What changed in this filing

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Item 1A. Risk Factors

2024-09-19 compared with 2023-09-14 · 35 added, 93 removed, 330 unchanged (28% of the section changed)

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Department of Health and Human Services (“FDA”) and analogous authorities in other jurisdictions outside of the United States (“Regulatory Authorities”), we must conduct extensive clinical studies to demonstrate safety and efficacy.

Clinical testing is expensive, time consuming and uncertain as to outcome.

Clinical testing is expensive, time consuming and uncertain as to the outcome.

Any delays in the commencement or completion of our ongoing, planned or future clinical trials could significantly increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues.

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● identifying and activating investigators and clinical trial sites to conduct trials;

● obtaining approval from one or more independent institutional review board (“IRB”) or Ethics Committee (“EC”) at each clinical trial site before each trial may be initiated;

● obtaining approval from one or more independent institutional review boards (“IRB”) or Ethics Committee (“EC”) at each clinical trial site before each trial may be initiated;

● IRBs/ECs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial;

● changes to clinical trial protocol;

● changes to a clinical trial protocol;

● clinical sites deviating from trial protocol or dropping out of a trial;

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Delays in initiating a new phase of clinical trials resulting from action by FDA or any other Regulatory Authority would delay the approval obtainment and commercialization of our product candidates and our ability to generate revenue, which would have an adverse effect on our business.

For example, as discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this Annual Report on Form 10-K, the FDA has re-imposed a human drug exposure limit equating to repeat doses of approximately 3 mg/kg per week, a limit which was previously removed during the RIZE study (the “New Restrictions”).

As is customary in pediatric drug development, there is a progression of the inclusion of younger participants as a program advances through different stages and continues to demonstrate a good safety profile and a prospect of benefit for children based on previous stages;

and the Company’s progression to include younger participants is dampened by the imposition of the New Restrictions by the FDA.

The Company and FDA have discussed potential solutions that could enable removal of the New Restrictions and as a result, the Company is pursuing some additional nonclinical studies to potentially address FDA’s concerns, in parallel with the initiation and advancement of the Phase 3 (“sunRIZE”) study outside of the U.S.

It is possible that the Company may not satisfy FDA’s nonclinical concerns, which will cause further delays and negatively impact the Company’s development plans for congenital hyperinsulinism (“HI”) in the U.S.

The clinical hold in the U.S.

on RZ358 may impact our development plans and may impact our ability to access the capital markets.

Our most advanced product candidate, RZ358, is currently under clinical hold in the U.S.

It may take considerable time and expense to respond to the New Restrictions that have been placed on RZ358 by the FDA, and no assurance can be given that the FDA will remove the New Restrictions or that we will receive FDA approval for RZ358, in which case our business and prospects will likely suffer material adverse consequences.

In May 2023, based on historical rat toxicology found during an early RZ358 development program, the FDA affirmed its decision to impose the New Restrictions after the Company completed its multinational Phase 2b RIZE study conducted in participants 2 years of age and older, which consisted of the age restriction of 12 years and above for U.S.

patients, and to re-impose impose a human drug exposure limit equating to repeat doses of approximately 3 mg/kg per week, a limit which was previously removed during the RIZE study.

The New Restrictions delay the Company’s progression to include younger participants and consequentially delay the sunRIZE study in the U.S.

A clinical hold for RZ358 and sunRIZE continues to be in place in the U.S., and we do not know whether or when the clinical hold for the development of RZ358 will be lifted.

However, we currently expect to commence the sunRIZE study outside of the U.S.

as we have concluded our pre-sunRIZE regulatory and scientific advice meetings with Regulatory Authorities outside of the U.S.

and have reached agreements on the design of the sunRIZE study that will include participants 3 months of age and older.

Positive or promising results from clinical trials of RZ358 conducted in jurisdictions outside of the U.S.

may not be predictive of similar results, or may not be replicated, in clinical trials within the U.S.

Accordingly, even if we continue to observe the lack of adverse liver findings in the sunRIZE study outside of the U.S., it is not guaranteed that the FDA will accept such findings and lift the New Restrictions which could impact our development plans or ability to file for approval or market RZ358 in the U.S.

It may take a considerable period of time, the length of which is not certain at this time, and expense for us to fully address FDA’s concerns, if at all.

Even if we are able to fully respond to the FDA’s questions, the FDA may subsequently make additional requests that we would need to fulfill prior to the lifting of the New Restrictions.

It is possible that we will be unable to fully address the FDA’s concerns and as a result the New Restrictions may never be lifted, and we may never be able to begin the sunRIZE study or complete our clinical trials of RZ358 in the U.S.

Many of the factors that cause, or lead to, a delay in the commencement or completion of the sunRIZE study may also ultimately lead to the denial of regulatory approval from the FDA for RZ358.

