including central nervous system (CNS) disorders. Our Therapeutic Pipeline We are advancing a pipeline of two therapeutic product candidates, with a focus on our lead product candidate, PAS-004, a next-generation macrocyclic (as defined below) Mitogen-Activated Protein Kinase (“MEK”) inhibitor, that we believe may address the limitations and liabilities associated with existing drugs with a similar mechanism of action. PAS-004 is a small molecule allosteric inhibitor of MEK 1 and 2 (“MEK 1/2”) for potential use in the treatment of a range of RASopathies, including neurofibromatosis type 1 (“NF1”), a number of MAPK pathway driven tumors, such as those driven by BRAFv600 mutations and BRAF fusion tumors, amyotrophic lateral sclerosis (“ALS”), among other indications including ETS2 driven diseases, such as inflammatory bowel disease (“IBD”), primary sclerosing cholangitis and ankylosing spondylitis. MEK 1/2 are two of several protein kinases involved in a signaling cascade, known as the mitogen-activated protein kinase, or MAPK pathway. The MAPK pathway is an important pathway in cellular biology which has been a frequent target for drug discovery efforts. The MAPK pathway has been implicated in a variety of diseases, as it functions to drive cell proliferation, differentiation, survival and a variety of other cellular functions that, when abnormally upregulated, are critical for the formation and progression of tumors, fibrosis and other diseases. MEK inhibitors block phosphorylation (activation) of extracellular signal-regulated kinases (“ERK”), which can lead to cell death and inhibition of tumor growth. Existing MEK inhibitors approved by the U.S. Food and Drug Administration (the “FDA”) are marketed for a range of diseases, including (i) certain cancers and (ii) symptomatic, inoperable NF1-associated plexiform neurofibromas (“NF1-PN”). For NF1-PN, Koselugo (selumitinib) and Gomekli (mirdametinib) are FDA approved for adult and pediatric NF1-PN patients. We believe that current FDA-approved MEK inhibitors have certain limitations, including known toxicities and high rates of adverse events (“AEs”) that may lead to dose interruptions and/or discontinuations and poor tolerability. Unlike currently FDA-approved MEK inhibitors, PAS-004 features a macrocyclic structure, a characteristic that we believe improves selectivity, provides higher oral bioavailability, and offers better metabolic stability. Macrocyclic molecules also provide structural rigidity, enabling stronger binding with target receptors. PAS-004’s macrocyclic design was specifically developed to improve metabolic stability and optimize its pharmacokinetic (“PK”) profile. The structure of PAS-004 is distinct from other earlier generation MEK inhibitors as it maintains critical protein/ligand contacts but does not possess a primary alcohol or hydroxamate functionality, a known metabolic liability in earlier generation MEK inhibitors. As described in greater detail below, PAS-004 offers a long half-life, a low peak (“Cmax”) to trough (“Cmin”) drug concentration ratio, and stable steady-state drug levels over time. We believe that sustained suppression of the MAPK pathway may result in improved efficacy, safety, and a broader therapeutic window (the dosage range of a drug that provides safe and effective treatment with minimal adverse effects, spanning from the minimum effective concentration to the minimum toxic concentration) as compared to current FDA-approved MEK inhibitors for NF1-PN, which have shorter half-lives, higher Cmax to Cmin ratios, and require twice-daily dosing. However, the ultimate safety and efficacy profile of PAS-004 will require clinical testing to be completed. In December 2023, the FDA cleared our Investigational New Drug application (the “IND”) for PAS-004 and we received a study may proceed letter for our first-in-human Phase 1 multicenter, open-label trial of PAS-004 in patients with MAPK pathway-driven advanced tumors with a documented RAS, NF1 or RAF mutation or patients who have failed BRAF/MEK inhibition (the “FIH Phase 1 Advanced Cancer Study”). We are currently conducting the FIH Phase 1 Advanced Cancer Study at four clinical sites in the U.S. and three sites in Eastern Europe and expect to complete the FIH Phase 1 Advanced Cancer Study in 2028. The primary objective of the FIH Phase 1 Advanced Cancer Study is to assess the safety and tolerability of PAS-004 when administered as a single dose (day 1) and as multiple doses (28-day treatment cycles). Secondary objectives are (i) to characterize the PK profile of PAS-004 when administered as a single dose and as multiple doses, (ii) to evaluate the pharmacodynamics (“PD”) effect of PAS-004, (iii) to evaluate the preliminary anticancer activity (efficacy) of PAS-004 per Response Evaluation Criteria in Solid Tumors (“RECIST”) 1.1 criteria, and (iv) to define the preliminary recommended Phase 2 dose(s) of PAS-004 in adults with MAPK pathway driven advanced solid tumors. On September 9, 2024, we announced the successful completion of long-term chronic toxicology studies for PAS-004. On September 26, 2024, we announced safety, tolerability, pharmacokinetic (PK) and preliminary efficacy data from the first two cohorts of patients in our FIH Phase 1 Advanced Cancer Study. To date, we have completed dose escalation through cohort 8 (45 mg capsule) with a total of 34 patients receiving PAS-004. No patients have discontinued treatment or interrupted dosing due to treatment-related AEs (“TRAEs”). The AE profile of PAS-004 has been characterized by grade 1 and grade 2 TRAEs, with the most frequently reported of these TRAEs being nausea, vomiting, and diarrhea through the 35-day DLT (as defined below) period. The interim data through a cut-off date of December 26, 2025, shows that PAS-004 is observed to be well tolerated and supports PAS-004’s potential favorable safety and tolerability profile. 1 We have observed no dose limiting toxicities (“DLTs”) in any of the cohorts assessed to date and have not reached the maximum tolerated dose (“MTD”). As such, we plan to file a protocol amendment to continue dose escalation in the FIH Phase 1 Advanced Cancer Study using our tablet formulation of PAS-004 in an effort to continue exploring the safety, PK, and early signals of efficacy at higher dose levels of PAS-004. Simultaneously, a pilot food effect assessment is planned in a subset of patients who agree to participate in this optional component of the study. The objective of the pilot food effect study is to determine if the PK properties of PAS-004 are impacted when PAS-004 is dosed in a fasted or fed state. To date, all patients have fasted when being administered PAS-004. All TRAEs have been either Grade 1 or Grade 2, with no dose interruptions or modifications, which support PAS-004’s potential favorable safety and tolerability profile. Additionally, PAS-004 has demonstrated favorable PK properties, including a long half-life of approximately 60 hours, a low peak to trough (Cmax to Cmin) ratio (ratio below 2) as compared to other FDA approved MEK inhibitors, and linear pharmacokinetics. Additionally, we have observed preliminary efficacy signals in a subset of advanced cancer patients with BRAF-mutated tumors. In May 2025, we initiated our Phase 1/1b multicenter, open-label, dose escalation trial of PAS-004 in adult patients with symptomatic and inoperable, incompletely resected, or recurrent NF1-PNs (the “Phase1/1b Adult NF1 Trial”). In addition, many of these patients also presented with cutaneous neurofibromas (“CNs”). The Phase1/1b Adult NF1 Trial is currently being conducted at five clinical trial sites in the United States, Australia and South Korea. The primary objective of the Phase1/1b Adult NF1 Trial is to evaluate the safety and tolerability of PAS-004 when administered for one 28-day treatment cycle in adult NF1 participants with at least one and up to two additional target PNs that are symptomatic and inoperable, incompletely resected, or recurrent. Secondary objectives are (i) to identify the recommended Part B dose (“RPBD”) and/or the MTD of PAS-004, (ii) to characterize the PK and PD profile of PAS-004, (iii) to evaluate the preliminary efficacy of PAS-004 on target PN volume utilizing Response Evaluation in Neurofibromatosis and Schwannomatosis (“REiNS”) criteria, (iv) to evaluate the preliminary efficacy of PAS-004 on the size, appearance, and associated symptoms of CNs, and (v) to evaluate the impact of PAS-004 on quality of life (“QOL”) and any physical symptoms attributed to the target PN. Experimental objectives are (i) to evaluate the impact of PAS-004 on QOL and any physical symptoms attributed to CNs, (ii) to evaluate the impact of PAS-004 on pain and function attributed to PNs, and (iii) to investigate PAS-004 effects on CN tumor cellular and molecular biology. The Phase1/1b Adult NF1 Trial is being conducted in two parts. In Part A (dose escalation phase), following a screening period of up to 28 days, up to 24 eligible participants will be enrolled sequentially to receive one of four initially planned dose levels of PAS-004 tablets (4 mg, 8 mg, 12 mg, 18 mg) in a modified 3+3 design. Part A will identify the recommended RPBD. During Part B (expansion phase), approximately 24 eligible participants will be enrolled in parallel to receive one of two planned dose levels of PAS-004 tablets. Participants will be dosed at the RPBD level and at a dose level below the RPBD for up to six continuous 28-day treatment cycles. Part B will identify the RP2D. The initial indications we plan to seek FDA marketing approval for PAS-004 is the treatment of symptomatic, inoperable NF1-PNs in both adult and pediatric patients. As such, we aim to conduct a Phase 1 trial for pediatric NF1-PN patients and ultimately complete registrational clinical trials in both adult and pediatric NF1-PN populations. Pending dialogue with the FDA and other regulatory agencies, we may plan to pursue a second IND focused on the treatment of NF1-CNs. Additionally, PAS-004 has received orphan-drug designation from the FDA for the treatment of NF1. Our PAS-001 discovery program is in the early stage of development and aims to develop a brain penetrant small molecule targeting the complement component 4A (“C4A”) for the treatment of schizophrenia. Recent findings implicate C4A in synaptic loss (fewer connections between nerve cells), which has been shown to occur in schizophrenia. In humans, structural variation in the complement 4 gene (C4) is an important genetic risk factor for schizophrenia. During the year ended December 31, 2025, we determined to cease further development of our PAS-003 program for ALS due to several factors including the significant capital, resources and time required to develop the program, among others. Our Strategy Our mission is to develop innovative therapies to address areas of high unmet medical need, initially in RASopathies for NF1. To achieve our mission, we are executing a near-term strategy with the following key elements: ● Expand and complete our first-in-human clinical trial of PAS-004 in advanced cancer patients. In February 2024 we opened the first clinical site of our FIH Phase 1 Advanced Cancer Study of PAS-004 in patients with MAPK pathway driven advanced solid tumors. The objective of the FIH Phase 1 Advanced Cancer Study is to assess the safety, tolerability, PK, and PD of PAS-004 as well as to evaluate the preliminary anticancer activity (efficacy) of PAS-004 and to define the preliminary recommended Phase 2 dose. We have completed the initial eight cohorts through 45 mg capsule and have not reached the MTD. We plan to submit a protocol amendment to continue dose escalation in the FIH Phase 1 Advanced Cancer Study. As such, we expect to complete the trial in 2028. ● Complete our advance Phase 1/1b clinical trial of PAS-004 for adult NF1-PN patients. Our primary focus is to advance the clinical development of PAS-004 for NF1-PN, the initial indication for which we plan to seek marketing approval. In May 2025, we initiated the Phase 1/1b Adult NF1 Trial with the first patient dosed in late July 2025. This Phase 1/1b Adult NF1 Trial is being conducted at clinical sites in the United States, Australia, and South Korea. To date, we have completed enrollment and dosing of three patients in each of the initial four cohorts in Part A. All patients currently remain on trial and patients are being offered the opportunity to remain on trial for up to one year. We expect to complete Part A by the end of 2026 and move to Part B in 2027 following dialogue with the FDA. 2 ● Complete key regulatory-required studies of PAS-004 prior to initiating registrational trials. In 2026 and 2027, we plan to complete non-clinical absorption, distribution, metabolism and excretion (“ADME”) studies, non-clinical developmental and reproductive toxicology studies, and clinical human ADME studies that are key regulatory-required studies prior to initiating a registration trial for PAS-004. Additionally, during 2027 and 2028, we plan to initiate and complete a drug-drug interaction (“DDI”) study to evaluate how PAS-004 interacts with other medications as well as a food effect study to fully determine if PAS-004 can be dosed in a fed state. ● Expand utility of PAS-004 for other indications. Based on results from preclinical studies and current understanding of certain disorders, we believe that PAS-004 may have potential for the treatment of other diseases, such as NF1-CN, ALS, ETS2 gene