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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-17 · 335 added, 310 removed, 618 unchanged (51% of the section changed)

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In any such case, the trading price of our common stock could decline.

Risk Factors Summary

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business.

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

• We will need substantial additional funding to fund our operations, and there is substantial doubt about our ability to continue as a going concern.

If we cannot obtain substantial additional funding, we could be forced to delay, reduce or terminate our research and development activities which would have a material adverse effect on our financial condition;

• Our business is substantially dependent on the successful development of our BET inhibitor product candidates;

• We may be unable to develop a lead molecule for the VYN202 program and exercise our option to license the applicable BET inhibitor compounds from Tay;

• We may encounter delays in enrolling patients and successfully completing clinical trials for our product candidates, and may even be prevented from commencing such trials due to factors that are largely beyond our control;

• Clinical drug development is very expensive, time-consuming and uncertain.

Our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates, which could prevent or delay regulatory approval and commercialization;

• New chemical entities may require more time and resources for development, testing and regulatory approval;

• Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified during the development of our product candidates, which could result in the abandonment or limitation of the development of our product candidates or prevent or delay our ability to pursue strategic alternatives for our product candidates;

• Results obtained in non-clinical studies and completed clinical trials may not predict success in later clinical trials;

• Topline and preliminary data from our clinical trials that we announce or publish from time to time may change as additional data become available and are subject to audit and verification procedures that could result in material changes in the final data;

• We have a limited history as a clinical-stage biopharmaceutical company developing product candidates for immuno-inflammatory conditions, which may make it difficult to assess our future viability;

• We may spend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success;

• We are subject to various risks and uncertainties arising out of the completed divestiture of our commercial business;

• We have not obtained regulatory approvals to market our other pipeline product candidates, and we may be delayed in obtaining or fail to obtain such regulatory approvals and to commercialize these product candidates;

• Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products could impair our ability to grow our business;

• We intend to engage in strategic transactions, which could impact our liquidity, increase our expenses and present significant distractions to our management;

• We may decide not to continue developing any of our product candidates at any time during development or of any of our products after approval, which would reduce or eliminate our potential return on investment for those product candidates or products;

• The COVID-19 pandemic could adversely affect our operations, including at our clinical trial sites, as well as the business or operations of our manufacturers, contract research organizations or other third parties with whom we conduct business;

• We are subject to various U.S.

federal, state, local and foreign health care fraud and abuse laws, including anti-kickback, self-referral, false claims and fraud laws, health information privacy and security, and transparency laws, and any violations by us of such laws could result in substantial penalties or other consequences including criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings.

Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business;

• Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market, and distribute our products after clearance or approval is obtained;

• The trading price of the shares of our common stock is volatile, and stockholders could incur substantial losses.

Risks Related to our Financial Position and Need for Capital

We will need substantial additional funding to fund our operations, and there is substantial doubt about our ability to continue as a going concern.

Developing and commercializing biopharmaceutical products and conducting preclinical studies and clinical trials is an expensive and highly uncertain process that takes years to complete.

As of December 31, 2022, we had approximately $31.0 million in cash, cash equivalents and restricted cash.

We received an additional $5.0 million deferred payment in January 2023 from the sale of our MST Franchise.

Based on our current operating plan, we do not have sufficient cash and cash equivalents to fund our anticipated level of operations as they become due during the twelve months following the date of the issuance of the financial statements included herein.

Our estimates may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

The aforementioned factors raise substantial doubt about our ability to continue as a going concern, as reflected in the audit report included with the audited financial statements included elsewhere in this report.

In addition, see “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for further discussion regarding our liquidity.

We may not be able to raise any proceeds from financing transactions.

Accordingly, additional funds may not be obtained for our ongoing operations and we may not succeed in our future operations.

Unless we are able to raise additional capital to finance our operations, our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations, including our product candidate programs.

Our future capital requirements depend on many factors, including:

• milestone payments associated with our development programs;

• the number and development requirements of the product candidates that we may pursue;

• the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our product candidates;

• the costs, timing and outcome of regulatory review of our product candidates;

• the extent to which we in-license or acquire additional product candidates and technologies;

• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

• the impact on the timing of our preclinical studies, on the recruitment, enrollment, conduct and timing of our clinical trials, and on our business, due to the COVID-19 pandemic or any other external or macroeconomic factors;

• our headcount and associated costs as we expand our research and development infrastructure;

• our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates, and earn revenue from such arrangements;

• the ongoing costs of operating as a public company.

Additional capital may not be available when we need it, on terms that are acceptable to us or at all.

If adequate funds are not available to us on a timely basis, we may be required to revise our operating plan in order to:

• delay, limit, reduce or terminate our research and development activities;

• delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for our product candidates.

If we raise additional capital through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.

If we raise additional capital through public or private equity offerings, the ownership interest of our existing shareholders will be diluted and the terms of any new debt securities or equity securities may have a preference over our common stock.

In addition, if we issue warrants or preferred stock in connection with our financing activities, such securities may include terms that are unfavorable to our stockholders, including anti-dilution provisions and other preferences.