If we don’t receive regulatory approval from the FDA for RZ358 our ability to raise capital and the terms of such raise could be impacted.

If we are unable to commercialize RZ358, need to limit the scope of our RZ358 program, or experience significant delays in development, our business, results of operations, financial condition, and our prospects will be adversely affected.

Results of preclinical testing or earlier clinical studies or approval from a Regulatory Authority for the next phase of clinical trials are not necessarily predictive of future results, therefore none of the product candidates we advance into clinical studies may have favorable results in later clinical studies or receive regulatory approval.

Success in preclinical testing does not ensure that clinical studies will generate adequate data to demonstrate the efficacy and safety of an investigational drug or biologic.

Even if our clinical studies produce promising results or a Regulatory Authority provided approval for the next phase of clinical trials, there is no assurance that such results will be replicated or exceeded in later clinical studies.

A number of companies in the biotechnology industry, including those with greater resources and experience, have suffered significant setbacks in clinical studies, even after seeing promising results in earlier preclinical and clinical studies.

We do not know whether our clinical studies will demonstrate adequate efficacy and safety to justify the continuing advancement of a program.

If later stage clinical studies, such as the sunRIZE study to be conducted outside of the U.S., do not produce favorable results, our ability to achieve regulatory approval for our product candidates may be adversely impacted.

Even if we believe that our product candidates have performed satisfactorily in preclinical testing and clinical studies, we may still fail to obtain FDA or other Regulatory Authority approval for our product candidates.

Adverse events in our clinical trials may force us to stop development of our product candidates or prevent regulatory approval of our product candidates.

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and may not be successful in meeting the study’s primary endpoint.

We are initiating and advancing the sunRIZE study outside of the U.S.

Prior to the FDA’s lift of the partial clinical hold in September 2024, we initiated and are advancing the sunRIZE study outside of the U.S.

The sunRIZE study may not produce positive results and meet its primary endpoint outside of the U.S.

We may need to commence and complete additional clinical trials that satisfy the specified primary endpoint criteria in order to obtain necessary regulatory approvals from the EMA for RZ358.

It is possible that we may not observe the lack of adverse liver findings in the sunRIZE study outside of the U.S., which could potentially impact the FDA’s decision regarding the New Restrictions.

We may need to commence and complete additional clinical trials that satisfy the specified primary endpoint criteria in order to obtain necessary regulatory approvals from the EMA for ersodetug.

Conducting clinical trials outside the U.S.

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After the completion of our clinical studies, we cannot predict whether or when we will obtain regulatory approval to commercialize our product candidates and we cannot, therefore, predict the timing of any future revenue from these product candidates.

Even if we achieve positive clinical results and file for regulatory approval, we cannot commercialize any of our product candidates until the appropriate Regulatory Authorities have reviewed and approved the applications for such product candidates.

We cannot assure that the Regulatory Authorities will complete their review processes in a timely manner or that we will obtain regulatory approval for any product candidate we develop.

We cannot provide assurance that the Regulatory Authorities will complete their review processes in a timely manner or that we will obtain regulatory approval for any product candidate we develop.

Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources.

In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in Regulatory Authority policy during the period of product development, clinical studies and regulatory review.

regulatory approval is obtained for a particular drug candidate, the FDA may still impose significant restrictions on marketing, indicated uses and/or require potentially costly post-approval studies or post-approval surveillance.

For example, the label ultimately approved, if any, may include restrictions on use.

Further, the FDA may require that long-term safety data may need to be obtained as a post-approval requirement.

Even if the FDA or a foreign Regulatory Authority approves a product candidate, the approval may impose significant restrictions on the indicated uses, conditions for use, labeling, advertising, promotion, marketing and/or production of such product and may impose requirements for post-approval studies, including additional research and development and clinical trials.

The FDA and other Regulatory Authorities also may impose various civil or criminal sanctions for failure to comply with regulatory requirements, including substantial monetary penalties and withdrawal of product approval.

If we or a Regulatory Authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a Regulatory Authority may impose restrictions on that product, the manufacturing facility or us, including requiring recall or

withdrawal of the product from the market or suspension of manufacturing.

If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a Regulatory Authority may:

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Although we generally do not begin a clinical study unless we believe we have a sufficient supply of a product candidate to complete the clinical study, any significant delay in the supply of raw material components needed to produce a product candidate for a clinical study due to the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing and potential regulatory approval of our product candidates.

If we or our manufacturers are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply of such product candidates, which would impair our ability to generate revenues from the sale of our product candidates.

If we or our manufacturers are unable to purchase these raw materials after regulatory approval has been obtained for our product

candidates, the commercial launch of our product candidates would be delayed or there would be a shortage in supply of such product candidates, which would impair our ability to generate revenues from the sale of our product candidates.

If we successfully commercialize any of our product candidates, we may be required to establish commercial manufacturing capabilities of larger scale.