driven diseases, (such as IBD, primary sclerosing cholangitis and ankylosing spondylitis), Noonan syndrome, LMNA cardiomyopathy and other MAPK-mutation driven cancers (such as BRAF V600 and BRAF fusion tumors). We plan to continue testing PAS-004 in various preclinical models to further demonstrate the potential utility of PAS-004 in several indications. ● Expand formulation development for PAS-004. PAS-004 is currently being administered orally in capsule formulation in the ongoing FIH Phase 1 Advanced Cancer Study in adult patients and tablet formulation in the ongoing Phase 1/1b. Adult NF1 Trial. We believe that tablet formulation will be our commercial formulation for PAS-004. We are currently evaluating additional formulations of PAS-004, such as a liquid formulation for the treatment of certain pediatric patients. Additionally, we may explore the development of a topical formulation for indications where topical treatment is preferred. ● Maximize the potential of PAS-004 utilizing investigator-initiated trials. In November 2025, the ALS Association announced a $1 million award through the ALS Association’s Hoffman Clinical Trial Awards Program to study the efficacy, safety and tolerability of PAS-004 in ALS. This award may be applied to support an investigator-initiated trial, terms of which are being negotiated. We may continue to explore non-dilutive funding and collaborative opportunities to enhance the potential of PAS-004 in additional indications. Overview of Our Lead Program: PAS-004 MAPK Pathway Overview Signaling pathways describe a series of biological mechanisms in which a group of molecules work together to control a cell function. A cell receives signals from its environment when a molecule binds to a specific receptor on or in the cell. This process may be repeated multiple times through the entire signaling pathway until the last receptor is activated and the cell function is carried out. Abnormal activation of signaling pathways may lead to diseases. The MAPK pathway, which relies upon the Ras/Raf/MEK/ERK signaling cascade, represents a central biological pathway in all human cells that is responsible for regulating cellular transcription, proliferation and survival. The general structure of the pathway consists of Ras, a small GTPase, and three downstream protein kinases, Raf, MEK and ERK. ERK 1 and 2 (“ERK 1/2”) are structurally similar protein-serine/threonine kinases that regulate a variety of cellular processes including adhesion, migration, survival, differentiation, metabolism, proliferation, transcription, cytoskeletal remodeling and cell cycle progression. MEK 1/2 catalyzes the phosphorylation of ERK 1/2, which is required for enzyme activation. Phosphorylated ERK 1/2 moves to the nucleus, and in turn activates many transcription factors, regulates gene expression, and controls various physiological processes, finally inducing cell repair or cell death. In addition, at the level of Ras, the pathway is negatively regulated by several proteins, including neurofibromin, the protein encoded by the NF1 gene. Given its direct regulation of ERK, which directly controls downstream signaling through the MAPK pathway, MEK occupies a pivotal position in this signaling cascade and represents a rational small-molecule therapeutic target for multiple diseases, including RASopathies (such as NF1), CNS indications (such as ALS), cardiomyopathies (such as LMNA cardiomyopathy) and oncology indications, where overactivation of the MAPK pathway contributes to disease onset and/or progression. Background of MEK Inhibitors MAPK represents one of the most highly targeted signaling pathways in drug development. Several allosteric inhibitors of MEK 1/2 are currently in clinical development with six already approved by the FDA; four for various oncological indications, and two for the treatment of adult and pediatric patients with symptomatic, inoperable NF1-PNs. A limitation of current FDA approved MEK inhibitors for the treatment of NF1-PNs is their high rates of TRAEs, which may contribute to dose modifications and discontinuations. These FDA-approved MEK inhibitors for NF1-PN have short half-lives (approximately 6-7 hours) and require twice per day dosing. Additionally, their PK profiles are characterized by high Cmax to Cmin ratios. This fluctuation in drug concentration potentially leads to periods of sub-therapeutic effect (around Cmin) and periods around the Cmax level characterized by a full pathway suppression potentially resulting in AEs. Our rationale in developing PAS-004 is to attempt to address these shortcomings to potentially provide patients with improved safety and tolerability with similar or superior outcomes, as well as a more convenient once per day dosing regimen. 3 RASopathies Overview RASopathies are a clinically defined group of genetic syndromes caused by germline mutations in genes that encode components or regulators of the MAPK pathway. These disorders include neurofibromatosis type 1 (NF1), Noonan syndrome, capillary malformation–arteriovenous malformation syndrome, Costello syndrome, cardio-facio-cutaneous syndrome, and Legius syndrome. Because of the common underlying MAPK pathway dysregulation amongst all of these syndromes, RASopathies exhibit numerous overlapping phenotypic features, including CNS abnormalities. The MAPK pathway plays an essential role in regulating various cell cycle functions, which are critical to normal human development. Therefore, we believe there is a strong scientific rationale for targeting the MAPK pathway with small-molecule therapeutics to treat various RASopathies. Neurofibromatosis type 1 (NF1) Overview The initial indication we plan to seek marketing approval for PAS-004 is the treatment of NF1-PN. NF1 is a RASopathy and part of a group of conditions known as neurocutaneous disorders, conditions that affect the skin and the CNS. NF1 affects approximately one in 3,000 newborns throughout the world, with approximately 114,000 patients living in U.S. with NF1. NF1 arises from mutations in the NF1 gene which encodes the tumor suppressor neurofibromin. Loss of NF1 function leads to loss of neurofibromin activity, leading to Ras being locked in its active confirmation, which stimulates MEK, and then ERK activity. NF1 is characterized by multiple café au lait (light brown) skin spots and neurofibromas (small benign growths) on or under the skin, and/or freckling in the armpits or groin. Individuals with NF1 may have other manifestations of the disorder, including cardiac malformations, cardiovascular disease, vasculopathy, hypertension, vitamin D deficiency, brain malformations, and seizures. About 50% of people with NF1 also have learning disabilities. Softening and curving of bones, and curvature of the spine (scoliosis) may occur in some patients with NF1. Occasionally, tumors may develop in the brain, on cranial nerves, or on the spinal cord. NF1 is usually diagnosed during childhood. Throughout their lifetime, about 30% to 50% of NF1 patients progress to develop plexiform neurofibromas (“PNs”), which are tumors that grow in an infiltrative pattern along the peripheral nerve sheath and can cause severe disfigurement, pain and functional impairment. In rare cases NF1-PN may be fatal. NF1-PN are most often diagnosed within the first twenty years of life. These tumors are characterized by aggressive growth, which is typically more rapid during childhood. While NF1-PN are initially benign, these tumors can undergo malignant transformation, leading to malignant peripheral nerve sheath tumors (“MPNST”). NF1 patients have an 8% to 13% lifetime risk of developing MPNST, a diagnosis that carries a 12-month survival rate of under 50%. In addition to MPNST, NF1 patients are at an increased risk of developing other malignancies, including breast cancer and gliomas. Until recently, the only treatment option for NF1-PN was the surgical removal of the tumors. However, because NF1-PN arise from nerve cells and grow in an infiltrative pattern, it is challenging to successfully resect tumors and surgery can lead to severe comorbidities, such as permanent nerve damage. Patients that are ineligible for surgery or those who have had a recurrence post-surgery are often treated with a variety of off-label therapies. Among these off-label therapies are various systemic treatments, such as chemotherapy and immunotherapy, which have not been shown to consistently confer a clinical benefit. Given that NF1-PN is driven by dysregulation in the MAPK pathway, MEK inhibitors have emerged as the only FDA approved therapy for the treatment of inoperable NF1-PNs. Additionally, over 95% of NF1 patients develop cutaneous neurofibromas (“CNs”), which are considered one of the hallmarks of the disease. CNs are a neoplasm of peripheral nerve Schwann cells that present as a soft nodule in the dermis of the skin at virtually any location in the body. Despite their benign nature, people with NF1 consider CNs to be the most burdensome feature of the disease. Physical symptoms include irritation, pain, and itching. Improper drying after wetting may lead to other complications including maceration, skin breakdown, and superficial infections. Individuals may have hundreds to thousands of CNs over the body leading to physical disfigurement. CNs are linked to a lower quality of life due to feelings of embarrassment, interference with daily activities and adverse social implications. People with NF1 may suffer from lower socioeconomic status as a result of their lower self-esteem and risk aversion, and many of those with NF1 suffer from major depressive disorder likely contributed by their CN burden. Physical removal or destruction has been the mainstay of therapy. 4 Limitations of Current Standard of Care Koselugo (selumetinib), a MEK inhibitor, was first approved by the FDA in April 2020 for NF1 pediatric patients two years of age and older who have symptomatic, inoperable PNs based on results from the SPRINT trial, a Phase 2 registrational trial. In November 2025, Koselugo was approved by the FDA for adult NF1 patients with symptomatic, inoperable PNs based on results from the KOMET study, a randomized, placebo-controlled, parallel, double-blind Phase 3 study. In February 2025, Gomekli (mirdametinib) was approved by the FDA for adult and pediatric patients aged two and older with NF1 who have symptomatic PNs not amenable to complete resection based on clinical results from the ReNu Phase 2b clinical trial. In addition to Koselugo and Gomekli, we are aware of other MEK inhibitors in clinical trials for this indication, as well as the off-label use of other drugs, such as bevacizumab, for the treatment of NF1. We believe that Koselugo, Gomekli and other earlier generation MEK inhibitors approved for indications other than NF1 suffer from limitations, such as known toxicities, high rates of drug discontinuation, limited efficacy and a dosing schedule that requires dosing twice a day. We believe that this creates a significant market opportunity for a next-generation MEK inhibitor that addresses these shortcomings, has a PK and tolerability profile suitable for long-term once-a-day or less dosing and that can arrest or reverse tumor growth. There are no therapies approved by the FDA for the treatment of NF1-CNs. Preclinical Profile and Mechanism of Action of PAS-004 PAS-004 is a next-generation MEK inhibitor that was rationally designed to have a macrocyclic structure by taking into consideration the metabolic liabilities of earlier generation MEK inhibitors. The structure of PAS-004 is distinct from other earlier generation MEK inhibitors as it maintains critical protein/ligand contacts but does not possess a primary alcohol or hydroxamate functionality, a known metabolic liability in earlier generation MEK inhibitors. It is generally observed that macrocyclic scaffolds improve drug-like properties including target binding, selectivity, and oral bioavailability. PAS-004 has displayed promising PK properties in IND-enabling toxicology studies of both rats and dogs. In these toxicology studies, PAS-004 has demonstrated a half-life of 11.5 hours in rats and 52 hours in dogs. Preclinical Studies Overview In vitro Preclinical Studies of PAS-004 In a screen of 99 protein kinases, a single high dose of PAS-004 (10 μM) was used to assess kinase inhibition specificity. This assay demonstrated that PAS-004 is a strong inhibitor of only the MEK 1 (~95%) and MEK 2 (>99%) kinases. In an unpublished preclinical study, the effects of PAS-004 were compared to selumetinib in tests for the ability to inhibit the growth of three NF1 mutant neurofibroma-derived Schwann cell lines, the tumorigenic cell of origin for NF1-PN, and two human wild-type Schwann cell lines. Cells were treated for 48 hours and all PAS-004 treated cell lines showed dose-dependent growth inhibition, with 60-80% growth inhibition in the three neurofibroma-derived NF1 mutant cell lines and less than 20% inhibition of the wild-type cell lines tested. Growth inhibition with PAS-004 was greater than the maximal growth inhibition seen with equivalent doses of selumetinib. In addition, the inhibition did not plateau at the highest doses used in the study, compared to a plateau effect with selumetinib. Additionally, PAS-004 was compared to selumetinib in an in vitro potency assay. Western blots from this unpublished preclinical study showed that cells treated with PAS-004 demonstrated greater reduction in ERK 1/2 phosphorylation as compared to cells treated with selumetinib. We believe these in vitro preclinical results support PAS-004’s favorable potency and dose-dependent inhibitory activity against cellular proliferation in NF1 deficient Schwann cells, demonstrating a profile that appears similar to selumetinib, an FDA approved MEK inhibitor. In vivo Preclinical Studies of PAS-004 In an unpublished preclinical study, the effects of PAS-004 were assessed in the in vivo Colo-205 xenograft tumor model, a common mouse model used for preclinical therapies. Results showed that PAS-004 dosed at 5 mg/kg once daily reduced tumor volume. The magnitude of tumor volume reduction was similar to selumetinib dosed at 25mg/kg, twice daily, as published in Molecular Cancer Therapeutics in 2007. 5 In an unpublished preclinical pilot study, PAS-004 was tested for tolerability and preliminary biological efficacy in a genetically engineered mouse model of NF1-PN. These mice were engineered to develop plexiform neurofibromas that closely phenocopy the human tumors by four months of age with 100% penetrance. In this pilot study, selumetinib was administered in a parallel group, which served as a positive control. Both PAS-004 and selumetinib were administered as single-agents to six mice per group. PAS-004 was administered at 10 mg/kg once daily and selumetinib was administered at the established maximum tolerated dose of 10 mg/kg, twice daily. Treatment began when the mice reached four months of age and was continued for 12 weeks or until death. Mice were monitored for signs of toxicity, as well as survival. Results demonstrated that both PAS-004 and selumetinib showed similar toxicity profiles and both PAS-004 (p=0.0123) and selumetinib (p=0.0048) significantly reduced the tumor size compared to vehicle-treated mice based on statistical analysis using uncorrected Fisher’s least significant difference. We believe the results from this preclinical pilot study illustrate that PAS-004 may be effective in reducing tumor burden of NF1-associated plexiform neurofibromas. When administered at 10 mg/kg once daily, PAS-004 and selumetinib, which was dosed at 10mg/kg twice daily, demonstrated similar results. We believe that the longer half-life of PAS-004, as compared to selumetinib, could potentially enhance efficacy by allowing more sustained MEK/ERK signaling inhibition. Additionally, it may allow for longer dosing intervals, such as a once-daily regimen, compared to the twice-daily dosing required for selumetinib. Mutations in the LMNA gene, which encodes nuclear lamins A and C, cause diseases affecting various organs, including the heart. Studies have found that the ERK 1/2 kinase branches of the MAPK signaling pathway were abnormally hyperactivated prior to the onset of significant cardiac impairment. PAS-004 was studied in the LMNA-cardiomyopathy Lmna H222P/H222P mouse model, a validated model of cardiomyopathy caused by LMNA mutations in humans. In this study, male mice were orally administered placebo, PAS-004 at 3 mg/kg/day or PAS-004 at 6 mg/kg/day starting at 14 weeks of age when symptoms of cardiomyopathy were present. Results of this preclinical study were published in Bioorganic & Medicinal Chemistry in 2017 and are summarized as follows: ● The effects of PAS-004 on phosphorylated ERK 1/2 were studied. Following six weeks of systemic administration, both doses of PAS-004 led to significant decreases in phosphorylated ERK 1/2 relative to total ERK 1/2 in the heart and liver when compared to placebo, whereas only the 6 mg/kg/day group produced a significant decrease in phosphorylated ERK 1/2 relative to total ERK 1/2 in quadricep muscles. ● The effects of PAS-004 on echocardiographic parameters of the heart that correlate with left ventricular function were studied. Following six weeks of systemic administration, both doses of PAS-004 resulted in significant increases in left ventricular fractional shortening, the percentage the left ventricular diameter decreases with each contraction as compared to placebo. ● The effects of PAS-004 on cardiac fibrosis were studied. Following six weeks of systemic administration, both doses of PAS-004 resulted in significant decreased fibrosis based on staining with Masson trichrome of fixed sections of left ventricles, when compared to placebo. Results showed that treatment of PAS-004 lead to dose-dependent statistically significant decreases in fibrosis when compared to placebo, as scored on a histologic scale of 0 to 4 by a pathologist blind to treatment group, when compared to placebo. ● The effects of PAS-004 on survival were studied. Mice were followed until death or euthanasia. 23 mice treated with placebo had a median survival of 202 days, whereas median survival was 225 days for 17 mice treated with 3 mg/kg/day of PAS-004 and 225 days for 15 mice treated with 6 mg/kg/day of PAS-004. Results showed the median survival based on Kaplan-Meier plots of mice treated with both doses of PAS-004 were statistically significantly (P<0.05) longer than that for mice treated with placebo. ● A preliminary analysis of potential tissue toxicity of PAS-004 was performed. Following six weeks of systemic administration, serum alkaline phosphatase activity, alanine aminotransferase activity and bilirubin concentration were measured to assess possible hepatic injury and liver function. Serum creatinine and blood urea nitrogen concentrations were also measured as indicators of renal function and serum amylase activity as a marker of pancreatic injury. Results showed that there were no statistically significant differences in any of these parameters between groups. A histopathological evaluation by a pathologist blind to treatment determined there were no consistent or specific abnormalities in liver, kidney or spleen of mice receiving either doses of PAS-004 and no alterations were observed that typically occur with drug toxicity. In unpublished preclinical in vivo studies, PAS-004 was tested for anti-tumor efficacy in NRAS mutation cancer xenograft models. In the first study, PAS-004 exhibited dose-dependent anti-tumor efficacy in the lung cancer NCI-H1299 cell-line-derived xenograft model. PAS-004 at dose levels of 10 mg/kg and 5 mg/kg, once daily, significantly inhibited tumor growth as compared to vehicle control. The anti-tumor efficacy of PAS-004, when taken at equivalent doses, was shown to be superior to that of binimetinib and selumetinib. In the second study, PAS-004 exhibited dose-dependent anti-tumor efficacy in the liver cancer xHepG2 cell-line-derived xenograft model. PAS-004 at dose levels of 10 mg/kg and 5 mg/kg, once daily, produced significant antitumor activities as compared to vehicle control. The anti-tumor efficacy of PAS-004, when taken at equivalent doses was shown to be similar to that of binimetinib and superior to that of selumetinib. PAS-004 has demonstrated dose-dependent response in vivo across several preclinical cancer, LMNA cardiomyopathy and NF1-PN models. 6 Toxicology Studies 28-day toxicological studies were performed in both rats and dogs under good laboratory practices (“GLP”) on PAS-004 by WuXi AppTec (Suzhou) Co., Ltd. and demonstrated a sufficient safety and toxicology profile of PAS-004 to support our IND with the FDA. Additionally, we have completed repeat dose toxicity and toxicokinetic studies in Sprague Dawley rats of up to 26 weeks’ duration and in Beagle dogs up to 39 weeks’ duration with 14 or 28-day recovery periods to support chronic dosing of PAS-004. Additional Indications: ETS2 Driven Diseases A 2024 Nature publication titled “A disease-associated gene desert directs macrophage inflammation through ETS2” demonstrated that the ETS2 gene is a central regulator for multiple inflammatory functions in human macrophages and that ETS2 has a key pathogenic role in IBD. Further, this publication identified that MEK inhibitors as a class are the strongest known ETS2 inhibitors, providing potent anti-inflammatory activity and that MEK inhibition reduced inflammatory cytokine release to similar levels as infliximab, an anti-TNF antibody that is widely used for the treatment of IBD. Blocking ETS2 signaling through MEK 1/2 inhibition was showed to affect multiple cytokines, including TNF and IL-23, which are targets of existing therapies. Based on this publication, we tested PAS-004 in pre-clinical models of ETS2 signaling at the Francis Crick Institute in London, U.K. Unpublished results from this in vitro study demonstrated that PAS-004 provides superior inhibition of ETS2-driven inflammatory responses compared to selumetinib in a human macrophage model of chronic inflammation that mimics the inflammatory milieu seen in IBD. RNA sequencing was used to measure gene expression, with PAS-004 consistently outperforming selumetinib across all tested doses (0.01 μM, 0.1 μM, and 1 μM), showing greater downregulation of ETS2 target genes, as well as experimentally validated MEK1/2 pathway genes. These data suggest more robust and durable MEK inhibition by PAS-004 under inflammatory conditions. PAS-004 significantly reduced ETS2-dependent functions such as cytokine production, phagocytosis, and reactive oxygen species (ROS) generation, all known to be central to chronic inflammation. Gene Set Enrichment Analysis revealed that PAS-004’s effects more closely mirrored ETS2 knockout profiles, with a higher normalized enrichment score (-3.96 vs -3.56) and greater statistical significance (1.2 x 10⁻²⁵⁰ vs 3.7 x 10⁻⁷⁴) as compared to selumetinib. Completion of GMP-Compliant Manufacturing In June 2023, we announced the successful completion of manufacturing the GMP-compliant Phase 1 clinical supplies of the active pharmaceutical ingredient (“API”) of our lead product candidate PAS-004. Utilizing this drug substance, we have manufactured the drug product in capsule form that we are utilizing in our ongoing FIH Phase 1 Advanced Cancer Study. In 2024, we completed a second batch of API and we have manufactured the drug product in tablet formulation to support our ongoing Phase 1/1b Adult NF1 Trial. In 2025, we improved the synthesis process of PAS-004 and have optimized the manufacturing process of API for commercial scale. In 2026, we plan to complete manufacturing of a third batch of API and drug product in tablet formulation to support our ongoing clinical trials and planned non-clinical studies. Throughout 2025 we continued to improve the synthesis process of PAS-004, and we believe we have further optimized the manufacturing process for commercial scale. Clinical Development Overview We are currently conducting two ongoing global clinical trials of PAS-004. Our clinical development plan for PAS-004 is to continue our Phase 1/1b clinical trial in adult patients with NF1-PN followed by pediatric NF1-PN patients and ultimately complete registrational clinical trials in these patient populations, which are the initial indications that we plan to seek marketing approval of PAS-004 for. In addition, we plan to analyze the NF1-CN results in the ongoing Phase 1/1b Adult NF1 Trial and may engage the FDA and necessary regulatory agencies for a separate clinical development path for the treatment of NF1-CN. FIH Phase 1 Advanced Cancer Study The FIH Phase 1 Advanced Cancer Study is a multicenter open-label study designed to evaluate the safety, tolerability, PK, PD, and preliminary efficacy of PAS-004 in cancer patients with MAPK pathway driven advanced solid tumors. Patients are being enrolled across four clinical sites in the U.S. and three clinical sites in Eastern Europe (Bulgaria and Romania) into dosing cohorts under a modified 3+3 dose escalation study design. If the first three patients enrolled into a dosing cohort reach the end of the first 28-day treatment cycle on day 35 without experiencing a DLT, following a review of safety, PK, and PD data by the safety committee, enrollment into the next highest dosing cohort begins. If two or more of the first three patients experience a DLT by day 35, dose-escalation will stop and cannot proceed at or above the current dose level. However, if one of the first three patients enrolled into a dosing cohort experiences a DLT by day 35, an additional three patients will be enrolled into the dosing cohort (six patients total). If only one of six patients experiences a DLT by day 35, following review of safety, PK and PD by the safety committee, enrollment into the next highest dose level begin; however, if two or more of the six patients experience a DLT, dose escalation will stop, and the prior dose level will be declared the MTD. Participants have sequentially received one of eight planned dose levels of PAS-004 in capsule formulation (2 mg, 4 mg, 8 mg, 15 mg, 22 mg, 30 mg, 37 mg and 45 mg) taken orally. Additionally, we have completed a dosing cohort using a 4 mg tablet formulation of PAS-004. PAS-004 is administered as a single dose on day 1, followed by a 7-day observation period, before initiating continuous 28-day treatment cycles of PAS-004. To date, we have completed dose escalation through cohort 8 (45 mg capsule), with a of a total of 34 patients receiving PAS-004. No patients have discontinued treatment or interrupted dosing due to TRAEs). The AE profile of PAS-004 has been characterized by grade 1 and grade 2 TRAEs, with the most frequently reported of these TRAEs being nausea, vomiting, and diarrhea through the 35-day DLT period. The interim data shows that PAS-004 is observed to be well tolerated and support PAS-004’s potential favorable safety and tolerability profile. We have observed no DLTs in any of the cohorts assessed to date and have not reached the MTD. As such, we have filed a protocol amendment to continue dose escalation in the FIH Phase 1 Advanced Cancer Study using our tablet formulation of PAS-004 in an effort to continue to explore the safety, PK, and early signals of efficacy at higher dose levels of PAS-004. Simultaneously, a pilot food effect assessment is planned in a subset of patients who agree to participate in this optional component of the study. The objective of the pilot food effect study is to determine if the PK properties of PAS-004 are impacted when PAS-004 is dosed in a fasted or fed state. To date, all patients have fasted when being administered PAS-004. 7 Interim PK results have demonstrated a half-life of approximately 60 hours for PAS-004, dose proportionality and linear PK. At steady-state, little fluctuations in drug concentrations are observed with a ratio of Cmax to Cmin below 2. Additionally, we have observed preliminary efficacy signals in a subset of advanced cancer patients with BRAF-mutated tumors. We plan to provide additional interim data throughout 2026 and currently expect to complete the FIH Phase 1 Advanced Cancer Study in 2028. Phase 1/1b Adult NF1 Trial The Phase 1/1b Adult NF1 Trial is a multicenter, open-label study designed to evaluate the safety, tolerability, PK and PD of PAS-004, in adult participants with NF1 with symptomatic and inoperable, incompletely resected, or recurrent PNs. This trial is being conducted at five clinical sites in the U.S., Australia, and South Korea. We opened our first clinical trial site in Australia in May 2025 and dosed the first patient in July 2025. The primary objective of the study is to evaluate the safety and tolerability of PAS-004 when administered for one 28-day treatment cycle in adult NF1participants with at least one and up to two additional target PNs that are symptomatic and inoperable, incompletely resected, or recurrent. Secondary objectives are (i) to identify the RPBD or MTD of PAS-004, (ii) to characterize the PK and PD profile of PAS-004, (iii) to evaluate the preliminary efficacy of PAS-004 on target PN volume, (iv) to evaluate the preliminary efficacy of PAS-004 on the size and appearance, and associated symptoms of CNs, and (v) to evaluate the impact of PAS-004 on QOL and any physical symptoms attributed to the target PN. Experimental objectives are (i) to evaluate the impact of PAS-004 on QOL and any physical symptoms attributed to CNs, (ii) to evaluate the impact of PAS-004 on pain and function attributed to PNs, and (iii) to investigate PAS-004 effects on CN tumor cellular and molecular biology. The primary endpoints are (i) the evaluation of DLTs, (ii) the evaluation of all AEs, (iii) the evaluation of AEs leading to interruption or discontinuation of PAS-004, and (iv) the evaluation of cardiac and visual function, hematology and clinical chemistry laboratory parameters. The secondary endpoints are (i) the evaluation of PK parameters, (ii) the evaluation of PD parameters including percentage of ERK phosphorylation inhibition from baseline in peripheral blood mononuclear cells (“PBMCs”), (iii) the evaluation of clinical benefit rate in terms of complete response, partial response, stable disease, and progressive disease over time on magnetic resonance imaging (“MRI”) with volumetric analysis using REiNS criteria, (iv) the evaluation of the best objective response rate over time on MRI with volumetric analysis using the REiNS criteria, (v) the evaluation of time to maximal response on MRI with volumetric analysis using the REiNS criteria, (vi) the evaluation of CN appearance and size metrics over time using photography and quantitative measurements, (vii) the evaluation of changes from baseline in physical functioning using the Patient-Reported Outcomes Measurement Information System (PROMIS), Physical Function (PF) assessment, and in QOL using the Plexi-QOL survey. Following a screening period of up to 28 days, up to 24 eligible participants in Part A will be enrolled sequentially to receive one of four planned dose levels of PAS-004 (4 mg, 8 mg, 12 mg, and 18 mg) tablets to be taken orally once daily. The dose escalation phase (Part A) is following a modified 3+3 study design. At the first planned dose level of 4 mg (day 1), participants will be provided with PAS-004 to be taken once daily during a continuous 28-day treatment cycle. If the first three participants enrolled into each dosing cohort complete the 28-day treatment cycle without experiencing a DLT, following a review of safety and available PK and PD data by the safety review committee, enrollment into the next higher dosing cohort will begin. If two or more of the first three participants experience a DLT, dose-escalation will stop and cannot proceed at or above that current dose level. However, if only one of the first three participants enrolled into a dosing cohort experiences a DLT by day 28, an additional three participants will be enrolled into the same dosing cohort (six participants in total). If no additional participants develop a DLT, enrollment into the next highest dose level may begin after review of safety and available PK and PD data by the safety review committee for all six participants. The dose escalation can be adjusted by the safety review committee based on the safety considerations. However, if two or more of the six participants experience a DLT, dose escalation will stop, and the prior dose level will be declared the MTD. The RPBD will be identified as the dose level where at least three participants in a dosing cohort demonstrate optimal ERK phosphorylation inhibition and 0 of 3 participants or greater than 1 of 6 participants experience a DLT. The RPBD will be a dose level at or below the MTD. Participants in Part A will be treated at their assigned dose level of PAS-004 for six treatment cycles. Each 28-day treatment cycle consists of once daily continuous dosing. Part A of the study also includes an optional treatment extension period of up to an additional six treatment cycles (up to 12 cycles in total). If the RPBD for Part B has not yet been selected, participants in Part A who have completed six treatment cycles may continue treatment for up to an additional six treatment cycles in Part A. This is to allow qualifying participants to continue in Part A without treatment interruption before enrolling in Part B and for continued safety data collection at the dose levels evaluated in Part A. 8 Participants in Part A will have their PNs and up to seven CNs measured at baseline. PNs will be measured on MRI at baseline and at the end of cycle 4 and cycle 6 as well as cycle 9 and cycle 12 for participants in the optional treatment extension period. CNs will be measured using digital calipers and two-dimensional photography at baseline and at the end of cycle 1, cycle 4, cycle 6, as well as cycle 9 and cycle 12 for participants in the optional treatment extension period. To date, we have completed enrollment and dosing of three patients in each of the initial four cohorts in Part A. All patients currently remain on trial with the opportunity to remain on study for up to 12 cycles. We expect to complete Part A by the end of 2026 and move to Part B in 2027 following dialogue with the FDA and other regulatory agencies. We expect to complete Part B of the trial in 2028. Our clinical development plan for PAS-004 is to continue our Phase 1/1b clinical trial in adult patients with NF1-PN followed by pediatric NF1-PN patients and ultimately complete registrational clinical trials in these two age indications, which are the initial indications that we plan to seek marketing approval of PAS-004 for. In addition, we plan to analyze the NF1-CN results and may engage the FDA for a separate development path for NF1-CN. Overview of Our Discovery Program: PAS-001 Schizophrenia Overview Schizophrenia is a chronic and disabling psychiatric illness characterized by positive psychotic symptoms, such as delusions and hallucinations, negative symptoms, such as social withdrawal and amotivation, and impairment in cognitive domains, including attention, working memory, verbal learning and executive function. According to the World Health Organization (“WHO”) schizophrenia affects up to 24 million people in the world. Schizophrenia has a low lifetime prevalence of about 1%, however the burden of the disease is substantial. Schizophrenia is a leading cause of adult disease burden and has been ranked 12th in the top global causes of disability for the last decade, leading to substantial healthcare and societal costs, with annual associated costs in the U.S. estimated to be more than $150 billion. Current pharmacological treatments for schizophrenia all act on dopamine D2 receptors. Although they are effective in reducing positive symptoms, they have little effect on both cognitive and negative symptoms. Furthermore, up to 30% of patients show only partial benefit with antipsychotics and have treatment resistant schizophrenia. This highlights the need for new therapeutic strategies. Despite extensive research, the molecular etiology remains unknown. The current dopamine hypothesis postulates that excessive striatal dopamine transmission and reduced frontal dopamine stimulation underlie the pathophysiology of positive and negative symptoms, respectively. However, converging lines of genetic, epidemiological and clinical evidence indicate that inflammatory pathways are also altered in schizophrenia. More recently, a leading hypothesis proposes that synaptic terminal loss is central to the pathophysiology of schizophrenia, leading to impaired cortical function, and symptoms, including cognitive impairments. Scientific Background and Rationale for Targeting C4A for the Treatment of Schizophrenia The complement system is a group of proteins found in both the blood and the CNS. In the brain, the complement system plays in almost every aspect of normal brain development, including neurogenesis, neuronal migration and synaptic refinement, and is now also recognized as a signaling cascade that facilitate microglial removal of synapses. Microglia are phagocytes residing in the CNS. Unlike other phagocytes, which primarily function in immunity, microglia are heavily involved in shaping and supporting brain tissue and are key modulators of neuronal development. There are nine major complement proteins, labeled C1 through C9. Complement protein C4 is the only complement protein that has two different isotypes encoded by two different genes: C4A and C4B. According to the synaptic pruning hypothesis, schizophrenia is thought to arise from a faulty pruning process and excessive synaptic elimination. 9 The largest genome-wide association study (GWAS) in schizophrenia in 2014 identified 128 independent associations spanning 108 conservatively defined loci that meet genome-wide significance. The most strongly associated GWAS locus is located in the extended Major Histocompatibility Complex (MHC) region on chromosome 6. This locus contains multiple copies of two closely related genes that codes for variants of C4: C4A and C4B. Their analyses revealed that C4A copy numbers, as well as other structural variance leading to increased C4A mRNA expression, to a large degree explained schizophrenia risk originating from this locus. This variant remains the strongest polygenic risk factor for schizophrenia identified to date, making C4A the first gene linked to a specific mechanism underlying the disease. Importantly, schizophrenia risk was not influenced by copy numbers of the closely related C4B gene. Animal models of increased C4A expression show reduced levels of synaptic proteins and increased phagocytosis of synaptic terminals by microglia. Moreover, preclinical models showed C4A overexpression leads to reduced neurotransmission in prefrontal cortical neurons, reduced social interaction and impaired memory, which mimic similar abnormalities seen in schizophrenia patients. Finally, excessive microglial synapse elimination has been observed in schizophrenia patient-derived neural cultures. Post-mortem brain analyses showed that C4A is expressed at significantly higher levels in people with schizophrenia than controls. C4A levels in cerebro-spinal fluid (“CSF”) have shown to be elevated in patients with schizophrenia relative to matched controls and correlates with CSF measurements of synapse density. C4A levels have also been found to be elevated in plasma in schizophrenia, and higher levels predict poorer outcomes in first episode patients. Several other studies in scientific journals have also reported increased complement gene expression, protein concentration, and overall activity in the serum or plasma of schizophrenia cases compared to controls. Further, a 2020 study published in Brain, Behavior and Immunity , found that C4A was overexpressed in the dorsolateral prefrontal cortex, parietal cortex, superior temporal gyrus and associative striatum of patients with schizophrenia and that C4A expression was not altered in the peripheral tissues of schizophrenia patients. Further, the study found lifelong C4Aoverexpression in the brain of schizophrenia patients. Taken together, this evidence has led to the hypothesis that C4A may play an important role in the pathophysiology of schizophrenia. We are currently developing a brain-penetrant small molecule able to down regulate C4A, for the systemic treatment of schizophrenia. To our knowledge, no other company is exploring this potentially important target. To date, we have created over 100 analogs of our 20 priority hits as provided via our past screening partnership with Evotec. In addition, we have used assays to assess C4 selectivity. We have prioritized several analogs for PK testing in mice. To date, we have demonstrated C4 selectivity in astrocytes and are expanding into additional cell types in vitro. We are continuing to conduct additional work for target deconvolution to identify a lead candidate. Our goal is to continue screening and proceeding with early development of PAS-001 while seeking partnerships and/or collaborators to support further development of the program including IND-enabling studies. Acquisitions Alpha-5 Integrin Therapeutics, LLC On June 21, 2022, we entered into a Membership Interest Purchase Agreement (the “Alpha-5 Agreement”) with PD Joint Holdings, LLC Series 2016-A and Prof. Lawrence Steinman (the “Alpha-5 Sellers”), pursuant to which we purchased from the Alpha-5 Sellers all of the issued and outstanding equity of Alpha-5 Integrin, LLC, a Delaware limited liability (“Alpha-5”). The Alpha-5 Sellers were the sole title and beneficial owners of 100% of the equity interests of Alpha-5. In consideration of the equity of Alpha-5, the Alpha-5 Sellers received (i) an aggregate of 163,044 shares (the “Alpha-5 Shares”) of our Common Stock, (ii) warrants to purchase 50,000 shares of our Common Stock at an exercise price of $37.60 per share (the “Alpha-5 Warrants”), and (iii) contingent earn-out payments of an aggregate of 2% to 4% of net sales generated from the sale of a drug currently in development by Alpha-5. Prof. Lawrence Steinman, one of the Alpha-5 Sellers, is our Executive Chairman and Co-Founder, and as such is considered a related party. The terms of the Alpha-5 Agreement were approved by (i) the disinterested members of the audit committee (“Audit Committee”) of Board and (ii) the disinterested members the Board, under the Company’s related party transaction policy. In connection with the Alpha-5 Agreement, each of the employees of Alpha-5 entered into employment agreements with the Company. In 2024, we terminated each of the former Alpha-5 employees following the closure of our research laboratory in South San Francisco. 10 AlloMek Therapeutics, LLC On October 11, 2022, we entered into a Membership Interest Purchase Agreement, dated October 11, 2022 (the “AlloMek Agreement”), by and among the Company, AlloMek Therapeutics, LLC, a Delaware limited liability company (the “AlloMek”), the persons listed on Schedule 1.1 thereto (each individually a “AlloMek Seller” and collectively, the “AlloMek Sellers”), and Uday Khire, not individually but in his capacity as the representative of Sellers (the “AlloMek Representative”), pursuant to which we purchased all of the issued and outstanding equity of AlloMek. The AlloMek Sellers were the sole title and beneficial owners of 100% of the equity interests of AlloMek. In consideration of the sale of the equity of AlloMek, the AlloMek Sellers received (i) an aggregate of 135,000 shares of our Common Stock, (ii) warrants to purchase an aggregate of 50,000 shares of our Common Stock (the “AlloMek Warrants”) at an exercise price of $37.60 per share, which may be exercised on a cashless basis, for a period of five years commencing on the date of issuance, (iii) a cash payment in the amount of $1.05 million, (iv) the right to certain milestone payments in an amount up to $5.0 million, and (v) the right to contingent earn-out payments ranging from 3% to 5% of net sales of the Drug currently in development (as defined in the AlloMek Agreement) depending on the amount of such net sales in the applicable measurement period. Pursuant to the AlloMek Agreement, we are required to offer to sell the Drug (as defined in the AlloMek Agreement) and certain intellectual property rights back to the AlloMek Sellers at a price set forth in the AlloMek Agreement within 30 days of the following two conditions being met: (1) there is a Change of Control (as defined in the AlloMek Agreement) and (2) we fail to meet our obligations regarding development and commercialization under the AlloMek Agreement, including by commencing a wind-up, a wind-down, a sale, liquidation or distribution of all or substantially all of our assets, an assignment for the benefit of creditors, or a bankruptcy, or by exiting or announcing an intention to exit the biotechnology business. The AlloMek Sellers have one year from the date of notice of our repurchase offer to accept such offer. Competition The biotechnology and pharmaceutical industries are characterized by rapidly evolving technologies, intense competition, and an emphasis on proprietary product candidates. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical, and biotechnology companies, academic institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Moreover, potential competitors have or may have patents or other rights that conflict with patents covering our technologies. The key competitive factors affecting the success of all our product candidates, if approved, are likely to be their efficacy, safety, side effects, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any product candidates that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic products. 11 PAS-004 Companies with FDA approved MEK inhibitors include: GSK plc, which received FDA approval for Mekinist (trametinib), that was subsequently sold to Novartis AG; Pfizer Inc., which received FDA approval for Mektovi (binimetinib); Genentech, Inc., a member of the Roche Company, which received FDA approval for Cotellic (cobimetinib); Verastem, Inc. which received FDA approval for Avutometinib co-packed as Avmapki Fakzynja; AstraZeneca PLC and Merck & Co., Inc., which received FDA approval for Koselugo (selumetinib); and SpringWorks Therapeutics, Inc. (acquired by Merck KGaA, Darmstadt, Germany), which received FDA approval for Gomekli (mirdametinib). Koselugo (selumetinib) marketed by AstraZeneca PLC was the first FDA approved therapy for the treatment of pediatric NF1-PN patients in April 2020. In December 2025, Koselugo was approved by the FDA for adult NF1-PN patients. Gomekli (mirdametinib) marketed by Merck KGA via the acquisition of SpringWorks Therapeutics was approved by the FDA in February 2025 for adult and pediatric patients aged two and older with NF1 who have symptomatic PNs not amenable to complete resection. Mekinist, Mektovi, Cotellic, and Avmapki Fakzynja Co-Pack are approved for certain oncology indications. We are aware that other companies are, or may be, developing products for NF1-PN, including, but not limited to Array BioPharma Inc. (a subsidiary of Pfizer), Chia Tai Tianqing Pharmaceutical Group Co., LTD, Healx Ltd., Infixion Bioscience, Inc., Novartis International AG, and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., and Shanghai Kechow Pharma, Inc. We are also aware of several therapies, some of which are generic, that are used off-label for the treatment of NF1-PN. These therapies include radiotherapy and various systemic treatments, such as chemotherapy and immunotherapy. NFlection Therapeutics, Inc. is developing a topical MEK inhibitor for NF1-CN. There are other MEK inhibitors in various stages of clinical trials for multiple indications, including various cancers and NF1-PN. Additionally, there are other FDA approved small molecule therapeutics that target the MAPK signaling pathway. Intellectual Property Our ability to obtain, maintain and enforce intellectual property protection for our products candidates, formulations, processes, methods and any other proprietary technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and in other countries is fundamental to the long-term success of our business. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination contractual arrangements and patents, both in the United States and abroad. However, patent protection may not afford us with complete protection against competitors who seek to circumvent our patents. We also depend upon the skills, knowledge, experience and know-how of our management and research and development personnel, as well as that of our advisors, consultants and other contractors. To help protect our proprietary know-how, which is not patentable, and for inventions for which patents may be difficult to enforce, we currently rely and will in the future rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure of confidential information and, where applicable, require invention assignment agreements to us of the ideas, developments, discoveries and inventions important to our business. We generally control access to our proprietary and confidential information through the use of internal controls that are subject to periodic review. Although we take steps to protect our proprietary information and trade secrets, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. As a result, we may not be able to meaningfully protect our trade secrets. For further discussion of the risks relating to intellectual property, see the section titled “Risk Factors—Risks Related to Our Intellectual Property.” Our patent portfolio includes issued and pending applications worldwide for each of our programs. 12 PAS-004 For PAS-004, we have issued patents titled “Novel MEK inhibitors, useful in the treatment of diseases” that have claims directed to composition of matter and methods of use, and includes granted patents in the United States, Australia, Canada, China, Germany, Spain, France, Italy, Great Britain, India and Japan, that are expected to expire in October of 2030 (without consideration of patent term adjustment (“PTA”) and patent term extension (“PTE”)). We have a pending application directed to solid forms of PAS-004 including claims directed to polymorphic forms and methods of use and a pending application directed to tablet formulations and uses thereof. We also have a pending application directed to stereoisomers of PAS-004 that have claims directed to composition of matter and methods of use. Patents that may be issued in these families will have a statutory expiration date of 2045 (without consideration of PTA and PTE). Grant Agreements FightMND Grant In connection with the acquisition of Alpha-5, we legally assumed rights under a three-year grant agreement with FightMND, a not-for-profit Australian charity, which was entered into by Alpha-5 on September 23, 2021. FightMND supports preclinical research, development and assessment of therapeutics for Motor Neuron Disease/Amyotrophic Sclerosis. Under the grant agreement, we are entitled to reimbursements for costs incurred up to $967,010 AUD for research related to a monoclonal antibody targeting a 5 b 1 integrin as a potential treatment for ALS. For the years ended December 31, 2025, and 2024, the Company recorded grant income of $43,000 and $0, respectively, as a contra expense within research and development. Manufacturing We contract with third parties for the manufacture of our product candidates for preclinical studies and clinical trials in accordance with the FDA’s cGMP (as defined below) regulations, and we intend to continue to do so in the future. For PAS-004, we currently work with one contract manufacturing organization (“CMO”) for GMP materials, WuXi STA, a subsidiary of WuXi AppTec (“WuXi”), for the manufacture of PAS-004 drug substance and drug product for our clinical trials. We do not own or operate and currently have no plans to establish any manufacturing facilities. The manufacture of pharmaceuticals is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control. Replacement of any of our CMOs would require us to qualify new manufacturers and negotiate and execute contractual agreements with them. If any of our supply or service agreements with our existing CMOs are terminated, we may experience delays and additional expenses in the completion of the development of and obtaining regulatory approval for our product candidates. To mitigate the risks above we utilize outside chemistry, manufacturing and controls (“CMC”) consultants with pharmaceutical development and manufacturing experience to assist with the management of the relationships with our CMO. We believe that the use of contract CMOs eliminates the need to directly invest in manufacturing facilities, equipment and additional staff. 13 As we further develop our product candidates, we expect to consider secondary or back-up manufacturers for both active pharmaceutical ingredients and drug product manufacturing. To date, our CMO has met the manufacturing requirements for our product candidates in a timely manner. We expect third-party manufacturers to be capable of providing sufficient quantities of our product candidates to meet our current needs, but we have not assessed these capabilities beyond the supply of clinical materials to date. Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement or be unable to reach agreement with an alternative manufacturer. If we are unable to obtain sufficient quantities of our products candidates or receive raw materials in a timely manner, we could be required to delay our ongoing clinical trials and seek alternative manufacturers, which could be costly and time-consuming. We currently engage CMOs on a fee for services based on the needs of our current development plans. Employees & Human Capital As of December 31, 2025, we had five full-time employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we depend on the skills, experience and performance of our senior management and clinical operations personnel. We compete for qualified personnel with other medical pharmaceutical and healthcare companies, as well as universities and non-profit research institutions. We provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary by country/region and employment classification) include incentive compensation plans, healthcare and insurance benefits, retirement investments, paid time off, and family leave, among others. We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees. We consider our relations with our employees to be good. Facilities Our principal executive office is located at 1111 Lincoln Road, Suite 500, Miami Beach, FL 33139. We rent approximately 300 square feet of space, which includes our executive offices. Our website is www.pasithea.com . On our website, investors can obtain, free of charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and Business Ethics, including disclosure related to any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission, or the SEC. None of the information posted on our website is incorporated by reference into this Annual Report. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. 14 Government Regulation and Drug Approval Government authorities in the United States (including federal, state and local authorities) and in other countries, extensively regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, pricing and export and import of pharmaceutical products, such as our future product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Moreover, failure to comply with applicable regulatory requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the product from the market. Any agency or judicial enforcement action could have a material adverse effect on us. U.S. Government Regulation In the United States, the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing regulations and other federal, state and local statutes and regulations. In the case of biologics, the section of the FDCA that governs the approval of drugs via New Drug Applications (“NDAs”) does not apply to the approval of biologics. Rather, biologics, such as monoclonal antibodies and gene therapy products, are approved for marketing under provisions of the Public Health Service Act (“PHSA”) via a Biologics License Application (“BLA”). However, the application process and requirements for approval of BLAs are very similar to those for NDAs. Drugs and biologics are also subject to other federal, state and local statutes and regulations. Accordingly, we have and plan to continue to investigate our products through the IND framework and seek approval through the NDA and BLA pathways. The process required by the FDA before our product candidates may be marketed in the United States generally involves the following: ● submission to the FDA of an IND which must become effective before human clinical trials may begin and must be updated annually; ● completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication in accordance with good clinical practice (“GCP”); ● submission to the FDA of an NDA or BLA after completion of all pivotal clinical trials; ● a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the NDA or BLA for review; ● satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the active pharmaceutical ingredient (“API”), and finished drug product are produced and tested to assess compliance with good manufacturing practices (“cGMP”) regulations; and ● FDA review and approval of an NDA or BLA prior to any commercial marketing or sale of the drug in the United States. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies. The IND also includes results of animal studies or other human studies with the investigational new drug, as appropriate, as well as manufacturing information, analytical data and any other available clinical data or literature to support the use of the investigational new drug. An IND must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to the proposed clinical trials. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before clinical trials can begin. Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence. 15 Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators in accordance with GCP, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s institutional review board (“IRB”) before the trial may be initiated, and the IRB must monitor the study until completed. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. The clinical investigation of a drug or biologic is generally divided into three phases. Although the phases are usually conducted sequentially, they may overlap or be combined. The three phases of an investigation are as follows: ● Phase I . Phase I includes the initial introduction of an investigational new drug into humans. Phase I clinical trials are typically closely monitored and may be conducted in patients with the target disease or condition or in healthy volunteers. These studies are designed to evaluate the safety, dosage tolerance, pharmacokinetics, absorption, distribution and metabolism and pharmacologic actions of the investigational drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness. During Phase I clinical trials, sufficient information about the investigational drug’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase II clinical trials. The total number of participants included in Phase I clinical trials varies but is generally in the range of 20 to 80. ● Phase II . Phase II generally includes controlled clinical trials conducted to preliminarily or further evaluate the effectiveness of the investigational drug for a particular indication(s) in patients with the disease or condition under study, to determine dosage tolerance and optimal dosage, and to identify possible adverse side effects and safety risks associated with the drug. Phase II clinical trials are typically well-controlled, closely monitored, and conducted in a limited patient population, usually involving no more than several hundred participants. ● Phase III . Phase III clinical trials are generally controlled clinical trials conducted in an expanded patient population generally at geographically dispersed clinical trial sites. They are performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to further evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the investigational drug product, and to provide an adequate basis for product approval. Phase III clinical trials usually involve several hundred to several thousand participants. A pivotal study is a clinical study which adequately meets regulatory agency requirements for the evaluation of a drug candidate’s efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal studies are also Phase III studies but may be Phase II studies if the trial design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need. The FDA, the IRB or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access to certain data from the study. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate. Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA or BLA requesting approval to market the product for one or more indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of the use of a product, or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product and to demonstrate that the company is able to manufacture the product according to specified quality and manufacturing standards and requirements and to the satisfaction of the FDA. 16 After an NDA or BLA submission is received by FDA, the FDA has 60 days to decide whether to accept it for filing so it can be reviewed. Once the NDA or BLA submission has been accepted for filing, within 60 days following submission, the FDA’s goal is to review applications for new molecular entities within ten months of the filing date or, if the application relates to a serious or life-threatening indication and demonstrates the potential to provide a significant improvement in safety or effectiveness over currently marketed therapies, six months from the filing date. The review process can be significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations. After the FDA evaluates the NDA or BLA and conducts inspections of manufacturing facilities where the drug product and/or its active pharmaceutical ingredient will be produced, it may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A complete response letter indicates that the review cycle of the application is complete, and the application is not ready for approval. A complete response letter may require additional clinical data and/or an additional pivotal Phase III clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. Even if such additional information is submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval. The FDA may grant accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, and requiring the company to conduct confirmatory trials. If the confirmatory trials fail to verify clinical benefit, then FDA may withdraw the approval. The FDA could also approve the NDA or BLA with a risk evaluation and mitigation strategy (REMS) to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase IV clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods to determine the overall survival benefit of the drug. After regulatory approval of a drug product is obtained, manufacturers are required to comply with a number of post-approval requirements. The holder of an approved NDA or BLA must report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional labeling for the approved product. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval to ensure and preserve the long-term stability of the drug product. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and record keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance. We expect to rely on third parties for the production of clinical and commercial quantities of our future product candidates. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production or distribution or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA or BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and precautions, contraindications and other use restrictions, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development. 17 Expedited Development and Review Programs for Drugs The FDA maintains several programs intended to facilitate and expedite development and review of new drugs and biologics to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions. These programs include Fast Track designation, Breakthrough Therapy designation, Priority Review and Accelerated Approval, and the purpose of these programs is to either expedite the development or review of important new drugs to get them to patients more quickly than standard FDA review timelines typically permit. A drug is eligible for Fast Track designation if it is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such disease or condition. Fast Track designation provides increased opportunities for sponsor interactions with the FDA during preclinical and clinical development, in addition to the potential for rolling review once a marketing application is filed. Rolling review means that the agency may review portions of the marketing application before the sponsor submits the complete application. In addition, a drug may be eligible for Breakthrough Therapy designation if it is intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Breakthrough Therapy designation provides all the features of Fast Track designation in addition to intensive guidance on an efficient drug development program, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate. Any product submitted to the FDA for approval, including a product with Fast Track or Breakthrough Therapy designation, may also be eligible for additional FDA programs intended to expedite the review and approval process, including Priority Review designation and Accelerated Approval. A product is eligible for Priority Review designation, once an NDA or a biologics license application, or BLA, is submitted, if the drug that is the subject of the marketing application has the potential to provide a significant improvement in safety or effectiveness in the treatment, diagnosis or prevention of a serious disease or condition. Under priority review, the FDA’s goal date to take action on the marketing application is six months compared to ten months for a standard review. Products are eligible for Accelerated Approval if they can be shown to have an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, which is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Accelerated Approval is usually contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies that are usually required to be underway prior to approval or within a specified timeframe after the date of approval to verify and describe the product’s clinical benefit. The FDA may withdraw approval of a drug, or an indication approved under Accelerated Approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, the FDA generally requires, as a condition for Accelerated Approval, that all advertising and promotional materials intended for dissemination or publication within 120 days of marketing approval be submitted to the agency for review during the pre-approval review period. After the 120-day period has passed, all advertising and promotional materials must be submitted at least 30 days prior to the intended time of initial dissemination or publication. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA review or approval may not be shortened. Furthermore, Fast Track designation, Breakthrough Therapy designation, Priority Review and Accelerated Approval do not change the scientific or medical standards for approval or the quality of evidence necessary to support approval, though they may expedite the development or review process. 18 Orphan Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug or biologic in the United States will be recovered from sales in the United States for that drug or biologic. Orphan drug designation must be requested before submitting a BLA or NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDA applicant to receive FDA approval for a particular active moiety to treat a rare disease for which the FDA has granted orphan designation is entitled to a seven-year exclusivity period in the United States for the specific product and the specific indication for which orphan designation was granted. During the seven-year exclusivity period, the FDA may not approve any other sponsor’s application to market the same drug for the same indication, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues or consent by the exclusivity holder. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same indication, or the same drug for a different indication. Other benefits of orphan drug designation include tax credits for certain research and an exemption from the user fee required to submit an NDA, as long as the NDA does not seek approval of an indication that has not received orphan drug designation. The Rare Pediatric Disease Designation and Priority Review Voucher Program Under the Rare Pediatric Disease Priority Review Voucher Program, the FDA may award a priority review voucher to the sponsor of an approved marketing application for a product that treats or prevents a rare pediatric disease. A rare pediatric disease is a serious or life-threatening disease or condition that affects less than 200,000 persons in the United States; affects more than 200,000 persons in the United States with no reasonable expectation of recovering the cost of developing and making the drug available in the United States; or is an orphan subset of a disease or condition that otherwise affects 200,000 or more persons in the United States. A voucher may be awarded only upon approval of a rare pediatric disease product application. A rare pediatric disease product application is a marketing application that meets the following criteria: the application is for a product that treats or prevents a rare pediatric disease; the application must be deemed eligible for priority review; the application must not seek approval for an adult indication; the product must not contain an active moiety or ingredient (as applicable) that has been previously approved by the FDA; the application must be submitted under section 505(b)(1) of the FDCA; and the application must rely on clinical data derived from studies examining a pediatric population and dosages of the drug intended for that population such that the approved product can be adequately labeled for the pediatric population. At a sponsor’s request, the FDA may designate a product as a product for a rare pediatric disease and the application for the new product as a rare pediatric disease product application. A sponsor must notify the FDA, upon submission of the rare pediatric disease application, of its intent to request a voucher. The FDA may revoke a rare pediatric disease priority review voucher if the product for which it was awarded is not marketed in the United States within 365 days of the product’s approval. The voucher, which is transferable to another sponsor, may be submitted with a subsequent application and entitles the holder to priority review of that application. The sponsor using a rare pediatric disease priority review voucher must notify FDA of its intent to submit the voucher with the NDA at least 90 days prior to submission of the application and must pay a priority review user fee determined by the FDA in addition to any other required user fee. Under the FDA’s current performance goals, the FDA’s goal is to take action on a priority review application within six months. The rare pediatric disease priority review voucher program began to sunset on December 20, 2024, and, under current law, the FDA may not award rare pediatric disease priority review vouchers after September 30, 2026. Renewal of the PRV Voucher Program is subject to approval by Congress and it is currently uncertain whether the program will be renewed and whether any such renewal will be retroactively effective. U.S. Patent Term Restoration Depending upon the timing, duration, and specifics of the FDA approval of the use of our current and potential product candidates, some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (“Hatch-Waxman Amendments”). The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA or BLA plus the time between the submission date of a BLA or NDA and the approval of that application. Only one patent applicable to an approved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. 19 Disclosure of Clinical Trial Information Sponsors of clinical trials of FDA-regulated drugs and biologics are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials no later than one year after the primary completion date of the trial. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial. Extensions may be available for good cause. Extensions may be available for good cause. Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design. Pediatric Information Under the Pediatric Research Equity Act (“PREA”), NDAs and BLAs must contain data to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grant full or partial waivers, or deferrals, for submission of data. Unless otherwise required by regulation, PREA does not apply to any product with orphan product designation except a product with a new active ingredient that is a molecularly targeted cancer product intended for the treatment of an adult cancer and directed at a molecular target determined by FDA to be substantially relevant to the growth or progression of a pediatric cancer that is subject to an NDA or BLA submitted on or after August 18, 2020. The Best Pharmaceuticals for Children Act (“BPCA”) provides a six-month extension of unexpired exclusivity if certain conditions are met. For NDAs, pediatric exclusivity will attach to unexpired nonpatent and patent exclusivity listed in the Approved Drug Products With Therapeutic Equivalence Evaluations for any drug containing same active moiety as the drug studied. Conditions for earning pediatric exclusivity include the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, FDA making a written request for pediatric studies, the applicant agreeing to perform and completing those studies, and the applicant reporting on the requested studies within the statutory timeframe for pediatric exclusivity to be granted. Applications and supplements proposing a labeling change as a result of a pediatric study conducted under the BPCA are treated as priority applications, with all of the benefits that designation confers. Post-Approval Requirements Once an NDA or BLA is approved, maintaining post-approval compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources. Manufacturers and other entities involved in the manufacture and distribution of approved products are required to register establishments where the approved products are made with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with GMP and other laws. Rigorous and extensive FDA regulation of products continues after approval, particularly with respect to GMP. We rely, and expect to continue to rely, on third parties for the production and distribution of clinical and commercial quantities of any products that we may commercialize. Manufacturers of our products are required to comply with applicable requirements in the GMP regulations, including quality control and quality assurance and maintenance of records and documentation. Other post-approval requirements include reporting of GMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After an NDA or BLA is approved, the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also may perform certain confirmatory tests on lots of some products before releasing the lots for distribution by the manufacturer. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain GMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval. We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. 20 Hatch-Waxman Amendments and Exclusivity Section 505 of the FDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published literature, in support of its application. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. ANDAs are termed “abbreviated” because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo or other testing. The generic version must deliver the same amount of active ingredients into a subject’s bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug. In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims that cover the applicant’s drug or a method of using the drug. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA. Upon submission of an ANDA or a 505(b)(2) NDA, an applicant must certify to the FDA that (1) no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through the last type of certification, also known as a paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired. If the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must send notice of the Paragraph IV certification to the NDA and patent holders once the application has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the paragraph IV certification. If the paragraph IV certification is challenged by an NDA holder or the patent owner(s) asserts a patent challenge to the paragraph IV certification, the FDA may not approve that application until the earlier of 30 months from the receipt of the notice of the paragraph IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in the applicant’s favor or settled, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA applicant files a paragraph IV certification, the NDA holder or patent owner(s) regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. The FDA also cannot approve an ANDA or 505(b)(2) application until all applicable non-patent exclusivities listed in the Orange Book for the branded reference drug have expired. For example, a pharmaceutical manufacturer may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity, or NCE, which is a drug containing an active moiety that has not been approved by FDA in any other NDA. An “active moiety” is defined as the molecule responsible for the drug substance’s physiological or pharmacologic action. During that five-year exclusivity period, the FDA cannot accept for filing (and therefore cannot approve) any ANDA seeking approval of a generic version of that drug or any 505(b)(2) NDA that relies on the FDA’s approval of the drug, provided that that the FDA may accept an ANDA four years into the NCE exclusivity period if the ANDA applicant also files a Paragraph IV certification. 21 A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant. Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2) application for the protected modification until after that three-year exclusivity period has run. However, unlike NCE exclusivity, the FDA can accept an application and begin the review process during the exclusivity period. Biosimilars and Exclusivity The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created an abbreviated approval pathway for biological products shown to be highly similar to, or interchangeable with, an FDA-licensed reference biological product. The FDA has issued several guidance documents outlining an approach to review and approval of biosimilars. Biosimilarity, which requires that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical studies, animal studies, and clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. The BPCIA includes, among other provisions: ● A 12-year exclusivity period from the date of first licensure, or BLA approval, of the reference product, during which approval of a 351(k) application referencing that product may not be made effective; ● A four-year exclusivity period from the date of first licensure of the reference product, during which a 351(k) application referencing that product may not be submitted; and ● An exclusivity period for certain biological products that have been approved through the 351(k) pathway as interchangeable biosimilars. The BPCIA also establishes procedures for identifying and resolving patent disputes involving applications submitted under section 351(k) of the PHSA. The BPCIA is complex and its interpretation and implementation by the FDA remains unpredictable. In addition, government proposals have sought to reduce the 12-year reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. As a result, the ultimate effect, implementation, and meaning of the BPCIA is subject to uncertainty. Failure to comply with the applicable U.S. requirements after approval may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Europe/Rest of World Government Regulation In addition to regulations in the United States, we may be subject to a variety of regulations in other jurisdictions governing, among other things, clinical trials and any commercial sales and distribution of our future product candidates. Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials. In Europe, for example, a clinical trial application (“CTA”), must be submitted to national health authorities and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed. 22 Following the U.K.’s exit from the European Union, a separate regulatory regime applies in the U.K. to clinical trials and licensing of medicines. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. To obtain regulatory approval of an investigational drug under EU regulatory systems, we must submit a marketing authorization application. The EMA is responsible for the scientific evaluation of centralized MAA. Once granted by the European Commission, the centralized marketing authorization is valid in all EU Member States, Iceland, Norway and Liechtenstein. The application used to file the NDA or BLA in the United States is similar to that required in Europe, with the exception of, among other things, country-specific document requirements. For other countries outside of the EU, such as countries in Eastern Europe that are not part of the EU, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Authorization Procedures in the European Union In all cases, the application for marketing approval requires the completion of clinical trials. Clinical trials are currently regulated under Directive 2001/20/EC. EU directives are not directly applicable in the Member States. They have to be transposed into national law. National law transposing EU directives often varies to a great extent. However, in April 2014 a new regulation on clinical trials on medicinal products for human use was adopted. Regulations are directly applicable in the Member States, so they generally lead to greater harmonization. Regulation 536/2014 (“CTR”), entered into force on in June 2014. The CTR will harmonize the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, or CTIS, which will contain a centralized EU portal and database for clinical trials. The exact timing of the Regulation’s application depends on confirmation of full functionality of CTIS through an independent audit. Medicines can be authorized in the EU by using either the centralized authorization procedure or national authorization procedures. ● Centralized Procedure (regulated in Regulation (EC) 726/2004). Under the Centralized Procedure a so-called Community Marketing Authorization is issued by the European Commission, based on the opinion of the Committee for Medicinal Products for Human Use of the European Medicines Agency (“EMA”). The Community Marketing Authorization is valid throughout the entire territory of the European Economic Area (“EEA”) (which includes the 27 Member States of the EU plus Norway, Liechtenstein and Iceland). The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products, and medicinal products indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, autoimmune and viral diseases. The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the medicine concerned is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health. 23 ● Cooperative Authorization Procedures (regulated in Directive 2001/83/EC and implemented into Member States’ national law). There are also two other possible routes to authorize medicinal products in several countries, which are available for investigational drug products that fall outside the scope of the centralized procedure: ● Decentralized Procedure. Using the Decentralized Procedure, an applicant may apply for simultaneous authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized procedure. Under the Decentralized Procedure the applicant chooses one country as Reference Member State. The regulatory authority of the Reference Member State will then be in charge of leading the assessment of the marketing authorization application. ● Mutual Recognition Procedure. In the Mutual Recognition Procedure, a medicine is first authorized in one EU Member State, in accordance with the national procedures of that country. Following this, further marketing authorizations can be sought from other EU countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization. ● Furthermore, there is the option to obtain a national authorization in just one Member State. In the EU, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical entity, and there is a risk that products may not qualify for data exclusivity. Australia Regulation In Australia, the relevant regulatory body responsible for the pharmaceutical industry is the Therapeutics Goods Administration, or TGA. The TGA has a Clinical Trial Notification (CTN) scheme and a Clinical Trial Approval (CTA) scheme to allow for clinical trials to proceed in Australia with an investigational product. Most clinical trials require Clinical Trial Notification via an electronic submission prior to commencing the clinical trial. In addition to the above-mentioned competent authority there are local competent authorities, human research ethic committee (HREC), ethics committees (ECs), IRBs and other regulatory authorities at federal, state or local levels who may need to be consulted based on the applicable laws and regulations. After we have completed our clinical trials, we must obtain marketing authorization before we can market our product in Australia. The approval process ensures that the product is safe, performs as intended and meets the appropriate standards for use in Australia. Just like with the FDA and EMA, quality, preclinical and clinical data is submitted to gain marketing authorization. Once the TGA reviews the application it aims to make a decision within 255 working days. The registration process is designed to take, on average, 330 calendar days (11 months), including the time for applicant activities. Once approval is granted, the product will be added to the Australian Register of Therapeutic goods, or the ARTG, the electronic register of therapeutic goods that are available for use in Australia. A five-year data exclusivity period commences on the day marketing approval is granted in Australia for any new active component. During this time period a third party may seek regulatory approval for a biosimilar product, however the third party must submit their own data package and may not rely on any submissions to the TGA that is under the data exclusivity period. Other Health Care Laws We may also be subject to healthcare regulation and enforcement by the U.S. federal government and the states and foreign governments where we may market our product candidates, if approved. The U.S. laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, physician sunshine and privacy and security laws and regulations with corresponding laws in non-U.S. countries. The U.S. federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject to evolving interpretations. In the past, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based on sham consulting and other financial arrangements with physicians. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. The majority of states also have anti-kickback laws which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, including commercial insurers. 24 Additionally, the U.S. Civil False Claims Act prohibits knowingly presenting or causing the presentation of a false, fictitious or fraudulent claim for payment to the United States government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the False Claims Act can result in very significant monetary penalties and treble damages. The federal government is using the False Claims Act, and the accompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the United States, for example, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multi-billion-dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws. HIPAA also created new federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, (collectively, “the Affordable Care Act”), among other things, imposed new reporting requirements on drug manufacturers for payments made by them to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately and completely the required information may result in civil monetary penalties of up to an aggregate of approximately $0.2 million per year (or up to an aggregate of $1.2 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in an annual submission. Drug manufacturers are required to submit reports to the government by the 90th day of each calendar year. Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of marketing expenditures and pricing information as well as gifts, compensation and other remuneration to physicians. We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by HITECH, and their respective implementing regulations, including the final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing such civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts. Coverage and Reimbursement Sales of our product candidates, once approved, will depend, in part, on the extent to which the costs of our products will be covered by third-party payors, such as government health programs, private health insurers and managed care organizations. Third-party payors generally decide which drugs they will cover and establish certain reimbursement levels for such drugs. In particular, in the United States, private health insurers and other third-party payors often provide reimbursement for products and services based on the level at which the government (through the Medicare or Medicaid programs) provides reimbursement for such treatments. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products. Sales of our products and product candidates, if approved, will therefore depend substantially on the extent to which the costs of products and our product candidates will be paid by third-party payors. Additionally, the market for our products and future product candidates will depend significantly on access to third-party payors’ formularies without prior authorization, step therapy, or other limitations such as approved lists of treatments for which third-party payors provide coverage and reimbursement. Additionally, coverage and reimbursement for therapeutic products can differ significantly from payor to payor. One third-party payor’s decision to cover a particular medical product or service does not ensure that other payors will also provide coverage for the medical product or service or will provide coverage at an adequate reimbursement rate. As a result, the coverage determination process will require us to provide scientific and clinical support for the use of our products to each payor separately and will be a time-consuming process. 25 In addition, the United States government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our future net revenue and results. Decreases in third-party reimbursement for our products and future product candidates or a decision by a third-party payor to not cover our products or future product candidates could reduce physician usage of our products and future product candidates, if approved, and have a material adverse effect on our sales, results of operations and financial condition. Health Care Reform In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. There have been and continue to be a number of initiatives at the United States federal and state levels that seek to reduce healthcare costs. In particular, in the United States, the Affordable Care Act has had, and is expected to continue to have, a significant impact on the healthcare industry. The Affordable Care Act was designed to expand coverage for the uninsured while at the same time containing overall healthcare costs. The Affordable Care Act, among other things, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts, which, through subsequent legislative amendments, was increased to 70%, off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D. Substantial new provisions affecting compliance were also enacted, which may require us to modify our business practices with healthcare providers and entities. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act. If a law is enacted, many if not all of the provisions of the ACA may no longer apply to prescription drugs. While we are unable to predict what changes may ultimately be enacted, to the extent that future changes affect how any future products are paid for and reimbursed by the government and private payers our business could be adversely impacted. During his first term in office, President Trump supported the repeal of all or portions of the ACA. President Trump also issued an executive order in which he stated that it is his administration’s policy to seek the prompt repeal of the ACA and in which he directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of, the provisions of the ACA to the maximum extent permitted by law. As a result of recent electoral developments, it is likely that continued legislative efforts will be pursued to repeal the ACA. We are not able to state with certainty what the impact of potential legislation will have on our business. In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies. Individual states in the United States have also become increasingly active in implementing 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 state and federal 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 reduced demand for our future product candidates or additional pricing pressures. 26