Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report.
Overview
We are a clinical-stage pharmaceutical company dedicated to the discovery, development, and commercialization of innovative therapies for the treatment of solid tumors and other serious diseases. Our investigational product, certepetide (formerly known as LSTA1 or CEND-1), is designed to activate a novel uptake pathway (the C-end rule active transport mechanism) that allows co-administered or tethered (i.e., molecularly bound) anti-cancer drugs to target and penetrate solid tumors more effectively. Certepetide actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are expected to remain unaffected. Certepetide has also been shown to modify the tumor microenvironment (“TME”) by reducing T-regulatory cells and augmenting cytotoxic T cells, thereby making tumors more susceptible to immunotherapies while also inhibiting the metastatic cascade (i.e., the spread of cancer to other parts of the body). We, our collaborators and other researchers have amassed and continue to amass significant non-clinical data demonstrating enhanced delivery of a range of existing and emerging anti-cancer therapies, including chemotherapeutics, immunotherapies, and RNA-based therapeutics. In addition, certain preclinical data using certepetide in combination with antibody drug conjugates (ADCs) has been generated as part of our research collaboration with Catalent. These data were presented at a scientific meeting during the fourth quarter of 2025. To date, certepetide has also demonstrated favorable safety, tolerability and activity in completed and ongoing clinical trials designed to enhance delivery of standard-of-care chemotherapy, with and without added immunotherapy, for pancreatic cancer. Certepetide is or has been the subject of several Phase 2 clinical studies globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), cholangiocarcinoma, appendiceal cancer, colon cancer and glioblastoma multiforme in combination with a variety of anti-cancer regimens.
Our leadership team has amassed many decades of collective biopharmaceutical and pharmaceutical product development experience across a variety of therapeutic categories and at all stages of development from preclinical through to product registration and launch. Our goal is to develop and commercialize products that address important unmet medical needs.
Recent Developments
Proposed Acquisition by Kuva Labs Inc.
On March 6, 2026, we entered into the Merger Agreement, pursuant to which, and upon the terms and subject to the conditions thereof, Purchaser will commence a tender offer to purchase all of our issued and outstanding shares of common stock in exchange for (i) $5.00 per share, net to the seller in cash, without interest, but subject to any applicable withholding of taxes (the “Closing Amount”) plus (ii) one non-tradeable CVR, which represents the contractual right to receive a contingent cash payment of $1.00 per CVR if the Milestone is met as further described in the CVR Agreement. If certain conditions are satisfied and the Offer is consummated, Kuva would acquire any remaining shares for the Offer Price by a merger of Purchaser with and into us. Following completion of the transaction, we will become part of Kuva, a privately-held company, and our common stock will be delisted from Nasdaq. We will also apply to deregister our common stock and cease to be a reporting company under the United States Securities Exchange Act of 1934, as amended. Under the Merger Agreement, the Offer and the Merger will be subject to customary closing conditions for a transaction of this nature. Kuva will be required to close on the Offer so long as there shall be validly tendered a number of Shares that represents (and will represent immediately following the consummation of the Offer) at least a majority of the aggregate voting power of all Shares then outstanding. We cannot predict whether and when the conditions to closing will be satisfied. Until these conditions are satisfied and we and Kuva complete the proposed transaction, our business, operating results and financial condition are exposed to certain risks due to the effect of the pending proposed transaction. Refer to Item 1A. “Risk Factors” for a summary of risks related to the proposed transaction.
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Termination of Qilu Exclusive License and Collaboration Agreement
On January 23, 2026, we and Qilu Pharmaceutical Co., Ltd. (“Qilu”) entered into a Mutual Termination Agreement (the “Termination Agreement”) relating to the Exclusive License and Collaboration Agreement between us (formerly Cend Therapeutics, Inc. (“Cend”)) and Qilu, relating to the research, development and commercialization of certepetide (formerly known as CEND-1), dated February 11, 2021, as amended on April 26, 2021, and further amended by the Side Letter Agreement, dated November 10, 2023 (collectively the “License and Collaboration Agreement”).
Previously, Cend (which was subsequently acquired by us) and Qilu entered into the License and Collaboration Agreement, pursuant to which we granted Qilu a royalty-bearing exclusive license for the research, development and commercialization of certepetide in the Greater China territory (including Mainland China, Hong Kong, Macau, and Taiwan). Pursuant to the License and Collaboration Agreement, we were eligible to receive up to $200 million in development and commercial milestone payments and royalties ranging from 10% to 15% on licensed product sales. In consideration for the license, Qilu made an upfront payment of $10.0 million to Cend, which was recognized as revenue by Cend prior to our acquisition of Cend on September 15, 2022 (the “Cend Merger”). In addition, Cend received and recognized as revenue a $5.0 million development milestone prior to the Cend Merger. We have not received any additional development and commercial milestone payments since the Cend Merger.
Pursuant to the Termination Agreement, the License and Collaboration Agreement is terminated, effective as of January 23, 2026, and is no longer in effect, except that the termination does not relieve the parties from obligations under the License and Collaboration Agreement that accrued prior to the termination and certain other provisions expressly indicated to survive the termination.
Results of Operations
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and 2024:
Year Ended December 31,
2025 2024 Change
Revenue $ 170 $ 1,000 $ (830)
Operating Expenses:
Research and development 7,949 11,334 (3,385)
General and administrative 10,430 12,075 (1,645)
Total operating expenses 18,379 23,409 (5,030)
Loss from operations (18,209) (22,409) 4,200
Total other income 661 1,626 (965)
Benefit from income taxes (962) (798) 164
Net loss $ (16,586) $ (19,985) $ 3,399
Overall, net losses were $16.6 million and $20.0 million for the years ended December 31, 2025 and 2024, respectively.
Revenue
Revenue totaled $0.2 million and $1.0 million for the years ended December 31, 2025 and 2024, in connection with certain upfront license fees in the current year and the Exclusive License and Collaboration Agreement with Kuva in the prior year.
Operating Expenses
For the year ended December 31, 2025, operating expenses totaled $18.4 million compared to $23.4 million for the year ended December 31, 2024, representing a decrease of $5.0 million or 21.5%.
Operating expenses comprise the following:
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• Research and development expenses were approximately $7.9 million for the year ended December 31, 2025, compared to $11.3 million for the year ended December 31, 2024, representing a decrease of approximately $3.4 million, or 29.9%. This was primarily due to a reduction in Clinical department expenses as a result of the elimination of several positions during the year and reversal of the bonus accrual in the fourth quarter, lower spend on the ASCEND trial, a reduction in patient treatment costs and clinical research organization (“CRO”) expenses associated with our Phase 2a proof-of-concept BOLSTER trial and lower spend on chemistry, manufacturing and controls (“CMC”) partially offset by an increase in expenses associated with our Phase 2a glioblastoma multiforme (“GBM”) proof-of-concept study.
• General and administrative expenses were approximately $10.4 million for the year ended December 31, 2025, compared to $12.1 for the year ended December 31, 2024, representing a decrease of approximately $1.6 million or 13.6%. This was primarily due to a reversal of the bonus accrual in the fourth quarter, one-off settlement costs in the prior year in addition to lower spending on consulting in the current year partially offset by a credit loss allowance, and impairment of a non-financial asset.
Historically, to minimize our use of cash, we have used a variety of equity instruments as compensation to employees, consultants, directors and other service providers. The use of these equity instruments has resulted in non-cash charges to the results of operations, which has been significant in the past.
Other Income
Total other income was $0.7 million for the year ended December 31, 2025, compared to $1.6 million for the year ended December 31, 2024, representing a decrease of approximately $1.0 million or 59.3%. This was primarily due to a reduction in investment income from cash, cash equivalents and marketable securities in the current year as a result of lower investment balances.
Income Tax Benefit
In January 2025, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (the “Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $0.9 million. The $1.0 million of our NJ NOL tax benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).
In March 2024, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $0.7 million. The $0.8 million of our NJ NOL tax benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).
Analysis of Liquidity and Capital Resources
At December 31, 2025, we had cash and cash equivalents of approximately $16.0 million, working capital of approximately $14.6 million, and stockholders’ equity of approximately $14.9 million.
During the year ended December 31, 2025, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation.
Net cash provided by or (used in) operating, investing and financing activities were as follows (in thousands):
Year Ended December 31,
2025 2024
Net cash used in operating activities $ (15,949) $ (19,356)
Net cash provided by investing activities 15,086 13,233
Net cash provided by (used in) financing activities 599 (206)
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Operating Activities
Our cash used in operating activities during the year ended December 31, 2025 totaled approximately $15.9 million, comprising (i) our net loss of $16.6 million, as adjusted for non-cash income and expenses totaling $1.9 million (which includes adjustments for equity-based compensation, depreciation and amortization, impairment of a non-financial asset, amortization/accretion of marketable securities and credit loss allowance), and (ii) changes in operating assets and liabilities using approximately $1.3 million.
Our cash used in operating activities during the year ended December 31, 2024 totaled approximately $19.4 million, comprising (i) our net loss of $20.0 million, as adjusted for non-cash income and expenses totaling $1.5 million (which includes adjustments for equity-based compensation, depreciation and amortization, loss from equity method investment, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $0.9 million.
Investing Activities
Our cash provided by investing activities during the year ended December 31, 2025 totaled approximately $15.1 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities).
Our cash provided by investing activities during the year ended December 31, 2024 totaled approximately $13.2 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities) partially offset by an investment of $0.1 million in Impilo.
Financing Activities
Our cash provided by financing activities during the year ended December 31, 2025 totaled $0.6 million in proceeds primarily from the issuance of shares of $0.8 million through our ATM Agreement (as defined below) partially offset by tax withholding-related payments on net share settlement equity awards to employees of $0.3 million.
Our cash used in financing activities during the year ended December 31, 2024 totaled $0.2 million, consisting primarily of tax withholding-related payments on net share settlement equity awards to employees.
Liquidity and Capital Requirements Outlook
As of December 31, 2025, we had cash and cash equivalents of approximately $16.0 million. We will need to raise additional capital to fund our planned future operations. However, we cannot guarantee that we will be able to obtain sufficient additional funding or that if we do obtain additional funding, that such funding will be obtainable on terms satisfactory to us.
Based on our current business plan and existing capital resources, management has concluded that there is substantial doubt regarding our ability to continue as a going concern for a period of twelve months from the date of issuance of the accompanying consolidated financial statements. The accompanying financial statements have been prepared on a going concern basis and do not include any adjustments to the carrying amounts and classification of assets and liabilities that may be necessary if we were unable to continue as a going concern.
To meet our short and long-term liquidity needs, we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of pharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations, and other sources of non-dilutive funding. As discussed above under recent developments, in January 2026, we entered into the Term Sheet with Kuva for the proposed acquisition of us by Kuva. However, there can be no assurance that the Purchase Agreement will be entered into and the Offer and the Merger will be consummated. Refer to Item 1A. “Risk Factors” for a summary of risks related to the proposed transaction. If the proposed acquisition does not occur, we may pursue other strategic alternatives. Our future capital requirements are difficult to forecast and will depend on many factors, including the timing and nature of the proposed acquisition by Kuva, any other strategic transactions that we undertake and our ability to establish and maintain collaboration partnerships, in-license/out-license or other similar arrangements and the financial terms of such agreements.
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On June 4, 2021, we entered into the ATM Agreement with H.C. Wainwright & Co., LLC as sales agent, in connection with an “at the market offering” under which we from time to time may offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million. As of the date of this filing and so long as our public float remains below $75.0 million, we are subject to limitations pursuant to General Instruction I.B.6 of Form S-3 (the “Baby Shelf Limitation”), which limits the amount we can offer to up to one-third of our public float during any trailing 12-month period. Subsequent to the filing of a prospectus supplement to our Registration Statement on Form S-3 (File No. 333-279034) relating to the at the market offering on August 21, 2024, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $29.6 million. Pursuant to the Baby Shelf Limitation, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of such prospectus supplement filing, the aggregate amount of securities that we are permitted to offer and sell pursuant to the ATM Agreement as of the date of this Annual Report on Form 10-K, is $9,855,890, which amount is equal to one-third of the aggregate market value of our common stock held by non-affiliates as of August 20, 2024. If our public float exceeds $75.0 million on a future measurement date, the Company will no longer be subject to the Baby Shelf Limitation. During the twelve months ended December 31, 2025, the Company issued 262,765 shares of common stock under the ATM Agreement for net proceeds of $784,761. Since inception through December 31, 2025, the Company has issued 330,938 shares of common stock under the ATM Agreement for net proceeds of $1,065,608.
While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; our stock price may not reach levels necessary to induce option or warrant exercises; and asset sales may not be possible on terms we consider acceptable. If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
An accounting policy is considered to be critical if it is important to our financial condition and results of operations and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements.
Share-Based Compensation
We expense all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. For awards with performance-based vesting criteria, we estimate the probability of achievement of the performance criteria and recognize compensation expense related to those awards expected to vest. We determine the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. Share-based compensation expense also includes an estimate, which is made at the time of the grant, of the number of awards that are expected to be forfeited. The fair value of our restricted stock and restricted stock units is based on the closing market price of our common stock on the date of grant.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.