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Risks Related to Our Business

We could be negatively impacted and unable to raise capital on favorable terms or generate revenue if we are not successful with the sunRIZE study outside of the U.S.

and if the FDA does not lift the New Restrictions on RZ358.

RZ358 is our lead clinical asset.

We have expended considerable resources and efforts on the development of RZ358.

As we continue to pursue the development of RZ358, there is no guarantee that we will be able to successfully complete clinical trials for RZ358 outside of the U.S.

or that the FDA will lift the New Restrictions imposed on RZ358 within the U.S.

If we do not receive positive results from the sunRIZE study outside of the U.S.

or if the FDA continues to impose the New Restrictions by such time, our ability to raise additional capital, if at all, on favorable terms may be impeded by our inability to advance the development of our product candidates.

Changes in financial accounting standards or policies have affected, and in the future may affect, our reported financial condition or results of operations;

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changes in corporate governance policies and practices may impact our business .

We prepare our consolidated financial statements in conformity with GAAP.

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of our financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the recorded amounts of assets, liabilities and net income during the reporting period.

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We expect that the amount of cash used in our operating activities will continue to increase for the next several years.

As of June 30, 2023, we had cash and cash equivalents of $16.0 million and investments in marketable debt securities of $102.3 million that is expected to provide us with adequate capital resources to fund planned activities at least through the third quarter of calendar year 2025.

As of June 30, 2024, we had cash and cash equivalents of $70.4 million and investments in marketable debt securities of $56.7 million that is expected to provide us with adequate capital resources to fund planned activities at least through the second quarter of calendar year 2026.

Since our inception, we have not generated meaningful revenue.

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Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

Although we have determined that our internal control over financial reporting was effective as of June 30, 2023, we cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

After remediation of a material weakness identified during the fiscal quarter ended March 31, 2024, we have determined that our internal control over financial reporting was effective as of June 30, 2024.

However, we cannot provide assurance that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.

Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.

If we are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.

Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Failure to remediate any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Operations outside the United States may be affected by different local politics, business and cultural factors, different regulatory requirements and prohibitions between jurisdictions.

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Operations outside the United States may be affected by different local business and cultural factors, different regulatory requirements and prohibitions between jurisdictions, including the Foreign Corrupt Practices Act and local laws prohibiting corrupt payments, and changes in regulatory requirements for financing activities.

We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

Our collection, use, processing, and cross-border transfer of personal information, including individually identifiable health information, is governed by restrictive regulations.

Our business is broadly regulated by U.S.

and foreign regulatory authorities, and we must comply with all applicable rules and regulations concerning our use, processing, handling, maintenance, and protection of personal information.

In the U.S., the Health Insurance Portability and Accountability Act (“HIPAA”) imposes requirements at the federal level relating to the privacy, security and transmission of individually identifiable health information, while individual states, such as California, have adopted privacy regulations restricting the use of personal information and providing individuals certain rights with respect to the collection and use of their data.

Further, the collection and use of personal information in Europe is governed by the EU’s General Data Protection Regulation and the United Kingdom’s implementation of the same, or the GDPR.

Failure to comply with the requirements of the GDPR and other applicable data protection laws of the EU member states and the United Kingdom, or other applicable privacy rules and regulations in other countries, may result in significant fines and other administrative penalties.

We may be required to put in place additional mechanisms to comply with current and future privacy and data protection regulations applicable to our business.

This may interrupt or delay our development activities and/or require us to change our business practices, which could adversely affect our business, financial condition, results of operations and prospects.

We could recognize losses on securities held in our marketable debt securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

As of June 30, 2024, the fair value of the investments in our marketable debt securities portfolio was approximately $56.7 million.

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Additional factors include, but are not limited to, rating agency downgrades of the securities or our own analysis of the value of the security, defaults by the issuer with respect to the underlying securities, and continued instability in the credit markets.

Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses.

The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

Any of the foregoing factors could result in credit-related loss and result in realized losses.

The process for determining whether allowances are needed for credit-related losses usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

As of June 30, 2024, we had $79,000 in net unrealized losses in our marketable debt securities.

Unrealized losses in our marketable debt securities portfolio may increase in the future due to the aforementioned economic factors.

While our goal is to hold each security until maturity, that may not be possible in light of our policy to preserve capital and liquidity and because investment in securities with unrealized losses has a diminished utility as a source of liquidity prior to maturity.

While our goal

is to hold each security until maturity, that may not be possible in light of our policy to preserve capital and liquidity and because investment in securities with unrealized losses has a diminished utility as a source of liquidity prior to maturity.

Selling securities with an unrealized loss would result in the realization of such losses, which could have an adverse effect on our financial condition and results of operations.

The collapse of certain banks and potentially other financial institutions may adversely impact us.