In addition, any holders of preferred stock may receive preferential voting rights that are superior to the voting rights of holders of our common stock.

If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures or specified financial ratios, any of which could restrict our ability to operate our business.

We have incurred significant losses since our inception and we anticipate that we will continue to incur significant losses for the foreseeable future, which could harm our future business prospects.

We have historically incurred substantial net losses, including net losses of $23.2 million and $73.3 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had an accumulated deficit of $662.7 million.

We expect our losses to continue as we continue to devote a substantial portion of our resources to our research and development efforts.

These losses have had, and will continue to have, an adverse effect on our working capital, total assets, and shareholders’ equity.

Because of the numerous risks and uncertainties associated with our research and development, we are unable to predict when we will become profitable, and we may never become profitable.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations, and cash flows.

We anticipate that our expenses will increase substantially if and as we:

• continue to develop product candidates and conduct preclinical studies and clinical trials;

• initiate and continue research and development, including preclinical, clinical and discovery efforts for any future product candidates;

• seek to identify additional product candidates;

• seek regulatory approvals for our product candidates that may successfully complete clinical development;

• add operational, financial and management information systems and personnel, including personnel to support our product candidate development and help us comply with our obligations as a public company;

• hire and retain additional personnel, such as clinical, quality control, scientific, and administrative personnel;

• maintain, expand and protect our intellectual property portfolio;

• add equipment and physical infrastructure to support our research and development; and

• acquire or in-license other product candidates and technologies.

Our expenses could increase beyond our expectations if we are required by the U.S.

Food and Drug Administration (the “FDA”), or other regulatory authorities to perform clinical trials in addition to those that we currently expect.

SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our shelf registration statement on Form S-3.

SEC regulations limit the amount that companies with a public float of less than $75 million may raise during any 12-month period pursuant to a shelf registration statement on Form S-3, referred to as the baby shelf rules.

As of the filing of this Annual Report on Form 10-K, we are subject to such rules.

Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3, including our at-the-market equity offering program under which Cantor Fitzgerald is acting as our sales agent, is limited to one-third of the aggregate market value of the shares of our common stock held by our non-affiliates.

Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3 until such time as our public float exceeds $75 million.

Furthermore, if we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by the SEC staff.

In addition, on March 15, 2022, we entered into a purchase agreement (the "Equity Purchase Agreement") with Lincoln Park Capital Fund, LLC ("Lincoln Park") which provides that, upon the terms and subject to the conditions and limitations set forth therein, we have the right, but not the obligation, to sell to Lincoln Park up to $30.0 million of shares of our common stock over the 36-month term of the Equity Purchase Agreement.

Upon execution of the Equity Purchase Agreement, we issued 92,644 shares of our common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement.

We may be limited in the amount of shares we can sell pursuant to the terms of the Equity Purchase Agreement.

For example, we are prohibited from directing Lincoln Park to purchase shares under the Equity Purchase Agreement if such purchase would result in Lincoln Park beneficially owning more than 9.99% of our total outstanding shares.

In addition, under applicable rules of Nasdaq, in no event may we issue or sell to Lincoln Park under the Equity Purchase Agreement shares of our common stock, including the commitment shares, in excess of 19.99% of the shares of our common stock outstanding immediately prior to the execution of the Equity Purchase Agreement (the "Exchange Cap") unless (i) we obtain stockholder approval to issue shares of our common stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds the minimum price per share as mandated by Nasdaq rules.

If any of the foregoing occur, we will be limited in the amount of proceeds we will be able to raise under the Equity Purchase Agreement which could have a material adverse effect on our financial condition and liquidity.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish proprietary rights.

We currently expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted and the terms of these securities may include liquidation, anti-dilution protection or other preferences that adversely affect your rights as a stockholder.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

In addition, we may opportunistically seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, reduce or terminate our product development or grant rights to third parties to develop product candidates that we would otherwise prefer to develop ourselves.

Risks Related to Development of Our Product Candidates

Our business is dependent on the successful development of FMX114 and our BET inhibitor product candidates.

In January 2022, we divested our commercial business in order to focus our efforts and resources on drug development.

Our development pipeline currently includes our Phase 2a asset FMX114 for the treatment of mild-to-moderate AD and preclinical candidates VYN201 and VYN202 which we are developing to treat immuno-inflammatory diseases.

We may be unable to develop a lead molecule for the VYN202 program and exercise our Option to license the applicable Oral BETi Compounds from Tay.

As discussed in "Item 1.

Business—Development and License Agreements—Agreements with Tay Therapeutics," under the terms of the Option Agreement, as amended, our Option to exercise our rights with respect to Tay's highly selective BET inhibitor compounds expires on April 30, 2023.

We are currently working with Tay to complete our assessment of several compounds that may be suitable for the program.

However, we may be unable to select a viable lead molecule in a timely manner or at all.

If we are unable to exercise the Option, we may be forced to terminate the program and would have a material adverse effect on our ability to execute our strategy of enhancing our pipeline.

Our product candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability.

If we are unable to complete development of, or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

All of our product candidates are in early stages of development.

We only recently commenced a Phase 1a/b clinical trial evaluating our lead candidate, VYN201, for the treatment of nonsegmental vitiligo in November 2022.

In addition, our VYN202 program is in preclinical development and may never advance to clinical-stage development.

Our ability to achieve and sustain profitability depends on obtaining regulatory approvals for, and successfully commercializing our product candidates, either alone or with third parties, and we cannot guarantee you that we will ever obtain regulatory approval for any of our product candidates.

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals including approval by the FDA.

Before obtaining regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates.

We may not have the resources to advance the development of our therapeutics candidates if we experience issues that delay or prevent the regulatory approval of, or our ability to commercialize, our product candidates, including:

• negative or inconclusive results from our clinical trials, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;

• preclinical study results, including toxicology data, may show the product candidate to be less effective than desired or to have harmful or problematic side effects;

• product-related side effects experienced by patients in our clinical trials or by individuals using drugs or therapeutics similar to our product candidates;

• our third-party manufacturers’ inability to successfully manufacture our therapeutics in sufficient quantities or at all;

• inability of any third-party contract manufacturer to scale up manufacturing of our product candidates and those of our collaborators to supply the needs of clinical trials;

• delays in enrolling patients in our clinical trials;

• harmful side effects or inability of our product candidates to meet efficacy endpoints during clinical trials;

• inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;

• greater than anticipated costs of our clinical trials;

• manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that no longer make a product candidate economically feasible;

• delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular or as a result of the impacts of the COVID-19 pandemic;

• varying interpretations of our data by the FDA and similar foreign regulatory agencies.

Our inability to advance or complete the development of our product candidates, or significant delays in doing so, could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Our business is substantially dependent on the successful development of our BET inhibitor product candidates.

In January 2022, we divested our commercial business, the MST Franchise, in order to focus our efforts and resources on drug development.

Our current development pipeline primarily consists of our BET inhibitor product candidates, VYN201 and VYN202, which we are developing for the treatment of immuno-inflammatory diseases.

The success of our business is dependent on our successful development and/or our ability to pursue strategic initiatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize, these product candidates.

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• intellectual property rights, such as patents, may fail to provide adequate protection, may be challenged and one or more claims may be revoked or the patent may be held to be invalid.

• intellectual property rights of third parties may potentially block our entry into certain markets, or make such entry economically impracticable.

Furthermore, VYN201 and VYN202 are very early stage programs.

VYN201 is being evaluated in preclinical animal models and has not yet been administered to humans and VYN202 is still in lead candidate selection.

The development of these NCEs carries even greater risk and a higher probability of failure.

Our failure to successfully develop our drug candidates will have a material adverse effect on our business and financial condition.

We may encounter delays in completing clinical trials for our product candidates and may even be prevented from commencing such trials due to factors that are largely beyond our control.

The development of these new chemical entities carries even greater risk and a higher probability of failure.

Our failure to successfully develop our product candidates will have a material adverse effect on our business and financial condition.

We may encounter delays in enrolling patients and successfully completing clinical trials for our product candidates and may even be prevented from commencing such trials due to factors that are largely beyond our control.

We have in the past experienced and may in the future experience delays in completing clinical trials and in commencing future clinical trials, including due to reasons associated with COVID-19.

For example, we have experienced delays in enrolling patients in our Phase 2a clinical trial evaluating FMX114 for the treatment of AD due to COVID-19 related issues.

We rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials.

For example, in 2022, we experienced delays in enrolling patients in our Phase 2a clinical trial evaluating FMX114 for the treatment of atopic dermatitis ("AD"), a program for which we are not currently making any additional investment in, due to COVID-19 related issues.

We rely on contract research organizations ("CROs") and clinical trial sites to ensure the proper and timely conduct of our clinical trials.

While we have agreements governing the committed activities of our CROs, we have limited influence over their actual performance.

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• reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which may be subject to extensive negotiation and vary significantly among different CROs and trial sites;

• obtain IRB approval at each site;

• enlist suitable patients to participate in a trial;

• obtain approval from an institutional review board (“IRB”) at each site;

• enlist an adequate number of suitable patients to participate in a trial;

• have patients complete a trial or return for post-treatment follow-up;

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Patient enrollment is also a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to available alternatives, including any new drugs or treatments that may be approved for the indications we are investigating.

We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, or by the FDA.

Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a

benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

We may also encounter delays if a clinical trial is suspended or terminated by us, the IRB of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, or by the FDA.

If we experience delays in carrying out or completing any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed.

In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.

In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate

development and approval process and jeopardize our ability to commence product sales and generate revenues.

Any of these occurrences may significantly harm our business and financial condition.

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Our clinical trials may fail to adequately demonstrate the safety and efficacy of our current or any future product candidates, which could prevent or delay regulatory approval and commercialization.

Clinical drug development is very expensive, time-consuming and difficult to design and implement, and its outcome is inherently uncertain, particularly as it relates to NCEs.

Clinical drug development is very expensive, time-consuming and difficult to design and implement, and its outcome is inherently uncertain, particularly as it relates to new chemical entities.

Before obtaining regulatory approval for the commercial sale of a product candidate, we must demonstrate through clinical trials that a product candidate is both safe and effective for use in the target indication.

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The clinical trials for these product candidates may take significantly longer than expected to complete.

In addition, we, any partner with which we may in the future collaborate, the FDA, an institutional review board (“IRB”) or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate our clinical trials at any time, for various reasons, including:

In addition, we, any partner with which we may in the future collaborate, the FDA, an IRB or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, require modifications to or terminate our clinical trials at any time, for various reasons, including:

• lack of effectiveness of any product candidate during clinical trials or the failure of a product candidate to meet specified endpoints;

• discovery of serious or unexpected side effects experienced by study participants, toxicities or other safety issues;

• discovery of serious or unexpected side effects experienced by trial participants, toxicities or other safety issues;

• slower than expected rates of subject recruitment and patient enrollment in clinical trials resulting from numerous factors, including COVID-19 or the prevalence of clinical trials for our competitors for their product candidates treating the same indication;

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• changes in applicable laws, regulations and regulatory policies;

• delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective contract research organizations (“CROs”), clinical trial sites and other third-party contractors;

• delays or failure in reaching agreement on acceptable terms in clinical trial contracts or protocols with prospective CROs, clinical trial sites and other third-party contractors;

• inability to add a sufficient number of clinical trial sites;

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Our BET inhibitor program is in the early stages of development, involves a novel therapeutic approach and new chemical entities, requires significant further research and development and regulatory approvals and is subject to the risks of failure inherent in the development of products based on innovative approaches.

New chemical entities derived from our InhiBET platform are molecules that have not previously been approved and marketed as therapeutics, unlike FMX114 which includes active pharmaceutical ingredients whose safety and efficacy have previously been established which we aim to improve through a new formulation.

New chemical entities derived from our InhiBET platform are molecules that have not previously been approved and marketed as therapeutics.

As a result, the product candidates from our InhiBET platform may face greater risk of unanticipated safety issues or other side-effects, or may not demonstrate efficacy.

Further, the regulatory pathway for our new chemical entities may be more demanding than that for FMX114, for which we may be able to leverage existing data under Section 505(b)(2) of the Food, Drug, and Cosmetic Act to reduce development risk, time and cost.

We may be unable to develop a lead molecule for the VYN202 program and exercise our option to license the applicable BET inhibitor compounds from In4Derm.

As discussed in "Item 1.

Business—Development and License Agreements—In4Derm Licensing Agreements," under the terms of the Option Agreement, our option to exercise our rights with respect to In4Derm's highly selective BET inhibitor compounds expires upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead NCE candidate and (ii) June 30, 2022.

We are currently working with In4Derm to develop a lead molecule for the VYN202 program.

However, we may be unable to develop a viable lead molecule in a timely manner or at all.

If we are unable to develop a lead candidate for the VYN202 program, we may not exercise our option with respect to In4Derm's BET inhibitor compounds suitable for oral administration which could cause us to terminate the program and would have a material adverse effect on our ability to execute our strategy of enhancing our pipeline.

Our clinical trials may fail to demonstrate the safety and efficacy of our drug candidates, or serious adverse or unacceptable side effects may be identified during the development of our drug candidates, which could result in the abandonment or limitation of the development of our drug candidates or prevent or delay our ability to pursue strategic alternatives for our drug candidates.

If our drug candidates are associated with side effects in preclinical studies and/or clinical trials or have characteristics that are unexpected, our development costs could increase or we may need to abandon development activities or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

Further, the regulatory pathway for our new chemical entities may be more demanding.

Our clinical trials may fail to demonstrate the safety and efficacy of our product candidates, or serious adverse or unacceptable side effects may be identified during the development of our product candidates, which could result in the abandonment or limitation of the development of our product candidates or prevent or delay our ability to pursue strategic alternatives for our product candidates.

If our product candidates are associated with side effects in preclinical studies and/or clinical trials or have characteristics that are unexpected, our development costs could increase or we may need to abandon development activities or limit development to more narrow uses in which the side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

The FDA or an IRB may also require that we suspend, discontinue, or limit our clinical trials based on safety information.

Such findings could result in regulatory authorities failing to provide marketing authorization for our drug candidates.

Many drug candidates that initially showed promise in early stage testing have later been found to cause side effects that prevented further development of the drug candidate.

Before any potential third-party partners can obtain marketing approvals for the commercial sale of our drug candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our drug candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing.

Such findings could result in regulatory authorities failing to provide marketing authorization for our product candidates.

Many product candidates that initially showed promise in early stage testing have later been found to cause side effects that prevented further development of the product candidate.

Before any potential third-party partners can obtain marketing approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication, and failures can occur at any stage of testing.

Additionally, if we or others identify undesirable side effects caused by our drugs, a number of potentially significant negative consequences could result, including:

• we may need to abandon the development or limit the further development of our drug candidates, including in various populations and for certain indications;

• we may need to abandon the development or limit the further development of our product candidates, including in various populations and for certain indications;

• we could be sued and held liable for harm caused to patients;

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• a medication guide outlining the risks of such side effects for distribution to patients may be required;

• our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our drug candidates would be harmed.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular drug candidate and could significantly harm our business, results of operations and prospects.

Results obtained in non-clinical studies and completed clinical trials may not predict success in later clinical trials.

Success in non-clinical testing, such as testing for VYN201 and FMX114, and early clinical trials does not ensure that later clinical trials will be successful, and any other clinical trials that we may conduct may not demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates in any indication.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize the particular product candidate and could significantly harm our business, results of operations and prospects.

Results obtained in preclinical studies and completed clinical trials may not predict success in later clinical trials.

Success in preclinical testing, such as testing for VYN201, and early clinical trials does not ensure that later clinical trials will be successful, and any other clinical trials that we may conduct may not demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates in any indication.

We and other companies in the biopharmaceutical industry have frequently suffered significant setbacks in later clinical trials, even after achieving promising results in earlier non-clinical studies or clinical trials.

Phase III clinical trials often produce unsatisfactory results even though prior clinical trials were successful.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize a particular drug candidate and could significantly harm our business, results of operations and prospects.

For example, in August 2022, our Phase 2a clinical trial for FMX114 did not meet its primary endpoint of improving symptoms and severity of AD after four weeks of treatment.

In addition, Phase 3 clinical trials often produce unsatisfactory results even though prior clinical trials were successful.

Any of these events could prevent us from pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize a particular product candidate and could significantly harm our business, results of operations and prospects.

Topline and preliminary data from our clinical trials that we announce or publish from time to time may change as additional data become available and are subject to audit and verification procedures that could result in material changes in the final data.

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Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

Accordingly, topline and preliminary data should not be considered complete and should be viewed with caution until the final data are available.

Accordingly, topline and preliminary data should not be considered complete and should be viewed with caution

until the final data are available.

We may also disclose interim data from our clinical trials.

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Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular drug candidate, any approved product, and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is derived from information that is typically extensive, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular program, drug candidate or our business.

If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

We have a limited history as a clinical-stage biopharmaceutical company developing drug candidates for immuno-inflammatory conditions, which may make it difficult to assess our future viability.

Prior to the Company's announcement on August 12, 2021, our operations over the last several years has been largely focused on raising capital, undertaking preclinical studies and conducting clinical trials, and commercializing minocycline-based products for dermatology.

Since announcing that we would be divesting our commercial business, we have been conducting preclinical studies evaluating VYN201 in a range of immuno-inflammatory conditions and considering initial indications for the program.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the potential of the particular program, the likelihood of marketing approval or commercialization of the particular product candidate, any approved product, and our company in general.

If the interim, topline or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

Our current and future clinical trials or those of any future collaborators may reveal significant adverse events not seen in our preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

If significant adverse events or other side effects are observed in any of our current or future clinical trials, we may have difficulty recruiting patients to such trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of one or more product candidates altogether.

For example, certain BET inhibitors have been linked to tolerability issues, particularly in the gastrointestinal tract.

We, the FDA or other applicable regulatory authorities, or an IRB may suspend any clinical trials of any product candidate at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects.

Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development.

Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved therapeutic due to its tolerability versus other therapies.

Any of these developments could materially harm our business, financial condition and prospects.

We have a limited history as a clinical-stage biopharmaceutical company developing product candidates for immuno-inflammatory conditions, which may make it difficult to assess our future viability.

Our team has limited experience in developing drugs for the treatment of immuno-inflammatory conditions.

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We may also encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.

We may spend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.

As of the date of this report, we have not determined which indication(s) to pursue for VYN201 or VYN202.

Following the completion of our preclinical analyses, we intend to select the initial indication(s) for these programs.

Because we have limited financial and management resources, we may be required to focus on specific indications.

As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential.

We may spend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

We have chosen to evaluate VYN201 in the treatment of nonsegmental vitiligo.

As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

For example, during 2022, we decided not to pursue further development of FMX114 for the treatment of AD and instead to focus our research and development efforts on VYN201 and VYN202.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities.

Our spending on current and future development programs and drug candidates for specific indications may not yield any commercially viable drugs.

If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through partnerships, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.

We have not obtained regulatory approvals to market our other pipeline product candidates, and we may be delayed in obtaining or fail to obtain such regulatory approvals and to commercialize these product candidates.

Our spending on current and future development programs and product candidates for specific indications may not yield any commercially viable drugs.

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through partnerships, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

We face competition from entities that have developed or may develop product candidates for the diseases addressed by our product candidates, including companies developing novel treatments and technology platforms.

If these companies develop

technologies or product candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize product candidates may be adversely affected.

The development and commercialization of drugs is extremely competitive.

Our product candidates, if approved, will face significant competition and our failure to effectively compete may prevent us from achieving significant market penetration.

Most of our competitors have significantly greater resources than we do, and we may not be able to successfully compete.

We compete with a variety of multinational biopharmaceutical companies, specialized biotechnology companies and emerging biotechnology companies, as well as with technologies and product candidates being developed at universities and other research institutions.

Our competitors have developed, are developing or will develop product candidates and processes competitive with our product candidates and processes.

Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments, including those based on novel technology platforms that enter the market.

We believe that a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we are trying, or may try, to develop product candidates.

There is intense and rapidly evolving competition in the biotechnology and biopharmaceutical fields.

Competition from many sources exists or may arise in the future.

Our competitors include larger and better funded biopharmaceutical, biotechnological and therapeutics companies, including companies focused on therapeutics for autoimmune diseases, fibrosis and cancer, as well as numerous small companies.

Moreover, we also compete with current and future therapeutics developed at universities and other research institutions.

Some of these companies are well-capitalized and, in contrast to us, have significant clinical experience, and may include our existing or future collaborators.

In addition, these companies compete with us in recruiting scientific and managerial talent.

Our success will depend partially on our ability to develop and commercialize therapeutics that are safer and more effective than competing therapeutics.

Our commercial opportunity and success will be reduced or eliminated if competing therapeutics are safer, more effective, or less expensive than the therapeutics we develop.

We have not obtained regulatory approvals to market our product candidates, and we may be delayed in obtaining or fail to obtain such regulatory approvals and to commercialize these product candidates.

The process of developing, obtaining regulatory approval for and commercializing our other product candidates is long, complex, costly and uncertain, and delays or failure can occur at any stage.

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If any of these outcomes occur, we would not receive approval for our other product candidates and may need to discontinue the development of such product candidates.

Our business has been adversely impacted and could continue to be adversely affected by the evolving and ongoing COVID-19 global pandemic in regions where we or third parties on which we rely have manufacturing facilities, clinical trial sites or other business operations.

The COVID-19 pandemic could adversely affect our operations, including at our clinical trial sites, as well as the business or operations of our manufacturers, contract research organizations or other third parties with whom we conduct business.

Our business has been adversely affected by the effects of the COVID-19 pandemic, which has resulted in a variety of restrictions in order to reduce the spread of the disease, which, among other things, direct businesses and governmental agencies to cease non-essential operations at physical locations, prohibit certain non-essential gatherings, and order cessation of non-essential travel.

For example, enrollment and other operations related to our ongoing Phase 1b/2a clinical trial for FMX114 in Australia have been impacted by the COVID-19 pandemic and restrictions imposed by Australian authorities.

In addition, some of our third-party preclinical science partners and manufacturers which we use for the supply of materials for our drug candidates or other materials necessary to manufacture drug product to conduct preclinical studies and clinical trials are located in countries affected by COVID-19, and should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing these studies and trials.

For example, enrollment and other operations related to our Phase 1b/2a clinical trial for FMX114 in Australia were negatively impacted by the COVID-19 pandemic and restrictions imposed by Australian authorities in 2022.

In addition, some of our third-party preclinical science partners and manufacturers which we use for the supply of materials for our product candidates or other materials necessary to manufacture drug product to conduct preclinical studies and clinical trials are located in countries affected by COVID-19, particularly in China, and should they experience disruptions, such as lockdowns, temporary closures or suspension of services, we would likely experience delays in advancing these studies and trials.

Any delay in the development of our product candidates could have a material adverse effect on our business and results of operations.

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The FDA may also approve our product candidates for a more limited indication or a narrower patient population than we originally requested, or may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates.

Furthermore, any such approved product will remain subject to extensive

regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping.

Furthermore, any such approved product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping.

If we fail to comply with the regulatory requirements of the FDA, or if we discover previously unknown problems with any approved commercial products, manufacturers or manufacturing processes, we could be subject to administrative or judicially imposed sanctions or other setbacks, which could require us to take corrective actions, including to:

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Nevertheless, we will be responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We and our CROs are required to comply with the FDA’s and other regulatory authorities’ good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical studies to assure that the data and reported results are credible and accurate, and that the rights, integrity and confidentiality of clinical study participants are protected.

We and our CROs are required to comply with the FDA’s and other regulatory authorities’ good clinical practices ("GCPs") for conducting, recording and reporting the results of clinical studies to assure that the data and reported results are credible and accurate, and that the rights, integrity and confidentiality of clinical trial participants are protected.

If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical studies may be deemed unreliable and the FDA and other regulatory authorities may require us to perform additional clinical studies before approving any marketing applications.

If the third parties or consultants that assist us in conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCPs, or for any other reason, we may need to conduct additional clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated.

If any of the foregoing were to occur, we may not be able to obtain, or may be delayed in obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in our efforts to, successfully commercialize these product candidates.

Changes in methods of drug candidate manufacturing or formulation may result in additional costs or delay.

As drug candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered in an effort to optimize processes and results.

If any of the foregoing were to occur, we may not be able to

obtain, or may be delayed in obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in our efforts to, successfully commercialize these product candidates.

Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through preclinical studies to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation, are altered in an effort to optimize processes and results.

Such modifications carry the risk that they will not achieve these intended objectives, and may also require additional testing, FDA notification or FDA approval.

Any of these changes could cause our drug candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.

candidates and jeopardize our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates.

Any of these changes could cause our product candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.

This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to pursue strategic alternatives, including identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

Other Risks Related to Our Business and Financial Operations

We will need substantial additional funding to fund our operations, and there is substantial doubt about our ability to continue as a going concern.

We could also be forced to delay, reduce or terminate our research and development activities which would have a material adverse effect on our financial condition.

Developing and commercializing biopharmaceutical products, including launching new products into the marketplace and conducting preclinical studies and clinical trials, is an expensive and highly uncertain process that takes years to complete.

As of December 31, 2021, we had approximately $42.9 million in cash, cash equivalents and restricted cash.

We received proceeds of $20.0 million less total transaction costs ranging from $4.0 million to $5.0 million from the sale of our commercial business in January 2022 and are entitled to receive an additional $5.0 million deferred payment in January 2023.

We do not have sufficient cash and cash equivalents to fund our anticipated level of operations as they become due during the twelve months following the date of filing of this report.

In addition, see “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity” for further discussion regarding our liquidity.

We may not be able to raise any proceeds from financing transactions.

Accordingly, additional funds may not be obtained for our ongoing operations and we may not succeed in our future operations.

Unless we are able to raise additional capital to finance our operations, our long-term business plan may not be accomplished, and we may be forced to cease, reduce, or delay operations.

Furthermore, if the Company issues equity or debt securities to raise additional funds, its existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of its existing stockholders.

Our future capital requirements depend on many factors, including:

• the number and development requirements of the drug candidates that we may pursue;

• the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our drug candidates;

• the costs, timing and outcome of regulatory review of our drug candidates;

• the extent to which we in-license or acquire additional drug candidates and technologies;

• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;

• the impact on the timing of our preclinical studies, on the recruitment, enrollment, conduct and timing of our clinical trials, and on our business, due to the COVID-19 pandemic;

• our ability to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our drug candidates, and earn revenue from such arrangements.

Additional capital may not be available when we need it, on terms that are acceptable to us or at all.

If adequate funds are not available to us on a timely basis, we may be required to revise our operating plan in order to:

• delay, limit, reduce or terminate our research and development activities;

• delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for our product candidates.

If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us.

If we raise additional capital through public or private equity offerings, the ownership interest of our existing shareholders will be diluted and the terms of any new equity securities may have a preference over our common stock.

SEC regulations limit the amount of funds we can raise during any 12-month period pursuant to our shelf registration statement on Form S-3.

As of the filing of this Annual Report on Form 10-K, we are subject to such rules.

Under these instructions, the amount of funds we can raise through primary public offerings of securities in any 12-month period using our registration statement on Form S-3 is limited to one-third of the aggregate market value of the shares of our common stock held by non-affiliates of the Company.

Therefore, we will be limited in the amount of proceeds we are able to raise by selling shares of our common stock using our Form S-3 until such time as our public float exceeds $75 million.

Furthermore, if we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by the SEC staff.

Upon execution of the Equity Purchase Agreement, we issued 1,667,593 shares of our common stock to Lincoln Park as commitment shares in accordance with the closing conditions contained within the Equity Purchase Agreement.

While our ability to sell shares to Lincoln Park in this transaction will not be limited by the baby shelf rules since the Equity Purchase Agreement was executed prior to the filing of this Annual Report on Form 10-K, we may be limited in the amount of shares we can sell pursuant to the terms of the Equity Purchase Agreement.

In addition, under applicable rules of Nasdaq, in no event may we issue or sell to Lincoln Park under the Equity Purchase Agreement shares of our common stock, including the commitment shares, in excess of 11,227,637 shares (the "Exchange Cap"), which is equal to 19.99% of the shares of our common stock outstanding immediately prior to the execution of the Equity Purchase Agreement unless (i) we obtain stockholder approval to issue shares of our common stock in excess of the Exchange Cap or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Equity Purchase Agreement equals or exceeds $0.545 per share.

Collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.

We may seek collaboration arrangements with pharmaceutical or biotechnology companies for the development or eventual commercialization of our product candidates in the future.

We may enter into arrangements on a selective basis, depending on the merits of retaining certain rights ourselves compared to entering into selective collaboration arrangements with pharmaceutical or biotechnology companies internationally and possibly also in the United States.

Any such collaboration arrangements may not be successful.

In addition, the success of future collaboration arrangements that we may enter into will depend heavily on the efforts and activities of our collaborators.

Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.

When entering collaboration arrangements, we are subject to a number of risks, including:

• collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial or abandon products, repeat or conduct new clinical trials, require a new formulation of products for clinical testing, may decide not to pursue development and commercialization of a product or product candidate or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to their acquisition of competitive products or their internal development of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

• any safety issues or adverse side effects that result from trials conducted by a collaborator will adversely impact our ability to obtain regulatory approval for our product candidates;

• any failure by a collaborator to demonstrate efficacy of a product candidate in its clinical trials could decrease the perceived likelihood of success for our clinical trials;

• disagreements between parties to a collaboration arrangement regarding clinical development matters may lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the collaboration arrangement;

• collaboration arrangements are complex and time consuming to negotiate, document and implement, and we may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we so chose to enter into such arrangements;

• collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party and any such termination or expiration would adversely affect us financially and could harm our business reputation;

• collaboration agreements may be terminated and, if terminated, may result in delays or the need for a new collaborator or additional capital to pursue further development of our product candidates in certain markets;

• collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates;

• terms of any collaborations or other arrangements that we may establish may not be favorable to us;

• we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

• we will face, to the extent that we decide to enter into collaboration agreements, significant competition in seeking appropriate collaborators;

• collaborators may not properly use, manage, maintain or defend our confidential information and intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

• collaborators may own or co-own intellectual property covering products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop such intellectual property and they may be able to develop such products without us;

• disputes may arise with respect to the ownership of any intellectual property developed pursuant to our collaborations;

• adverse regulatory determinations or other legal action may interfere with the ability of a collaborator to conduct clinical trials or other development activity;

• one or more collaborators may be subject to regulatory or legal action resulting from the failure to meet healthcare industry compliance requirements in the conduct of clinical trials;

• collaboration arrangements could be adversely impacted by changes in collaborators’ key management personnel and other personnel that are administering collaboration agreements.

We are subject to various risks and uncertainties arising out of the completed divestiture of our commercial business, any of which could materially and adversely affect our business and operations, and our stock price.

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If any of the foregoing events occur, we will not realize all of the benefits of the sale.

In addition, we are still subject to potential liabilities relating to our historical commercial business operations that were subject to the Asset Purchase Agreement.

Under the terms of the agreement, we retained and are responsible for historical liabilities of the commercial business operations based on events occurring prior to the sale other than those liabilities expressly assumed by Journey.

We are also obligated to indemnify Journey against certain potential liabilities and for breaches of representations, warranties and covenants under the agreement up to certain caps, and those liabilities may be set off against any future payments owed to us by Journey, including the deferred payment.

In addition, we are still subject to distractions and potential liabilities relating to our historical commercial business operations that were subject to the Asset Purchase Agreement.

Under the terms of the Asset Purchase Agreement, we retained and are responsible for historical liabilities of the commercial business operations based on events occurring prior to the sale other than those liabilities expressly assumed by Journey.

For example, we remain liable for payment of product sales provisions, such as distribution fees and trade discounts and allowances, rebates, chargebacks and other discounts and product returns.

See "Part II—Item 8.

Financial Statements—Note 2 - Significant Accounting Policies—Revenue Recognition—Product Sales Provisions." We are also obligated to indemnify Journey against certain potential liabilities and for breaches of representations, warranties and covenants under the agreement up to certain caps, and those liabilities may be set off against any future payments owed to us by Journey.

In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of such claims, any of which could have a material adverse effect on our business and stock price.

Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products could impair our ability to grow our business and execute our strategy.

We intend to in-license, acquire, develop and market additional products and product candidates.

The success of this strategy depends partly upon our ability to identify and select promising pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners and finance these arrangements.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex.

Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with us for the license or acquisition of product candidates and approved products.

We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure.

Moreover, we may devote resources to potential acquisitions or licensing

opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts.

In addition, we remain subject to potential investigation or inquiry with respect to our legacy commercial business operations, which may result in potential liabilities.

Our failure to successfully in-license, acquire, develop and market additional product candidates or approved products could impair our ability to grow our business.

We may in-license, acquire and develop additional product candidates.

The success of this strategy depends partly upon our ability to identify and select promising pharmaceutical product candidates, negotiate licensing or acquisition agreements with their current owners and finance these arrangements.

The process of proposing, negotiating and implementing a license or acquisition of a product candidate is lengthy and complex.

Other companies, including some with substantially greater financial and other resources may compete with us for the license or acquisition of product candidates.

We have limited resources to identify and execute the acquisition or in-licensing of third-party product candidates, businesses and technologies and integrate them into our current infrastructure.

Moreover, we may devote resources to potential acquisitions or licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts.

Additionally, we may not be able to acquire the rights to additional product candidates on terms that we find acceptable, or at all.

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All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.

In addition, we cannot provide assurance that any approved products that we acquire will be manufactured or sold profitably or achieve market acceptance.

We intend to engage in strategic transactions which could impact our liquidity, increase our expenses and present significant distractions to our management.

Our strategy is to in-license and acquire product candidates or engage in other strategic transactions.

We may engage in strategic transactions, which could impact our liquidity, increase our expenses and present significant distractions to our management.

We may in-license and acquire product candidates or engage in other strategic transactions.

Additional potential transactions that we may consider include a variety of different business arrangements, including out-licensing, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments.

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• our failure to locate and obtain replacement suppliers and manufacturers as needed on a timely basis;

• conditions affecting the cost and availability of raw materials;

• the impact of COVID-19.

• conditions affecting the cost and availability of raw materials, including inflationary factors;

• business interruptions resulting from geopolitical actions, including war, such as the current Russia-Ukraine war, and terrorism, COVID-19 or another outbreak of a contagious disease, or natural disasters including earthquakes, typhoons, floods and fires.

Production of product is necessary to perform preclinical activities and clinical trials and successful registration batches are necessary to file for approval to commercially market and sell product candidates.

Delays in obtaining clinical material or registration batches could adversely impact our clinical trials and delay regulatory approval for our product candidates.