On March 10, 2023, Silicon Valley Bank (“SVB”) was shut down, followed on March 11, 2023 by Signature Bank and on May 1, 2023 by First Republic Bank whereby, the Federal Deposit Insurance Corporation was appointed as receiver for each of those banks.

As a result, there have been reports of instability at other banks across the globe.

Despite the steps taken to date by U.S.

agencies to protect depositors, the follow-on effects of the events surrounding the failures of SVB, Signature Bank, and First Republic Bank and the pressure on other banks are unknown.

Such effects could include failures of other financial institutions to which we face direct or more significant exposure, and the extent of the impacts relating to financial institution instability or failure is uncertain.

Our investment portfolio did not and currently does not contain any securities of SVB, and we did not have any deposit accounts with SVB.

We are monitoring the situation and intend to minimize any disruptions to our operations should they arise.

However, there may be risks that we have not yet identified, and we cannot guarantee that we will be able to avoid negative consequences directly or indirectly from the foregoing events or other impacts on financial institutions.

Unfavorable global and regional economic, political and health conditions could adversely affect our business, financial condition or results of operations.

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Certain Provisions of Nevada law may have anti-takeover effects.

Certain provisions of Nevada law applicable to us could also delay or make more difficult a merger, tender offer or proxy contest involving us, including Sections 78.411 through 78.444 of the Nevada Revised Statutes, which prohibit a Nevada corporation from engaging in any business combination with any "interested shareholder"

(as defined in the statute) for a period of two years unless certain conditions are met.

In addition, our senior management is entitled to certain payments upon a change in control.

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Moreover, many jurisdictions permit third parties to challenge issued patents in administrative proceedings, which may result in further narrowing or even cancellation of patent claims.

We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any patents, if issued, will provide sufficient protection from competitors.

We cannot predict whether the patent applications we are currently pursuing will be issued as patents in any particular jurisdiction or whether the claims of any patents, if issued, will provide sufficient protection from competitors.

We and our licensors will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.

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We may have to license those patents and pay significant fees or royalties to the owners of the patents in order to keep marketing our products.

This would cause profits on sales to suffer.

This would cause profits from any sales to suffer.

We have been granted patents or licensed patents in the United States, but patent applications that have been, or may in the future be, filed by us may not result in the issuance of additional patents.

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The laws of foreign jurisdictions in which we intend to sell our products may not protect our rights to the same extent as the laws of the United States.

In addition to patent protection, we also rely on trade secrets, proprietary know-how and technology advances.

In addition to patent protection, we also rely on trade secrets, proprietary know-how and technological advances.

We enter into confidentiality agreements with our employees and others, but these agreements may not be effective in protecting our proprietary information.

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The holders of these securities may be expected to exercise or convert such stock options, warrants and convertible securities at a time when we would be able to obtain additional equity capital on terms more favorable than such securities or when our common stock is trading at a price higher than the exercise or conversion price of the securities.

Our common stock may be delisted from the Nasdaq Capital Market if we fail to comply with continued listing standards.

Our common stock is currently traded on Nasdaq under the symbol “RZLT”.

If we fail to meet any of the continued listing standards of Nasdaq, our common stock could be delisted from Nasdaq.

The continued listing standards include specifically enumerated criteria, such as:

$1.00 minimum closing bid price (the “Share Price Condition”);

shareholders’ equity of at least $2.5 million;

500,000 shares of publicly-held common stock with a market value of at least $1 million;

300 round-lot shareholders;

and compliance with Nasdaq’s corporate governance requirements, as well as additional or more stringent criteria that may be applied in the exercise of Nasdaq’s discretionary authority.

In order to obtain the initial listing of our shares for trading on the Nasdaq Capital Market in November 2020, we effected a reverse stock split in the ratio of 50 shares for 1 share in order to comply with the Share Price Criteria.

If the trading price for our shares decreases below $1.00 per share in the future, Nasdaq could delist our shares if the trading price does not subsequently increase above $1.00 per share during prescribed periods and under prescribed conditions set forth in Nasdaq’s listing rules.

Our stock price may be volatile.

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Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our shareholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period or lockup agreements, under Rule 144, or issued upon the exercise of outstanding PFWs, stock options, warrants or other convertible securities, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall.

anticipation of which the market price of our common stock could fall.

The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

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tax law could adversely affect our business.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock.

Changes to tax laws (which changes may have retroactive application) could adversely affect us or the holders of our common stock.

For example, for the fiscal year ended June 30, 2023, we became subject to Internal Revenue Code Section 174 that requires capitalization of the vast majority of research and development costs whereas under prior tax law substantially all of these costs were deductible in the year incurred.

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This could result in an increase in our tax liability or require changes in our business in order to mitigate any adverse effects of changes in tax laws.

Unresolved Staff Comments.

Not required for smaller reporting companies.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors