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What changed in Ensysce Biosciences, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Ensysce Biosciences, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+368 added−495 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-30)

Top changes in Ensysce Biosciences, Inc.'s 2023 10-K

368 paragraphs added · 495 removed · 286 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

91 edited+37 added−58 removed214 unchanged
Biggest changeEach prodrug is intended to be able to be combined with our MPAR™ technology for overdose protection. Additionally, nafamostat di-mesylate (“ nafamostat ”), which is an ingredient in our overdose protection combination products, is also being developed for the intended purpose of treating infection and pulmonary lung diseases.
Biggest changeAdditionally, nafamostat di-mesylate (“ nafamostat ”), which is an ingredient in our overdose protection combination products, is also being developed for the intended purpose of treating infection and pulmonary lung diseases. 9 The technology under the TAAP platform when applied to opioid drugs is designed to release clinically effective opioid drugs only when exposed to specific physiological conditions (i.e., when the drug is ingested and exposed to the digestive enzyme trypsin).
PF614-MPAR™ We initiated a Phase 1 study that is evaluating PF614-MPAR™ in study entitled “A Single Dose, 2 Part Study to Evaluate the Pharmacokinetics of Oxycodone, PF614, PFR06082, and nafamostat, when PF614 Solution is Co-Administered with nafamostat, as an Immediate Release Solution and/or Extended Release (ER) Capsule Formulations in Healthy Subjects:” We are clinically testing MPAR in partnership with Quotient Sciences, using its integrated Translational Pharmaceutics® platform to search for a PF614-MPAR formulation that allows conversion into oxycodone within the prescribed dose range but reduces conversion to oxycodone at higher than prescribed dose levels in an overdose scenario.
PF614-MPAR We initiated a Phase 1 study that is evaluating PF614-MPAR in study entitled “A Single Dose, 2 Part Study to Evaluate the Pharmacokinetics of Oxycodone and PF614, when PF614 Solution is Co-Administered with nafamostat, as an Immediate Release Solution and/or Extended Release (ER) Capsule Formulations in Healthy Subjects:” We are clinically testing MPAR ® in partnership with Quotient Sciences, using its integrated Translational Pharmaceutics ® platform to search for a PF614-MPAR formulation that allows conversion into oxycodone within the prescribed dose range but reduces conversion to oxycodone at higher than prescribed dose levels in an overdose scenario.
Countries of Filings Natural or Projected Expiry Date TAAP and MPAR™ Patents and Applications for Opioids Compositions Comprising Enzyme-Cleavable Ketone-Modified Opioid Prodrugs and Optional Inhibitors Thereof U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Mexico, Russia 2030 Compositions Comprising Enzyme-Cleavable Opioid Prodrugs and Inhibitors Thereof U.S. 2030 Compositions Comprising Enzyme-Cleavable Oxycodone Prodrugs U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Russia 2032 Compositions Comprising Enzyme-Cleavable Prodrugs and Controlled Release Nafamostat and Methods of Use Thereof U.S., PCT, Taiwan 2042 Active Agent Prodrugs with Heterocyclic Linkers U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Russia 2032 Enzyme-Cleavable Methadone Prodrugs and Methods of Use Thereof U.S., PCT 2042 Nafamostat Patents and Applications Methods of Treating Coronavirus Infections and COVID-19 U.S., Canada, Europe 2041 Oral formulations of Nafamostat U.S., PCT, Taiwan 2042 Methods of Treating Respiratory Diseases with Mucostasis Germany, France, Italy, United Kingdom 2028 TAAP and MPAR™ Patents and Applications for Amphetamines Compositions Comprising Enzyme-Cleavable Amphetamine Prodrugs and Inhibitors Thereof U.S., Europe 2031 Compositions Comprising Enzyme-Cleavable Amphetamine Prodrugs and Inhibitors Thereof U.S., Europe, Hong Kong 2040 *“ Europe ” refers to patent applications filed in, and patents issued by, the European Patent Office (“ EPO ”), which can provide the basis for rights in multiple countries that are members of the European Patent Convention. 21 While we seek broad coverage under our existing patent applications, there is always a risk that an alteration to the products or processes may provide sufficient basis for a competitor to avoid infringing our patent claims.
Countries of Filings* Natural or Projected Expiry Date TAAP and MPAR Patents and Applications for Opioids Compositions Comprising Enzyme-Cleavable Ketone-Modified Opioid Prodrugs and Optional Inhibitors Thereof U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Mexico, Russia 2030 Compositions Comprising Enzyme-Cleavable Opioid Prodrugs and Inhibitors Thereof U.S. 2030 Compositions Comprising Enzyme-Cleavable Oxycodone Prodrugs U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Russia 2032 Compositions Comprising Enzyme-Cleavable Prodrugs and Controlled Release Nafamostat and Methods of Use Thereof U.S., PCT, Taiwan 2042 Active Agent Prodrugs with Heterocyclic Linkers U.S., Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, India, Japan, Russia 2032 Enzyme-Cleavable Methadone Prodrugs and Methods of Use Thereof U.S., PCT, Europe, Brazil, China, Japan, Korea, Canada, Mexico, Australia, India, Israel 2042 Nafamostat Patents and Applications Methods of Treating Coronavirus Infections and COVID-19 U.S., Canada, Europe 2041 Oral formulations of Nafamostat U.S., PCT, Taiwan, Europe, Brazil, China, Japan, Korea, Canada, Mexico, Australia, India, Israel 2042 Methods of Treating Respiratory Diseases with Mucostasis Germany, France, Italy, United Kingdom 2028 TAAP and MPAR Patents and Applications for Amphetamines Compositions Comprising Enzyme-Cleavable Amphetamine Prodrugs and Inhibitors Thereof U.S., Europe 2031 Compositions Comprising Enzyme-Cleavable Amphetamine Prodrugs and Inhibitors Thereof U.S., Europe, Hong Kong 2040 *” Europe ” refers to patent applications filed in, and patents issued by, the European Patent Office (“ EPO ”), which can provide the basis for rights in multiple countries that are members of the European Patent Convention. 19 While we seek broad coverage under our existing patent applications, there is always a risk that an alteration to the products or processes may provide sufficient basis for a competitor to avoid infringing our patent claims.
Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the non-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. 29 Post-Marketing Requirements Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “ off-label use ”), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet.
Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the non-clinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. 28 Post-Marketing Requirements Following approval of a new product, a pharmaceutical company and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the product, providing the regulatory authorities with updated safety and efficacy information, product sampling and distribution requirements, and complying with promotion and advertising requirements, which include, among others, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “ off-label use ”), limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet.
Comparing safety data across cohorts, the data indicated that dose, naltrexone, and fed/fasted state had no clinically relevant effect on the safety profile of PF614. PF614 was generally well tolerated at doses up to 200 mg in healthy subjects. PF614-102 Phase 1b Clinical Trial A Phase 1b study was conducted by ICON (formerly PRA Health Sciences) with Dr.
Comparing safety data across cohorts, the data indicated that dose, naltrexone, and fed/fasted state had no clinically relevant effect on the safety profile of PF614. PF614 was generally well tolerated at doses up to 200 mg in healthy subjects. 14 PF614-102 Phase 1b Clinical Trial A Phase 1b study was conducted by ICON (formerly PRA Health Sciences) with Dr.
Due to the small sample number for OxyContin some PK parameters could not be calculated. Trough concentrations of oxycodone were generally similar from Day 2 through Day 4, suggesting that subjects achieved steady state after repeated oral BID dosing of PF614 and OxyContin at all dose levels. Part B: A total of 57 subject were included in the PK analyses.
Due to the small sample number for OxyContin some PK parameters could not be calculated. Trough concentrations of oxycodone were generally similar from Day 2 through Day 4, suggesting that subjects achieved steady state after repeated oral BID dosing of PF614 and OxyContin at all dose levels. Part B: A total of 57 subjects were included in the PK analyses.
Post-marketing studies may also be required to determine whether the marketing of a product with abuse-deterrent properties results in meaningful reductions in abuse, misuse, and related adverse clinical outcomes, including addiction, overdose, and death in the post-approval setting. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
Post-marketing studies may also be required to determine whether the marketing of a product with abuse-deterrent properties results in meaningful reductions in abuse, misuse, and related adverse clinical outcomes, including addiction, overdose, and death in the post-approval setting. 25 Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
These guidelines are based on the indications, acute and chronic pain, that we intend to explore for our TAAP and MPAR™ opioid products including PF614. 13 Opioids are offered in a variety of dosages including immediate-release tablets (or capsules), extended-release tablets (or capsules), patches, and other dose forms. Oxycodone is one of the most effective pain killers available today.
These guidelines are based on the indications, acute and chronic pain, that we intend to explore for our TAAP and MPAR® opioid products including PF614. Opioids are offered in a variety of dosages including immediate-release tablets (or capsules), extended-release tablets (or capsules), patches, and other dose forms. Oxycodone is one of the most effective pain killers available today.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website. 10 Business Overview We are a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the potential for opioid misuse, abuse, and overdose.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website. Business Overview We are a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the potential for opioid misuse, abuse, and overdose.
An IND was submitted (149877) for the evaluation of oral nafamostat in coronaviral infections. A Phase 1 trial to evaluate safety and PK was completed in 2021. Market Opportunity Drug Abuse and Drug Overdose Opioid pain medications are essential for improving the care and outcomes of a majority of Americans who live with chronic pain.
An IND was submitted (149877) for the evaluation of oral nafamostat in coronaviral infections. A Phase 1 trial to evaluate safety and PK was completed in 2021. 11 Market Opportunity Drug Abuse and Drug Overdose Opioid pain medications are essential for improving the care and outcomes of a majority of Americans who live with chronic pain.
Because PF614 is regulated as a Schedule II controlled substance, it is subject to the DEA’s aggregate, individual production, and procurement quota scheme. Ordering and distribution of any Schedule I or II controlled substance are also subject to special ordering requirements under either the electronic Controlled Substance Ordering System (“ CSOS ”) or use of DEA Form 222s.
Because PF614 is regulated as a Schedule II controlled substance, it is subject to the DEA’s aggregate, individual production, and procurement quota scheme. 30 Ordering and distribution of any Schedule I or II controlled substance are also subject to special ordering requirements under either the electronic Controlled Substance Ordering System (“ CSOS ”) or use of DEA Form 222s.
We believe that having prescription drug products available that have a reduced potential for abuse by crushing and injecting, snorting, and chewing could provide an even greater reduction of prescription opioid related deaths in the abuse of opioids or amphetamines. 14 Nafamostat Nafamostat’s market opportunity is multifaceted.
We believe that having prescription drug products available that have a reduced potential for abuse by crushing and injecting, snorting, and chewing could provide an even greater reduction of prescription opioid related deaths in the abuse of opioids or amphetamines. Nafamostat Nafamostat’s market opportunity is multifaceted.
In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. 26 In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.
In rare instances, a single Phase 3 trial may be sufficient when either (1) the trial is a large, multicenter trial demonstrating internal consistency and a statistically very persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity, or prevention of a disease with a potentially serious outcome and confirmation of the result in a second trial would be practically or ethically impossible or (2) the single trial is supported by other confirmatory evidence. 24 In addition, the manufacturer of an investigational drug in a Phase 2 or Phase 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access to such investigational drug.
The single ascending dose study also compared the release of oxycodone from PF614 under both fasted and fed conditions at the highest does of PF614 evaluated, 200 mg. The pharmacokinetics of the prodrug fragments was also evaluated. In addition, this study instructed as to the “conversion efficiency” of the PF614 prodrug to oxycodone, with respect to OxyContin.
The single ascending dose study also compared the release of oxycodone from PF614 under both fasted and fed conditions at the highest dose of PF614 evaluated, 200 mg. The pharmacokinetics of the prodrug fragments was also evaluated. In addition, this study instructed as to the “conversion efficiency” of the PF614 prodrug to oxycodone, with respect to OxyContin.
See “ Risk Factors—We expect to be completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates could be halted, delayed or made less profitable if those third parties fail to maintain a compliance status acceptable to the FDA or comparable foreign regulatory authorities, fail to provide to us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices ” for more information. 24 Government Grants We have received funding under federal grant award programs through governmental agencies, such as the NIH and NIDA.
See “ Risk Factors—We expect to be completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates could be halted, delayed or made less profitable if those third parties fail to maintain a compliance status acceptable to the FDA or comparable foreign regulatory authorities, fail to provide to us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices ” for more information. 22 Government Grants We have received funding under federal grant award programs through governmental agencies, such as the NIH and NIDA.
Subjects were monitored for hypotension, hypopnea, apnea, and oxygen desaturation. 17 Part B treated a total of 60 subjects and utilized an open-label, single-dose, randomized, 4-way crossover design.
Subjects were monitored for hypotension, hypopnea, apnea, and oxygen desaturation. Part B treated a total of 60 subjects and utilized an open-label, single-dose, randomized, 4-way crossover design.
If issued, these patent applications would expire between 2031 and 2040, subject to any applicable patent term adjustment or extension that might be available in a jurisdiction. 23 Trademarks and Trade Secrets We intend to pursue trademark registrations in the United States and other significant commercial markets for our product candidates as they progress through clinical development.
If issued, these patent applications would expire between 2031 and 2040, subject to any applicable patent term adjustment or extension that might be available in a jurisdiction. 21 Trademarks and Trade Secrets We intend to pursue trademark registrations in the United States and other significant commercial markets for our product candidates as they progress through clinical development.
Furthermore, as noted above, we have not obtained assignments for certain patent applications relating to abuse-resistant amphetamines. 22 We believe that one patent covering PF614 will be eligible for up to five years of patent term extension in the United States and intend to pursue such extension.
Furthermore, as noted above, we have not obtained assignments for certain patent applications relating to abuse-resistant amphetamines. 20 We believe that one patent covering PF614 will be eligible for up to five years of patent term extension in the United States and intend to pursue such extension.
In addition, we own pending United States and European patent applications directed to pharmaceutical compositions containing chemically modified amphetamines covalently linked to a gastrointestinal enzyme-cleavable moiety and a trypsin inhibitor and methods of using the same to treat a subjects.
In addition, we own pending United States and European patent applications directed to pharmaceutical compositions containing chemically modified amphetamines covalently linked to a gastrointestinal enzyme-cleavable moiety and a trypsin inhibitor and methods of using the same to treat a subject.
The study consisted of 4 phases: Screening, Qualification, Treatment, and Follow-up. Subjects were randomized to receive PF614 100mg or crushed oxycodone 40 mg intranasally.
G. Apseloff. The study consisted of 4 phases: Screening, Qualification, Treatment, and Follow-up. Subjects were randomized to receive PF614 100mg or crushed oxycodone 40 mg intranasally.
Further, upon the closing of the Merger, GEM Global became entitled to a commitment fee in the form of cash or freely tradeable shares of our common stock in an amount equal to 2% of the Aggregate Limit or $1.2 million to be paid in two tranches.
Further, upon the closing of the Merger, GEM Global became entitled to a commitment fee in the form of cash or freely tradeable shares of our common stock in an amount equal to 2% of the Aggregate Limit or $1.2 million to be paid in two tranches. The commitment fees have been paid in full.
Oxycodone safety, metabolism, and pharmacokinetics have been well studied. 16 PF614-101 Phase 1 Clinical Trial PF614 (IND 116796) has been evaluated in a Phase 1 clinical study for safety and pharmacokinetics of oxycodone release in 64 healthy subjects in seven different closing cohorts from November 2016 to January 2018.
PF614-101 Phase 1 Clinical Trial PF614 (IND 116796) has been evaluated in a Phase 1 clinical study for safety and pharmacokinetics of oxycodone release in 64 healthy subjects in seven different closing cohorts from November 2016 to January 2018.
In the Phase 1 study of PF614, the time to maximal blood concentration of oxycodone (T max ) was five to six hours for the release of oxycodone and this time cannot be modified by crushing, chewing, or physically manipulating the drug product.
In the Phase 1 study of PF614, the time to maximal blood concentration of oxycodone (T max ) was five to six hours for the release of oxycodone and this time cannot be modified by crushing, chewing, or physically manipulating the drug product. Oxycodone safety, metabolism, and pharmacokinetics have been well studied.
In the event that Purisys is unable to perform the services promised under future agreements, we may be subject to unforeseen costs and delays with respect to our clinical trials and may be unable to replace the Purisys arrangements on terms as favorable to us.
We do not currently have a binding written agreement with Purisys. In the event that Purisys is unable to perform the services promised under future agreements, we may be subject to unforeseen costs and delays with respect to our clinical trials and may be unable to replace the Purisys arrangements on terms as favorable to us.
Furthermore, we rely upon trade secrets, know-how, continuing technological innovation, and potential in-licensing opportunities to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality and invention assignment agreements with our commercial partners, collaborators, employees, and consultants.
We received registration of our trademark for MPAR on May 16, 2023. Furthermore, we rely upon trade secrets, know-how, continuing technological innovation, and potential in-licensing opportunities to develop and maintain our competitive position. We seek to protect our proprietary information, in part, using confidentiality and invention assignment agreements with our commercial partners, collaborators, employees, and consultants.
Manufacturers must refuse to complete any sale and report to DEA any orders for which it is unable to resolve any potential “ red flags .” A compliant suspicious order monitoring system includes well-defined due diligence, “ know your customer ” process as well as systems to identify and monitor ordering and sales of controlled substances. 31 To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlled substances.
Manufacturers must refuse to complete any sale and report to DEA any orders for which it is unable to resolve any potential “ red flags .” A compliant suspicious order monitoring system includes well-defined due diligence, “ know your customer ” process as well as systems to identify and monitor ordering and sales of controlled substances.
The Consulting Agreements were subsequently terminated by Messrs. Hall and Cole. Patents and Patent Applications We own numerous patents and applications in the United States and significant commercial markets, such as Europe, China, and Japan, relating to our product candidates currently in development, as well as other product candidates that may be developed in the future.
Patents and Patent Applications We own numerous patents and applications in the United States and significant commercial markets, such as Europe, China, and Japan, relating to our product candidates currently in development, as well as other product candidates that may be developed in the future.
Manufacturing and Supply We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. Our drug substance and drug products are manufactured for us by contract manufacturing organizations, or CMOs, to our specifications.
Manufacturing and Supply We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. Our drug substance and drug products are manufactured for us by contract manufacturing organizations, or CMOs, to our specifications. Any manufacturing problem or the loss of a CMO could be disruptive to our operations.
Amphetamines like Adderall are manufactured in pill form and are intended for oral ingestion. As of Q4 2022, seventy-five percent of Adderall prescriptions are prescribed to the 10.5 million adults, age 22 or older, that are diagnosed with attention deficit hyperactivity disorder, or ADHD. ADHD is the most common neurodevelopment disorder in children.
As of Q4 2022, seventy-five percent of Adderall prescriptions are prescribed to the 10.5 million adults, age 22 or older, that are diagnosed with attention deficit hyperactivity disorder, or ADHD. ADHD is the most common neurodevelopment disorder in children.
Sponsors are also obligated to disclose the results of their clinical trials after completion. Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.
Disclosure of the results of clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.
These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such product or may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market.
These firms and, where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions, including failure to conform to cGMP, could result in enforcement actions that interrupt the operation of any such product or may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market. 29 The CSA and DEA Regulation Our products are regulated as “ controlled substances ” as defined under the CSA and regulations promulgated by DEA.
See “ Risks Related to Our Business, Financial Condition and Capital Requirements ” for additional information. 25 Finally, pursuant to the terms of the GEM Agreement, we are required to indemnify GEM Global for any losses it incurs as a result of a breach by us or of our representations and warranties and covenants under the GEM Agreement or for any misstatement or omission of a material fact in a registration statement registering those shares pursuant to the GEM Agreement.
Finally, pursuant to the terms of the GEM Agreement, we are required to indemnify GEM Global for any losses it incurs as a result of a breach by us or of our representations and warranties and covenants under the GEM Agreement or for any misstatement or omission of a material fact in a registration statement registering those shares pursuant to the GEM Agreement.
PF614-103 Intranasal Human Abuse Potential Clinical Trial PF614-103 was a randomized, double-blind, placebo- and active-controlled, 3-way crossover study to evaluate the abuse potential and pharmacokinetics of intranasally administered PF614, relative to crushed oxycodone IR tablets and placebo, in non-dependent recreational opioid users conducted by Lotus Clinical Trials LLC through Ohio Clinical Trials, Inc with Principal investigator, Dr. G. Apseloff.
PF614 was generally safe and well-tolerated following single and multiple oral doses under naltrexone blockade. 15 PF614-103 Intranasal Human Abuse Potential Clinical Trial PF614-103 was a randomized, double-blind, placebo- and active-controlled, 3-way crossover study to evaluate the abuse potential and pharmacokinetics of intranasally administered PF614, relative to crushed oxycodone IR tablets and placebo, in non-dependent recreational opioid users conducted by Lotus Clinical Trials LLC through Ohio Clinical Trials, Inc with Principal investigator, Dr.
For the fiscal year ended December 31, 2022, we received federal grants totaling $2.5 million, $2.0 million from NIH related to the Phase 1 clinical trial for PF614 MPAR™ and $0.5 million from NIDA for preclinical development of our opioid use disorder-MPAR TM technology.
For the year ended December 31, 2023, we received federal grant funding totaling $2.2 million, $1.3 million from NIH related to the Phase 1 clinical trial for PF614-MPAR and $0.9 million from NIDA for preclinical development of our opioid use disorder-MPAR ® technology.
Current remaining funding under the two approved grants totals $4.6 million, covering the period through August 31, 2023. We may apply for additional grant funding from these or similar governmental agencies in the future.
Current remaining funding under approved grants totaled $2.2 million as of December 31, 2023, covering the period through August 2024. We may apply for additional grant funding from these or similar governmental agencies in the future.
There was no apparent difference in the safety profile of single oral doses of 100 mg PF614 when administered in the fasted or fed state or between PF614 and OxyContin when administered in the fasted and fed state. PF614 was generally safe and well-tolerated following single and multiple oral doses under naltrexone blockade.
There was no apparent difference in the safety profile of single oral doses of 100 mg PF614 when administered in the fasted or fed state or between PF614 and OxyContin when administered in the fasted and fed state.
In study 1 PF614-103, we evaluated the abuse potential of PF614 100 mg relative to crushed oxycodone immediate-release (IR) tablets 40 mg (equivalent opioid doses) and placebo following intranasal administration.
In study 1, PF614-103, we evaluated the abuse potential of PF614 100 mg relative to crushed oxycodone immediate-release (IR) tablets 40 mg (equivalent opioid doses) and placebo following intranasal administration. In study 2, PF614-104, we evaluated the oral abuse potential of intact PF614 at 3 different dose levels 50, 100 and 200 mg to IR oxycodone 40 mg and placebo.
The initial data demonstrated the overdose protection of our MPAR combination product, with reduced release of oxycodone from PF614 in a simulated overdose situation. It also demonstrated the PF614 in the systemic circulation (simulated injection) did not convert to oxycodone. We completed the clinical portion and reported data from Part A of this study in December 2022.
It also demonstrated the PF614 in the systemic circulation (simulated injection) did not convert to oxycodone. We completed the clinical portion and reported data from Part A of this study in December 2022.
Our portfolio of TAAP product candidates is based on a differentiated understanding of chemical reactivity and metabolism, as well as the key pillars of our unique approach which focuses on: (1) enzyme mediated metabolic activation localized in the gastrointestinal track; (2) rearrangement chemistry to achieve pharmacokinetic release of active drug products; and (3) preclinical and clinical data that set forth the metabolic and chemical activation profile for each of our clinical candidates. 11 Utilizing this approach, we filed an Investigational New Drug application, or IND (116794), and commenced a Phase 1 clinical trial for PF614, which was completed in February 2018.
Our portfolio of TAAP product candidates is based on a differentiated understanding of chemical reactivity and metabolism, as well as the key pillars of our unique approach which focuses on: (1) enzyme mediated metabolic activation localized in the gastrointestinal track; (2) rearrangement chemistry to achieve pharmacokinetic release of active drug products; and (3) preclinical and clinical data that set forth the metabolic and chemical activation profile for each of our clinical candidates.
For example, we discovered the ability of nafamostat in inhibiting the action of enzymes associated with the COVID-19 infection, and, as such, have devoted efforts to develop an oral and inhalation drug product of nafamostat, for use against coronaviral infections and other pulmonary diseases such as cystic fibrosis.
For example, we discovered the ability of nafamostat in inhibiting the action of enzymes associated with the COVID-19 infection, and, as such, have devoted efforts to develop an oral and inhalation drug product of nafamostat, for use against coronaviral infections and other pulmonary diseases such as cystic fibrosis. 10 PF614 PF614 is our lead TAAP prodrug candidate under development for the treatment of acute or chronic pain.
In the event that Societal is unable to perform the services anticipated under future agreements, we may be subject to unforeseen costs and delays with respect to our clinical trials.
We expect to enter into additional related agreements with Societal CDMO as we manufacture future batches of PF614. In the event that Societal is unable to perform the services anticipated under future agreements, we may be subject to unforeseen costs and delays with respect to our clinical trials.
The oral form could be used alone or in combination with other antiviral drugs that target separate processes needed for virus product, such as RNA replication or viral protein processing. An inhaled form of nafamostat could be prescribed for patients that have a more severe stage of the disease.
The oral form could be used alone or in combination with other antiviral drugs that target separate processes needed for virus product, such as RNA replication or viral protein processing.
The Hatch-Waxman Amendments Under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, a portion of a product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored.
Competitors may use this publicly available information to gain knowledge regarding the progress of clinical development programs as well as clinical trial design. 26 The Hatch-Waxman Amendments Under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, a portion of a product’s U.S. patent term that was lost during clinical development and regulatory review by the FDA may be restored.
Controlled substances are classified into five schedules: Schedule I, II, III, IV, or V, depending on the abuse potential. Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the United States.
The law and regulations establish registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, and other requirements administered by DEA. Controlled substances are classified into five schedules: Schedule I, II, III, IV, or V, depending on the abuse potential. Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the United States.
An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug.
Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug.
The primary measure in this study, “ drug liking ,” is recommended by the FDA in their Guidance on “Assessment of Abuse Potential of Drugs.” This measure is known to correlate with a drug’s potential for abuse.
The primary measure in this study, “ drug liking ,” is recommended by the FDA in their Guidance on “Assessment of Abuse Potential of Drugs.” This measure is known to correlate with a drug’s potential for abuse. The results demonstrated that inhaled powdered PF614 had significantly lower drug liking than inhaled crushed IR oxycodone.
PF614 PF614 is our lead TAAP prodrug candidate under development for the treatment of acute or chronic pain. PF614 is a delayed release TAAP prodrug designed to release oxycodone under certain specific physiological circumstances when taken orally. PF164 was evaluated for safety and pharmacokinetic release of oxycodone in a Phase 1 single ascending dose clinical trial in 64 healthy subjects.
PF614 is a delayed release TAAP prodrug designed to release oxycodone under certain specific physiological circumstances when taken orally. PF164 was evaluated for safety and pharmacokinetic release of oxycodone in a Phase 1 single ascending dose clinical trial in 64 healthy subjects. The trial showed that PF614 was well tolerated with no serious adverse events.
We believe the potential benefits to society of applying TAAP to opioids and amphetamines providing medication that resists both oral and parenteral abuse are considerable. 15 MPAR™ Prescription Drugs MPAR TM combination therapy, involves co-formulating TAAP prodrugs with a trypsin inhibitor, nafamostat, which, when administered at prescribed dose levels, are intended to have no effect on the conversion of the prodrug to the active ingredient thus allowing normal drug plasma exposure levels.
MPAR® Prescription Drugs MPAR ® combination therapy, involves co-formulating TAAP prodrugs with a trypsin inhibitor, nafamostat, which, when administered at prescribed dose levels, are intended to have no effect on the conversion of the prodrug to the active ingredient thus allowing normal drug plasma exposure levels.
Specifically, EBIR acquired Patent EP2124926B1 and all data and assets associated with the development and expansion of the inhaled nafamostat program. These assets included COVID-19 and cystic fibrosis drug targets in development. In consideration for this intellectual property, Mucokinetica received a 1% equity ownership in EBIR, and its founders, Roderick Hall and Peter Cole, entered into Consulting Agreements with EBIR.
These assets included COVID-19 and cystic fibrosis drug targets in development. 18 In consideration for this intellectual property, Mucokinetica received a 1% equity ownership in EBIR, and its founders, Roderick Hall and Peter Cole, entered into Consulting Agreements with EBIR. The Consulting Agreements were subsequently terminated by Messrs. Hall and Cole.
If a pediatric study is requested by the FDA in a Pediatric Written Request, or PWR, and we complete the pediatric study according to the terms of the PWR, all unexpired Orange Book listed exclusivities (patent or regulatory) will be extended by six months.
If a pediatric study is requested by the FDA in a Pediatric Written Request, or PWR, and we complete the pediatric study according to the terms of the PWR, all unexpired Orange Book listed exclusivities (patent or regulatory) will be extended by six months. 27 Similar provisions are available in Europe, Japan, and certain other jurisdictions to extend the exclusivity of a patent that covers an approved drug.
We do not believe there are other companies developing products that have an overdose mechanism similar to our MPAR™ technology. 20 Intellectual Property Our commercial success depends in part on our ability to obtain and maintain proprietary protection for product candidates and any of our future product candidates, novel discoveries, product development technologies, and know-how; to operate without infringing on the proprietary rights of others; and to prevent others from infringing our proprietary rights.
Intellectual Property Our commercial success depends in part on our ability to obtain and maintain proprietary protection for product candidates and any of our future product candidates, novel discoveries, product development technologies, and know-how; to operate without infringing on the proprietary rights of others; and to prevent others from infringing our proprietary rights.
An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing original NDAs. 27 Section 505(b)(2) NDAs An alternative to the NDA pathway described above is an NDA submitted under Section 505(b)(2) of the FDC Act, which enables the applicant to rely, in part, on the FDA’s prior findings in approving a similar product or published literature in support of its application.
Section 505(b)(2) NDAs An alternative to the NDA pathway described above is an NDA submitted under Section 505(b)(2) of the FDC Act, which enables the applicant to rely, in part, on the FDA’s prior findings in approving a similar product or published literature in support of its application.
The technology under the TAAP platform when applied to opioid drugs is designed to release clinically effective opioid drugs only when exposed to specific physiological conditions (i.e., when the drug is ingested and exposed to the digestive enzyme trypsin).
Our Technology Platform Solution TAAP Prescription Drugs The technology under the TAAP platform utilizes a novel technology designed to deter prescription drug abuse at the molecular level. The molecular delivery system is designed to release clinically effective drugs only when exposed to specific physiological conditions (i.e., when the drug is ingested and exposed to the digestive enzyme trypsin).
A second Phase 1b multi-ascending dose study (MAD) was initiated in 2021 to evaluate PF614 delivered to healthy subjects twice daily for 4.5 days. This study evaluated both safety and PK, with a second part to evaluate the bioequivalence (BE) of PF614 versus OxyContin. Final data from this trial was reported in July 2022.
This study evaluated both safety and PK, with a second part to evaluate the bioequivalence (BE) of PF614 versus OxyContin. Final data from this trial was reported in July 2022.
Each prodrug is intended to be able to be combined with our MPAR™ technology for overdose protection. Additionally, nafamostat, which is an ingredient in our overdose protection combination products, is also being developed for infection and pulmonary lung diseases.
Additionally, nafamostat, which is an ingredient in our overdose protection combination products, may be developed for infection and pulmonary lung diseases.
A pharmaceutical product may be listed as Schedule II, III, IV, or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. 30 PF614 will be classified as a Schedule II controlled substance under the CSA and regulations because it contains oxycodone which is already regulated as a Schedule II controlled substance.
A pharmaceutical product may be listed as Schedule II, III, IV, or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.
First, the abuse-resistance provided by PF614 is designed to be unaffected by simple physical manipulations (e.g., extraction, chewing, and/or crushing). It also limits the bioavailability of active medication following co-ingestion of multiple doses.
This approach differs from formulation-based strategies which are currently commercially available, in a number of ways. First, the abuse-resistance provided by PF614 is retained even when dissolved in water and is designed to be unaffected by simple physical manipulations (e.g., extraction, chewing, and/or crushing). It also limits the bioavailability of active medication following co-ingestion of multiple doses.
Our Development Programs We are currently developing product candidates designed to improve the safety and performance of prescription drugs. Our primary focus has been on opioid pain products and opioid use disorder products. Our development pipeline of TAAP prodrugs is summarized in the table below.
Our Development Programs We are currently developing product candidates designed to improve the safety and performance of prescription drugs. Our primary focus has been on opioid pain products and opioid use disorder products. Each prodrug is intended to be able to be combined with our MPAR® technology for overdose protection.
A second multi-ascending dose study with a bioequivalent arm was completed in July 2022 and a nasal human abuse potential (HAP) study was completed in October 2022. A second oral HAP study has been initiated in September 2022 and data is expected in early 2023.
A second multi-ascending dose study with a bioequivalent arm was completed in July 2022 and a nasal human abuse potential (HAP) study was completed in October 2022. A second oral HAP study was completed in March 2023. Most recently, a study to evaluate efficacy was completed in December 2023.
Other companies offer products indicated for chronic, severe, long-term pain with various delivery technologies, but these products do not have abuse-deterrent claims on their labels.
Other companies offer products indicated for chronic, severe, long-term pain with various delivery technologies, but these products do not have abuse-deterrent claims on their labels. Vertex has recently announced a non-opioid pain product that inhibits NaV1.8 and has entered Phase 3 development.
Government Regulation In the United States, pharmaceutical products are subject to extensive regulation by the FDA, and those pharmaceutical products that are controlled substance are also subject to extensive regulation by the DEA.
Restrictions pursuant to the terms of our recent financings may also affect our ability to use the GEM Facility. 23 Government Regulation In the United States, pharmaceutical products are subject to extensive regulation by the FDA, and those pharmaceutical products that are controlled substance are also subject to extensive regulation by the DEA.
In Japan, we believe PF614 will be eligible for eight years of regulatory exclusivity from a Japanese new drug application, or J-NDA, approval. Orange Book Listing In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the applicant’s product or method of using the product.
Orange Book Listing In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the applicant’s product or method of using the product. Upon approval of a drug, each of the patents identified in the application for the drug are then published in the FDA’s Orange Book.
The study will continue in 2023 to test the overdose protection of the selected formulation by administering an escalating number of dose units to a group of healthy subjects. Data is expected in the second half of 2023.
A second, Part B was initiated in January 2023 to test the overdose protection of the selected formulation by administering an escalating number of dose units to a group of healthy subjects. Enrollment was completed in March 2023.
We plan to seek PTEs for any of our issued patents in any jurisdiction where these are available; however, there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions. 28 We also believe that (1) PF614 and nafamostat will be eligible for a five-year NCE regulatory exclusivity, and (2) PF614-MPAR™ will be eligible for a three-year clinical investigation, or CI, regulatory exclusivity, under the Hatch-Waxman Act, during which time no ANDA can be approved.
We plan to seek PTEs for any of our issued patents in any jurisdiction where these are available; however, there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of such extensions.
Disclosure of Clinical Trial Information Sponsors of clinical trials of FDA-regulated products, including drugs, are required to register and disclose certain clinical trial information on the website www.clinicaltrials.gov. Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration.
Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of a clinical trial are then made public as part of the registration. Sponsors are also obligated to disclose the results of their clinical trials after completion.
The study will continue in 2023 to test the overdose protection of the selected formulation by administering an escalating number of dose units to a group of healthy subjects. Data is expected in the second half of 2023.
Part B of the study to test the overdose protection of the selected PF614-MPAR 25 mg formulation by administering an escalating number of dose units to a group of healthy subjects completed enrollment in March 2023.
Misuse or abuse of opioids is often done in one of the following manners: ● Oral Excessive Tablet Abuse . Generally recognized as the most prevalent route of administration by abusers, an abuser orally ingests more tablets (or capsules) than is recommended for pain relief. ● Nasal snorting .
Generally recognized as the most prevalent route of administration by abusers, an abuser orally ingests more tablets (or capsules) than is recommended for pain relief. ● Nasal snorting . Crushed tablets are insufflated for absorption of the drug through the nasal tissues. ● Injection .
Additionally, we issued a warrant with a 36-month term at the closing of the Merger granting GYBL the right to purchase 55,306 shares of our common stock (an amount equal to 4% of the total number of our common stock outstanding as of the closing date of the Merger (subject to adjustments described below), calculated on a fully diluted basis), at a strike price per share equal to, after several downward adjustments, $0.7512 as of January 12, 2023.
Additionally, we issued a warrant with a 36-month term at the closing of the Merger granting GYBL the right to purchase 4,608 shares of our common stock at a strike price per share equal to $1.5675, after several downward adjustments to the strike price.
Similar provisions are available in Europe, Japan, and certain other jurisdictions to extend the exclusivity of a patent that covers an approved drug. In Europe, we believe PF614 and nafamostat will be eligible for 10 years of regulatory exclusivity from European Marketing Application, or EMA, approval.
In Europe, we believe PF614 and nafamostat will be eligible for 10 years of regulatory exclusivity from European Marketing Application, or EMA, approval. In Japan, we believe PF614 will be eligible for eight years of regulatory exclusivity from a Japanese new drug application, or J-NDA, approval.
We currently have sufficient supplies of PF614 and nafamostat on hand for our current clinical trial needs. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability, and quality.
Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability, and quality. Purisys Purisys LLC manufactures PF614 and other clinical trial materials under cGMP conditions and provides stability studies with respect to our PF614 clinical trials.
Based on information from the CDC, the most common drugs involved in prescription opioid overdose deaths include Methadone, Oxycodone (such as OxyContin®), and Hydrocodone (such as Vicodin®). The CDC indicates that improving opioid prescribing, treatment of opioid use disorder, and prevention of opioid use disorder would help to improve the opioid crisis.
However, 2.1 million people reported having opioid use disorder (“ Opioid Use Disorder ”) in 2019. Based on information from the CDC, the most common drugs involved in prescription opioid overdose deaths include Methadone, Oxycodone (such as OxyContin®), and Hydrocodone (such as Vicodin®).
Consequently, the manufacturing, shipping, storing, selling, prescribing, and dispensing of our products is subject to a high degree of regulation. Schedule II drugs are subject to the strictest requirements for registration, security, recordkeeping, and reporting. Facilities must maintain complete and accurate inventories and records of all controlled substances received, manufactured, stored, and distributed.
Schedule II drugs are subject to the strictest requirements for registration, security, recordkeeping, and reporting. Facilities must maintain complete and accurate inventories and records of all controlled substances received, manufactured, stored, and distributed. These facilities must comply with strict security requirements to prevent diversion of drugs in their possession. Also, distribution and dispensing of these drugs are highly regulated.
Crushed tablets are insufflated for absorption of the drug through the nasal tissues. ● Injection . The opioid is physically or chemically removed from the dosage and injected into the vein using a syringe. ● Oral Manipulated Tablet Abuse .
The opioid is physically or chemically removed from the dosage and injected into the vein using a syringe. ● Oral Manipulated Tablet Abuse . Extended-release tablets or patches are crushed, chewed, or otherwise physically or chemically manipulated to defeat an extended-release mechanism and provide an immediate-release of the opioid for oral ingestion. ● Poly-pharmacy .
From time to time, we also retain independent contractors to support our organization. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good. 32 Identification of Our Executive Officers The Company’s Executive Officers and their age and position are below.
None of our employees is represented by a labor union or covered by collective bargaining agreements, and we believe our relationship with our employees is good. 32
Users may accidentally introduce excessive quantities of drugs in their systems or combine drugs that may heighten the chance of adverse effects of drugs. Some patients may over-ingest drugs accidentally or with the express intent of suicide. ● Chronic or prolonged use. Chronic or prolonged use of opioids resulting in dependence is another form of misuse or abuse.
Some patients may over-ingest drugs accidentally or with the express intent of suicide. ● Chronic or prolonged use. Chronic or prolonged use of opioids resulting in dependence is another form of misuse or abuse. Amphetamines like Adderall are manufactured in pill form and are intended for oral ingestion.
We initiated a Phase 1 clinical trial, PF614-MPAR-101, to evaluate safety and PK in healthy subjects in December 2021. Initial data from this trial was reported in May of 2022. The PF614-MPAR-101 overdose protection study examined PF614 administered orally alone or in combination with the trypsin inhibitor nafamostat (MPAR) to healthy volunteers.
We addressed deficiencies from the initial IND submission, amended the protocol and submitted a response to the clinical hold letter on March 29, 2021. We initiated a Phase 1 clinical trial, PF614-MPAR-101, to evaluate safety and PK in healthy subjects in December 2021. Initial data from this trial was reported in May of 2022.
Any manufacturing problem or the loss of a CMO could be disruptive to our operations and result in lost sales. Our lead product candidate, PF614, is small molecule opioid prodrug. As such, it is a controlled substance, regulated by the Drug Enforcement Administration (“ DEA ”) and state-controlled substance authorities.
Our lead product candidate, PF614, is a small molecule opioid prodrug. As such, it is a controlled substance, regulated by the Drug Enforcement Administration (“ DEA ”) and state-controlled substance authorities. Our CMOs will be required to be registered with DEA and will be responsible for obtaining adequate quota to manufacture and otherwise handle controlled substances.
Besides our clinical candidates, we have a product portfolio of other TAAP and MPAR TM opioids that could potentially be developed to build on this pipeline. Besides our clinical candidates, we have a product portfolio of other TAAP and MPAR TM opioids and amphetamines that could potentially be developed to build on this pipeline.
Besides our clinical candidates, we have a product portfolio of other TAAP and MPAR ® opioids and amphetamines that could potentially be developed to build on this pipeline. 13 Clinical agents PF614 PF614 is a chemically modified, extended-release oxycodone-derivative which releases clinically effective oxycodone only when exposed trypsin in the gut (i.e., when the drug is ingested).
Our CMOs will be required to be registered with DEA and will be responsible for obtaining adequate quota to manufacture and otherwise handle controlled substances. We currently engage third parties to provide clinical supplies of PF614 and nafamostat. We also currently engage a CMO to provide drug product manufacture of PF614, PF614-MPAR™, and nafamostat.
We currently engage third parties to provide clinical supplies of PF614 and nafamostat. We also currently engage a CMO to provide drug product manufacture of PF614, PF614-MPAR and nafamostat. We currently have sufficient supplies of PF614 and nafamostat on hand for our current clinical trial needs.
Recro (now Societal CDMO) has completed the manufacture of PF614 50 and 100 mg capsules that have been used in clinical studies PF614-102, PF614-103 and PF614-104.We expect to enter into additional related agreements with Societal CDMO as we manufacture future batches of PF614.
Societal CDMO Societal CDMO manufactures PF614 and other clinical trial drug products under cGMP conditions and provides stability studies with respect to our PF614 clinical trials. Societal has completed the manufacture of PF614 50 and 100 mg capsules that have been used in clinical studies PF614-102, PF614-103, PF614-104 and PF614-201.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf these CROs do not successfully carry out their contractual duties, meet expected deadlines or conduct the clinical trials in accordance with regulatory requirements or our stated protocols, it could adversely affect the development of our product candidates and it could result in us not being able to obtain, or being delayed in obtaining, marketing approvals for our product candidates and it could adversely affect our efforts to successfully commercialize our product candidates. 44 We expect to be completely dependent on third parties to manufacture our product candidates, and our commercialization of our product candidates could be halted, delayed or made less profitable if those third parties fail to maintain a compliance status acceptable to the FDA or comparable foreign regulatory authorities, fail to provide to us with sufficient quantities of our product candidates or fail to do so at acceptable quality levels or prices.
Biggest changeIf these CROs do not successfully carry out their contractual duties, meet expected deadlines or conduct the clinical trials in accordance with regulatory requirements or our stated protocols, it could adversely affect the development of our product candidates and it could result in us not being able to obtain, or being delayed in obtaining, marketing approvals for our product candidates and it could adversely affect our efforts to successfully commercialize our product candidates.
In the event that Societal is unable to perform its obligations under the Recro Agreement, we may be unable to replace the Societal Agreement on terms as favorable to us.
In the event that Societal is unable to perform its obligations under the Recro Agreement, we may be unable to replace the Recro Agreement on terms as favorable to us.
We may also experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to receive marketing approval or commercialize the product candidates we develop, including: ● regulators, or institutional review boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; 49 ● we may not reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● we may experience challenges or delays in recruiting principal investigators or study sites to lead our clinical trials; ● the number of subjects or patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; ● our third-party contractors, including those manufacturing our product candidates or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● we may have to amend clinical trial protocols submitted to regulatory authorities or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to resubmit to an IRB and regulatory authorities for re-examination; ● regulators or other reviewing bodies may find deficiencies with or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, or the supply or quality of any product candidate or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and ● the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.
We may also experience numerous unforeseen events during our clinical trials that could delay or prevent our ability to receive marketing approval or commercialize the product candidates we develop, including: ● regulators, or institutional review boards, or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; ● we may not reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; ● we may experience challenges or delays in recruiting principal investigators or study sites to lead our clinical trials; ● the number of subjects or patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; ● our third-party contractors, including those manufacturing our product candidates or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; ● we may have to amend clinical trial protocols submitted to regulatory authorities or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to resubmit to an IRB and regulatory authorities for re-examination; ● regulators or other reviewing bodies may find deficiencies with or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, or the supply or quality of any product candidate or other materials necessary to conduct clinical trials of our product candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and ● the potential for approval policies or regulations of the FDA or the applicable foreign regulatory agencies to significantly change in a manner rendering our clinical data insufficient for approval.
The following examples are illustrative: ● others may be able to make formulations that are similar to our product candidates or other formulations but that are not covered by the claims of our patent rights; ● the patents of third parties may have an adverse effect on our business; ● we or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own; ● we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions; 61 ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we may own or that we exclusively license in the future may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; ● our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● third parties performing manufacturing or testing for us using our product candidates or technologies could use the intellectual property of others without obtaining a proper license; ● we may not develop additional proprietary technologies that are patentable; and ● the patents of others may have an adverse effect on our business.
The following examples are illustrative: ● others may be able to make formulations that are similar to our product candidates or other formulations but that are not covered by the claims of our patent rights; ● the patents of third parties may have an adverse effect on our business; ● we or any future strategic partners might not have been the first to conceive or reduce to practice the inventions covered by the issued patent or pending patent application that we own; ● we or any future strategic partners might not have been the first to file patent applications covering certain of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we may own or that we exclusively license in the future may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; ● our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● third parties performing manufacturing or testing for us using our product candidates or technologies could use the intellectual property of others without obtaining a proper license; ● we may not develop additional proprietary technologies that are patentable; and ● the patents of others may have an adverse effect on our business.
We may experience difficulties in patient enrollment in our clinical trials for a variety of factors, including: ● the patient eligibility criteria defined in the protocol; ● the size of the patient population required for analysis of the trial’s primary endpoints; ● the proximity of patients to study sites; ● the design of the trial; 50 ● our ability to recruit clinical trial investigators with the appropriate competencies and experience; ● competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications that we are investigating; ● our ability to obtain and maintain patient consents; and ● the risk that patients enrolled in clinical trials will drop out of the trials before completion.
We may experience difficulties in patient enrollment in our clinical trials for a variety of factors, including: ● the patient eligibility criteria defined in the protocol; ● the size of the patient population required for analysis of the trial’s primary endpoints; ● the proximity of patients to study sites; ● the design of the trial; ● our ability to recruit clinical trial investigators with the appropriate competencies and experience; ● competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications that we are investigating; ● our ability to obtain and maintain patient consents; and ● the risk that patients enrolled in clinical trials will drop out of the trials before completion.
Serious adverse events, or SAEs, or other adverse effects, as well as tolerability issues, could hinder or prevent market acceptance of the product candidate at issue. 46 Our current and future product candidates could fail to receive regulatory approval for many reasons, including the following: ● the FDA or comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; ● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for our proposed indication; ● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from clinical trials or preclinical studies; ● the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA to the FDA or other submission or to obtain regulatory approval in the United States, the European Union or elsewhere; ● the FDA or comparable foreign regulatory authorities may find deficiencies with the manufacturing processes of third-party manufacturers with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Serious adverse events, or SAEs, or other adverse effects, as well as tolerability issues, could hinder or prevent market acceptance of the product candidate at issue. 44 Our current and future product candidates could fail to receive regulatory approval for many reasons, including the following: ● the FDA or comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; ● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for our proposed indication; ● the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from clinical trials or preclinical studies; ● the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA to the FDA or other submission or to obtain regulatory approval in the United States, the European Union or elsewhere; ● the FDA or comparable foreign regulatory authorities may find deficiencies with the manufacturing processes of third-party manufacturers with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Adverse differences between preliminary or interim data and final data could significantly harm our reputation and business prospects. Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our product candidates.
Adverse differences between preliminary or interim data and final data could significantly harm our reputation and business prospects. 46 Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our product candidates.
This equity line facility is available for a period of 36 months from the closing date of the Merger. However, we have not been able to make use of the GEM Facility and we may not be able to do so before it expires. Please see the section entitled “ Business ” for additional information.
This equity line facility is available for a period of 36 months from the closing date of the Merger. However, we have not been able to make use of the GEM Facility and we may not be able to do so before it expires. Please see the section entitled “Item1. Business ” for additional information.
Failure to protect such assets may have a material adverse effect on our business, operations, financial condition and prospects. 55 We may face litigation from third parties claiming that our products or business infringe, misappropriate, or otherwise violate their intellectual property rights, or seeking to challenge the validity of our patents.
Failure to protect such assets may have a material adverse effect on our business, operations, financial condition and prospects. We may face litigation from third parties claiming that our products or business infringe, misappropriate, or otherwise violate their intellectual property rights, or seeking to challenge the validity of our patents.
We are committing a substantial majority of our resources to the development of products utilizing our TAAP and MPAR TM . There can be no assurance that our products will perform as tested and limit or impede the actual abuse, overdose or misuse of such products or provide other benefits in commercial settings.
We are committing a substantial majority of our resources to the development of products utilizing our TAAP and MPAR ® . There can be no assurance that our products will perform as tested and limit or impede the actual abuse, overdose or misuse of such products or provide other benefits in commercial settings.
Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings. The expiration or loss of patent protection may adversely affect our future revenues and operating earnings.
Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings. 56 The expiration or loss of patent protection may adversely affect our future revenues and operating earnings.
As a result, we may (i) fail to capitalize on viable commercial products or profitable market opportunities, (ii) be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or (iii) relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights. 40 Our PF614 and PF614-MPAR™ product candidates may not be successful in limiting or impeding abuse, overdose or misuse or providing additional safety upon commercialization.
As a result, we may (i) fail to capitalize on viable commercial products or profitable market opportunities, (ii) be required to forego or delay pursuit of opportunities with other product candidates or other diseases and disease pathways that may later prove to have greater commercial potential than those we choose to pursue, or (iii) relinquish valuable rights to such product candidates through collaboration, licensing, or other royalty arrangements in cases in which it would have been advantageous for us to invest additional resources to retain sole development and commercialization rights. 38 Our PF614 and PF614-MPAR product candidates may not be successful in limiting or impeding abuse, overdose or misuse or providing additional safety upon commercialization.
The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. We cannot be certain that our patents and patent rights will be effective in protecting our product candidates and technologies.
The laws of foreign countries may not protect our rights to the same extent as the laws of the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. 54 We cannot be certain that our patents and patent rights will be effective in protecting our product candidates and technologies.
Additionally, we are a “ smaller reporting company ” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
We are a “ smaller reporting company ” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis or result in material misstatements in our consolidated financial statements, which could harm our operating results.
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis or result in material misstatements in our consolidated financial statements, which could harm our operating results.
These products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
These products may compete with our product candidates, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. 57 Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
Our failure to become and remain profitable may depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. 35 We require substantial additional funding.
Our failure to become and remain profitable may depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings or continue our operations. We require substantial additional funding.
We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively pursuing our more advanced clinical-stage product candidates, such [as nafamostat], PF614 and PF614-MPAR™, and ensuring the development of additional potential product candidates.
We seek to maintain a process of prioritization and resource allocation to maintain an optimal balance between aggressively pursuing our more advanced clinical-stage product candidates, such as PF614 and PF614-MPAR, and ensuring the development of additional potential product candidates.
If any of our product candidates encounter safety or efficacy problems, development delays or regulatory issues or other problems, our development plans and business would be materially harmed. We may not have the financial resources to continue development of our product candidates.
If any of our product candidates encounter safety or efficacy problems, development delays or regulatory issues or other problems, our development plans and business would be materially harmed. 36 We may not have the financial resources to continue development of our product candidates.
Any of these occurrences may adversely affect our business, financial condition and prospects significantly. Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials.
Any of these occurrences may adversely affect our business, financial condition and prospects significantly. 51 Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have agreed to enter into clinical trials.
In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval. 51 Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.
In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to accelerated product development or earlier approval. 50 Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during a product candidate’s clinical development and may vary among jurisdictions.
The timing of the scheduling process is uncertain and may delay our ability to market any product candidate that we successfully developed and approved. 47 If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for, or commercialize our product candidates.
The timing of the scheduling process is uncertain and may delay our ability to market any product candidate that we successfully developed and approved. 45 If our clinical trials fail to replicate positive results from earlier preclinical studies or clinical trials conducted by us or third parties, we may be unable to successfully develop, obtain regulatory approval for, or commercialize our product candidates.
Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the Securities and Exchange Commission, or SEC, or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing or future financing arrangements.
Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, or violations of applicable stock exchange listing rules, which may result in a breach of the covenants under existing or future financing arrangements.
If any of these events occur, it could require us to conduct more extensive clinical trials and go through more extensive FDA review, which could substantially increase expenses and delay the time for commercializing our products.
If any of these events occur, it could require us to conduct more extensive clinical trials and go through more extensive FDA reviews, which could substantially increase expenses and delay the time for commercializing our products.
Even if clinical trials are completed, we may experience other issues that may delay or prevent regulatory approval of, or our ability to commercialize, our product candidates, including: ● inability to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe and effective; ● insufficiency of our financial and other resources to complete the necessary clinical trials and preclinical studies; ● negative or inconclusive results from our clinical trials, preclinical studies or the clinical trials of others for product candidates that are similar to ours, leading to a decision or requirement to conduct additional clinical trials or preclinical studies or abandon a program; ● product-related adverse events experienced by subjects in our clinical trials, including unexpected toxicity results, or by individuals using drugs or therapeutic biologics similar to our product candidates; ● delays in submitting an Investigational New Drug application, or IND, or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial or a suspension or termination, or hold, of a clinical trial once commenced; ● conditions imposed by the FDA, the European Medicines Agency, or EMA, or comparable foreign regulatory authorities regarding the scope or design of our clinical trials; ● poor effectiveness of our product candidates during clinical trials; ● better than expected performance of control arms, such as placebo groups, which could lead to negative or inconclusive results from our clinical trials; ● delays in enrolling subjects in clinical trials; ● high drop-out rates of subjects from clinical trials; ● inadequate supply or quality of product candidates or other materials necessary for the conduct of our clinical trials; ● greater than anticipated clinical trial or manufacturing costs; 39 ● unfavorable FDA, EMA or comparable regulatory authority inspection and review of a clinical trial site; ● failure of our third-party contractors or investigators to comply with regulatory requirements or the clinical trial protocol or otherwise meet their contractual obligations in a timely manner, or at all; ● unfavorable FDA, EMA or comparable regulatory authority inspection and review of manufacturing facilities or inability of those facilities to maintain a compliance status acceptable to the FDA, EMA or comparable regulatory authorities; ● 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 therapies in particular; or ● varying interpretations of data by the FDA, EMA and comparable foreign regulatory authorities.
Even if clinical trials are completed, we may experience other issues that may delay or prevent regulatory approval of, or our ability to commercialize, our product candidates, including: ● inability to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidates are safe and effective; ● insufficiency of our financial and other resources to complete the necessary clinical trials and preclinical studies; ● negative or inconclusive results from our clinical trials, preclinical studies or the clinical trials of others for product candidates that are similar to ours, leading to a decision or requirement to conduct additional clinical trials or preclinical studies or abandon a program; ● product-related adverse events experienced by subjects in our clinical trials, including unexpected toxicity results, or by individuals using drugs or therapeutic biologics similar to our product candidates; ● delays in submitting an Investigational New Drug application, or IND, or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial or a suspension or termination, or hold, of a clinical trial once commenced; ● conditions imposed by the FDA, the European Medicines Agency, or EMA, or comparable foreign regulatory authorities regarding the scope or design of our clinical trials; ● poor effectiveness of our product candidates during clinical trials; ● better than expected performance of control arms, such as placebo groups, which could lead to negative or inconclusive results from our clinical trials; ● delays in enrolling subjects in clinical trials; ● high drop-out rates of subjects from clinical trials; ● inadequate supply or quality of product candidates or other materials necessary for the conduct of our clinical trials; ● greater than anticipated clinical trial or manufacturing costs; ● unfavorable FDA, EMA or comparable regulatory authority inspection and review of a clinical trial site; ● failure of our third-party contractors or investigators to comply with regulatory requirements or the clinical trial protocol or otherwise meet their contractual obligations in a timely manner, or at all; ● unfavorable FDA, EMA or comparable regulatory authority inspection and review of manufacturing facilities or inability of those facilities to maintain a compliance status acceptable to the FDA, EMA or comparable regulatory authorities; ● 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 therapies in particular; or ● varying interpretations of data by the FDA, EMA and comparable foreign regulatory authorities. 37 Our product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and applicable foreign regulatory authorities.
To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of shares of our common stock and increase the number of shares of common stock eligible for resale in the public market.
To the extent these warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of shares of our common stock and increase the number of shares of common stock eligible for resale in the public market.
The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit the ability of stockholders to sell their common stock in the secondary market. 67
The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit the ability of stockholders to sell their common stock in the secondary market. 65
It is possible that even if any of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials.
It is possible that even if any of our product candidates has a beneficial effect, that effect will not be detected during clinical evaluation because of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials.
Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control and may be difficult to predict, including the following: ● the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, ● our ability to successfully recruit and retain subjects for clinical trials, and any delays caused by difficulties in such efforts, including as a result of COVID-19; ● the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future therapeutics that compete with our product candidates; ● our ability to obtain marketing approval for our product candidates and the timing and scope of any such approvals we may receive; ● the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time; ● the cost of manufacturing our product candidates, which may vary depending on the quantity of production and the terms of our agreements with manufacturers; ● our ability to attract, hire and retain qualified personnel; ● expenditures that we will or may incur to develop additional product candidates; ● the level of demand for our product candidates should they receive approval, which may vary significantly; ● the changing and volatile U.S. and global economic environments; and ● future accounting pronouncements or changes in our accounting policies.
Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control and may be difficult to predict, including the following: ● the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, ● our ability to successfully recruit and retain subjects for clinical trials, and any delays caused by difficulties in such efforts; ● the risk/benefit profile, cost and reimbursement policies with respect to our product candidates, if approved, and existing and potential future therapeutics that compete with our product candidates; ● our ability to obtain marketing approval for our product candidates and the timing and scope of any such approvals we may receive; ● the timing and cost of, and level of investment in, research and development activities relating to our product candidates, which may change from time to time; ● the cost of manufacturing our product candidates, which may vary depending on the quantity of production and the terms of our agreements with manufacturers; ● our ability to attract, hire and retain qualified personnel; ● expenditures that we will or may incur to develop additional product candidates; ● the level of demand for our product candidates should they receive approval, which may vary significantly; ● the changing and volatile U.S. and global economic environments; and ● future accounting pronouncements or changes in our accounting policies. 64 The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results.
Please see the risk factors under “ Risks Related to the Ownership of Common Stock and Financial Reporting .” 36 We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023, while advancing our main product candidates such as, PF614 and PF614 MPAR™ and nafamostat through their respective next phases of clinical development.
Please see the risk factors under “ Risks Related to the Ownership of Common Stock and Financial Reporting .” We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2024, while advancing our main product candidates such as, PF614 and PF614-MPAR and nafamostat through their respective next phases of clinical development.
Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates. The FDA may recommend scheduling with respect to any of our current or future product candidates. In such event, prior to a product launch, the DEA will need to determine the controlled substance schedule of the product, taking into account the recommendation of the FDA.
Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates. The FDA may recommend scheduling with respect to any of our current or future product candidates. In such event, prior to a product launch, the DEA will need to determine the controlled substance schedule of the product, considering the recommendation of the FDA.
Our future need for additional funding depends on many factors, including: ● the scope, progress, results and costs of researching and developing our current product candidates, as well as other additional product candidates we may develop and pursue in the future, including the costs related to preclinical and clinical development of the product; ● the timing of, and the costs involved in, obtaining marketing approvals for our product candidates and any other additional product candidates we may develop and pursue in the future; ● the number of future product candidates that we may pursue and their development requirements; ● subject to receipt of regulatory approval, the costs of commercialization activities for our product candidates, to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; ● subject to receipt of regulatory approval, the amount of revenue, if any, received from commercial sales of our product candidates or any other additional product candidates we may develop and pursue in the future; ● the extent to which we in-license or acquire rights to other products, product candidates or technologies; ● our ability to establish collaboration arrangements for the development of our product candidates on favorable terms, if at all; ● dependent on financing, our headcount growth and associated costs as we expand our research and development and establishes a commercial infrastructure; ● the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and ● the costs of operating as a public company.
We cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of any product candidate we develop and we will require substantial additional funding to complete the development and commercialization of our product candidates. 34 Our future need for additional funding depends on many factors, including: ● the scope, progress, results and costs of researching and developing our current product candidates, as well as other additional product candidates we may develop and pursue in the future, including the costs related to preclinical and clinical development of the product; ● the timing of, and the costs involved in, obtaining marketing approvals for our product candidates and any other additional product candidates we may develop and pursue in the future; ● the number of future product candidates that we may pursue and their development requirements; ● subject to receipt of regulatory approval, the costs of commercialization activities for our product candidates, to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities; ● subject to receipt of regulatory approval, the amount of revenue, if any, received from commercial sales of our product candidates or any other additional product candidates we may develop and pursue in the future; ● the extent to which we in-license or acquire rights to other products, product candidates or technologies; ● our ability to establish collaboration arrangements for the development of our product candidates on favorable terms, if at all; ● dependent on financing, our headcount growth and associated costs as we expand our research and development and establishes a commercial infrastructure; ● the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and ● the costs of operating as a public company.
Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of such product candidate that is greater than the actual positive effect, if any.
Conversely, because of the same factors, our clinical trials may indicate an apparent positive effect of such product candidate that is greater than the actual positive effect, if any.
If we continue to suffer losses as we have since inception, investors may not receive any return on their investment and may lose their entire investment. 34 In addition, as a public company, we incur significant additional legal, accounting and other expenses that we did not incur as a private company as we: ● meet the requirements and demands of being a public company; ● expand our operational, financial and management systems and increases personnel to support our operations; ● hire additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations; ● advance our clinical-stage product candidate PF614 through clinical development; ● advance our preclinical stage product candidates into clinical development; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● undertake any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own or jointly with third parties; ● maintain, expand and protect our intellectual property portfolio; and ● make milestone, royalty or other payments due under any future in-license or collaboration agreements.
In addition, as a public company, we incur significant additional legal, accounting and other expenses that we did not incur as a private company as we: ● meet the requirements and demands of being a public company; ● expand our operational, financial and management systems and increase personnel to support our operations; ● hire additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations; ● advance our clinical-stage product candidate PF614 through clinical development; ● advance our preclinical stage product candidates into clinical development; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; 33 ● undertake any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own or jointly with third parties; ● maintain, expand and protect our intellectual property portfolio; and ● make milestone, royalty or other payments due under any future in-license or collaboration agreements.
In the event of a successful claim of infringement, misappropriation or other violation against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure. 56 Patent litigation and other proceedings may also absorb significant management time.
In the event of a successful claim of infringement, misappropriation or other violation against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
If we fail to achieve any announced milestones in the timeframes we expect, the development and commercialization of our product candidates may be delayed, and our business and results of operations may be harmed and it could negatively impact our share price performance. Please see “ Business ” for more information.
If we fail to achieve any announced milestones in the timeframes we expect, the development and commercialization of our product candidates may be delayed, and our business and results of operations may be harmed and it could negatively impact our share price performance.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
As a result, comparing our operating results on a period-to-period basis may not be meaningful. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process.
We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.
Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our platforms, programs, planned clinical trials or future commercialization efforts.
Our failure to raise capital as and when needed or on acceptable terms would have a negative impact on our financial condition and our ability to pursue our business strategy, and we may have to delay, reduce the scope of, suspend or eliminate one or more of our platforms, programs, planned clinical trials or future commercialization efforts. 35 There may be no proceeds under the GEM Agreement or proceeds may be less than anticipated.
If we are unable to extend the expiration date of our existing patents or obtain new patents with longer expiry dates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products following our patent expiration and launch their product earlier than might otherwise be the case. 57 We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
If we are unable to extend the expiration date of our existing patents or obtain new patents with longer expiry dates, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data to obtain approval of competing products following our patent expiration and launch their product earlier than might otherwise be the case.
We believe that fast track designation will enable us to facilitate the development and expedite the review of PF614. Fast track designation does not ensure that PF614 will receive marketing approval or that approval will be granted within any particular timeframe. As a result, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
Fast Track designation does not ensure that PF614 will receive marketing approval or that approval will be granted within any timeframe. As a result, we may not experience a faster development process, review or approval compared to conventional FDA procedures.
Factors that may inhibit our efforts to commercialize our product candidates on our own include: ● our inability to recruit and retain effective sales and marketing personnel; ● the inability of sales personnel to obtain access to or persuade physicians to prescribe any future products; ● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with creating an independent sales and marketing organization.
Any failure or delay in the development of our or third parties’ internal sales, marketing and distribution capabilities would adversely impact the commercialization of PF614, our other product candidates and other future product candidates. 43 Factors that may inhibit our efforts to commercialize our product candidates on our own include: ● our inability to recruit and retain effective sales and marketing personnel; ● the inability of sales personnel to obtain access to or persuade physicians to prescribe any future products; ● the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and ● unforeseen costs and expenses associated with creating an independent sales and marketing organization.
Intellectual property rights do not necessarily address all potential threats to our business. Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant.
Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such grant.
Risks Related to Our Dependence on Third-Party Providers We currently rely on, and expect to rely on in the future, third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for completing such trials, failing to satisfy legal or regulatory requirements or terminating the relationship.
Any such reductions could delay the development of our product candidates and the introduction of new products. 41 Risks Related to Our Dependence on Third-Party Providers We currently rely on, and expect to rely on in the future, third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for completing such trials, failing to satisfy legal or regulatory requirements or terminating the relationship.
Part A of the study completed enrollment in December 2021 and Part B was completed mid-year 2022. A Phase 1 trial was also initiated for PF614-MPAR™ in December 2021 and the clinical portion of Part A of that trial was completed in December 2022.
A Phase 1 trial was also initiated for PF614-MPAR in December 2021 and the clinical portion of Part A of that trial was completed in December 2022. The clinical portion of Part B was initiated in January 2023 and enrollment completed in March 2023. A Phase 1 safety study of nafamostat was completed in 2020.
In addition, the occurrence of the Merger triggered (i) payment of a commitment fee of $1.2 million to GEM Global payable in either our common stock or cash, of which all has been satisfied with 46,062 shares of common stock transferred from related parties in July 2022 and an additional 533,334 shares of common stock issued in January 2023 and (ii) the issuance of a warrant granting GYBL the right to purchase 55,306 shares of our common stock, at a strike price per share of $0.7512 as of January 12, 2023.
In addition, the occurrence of the Merger triggered (i) payment of a commitment fee of $1.2 million to GEM Global payable in either our common stock or cash, of which all has been satisfied with 3,838 shares of common stock transferred from related parties in July 2022 and an additional 44,444 shares of common stock issued in January 2023 and (ii) the issuance of a warrant granting GYBL the right to purchase 4,608 shares of our common stock, at a strike price per share reset to $1.5675.
We have entered into a Manufacturing Agreement (the “ Recro Agreement ”) with Recro Gainesville LLC (“ Recro ”) now known as Societal CDMO, (“ Societal ”) for the production of PF614 capsules and other materials and services with respect to our clinical studies.
We have entered into an agreement with Purisys LLC (“Purisys”) for production of PF614 drug substance and a Manufacturing Agreement (the “Recro Agreement”) with Recro Gainesville LLC (“Recro”) now known as Societal CDMO, (“Societal”) for the production of PF614 capsules and other materials and services with respect to our clinical studies.
This could have a material adverse effect on our business, results of operations, financial condition and prospects. 54 Risks Related to our Intellectual Property If we are unable to obtain and maintain patent protection for our products candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates that are similar or identical to our product candidates, and our ability to successfully commercialize our product candidates may be adversely affected.
Risks Related to our Intellectual Property If we are unable to obtain and maintain patent protection for our products candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize product candidates that are similar or identical to our product candidates, and our ability to successfully commercialize our product candidates may be adversely affected.
If we cannot enhance and optimize output, we may not be able to reduce our costs over time. 45 If we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates. We currently have no marketing, sales or distribution capabilities.
If we are unable to develop our sales, marketing and distribution capability on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates. We currently have no marketing, sales or distribution capabilities.
Delays in patient enrollment may result in increased costs, negatively affect the timing or outcome of the planned clinical trials, delay the product candidate development and approval process and jeopardize our ability to seek and obtain the regulatory approval required to commence product sales and generate revenue, which could cause our value to decline and limit our ability to obtain additional financing if needed.
Delays in patient enrollment may result in increased costs, negatively affect the timing or outcome of the planned clinical trials, delay the product candidate development and approval process and jeopardize our ability to seek and obtain the regulatory approval required to commence product sales and generate revenue, which could cause our value to decline and limit our ability to obtain additional financing if needed. 49 Fast Track designation by the FDA for PF614 for chronic pain may not lead to a faster development or regulatory review or approval process and does not assure FDA approval.
We do not know whether any clinical trials that we conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates for the indications that we are pursuing. If later-stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates will be adversely impacted.
We do not know whether any clinical trials that we conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market our product candidates for the indications that we are pursuing.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial.
Patent litigation and other proceedings may also absorb significant management time. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial.
Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel. 58 Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed and if we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed and if we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business would be harmed.
The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. Testing and maintaining internal controls may divert management’s attention from other matters that are important to our business.
The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation.
If we experience delays in obtaining manufacturing approval or if we fail to obtain manufacturing approval of any product candidates we may develop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired.
If we experience delays in obtaining manufacturing approval or if we fail to obtain manufacturing approval of any product candidates we may develop, the commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired. 47 We may incur unexpected costs or experience delays in completing, or ultimately be unable to complete, the preclinical and clinical studies necessary for development and commercialization of our product candidates.
This could materially adversely affect us and lead to a decline in the market price of our common stock. 64 We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to “smaller reporting companies,” this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, in the absence of patent protection, we would have no right to prevent them, or those to whom they communicate, from using that technology or information to compete with us. 59 We may not be able to prevent misappropriation of our intellectual property, trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States.
If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, in the absence of patent protection, we would have no right to prevent them, or those to whom they communicate, from using that technology or information to compete with us.
Trade secrets and know-how can be difficult to protect as trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles, and the movement of personnel skilled in the art from company to company or academic to industry scientific positions.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our business and competitive position could be harmed. 59 Trade secrets and know-how can be difficult to protect as trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles, and the movement of personnel skilled in the art from company to company or academic to industry scientific positions.
Any delay or refusal by the DEA in establishing a quota, a reduction in quota, or a failure to increase quota over time could delay or stop the clinical development or commercial sale of some of our products or product candidates.
Any delay or refusal by the DEA in establishing a quota, a reduction in quota, or a failure to increase quota over time could delay or stop the clinical development or commercial sale of some of our products or product candidates. This could have a material adverse effect on our business, results of operations, financial condition and prospects.
Failure to establish and maintain an effective management team and work force could adversely affect our ability to operate, grow and manage our business. 43 Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
Our employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.
If any of our manufacturers of API or dosage forms are unable to obtain the necessary annual quota to meet the research and development or commercial demand for PF614, our business would be negatively impacted.
We may also need significantly greater amounts to implement our commercialization plans if the FDA approves our proposed formulations. If any of our manufacturers of API or dosage forms are unable to obtain the necessary annual quota to meet the research and development or commercial demand for PF614, our business would be negatively impacted.
Competitive products may reduce or eliminate commercial opportunity for our product candidates, if approved.
Please see “ Business ” for more information. 39 Competitive products may reduce or eliminate commercial opportunity for our product candidates, if approved.
Therefore, we cannot provide any assurance that we will receive any future grant funding from any government agencies, or, that if received, we will receive the full amount of the particular grant award. Any such reductions could delay the development of our product candidates and the introduction of new products.
Therefore, we cannot provide any assurance that we will receive any future grant funding from any government agencies, or, if received, we will receive the full amount of the particular grant award.
In addition, our competitors may succeed in developing, acquiring or licensing technologies and products that are more effective or less costly than PF614, our other product candidates or any other product candidates that we may develop, which could render our product candidates obsolete and noncompetitive. 42 If we obtain approval for any of our product candidates, we may face competition based on many different factors, including the efficacy, safety and tolerability of our products, the ease with which our products can be administered, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position.
If we obtain approval for any of our product candidates, we may face competition based on many different factors, including the efficacy, safety and tolerability of our products, the ease with which our products can be administered, the timing and scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position.
In addition, we may not receive full funding under current or future grants because of budgeting constraints of the agency administering the program or unsatisfactory progress on the study being funded. Also, the continued spread of COVID-19 could affect governmental priorities in the future or prospective funding for our product candidates.
In addition, we may not receive full funding under current or future grants because of budgeting constraints of the agency administering the program or unsatisfactory progress on the study being funded.
The number of shares underlying the warrant as well as the strike price is subject to adjustments for recapitalizations, reorganizations, change of control, stock split, stock dividend, reverse stock splits and certain issuances of additional shares of our common stock. 38 The issuances of shares at discount under the GEM Agreement and the anti-dilution protection granted to GEM Global in connection with issuances of additional shares of our common stock, would result in dilution of existing stockholders and have a negative impact on the market price of our common stock and our ability to obtain equity financing.
The issuances of shares at discount under the GEM Agreement and the anti-dilution protection granted to GEM Global in connection with issuances of additional shares of our common stock, would result in dilution of existing stockholders and have a negative impact on the market price of our common stock and our ability to obtain equity financing.
To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities as we have done in the past, our stockholders’ ownership interest has been, and may in the future be, diluted.
In addition, we may 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. 62 To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities as we have done in the past, our stockholders’ ownership interest has been, and may in the future be, diluted.
If we are unable to maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could harm our business, financial condition, results of operations and prospects. 53 Oxycodone is a Schedule II controlled substance under the federal CSA, and any failure to comply with the CSA or its state equivalents would have a negative impact on our business.
If we are unable to maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our product candidates, which could harm our business, financial condition, results of operations and prospects.
Our failure to successfully initiate and complete clinical trials and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates would significantly harm its business.
If later-stage clinical trials do not produce favorable results, our ability to obtain regulatory approval for our product candidates will be adversely impacted. 48 Our failure to successfully initiate and complete clinical trials and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market our product candidates would significantly harm its business.
If these facilities do not maintain a compliance status acceptable to the FDA, Drug Enforcement Agency, or DEA, or comparable regulatory authorities, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
If these facilities do not maintain a compliance status acceptable to the FDA, Drug Enforcement Agency, or DEA, or comparable regulatory authorities, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. 42 Our contract manufacturers, including Purisys and Societal, will be subject to ongoing periodic unannounced inspections by the FDA, DEA and corresponding state and foreign agencies for compliance with cGMPs, security, recordkeeping and similar regulatory requirements.
Such restrictions could adversely impact our ability to conduct our operations and execute our business plan. The Investor Notes contain such restrictions.
Such restrictions could adversely impact our ability to conduct our operations and execute our business plan. The Investor Notes contain such restrictions including a pledge of substantially all of our tangible and intangible assets, including our intellectual property.
We have received feedback from the FDA on requirements to achieve abuse deterrent labeling claims for PF614. We have submitted an IND for PF614-MPAR™ and have received feedback on required pre-clinical, manufacturing and clinical studies that will be required for an NDA. Our clinical trial results may not support approval of our product candidates.
We have been granted Breakthrough Therapy designation by the FDA for PF614-MPAR. For all INDs that we hold we have received feedback on required pre-clinical, manufacturing and clinical studies that will be required for an NDA. Our clinical trial results may not support approval of our product candidates.
In such an event, we would be unable to further practice our technologies or develop and commercialize any of our product candidates at issue, which could harm our business and financial condition significantly.
In such an event, we would be unable to further practice our technologies or develop and commercialize any of our product candidates at issue, which could harm our business and financial condition significantly. 55 Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates, if approved.
We will need to increase our insurance coverage if we commercialize any product that receives regulatory approval. In addition, insurance coverage is becoming increasingly expensive.
The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if we commercialize any product that receives regulatory approval. In addition, insurance coverage is becoming increasingly expensive.
The EU Patent Package may increase the uncertainties and costs surrounding the enforcement or defense of our issued European patents and pending applications. The full impact on future European patent filing strategy and the enforcement or defense of our issued European patents in member states and/or the UPC is not known.
The EU Patent Package may increase the uncertainties and costs surrounding the enforcement or defense of our issued European patents and pending applications.
Any product candidates we develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining marketing approval or prevent or limit commercial use. 48 The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved.
The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved.
Fast track designation by the FDA for PF614 for chronic pain may not lead to a faster development or regulatory review or approval process and does not assure FDA approval. We have obtained fast track designation for PF614 for management of moderate to severe chronic pain when a continuous, around-the-clock analgesic is needed for an extended period of time.
We have obtained Fast Track designation for PF614 for management of moderate to severe chronic pain when a continuous, around-the-clock analgesic is needed for an extended period. We believe that Fast Track designation will enable us to facilitate the development and expedite the review of PF614.
Moreover, a third party may challenge the current patents, or patents that may be issued in the future, within our portfolio which could result in the invalidation of some or all the patents that might otherwise be eligible for listing in the Orange Book for one of our products.
If we do not file a patent infringement lawsuit within the required 45-day period, the third party’s ANDA will not be subject to the 30-month stay of FDA approval. 61 Moreover, a third party may challenge the current patents, or patents that may be issued in the future, within our portfolio which could result in the invalidation of some or all the patents that might otherwise be eligible for listing in the Orange Book for one of our products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that all of our facilities are in good condition and are well maintained and that our current arrangements will be sufficient to meet our needs for the foreseeable future, and that, should it be needed, suitable additional space will be available to accommodate any such expansion of our operations.
Biggest changeWe believe that our current arrangements will be sufficient to meet our needs for the foreseeable future, and that, should it be needed, suitable space will be available to accommodate our administrative activities. 66
Item 2. Properties Our principal executive office is located at 7946 Ivanhoe Ave., Suite 201 in La Jolla, California, where we lease a total of 850 square feet of office space that we use for our administrative activities. The lease expires in October 2023. All other development activities are undertaken at contract research organizations.
Item 2. Properties Our principal executive office is located at 7946 Ivanhoe Ave., Suite 201 in La Jolla, California, where we lease a total of 850 square feet of office space that we use for our administrative activities. All development activities are undertaken at contract research organizations. The lease expires in October 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs additional information becomes available, we reassess the potential liability related to pending claims and litigation. As of the date hereof, we are not a party to any material legal proceeding.
Biggest changeAs additional information becomes available, we reassess the potential liability related to pending claims and litigation. As of the date hereof, we are not a party to any material legal proceeding. Item 4. Mine Safety Disclosures Not applicable. PART II
Item 3. Legal Proceedings From time to time, we could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, we review the status of significant matters, if any exist, and assesses its potential financial exposure.
Item 3. Legal Proceedings From time to time, we could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters. Periodically, we review the status of significant matters, if any exist, and assess the potential financial exposure.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2022 with respect to securities that may be issued under our equity compensation plans: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) Equity compensation plans approved by security holders 328,248 $ 56.80 54,588 Equity compensation plans not approved by security holders - - - Total 328,248 $ 56.80 54,588 Recent Sales of Unregistered Securities and Use of Proceeds On June 30, 2022, we entered into a Securities Purchase Agreement for an aggregate financing of $8.0 million with institutional investors.
Biggest changeWe do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. 67 Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2023, with respect to securities that may be issued under our equity compensation plans: Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) Equity compensation plans approved by security holders 581,314 $ 33.15 2,112 Equity compensation plans not approved by security holders - - - Total 581,314 $ 33.15 2,112 Recent Sales of Unregistered Securities and Use of Proceeds On October 23, 2023, we entered into a Securities Purchase Agreement for an aggregate financing of $1.7 million with investors.
All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising. 69 Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 68
Holders As of March 27, 2023, there were approximately 150 holders of record of our common stock . Such numbers do not include beneficial owners holding our securities through nominee names. Dividends We have not paid any cash dividends on our common stock to date.
Holders As of March 8, 2024, there were approximately 71 holders of record of our common stock. Such numbers do not include beneficial owners holding our securities through nominee names. Dividends We have not paid any cash dividends on our common stock to date.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Price and Ticker Symbol Our common stock is currently listed on the Nasdaq Stock Market under the symbol “ENSC.” Our Public Warrants are currently listed on the OTC Pink Open Market under the symbol “ENSCW.” The closing price of our common stock and Public Warrants on March 27, 2023, was $0.54 and $0.02, respectively.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Price and Ticker Symbol Our common stock is currently listed on the Nasdaq Stock Market under the symbol “ENSC.” Our Public Warrants are currently listed on the OTC Pink Open Market under the symbol “ENSCW.” The closing price of our common stock and Public Warrants on March 8, 2024, was $0.7852 and $0.041, respectively.
The Company issued to the investors (i) 2022 Notes in the aggregate principal amount of $8.48 million for an aggregate purchase price of $8.0 million and (ii) warrants to purchase 466,788 shares of the Company’s common stock in the aggregate at an exercise price of $14.17 per share.
The Company issued to the investors (i) 2023 Notes in the aggregate principal amount of $1.8 million for an aggregate purchase price of $1.7 million and (ii) warrants to purchase 3.8 million shares of the Company’s common stock in the aggregate at an exercise price of $1.5675 per share.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future.
In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur.
The first funding of $4.0 million occurred on July 1, 2022 and the second funding of $4.0 million occurred on August 9, 2022. Pursuant to the 2022 Notes, shares of Company common stock were issued to these investors in satisfaction of principal and interest payments.
The first funding of $0.6 million occurred on October 25, 2023 and the second funding of $1.1 million occurred on November 28, 2023. Pursuant to the 2023 Notes, shares of Company common stock were issued to these investors in satisfaction of principal and interest payments. The proceeds are being used for working capital purposes subject to certain customary restrictions.
The transaction involved the receipt by two insiders of unregistered and restricted shares of common stock None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.
See, “ Liquidity and Capital Resources ” for a detailed description of the 2023 Notes. None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.
Removed
On January 31, 2023, we declared a dividend of 0.001 of a share of Series A Preferred Stock, par value $0.0001 per share (“Series A Preferred Stock”), for each outstanding share of common stock to stockholders of record on February 13, 2023. Series A Preferred Stock is uncertificated and represented in book-entry form.
Removed
No shares of Series A Preferred Stock may be transferred by the holder thereof except in connection with a transfer by such holder of any shares of common stock held by such holder, in which case a number of one one-thousandths (1/1,000ths) of a share of Series A Preferred Stock equal to the number of shares of common stock to be transferred by such holder will be automatically transferred to the transferee of such shares of common stock.
Removed
Each share of Series A Preferred Stock entitles the holder thereof to 1,000,000 votes per share.
Removed
Thus, each 0.001 of a share of Series A Preferred Stock would entitle the holder thereof to 1,000 votes The outstanding shares of Series A Preferred Stock vote together with the outstanding shares of common stock as a single class exclusively with respect to (1) any proposal to adopt an amendment to our Certificate of Incorporation, to reclassify the outstanding shares of common stock into a smaller number of shares of common stock at a ratio specified in or determined in accordance with the terms of such amendment (the “Reverse Stock Split”) and (2) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Reverse Stock Split (the “Adjournment Proposal”).
Removed
The Series A Preferred Stock will not be entitled to vote on any other matter, except to the extent required under the Delaware General Corporation Law.
Removed
The conversion price of the 2022 Notes (and exercise price of the related warrants) was subsequently reset lower such that a greater amount of principal on the 2022 Notes could be extinguished for shares. The proceeds are being used for working capital purposes subject to certain customary restrictions.
Removed
See, “ Liquidity and Capital Resources ” for a detailed description of the 2022 Notes. On October 19, 2022, we issued 14,243 shares of common stock to Dr. Lynn Kirkpatrick and 31,819 shares of Company common stock to Dr. Bob Gower (collectively, the “K&G Shares”).
Removed
The K&G Shares were issued in satisfaction (reimbursement) of an obligation to a third-party vendor previously incurred by the Company that was paid by Drs. Kirkpatrick and Gower. The reimbursement replaced registered but restricted shares on a one-for-one basis with unregistered and restricted shares. The aggregate market value of the K&G Shares on the transfer date was $191,618.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTo date, no amounts are being presented as an uncertain tax position. 77 Results of Operations Comparison of the Years ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Change Federal grants $ 2,523,383 $ 3,531,199 $ (1,007,816 ) Operating expenses: Research and development $ 19,835,875 $ 4,690,082 $ 15,145,793 General and administrative 6,909,603 18,711,548 (11,801,945 ) Total operating expenses 26,745,478 23,401,630 3,343,848 Loss from operations (24,222,095 ) (19,870,431 ) (4,351,664 ) Other income (expense): Change in fair value of derivative liabilities - 673,314 (673,314 ) Loss on issuance of convertible notes (3,609,944 ) - (3,609,944 ) Issuance costs for convertible notes (1,137,740 ) (1,920,158 ) 782,418 Change in fair value of convertible notes 5,756,787 (2,993,060 ) 8,749,847 Issuance of liability classified warrants (3,737,371 ) (1,865,403 ) (1,871,968 ) Change in fair value of liability classified warrants 6,730,613 (1,438,186 ) 8,168,799 Loss on debt conversions (3,964,633 ) (154,391 ) (3,810,242 ) Interest expense (109,525 ) (1,295,307 ) 1,185,782 Other income and expense, net 86,223 (282,279 ) 368,502 Total other income/(expenses), net 14,410 (9,275,470 ) 9,289,880 Net loss $ (24,207,685 ) $ (29,145,901 ) $ 4,938,216 Net loss attributable to noncontrolling interests (35,393 ) (62,190 ) 26,797 Deemed dividend related to warrants down round provision 913,204 803,140 110,064 Net loss attributable to common stockholders $ (25,085,496 ) $ (29,886,851 ) $ 4,801,355 Federal Grants Revenue from federal grants totaled $2.5 million for the year ended December 31, 2022, compared to $3.5 million for the year ended December 31, 2021.Revenue decreased $1.0 million during the year ended December 31, 2022, due to the timing of research activities eligible for funding under the grants.
Biggest changeThe following table summarizes our results of operations for the years ended December 31, 2023 and 2022: 77 Results of Operations Comparison of the Years ended December 31, 2023 and 2022 Year Ended December 31, 2023 2022 Change Federal grants $ 2,230,520 $ 2,523,383 $ (292,863 ) Operating expenses: Research and development $ 7,587,473 $ 19,835,875 $ (12,248,402 ) General and administrative 5,361,234 6,909,603 (1,548,369 ) Total operating expenses 12,948,707 26,745,478 (13,796,771 ) Loss from operations (10,718,187 ) (24,222,095 ) 13,503,908 Other income (expense): Loss on issuance of convertible notes - (3,609,944 ) 3,609,944 Issuance costs for convertible notes - (1,137,740 ) 1,137,740 Loss on conversions and change in fair value of convertible notes 146,479 1,792,154 (1,645,675 ) Issuance of liability classified warrants - (3,737,371 ) 3,737,371 Change in fair value of liability classified warrants 283,958 6,730,613 (6,446,655 ) Interest expense (353,945 ) (109,525 ) (244,420 ) Other income and expense, net 15,420 86,223 (70,803 ) Total other income/(expenses), net 91,912 14,410 77,502 Net loss $ (10,626,275 ) $ (24,207,685 ) $ 13,581,410 Net loss attributable to noncontrolling interests (13,201 ) (35,393 ) 22,192 Deemed dividend related to warrants down round provision 12,937 913,204 (900,267 ) Net loss attributable to common stockholders $ (10,626,011 ) $ (25,085,496 ) $ 14,459,485 Federal Grants Revenue from federal grants totaled $2.2 million for the year ended December 31, 2023, compared to $2.5 million for the year ended December 31, 2022.
This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of the following: ● the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities; ● establishing an appropriate safety and efficacy profile with investigational new drug (“ IND ”) enabling studies; ● successful patient enrollment in and the initiation and completion of clinical trials; ● the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S. regulators; ● the extent of any required post-marketing approval commitments to applicable regulatory authorities; ● establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully; 75 ● development and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch; ● obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights; ● significant and changing government regulation; ● launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and ● maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.
This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of the following: ● the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities; ● establishing an appropriate safety and efficacy profile with investigational new drug (“ IND ”) enabling studies; ● successful patient enrollment in and the initiation and completion of clinical trials; ● the timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S. regulators; ● the extent of any required post-marketing approval commitments to applicable regulatory authorities; ● establishing clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party manufacturers are able to make product successfully; ● development and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch; ● obtaining, maintaining, defending and enforcing patent claims and other intellectual property rights; ● significant and changing government regulation; ● launching commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and ● maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.
We do not have any products approved for sale and we have not generated any revenue from product sales. We may never be able to develop or commercialize a marketable product. Our lead product candidate, PF614, is in Phase 1b clinical development, PF614-MPAR™ is in Phase 1 clinical development and nafamostat is proceeding towards Phase 2 clinical development.
We do not have any products approved for sale and we have not generated any revenue from product sales. We may never be able to develop or commercialize a marketable product. Our lead product candidate, PF614, is in Phase 2 clinical development, PF614-MPAR is in Phase 1b clinical development and nafamostat is proceeding towards Phase 2 clinical development.
We have received funding under federal grants from the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse (“NIDA”). In September 2018, we were awarded a research and development grant related to the development of our MPAR TM overdose prevention technology (the “MPAR Grant”).
We have received funding under federal grants from the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse (“NIDA”). In September 2018, we were awarded a research and development grant related to the development of our MPAR® overdose prevention technology (the “MPAR Grant”).
These employees work across multiple programs and, therefore, we do not track our costs by program and cannot state precisely the total costs incurred for each of our clinical and preclinical programs on a project-by-project basis. Research and development activities are central to our business model.
These employees work across multiple programs and, therefore, we do not track our costs by program and cannot state precisely the total costs incurred for each of our clinical and preclinical programs on a project-by-project basis. 74 Research and development activities are central to our business model.
Changes in the fair value of the notes are recognized through earnings for each reporting period. 76 Issuance of liability classified warrants The warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features. We use a Black-Scholes option pricing model to estimate the fair value of the warrants.
Changes in the fair value of the notes are recognized through earnings for each reporting period. Issuance of liability classified warrants The warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features. We use a Black-Scholes option pricing model to estimate the fair value of the warrants.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period.
Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any period.
TAAP modification of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the medication more quickly than by swallowing. MPAR™ adds a layer of overdose protection to each TAAP product.
TAAP modification of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the effect of the medication more quickly than by swallowing. MPAR ® adds a layer of overdose protection to each TAAP product.
We expense research and development costs as incurred, which include: ● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval; ● expenses incurred under agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”) that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs; ● other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services; ● payments made in cash or equity securities under third-party licensing, acquisition and option agreements; ● employee-related expenses, including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development functions; ● costs related to compliance with regulatory requirements; and ● allocated facilities-related costs, depreciation and other expenses, which include rent and utilities. 74 We recognize external development costs as incurred.
We expense research and development costs as incurred, which include: ● expenses incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval; ● expenses incurred under agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”) that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs; ● other costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services; ● payments made in cash or equity securities under third-party licensing, acquisition and option agreements; ● employee-related expenses, including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development functions; ● costs related to compliance with regulatory requirements; and ● allocated facilities-related costs, depreciation and other expenses, which include rent and utilities.
In September 2019, we were awarded a second research and development grant related to the development of our TAAP/MPAR TM abuse deterrent technology for Opioid Use Disorder (“OUD”) (the “OUD Grant”).
In September 2019, we were awarded a second research and development grant related to the development of our TAAP/MPAR® abuse deterrent technology for Opioid Use Disorder (“OUD”) (the “OUD Grant”).
The resulting difference is either a loss if the conversion price was below the average of the high and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low stock price on the date of conversion.
The resulting difference was either a loss if the conversion price was below the average of the high and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low stock price on the date of conversion.
However, in order to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding in the future. 71 Convertible Promissory Notes On September 24, 2021, we entered into the SPA for an aggregate financing of $15.0 million with institutional investors.
However, in order to complete our current and future preclinical studies and clinical trials, and to complete the process of obtaining regulatory approval for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we may require substantial additional funding in the future. 2021 Notes On September 24, 2021, we entered into the SPA for an aggregate financing of $15.0 million with institutional investors.
We use a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs. The loss on issuance of convertible notes represents the difference between the gross proceeds received and the calculated fair value on the issuance date of the notes.
We used a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs. The loss on issuance of convertible notes represents the difference between the gross proceeds received and the calculated fair value on the issuance date of the notes.
Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.
Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, issuing additional equity, making acquisitions or capital expenditures or declaring dividends.
Issuance costs for convertible notes The issuance costs for convertible notes represent the original issue discount (expensed immediately due to the initial recognition at fair value of both the 2021 and 2022 Notes noted above), legal and accounting fees incurred in connection with the issuance of the 2021 and 2022 Notes.
Issuance costs for convertible notes The issuance costs for convertible notes represent the original issue discount (expensed immediately due to the initial recognition at fair value of the 2022 Notes noted above), and legal and accounting fees incurred in connection with the issuance of the 2022 Notes.
This has not impacted our effective tax rate or our cash tax payable in 2022; however, if the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.
This has not impacted our effective tax rate or our cash tax payable in 2023; however, if the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.
Our tax return period for United States federal income taxes for the tax years since 2019 remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions. We record reserves for potential tax payments to various tax authorities related to uncertain tax positions, if any.
Our tax return period for United States federal income taxes for the tax years since 2020 remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions are open for examination from 2019. We record reserves for potential tax payments to various tax authorities related to uncertain tax positions, if any.
Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Our actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe that the following accounting policy is the most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
As of December 31, 2022 and 2021, we continue to maintain a full valuation allowance against all of our deferred tax assets based on our evaluation of all available evidence.
As of December 31, 2023 and 2022, we continue to maintain a full valuation allowance against all of our deferred tax assets based on our evaluation of all available evidence.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
Smaller Reporting Company Status We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
Change in fair value of convertible notes We elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock underlying the conversion option.
We elected the fair value option to account for the 2021 Notes as we believe the fair value option provided users of the financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock underlying the conversion option.
The 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share settlement features contained within the notes. We use a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.
The 2022 Notes were accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share settlement features contained within the notes. We used a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.
We expect that our expenses and capital requirements will increase substantially in connection with our ongoing development activities, particularly if and as we: ● continue preclinical studies and continues existing and initiates new clinical trials for PF614, PF614-MPAR™ and nafamostat, our lead product candidates being tested for chronic pain and infectious disease; ● advance the development of our product candidate pipeline of other product candidates, including through business development efforts to invest in or in-license other technologies or product candidates; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations; ● seek regulatory approval for any product candidates that successfully complete clinical trials; ● undertake any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval; ● expand our infrastructure and facilities to accommodate our growing employee base; and ● add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and our transition to operating as a public company. 70 We expect to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other expenses that we did not incur as a private company.
We expect that our expenses and capital requirements will increase substantially in connection with our ongoing development activities, particularly if and as we: ● continue preclinical studies and continues existing and initiates new clinical trials for PF614, PF614-MPAR and nafamostat, our lead product candidates being tested for chronic pain and infectious disease; ● advance the development of our product candidate pipeline of other product candidates, including through business development efforts to invest in or in-license other technologies or product candidates; ● maintain, expand and protect our intellectual property portfolio; ● hire additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations; ● seek regulatory approval for any product candidates that successfully complete clinical trials; ● undertake any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval; ● expand our infrastructure and facilities to accommodate our growing employee base; and ● add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and our transition to operating as a public company.
In addition, upon the completion of the Merger, we have incurred, and will continue to incur, additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other expenses that we did not incur as a private company.
In addition, upon the completion of the Merger, we have incurred, and will continue to incur, additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other expenses.
We also expect our related personnel costs to increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, to remain elevated over prior periods.
We also expect our related personnel costs to increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, to remain elevated.
Each Pre-Funded Warrant will be exercisable upon issuance and will expire when exercised in full (all Pre-Funded Warrants were exercised immediately upon issuance). Each Pre-Funded Warrant is being sold with a Common Warrant to purchase two shares of Common Stock.
Each pre-funded warrant was exercisable upon issuance and will expire when exercised in full (all pre-funded warrants were exercised immediately upon issuance). Each pre-funded warrant was sold with a common warrant to purchase two shares of common stock.
Additionally, we issued a warrant with a 36-month term at the closing of the Merger granting GEM Global the right to purchase 55,306 shares of our common stock (an amount equal to 4% of the total number of our common stock outstanding as of the closing date of the Merger (subject to adjustments described below), calculated on a fully diluted basis), at a strike price per share equal to $200.20, which was the closing bid price for such common stock on the first day of trading on Nasdaq.
Additionally, we issued a warrant with a 36-month term at the closing of the Merger granting GEM Global the right to purchase 4,608 shares of our common stock (an amount equal to 4% of the total number of our common stock outstanding as of the closing date of the Merger (subject to adjustments described below), calculated on a fully diluted basis), at a strike price per share equal to $2,402.40, which was the closing bid price for such common stock on the first day of trading on Nasdaq.
Any advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.
We recognize external development costs as incurred. Any advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.
We expect future research and development expenses to approximate current levels but may need to be adjusted based on our ability to raise capital sufficient to fund these expenses. General and Administrative Expenses General and administrative expenses were $6.9 million for the year ended December 31, 2022, compared to $18.7 million for the year ended December 31, 2021.
We expect future research and development expenses to approximate current levels but may need to be adjusted based on our ability to raise capital sufficient to fund these expenses. General and Administrative Expenses General and administrative expenses were $5.4 million for the year ended December 31, 2023, compared to $6.9 million for the year ended December 31, 2022.
The commitment fee for the first tranche, which is equal to 67% of the commitment fee, or $800,000, was discharged with 46,062 shares of common stock transferred from related parties in July 2022.
The commitment fee for the first tranche, which was equal to 67% of the commitment fee, or $800,000, was discharged with 3,838 shares of common stock transferred from related parties in July 2022.
The commitment fee for the second tranche, which is equal to the remaining 33% of the commitment fee, or $400,000 was paid in January 2023 through the issuance of 533,334 shares of registered common stock.
The commitment fee for the second tranche, which was equal to the remaining 33% of the commitment fee, or $400,000 was paid in January 2023 through the issuance of 44,444 shares of registered common stock.
The public purchase price of one share of Common Stock and accompanying Common Warrant to purchase two shares of Common Stock is $1.40 and the combined purchase price of one Pre-Funded Warrant and accompanying Common Warrant to purchase two shares of Common Stock is $1.40.
The public purchase price of one share of common stock and accompanying common warrant to purchase two shares of Common Stock is $16.80 and the combined purchase price of one pre-funded warrant and accompanying common warrant to purchase two shares of common stock is $16.80.
The increase was primarily the result of increased external research and development costs related to the clinical programs for PF614 and PF614-MPAR™. We do not currently track expenses on a program-by-program basis.
The decrease was primarily the result of changes in timing of external research and development costs related to the clinical programs for PF614 and PF614-MPAR. We do not currently track expenses on a program-by-program basis.
However, we remain obligated under the 2022 Notes to pay additional cash as true-up payments for interest or redemption amounts that we paid in shares of common stock that were valued below $2.006 or the lower conversion price of $0.7512 in effect between January 12, 2023 and May 12, 2023.
We were obligated under the 2022 Notes to pay additional cash as true-up payments for interest or redemption amounts that we paid in shares of common stock that were valued below $24.07 or the lower conversion price of $9.01 in effect between January 12, 2023 and May 12, 2023.
The timing and amount of our operating expenditures will depend largely on our ability to: ● advance preclinical development of our early-stage programs and clinical trials of our product candidates; ● manufacture, or have manufactured on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial manufacturing; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own; ● hire additional clinical, quality control and scientific personnel; ● expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; ● obtain, maintain, expand and protect our intellectual property portfolio; ● manage the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and ● manage the costs of operating as a public company. 81 Our commitments as of December 31, 2022 included an estimated $21.6 million related to open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations for multi-year pre-clinical and clinical research studies.
The timing and amount of our operating expenditures will depend largely on our ability to: ● advance preclinical development of our early-stage programs and clinical trials of our product candidates; ● manufacture, or have manufactured on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial manufacturing; ● seek regulatory approvals for any product candidates that successfully complete clinical trials; ● establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own; ● hire additional clinical, quality control and scientific personnel; 81 ● expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and commercialization efforts and our operations as a public company; ● obtain, maintain, expand and protect our intellectual property portfolio; ● manage the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and ● manage the costs of operating as a public company.
At the first closing, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $5.3 million for an aggregate purchase price of $5.0 million (collectively, the “ First Closing Notes ”) and (ii) warrants to purchase 18,058 shares of the Company’s common stock in the aggregate at an exercise price of $152.60 per share.
At the first closing, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $5.3 million for an aggregate purchase price of $5.0 million and (ii) warrants to purchase 1,507 shares of the Company’s common stock in the aggregate at a current exercise price of $3.64 per share.
The 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share settlement features contained within the notes. As a result, the 2022 Notes are recorded as liabilities at fair value upon initial recognition and at the balance sheet date.
Other Income (Expense) Loss on issuance of convertible notes The 2022 Notes were accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share settlement features contained within the notes. As a result, the 2022 Notes were recorded as liabilities at fair value upon initial recognition and at the balance sheet date.
We have not yet successfully completed any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities. We expect to continue to incur net losses for the foreseeable future, and we expect our clinical development expenses, and general and administrative expenses to continue to increase.
We have not yet successfully completed any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities. We have incurred significant operating losses since inception and we expect to continue to incur net losses for the foreseeable future.
Funding Requirements Our primary use of cash is to fund operating expenses, primarily related to our research and development activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
At the second closing, the Company issued to the institutional investors referenced above, (i) senior secured convertible promissory notes in the aggregate principal amount of $10.6 million (collectively, the “ Second Closing Notes ”, together with the First Closing Notes, the “ 2021 Notes ”) for an aggregate purchase price of $10.0 million and (ii) warrants to purchase 36,116 shares of the Company’s common stock in the aggregate at an exercise price of $152.60 per share.
At the second closing, the Company issued to the institutional investors referenced above, (i) senior secured convertible promissory notes in the aggregate principal amount of $10.6 million for an aggregate purchase price of $10.0 million and (ii) warrants to purchase 3,011 shares of the Company’s common stock in the aggregate at a current exercise price of $3.64 per share.
Pursuant to the GEM Agreement, we are entitled to draw down up to $60.0 million of gross proceeds (“ Aggregate Limit ”) from GEM Global in exchange for shares of our common stock, subject to meeting the terms and conditions of the GEM Agreement.
In turn, we are expected to file for patent protection and to ensure commercialization upon licensing for the benefit of public health. 79 Pursuant to the GEM Agreement, we are entitled to draw down up to $60.0 million of gross proceeds (“ Aggregate Limit ”) from GEM Global in exchange for shares of our common stock, subject to meeting the terms and conditions of the GEM Agreement.
Grant funds are awarded annually through a Notice of Award which contains certain terms and conditions including, but not limited to, complying with the grant program legislation, regulation and policy requirements, complying with conditions on expenditures of funds with respect to other applicable statutory requirements such as the federal appropriations acts, periodic reporting requirements, and budget requirements.
Grant funds are awarded annually through a Notice of Award which contains certain terms and conditions including, but not limited to, complying with the grant program legislation, regulation and policy requirements, complying with conditions on expenditures of funds with respect to other applicable statutory requirements such as the federal appropriations acts, periodic reporting requirements, and budget requirements. 73 Operating Expenses Research and Development Expenses Research and development expenses consist primarily of costs incurred for research activities, including drug discovery efforts and the development of our product candidates.
The 2022 Notes are convertible into common stock, at a per share conversion price equal to $10.90 (original conversion price).
The notes are convertible into common stock, at a per share conversion price equal to $1.5675.
Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our provision for income taxes.
Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our provision for income taxes. To date, no amounts are being presented as an uncertain tax position.
Since inception, we have generated limited revenues and have incurred significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses for at least the foreseeable future.
Liquidity and Capital Resources Sources of Liquidity and Capital As of December 31, 2023, we had $1.1 million of cash and cash equivalents. Since inception, we have generated limited revenues and have incurred significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses for at least the foreseeable future.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. [As a result, we expect that our research and development expenses will remain elevated as we continue our existing, and commences additional, planned clinical trials for PF614, PF614-MPAR™ and nafamostat, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates, subject to our ability to obtain financing.
As a result, we expect that our research and development expenses will remain elevated as we continue our existing, and commences additional, planned clinical trials for PF614, PF614-MPAR® and nafamostat, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates, subject to our ability to obtain financing.
Pursuant to the terms and conditions of the two grants, we are required to submit progress reports to NIDA on an annual basis and a final research performance progress report within 120 days of the performance period end date.
Remaining funding under approved federal research grants totals $2.2 million and is expected to be utilized by August 2024. Pursuant to the terms and conditions of the two grants, we are required to submit progress reports to NIDA on an annual basis and a final research performance progress report within 120 days of the performance period end date.
For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate.
For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development of that product candidate. 75 General and Administrative Expenses General and administrative expenses consist primarily of employee-related expenses, including salaries and related benefits, travel and stock-based compensation for personnel in executive, business development, finance, human resources, legal, information technology, and administrative functions.
On June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors (the “2022 Notes”). The agreement provided for two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million). Funds were received for the first closing on July 1, 2022 and for the second closing on August 9, 2022.
The 2021 Notes were satisfied on October 10, 2022. 70 2022 Notes On June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors. The agreement provided for two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million).
On July 2, 2021, the combined company’s common stock began trading on Nasdaq under the ticker symbol “ENSC”. Components of Our Operating Results Revenue We have generated limited revenue since our inception and we do not expect to generate any revenue from the sale of products in the near future, if at all.
Components of Our Operating Results Revenue We have generated limited revenue since our inception and we do not expect to generate any revenue from the sale of products in the near future, if at all.
Loss on debt conversions When conversions on the 2021 Notes occur, we calculate the difference between the conversion price and the average of the high and low stock price on the date of conversion.
Loss on conversions and change in fair value of convertible notes When conversions on the 2021 Notes occurred, we calculated the difference between the conversion price and the average of the high and low stock price on the date of conversion.
The strike price was reduced to $1.40 per share at December 31, 2022 because of a pricing adjustment per the GEM Agreement and reduced to $0.7512 per share in January 2023. The warrant can be exercised on a cashless basis in part or in whole at any time during the term.
The exercise price was reduced to $1.5675 per share as of December 31, 2023 because of a pricing adjustment per the GEM Agreement which is reflected on the consolidated statement of operations as a deemed dividend. The warrant can be exercised on a cashless basis in part or in whole at any time during the term.
Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements We do not have during the periods presented, and do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. 83 Recently Issued Accounting Pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Ensysce is a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the fear of and the potential for addiction, opioid misuse, abuse and overdose. We have also incorporated a 79.2%-owned subsidiary, EBIR, Inc.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview Ensysce is a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the fear of and the potential for opioid misuse, abuse and overdose. Our lead product candidate, PF614, is an extended release TAAP prodrug of oxycodone.
We have generated limited revenues and have incurred significant operating losses since our inception, and as of December 31, 2022, have an accumulated deficit of $110.9 million. In addition, we expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern.
We have generated limited revenues and have incurred significant operating losses since our inception and expect to continue to incur operating losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern. Our future viability is dependent on our ability to raise additional capital to finance our operations.
In addition, under the terms of the Underwriting Agreement, the Company granted the Underwriter the option, for 45 days from the closing of the Offering, to purchase up to 342,000 additional shares of Common Stock and Common Warrants to purchase up to an additional 870,000 shares of Common Stock (the “ Option Shares ” and, together with the Firm Shares, the “ Shares ”). 73 In lieu of a purchase of Common Stock that would otherwise result in an investor’s beneficial ownership exceeding 4.99% (or, at the election of the investor, 9.99%) of the outstanding Common Stock, a Pre-Funded Warrant was offered, each of which enables the investor to purchase one share of Common Stock at an exercise price of $0.0001.
In lieu of a purchase of common stock that would otherwise result in an investor’s beneficial ownership exceeding 4.99% (or, at the election of the investor, 9.99%) of the outstanding common stock, a pre-funded warrant was offered, each of which enables the investor to purchase one share of common stock at an exercise price of $0.0001.
The true-up payments compensate for the difference between the value of a share and the conversion price in effect at the time of redemption, multiplied by the number of shares paid. 2022 Underwriting Agreement On December 7, 2022, we entered into an underwriting agreement (the “ Underwriting Agreement ”) with Lake Street Capital Management, LLC (the “ Underwriter ”), pursuant to which we agreed to issue and sell (i) 2,280,000 shares (the “ Firm Shares ”) of the Company’s common stock, par value $0.0001 per share (the “ Common Stock ”), (ii) pre-funded warrants (the “ Pre-Funded Warrants ”) to purchase 620,000 shares of Common Stock and (iii) warrants to purchase 5,800,000 shares of Common Stock (the “ Common Warrants ” and, collectively with the Pre-Funded Warrants, the “ Warrants ”) to the Underwriter in a public offering (the “ Offering ”).
The warrants have a current exercise price of $3.64 and are exercisable for five years following issuance of the 2022 Notes. 2022 December Offering On December 7, 2022, we entered into an underwriting agreement with Lake Street Capital Management, LLC (the “ Underwriter ”), pursuant to which we agreed to issue and sell (i) 190,000 shares of the Company’s common stock, par value $0.0001 per share, (ii) pre-funded warrants to purchase 51,666 shares of common stock and (iii) warrants to purchase 483,333 shares of common stock to the Underwriter in a public offering.
This represents the immediate expense upon initial recognition of the liability that is included in the statement of operations. The liability is subsequently remeasured each reporting period as described further below. Change in fair value of liability classified warrants The warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features.
This represents the immediate expense upon initial recognition of the liability that is included in the statement of operations. The liability is remeasured each reporting period as described further below. 76 Change in fair value of liability classified warrants We use a Black-Scholes option pricing model to estimate the fair value of the liability classified warrants.
The Underwriter agreed to purchase the Firm Shares from the Company pursuant to the Underwriting Agreement at a price of $1.302 per share. Each Common Warrant is exercisable immediately at an exercise price of $1.40 per share and will expire five years following the date of issuance.
Each common warrant is exercisable immediately at an exercise price of $16.80 per share and will expire five years following the date of issuance.
The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing research and development efforts and related general and administrative support. We anticipate that we will fund our operations through public or private equity or debt financings or other sources, such as potential collaboration agreements.
To fund future operations, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including the timing and results of our ongoing research and development efforts and related general and administrative support.
We expect funding from federal grants to generally increase in the future due to the timing of preclinical and clinical development activities under the grants. Research and Development Expenses Research and development expenses were $19.8 million for the year ended December 31, 2022, compared to $4.7 million for the year ended December 31, 2021.
Revenue decreased $0.3 million during the year ended December 31, 2023, due to the timing of research activities eligible for funding under the grants. Research and Development Expenses Research and development expenses were $7.6 million for the year ended December 31, 2023, compared to $19.8 million for the year ended December 31, 2022.
We believe that our available resources and existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023. We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Without raising additional capital through a future offering, we believe that current cash on hand is sufficient to fund operations into the third quarter of 2024. We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
We have funded our operations to date primarily with proceeds from the sale of common equity, funding under federal research grants and borrowings under convertible promissory notes. To fund future operations, we will need to raise additional capital.
We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. We have funded our operations to date primarily with proceeds from the sale of common equity, funding under federal research grants and borrowings under convertible promissory notes.
In 2022, net cash consisted primarily of net proceeds from the issuance of the 2022 Notes and the net proceeds of the issuance of shares and related warrants in connection with the underwriting agreement completed in December of 2022 which were less in the aggregate than that raised in 2021.
In 2022, net cash consisted primarily of net proceeds from the issuance of the 2022 Notes and the net proceeds of the issuance of shares and related warrants in connection with the underwriting agreement completed in December of 2022. Funding Requirements Our primary use of cash is to fund operating expenses, primarily related to our research and development activities.
Without the availability of proceeds through the share subscription facility, or capital raised through other financing transactions, existing cash resources are not sufficient to allow us to fund current planned operations through the next 12 months following the filing of this Annual Report on Form 10-K, which raises substantial doubt about the Company’s ability to continue as a going concern.
We expect to continue to incur significant expenses and operating losses for the foreseeable future. Without capital raised through financing transactions, existing cash resources are sufficient to allow us to fund current planned operations into the third quarter of 2024, which raises substantial doubt about the Company’s ability to continue as a going concern.
At December 31, 2022, $4.2 million of the 2022 Notes remained outstanding. The remaining amount of principal and interest on the 2022 Notes was repaid in the first quarter of 2023.
Funds were received for the first closing on July 1, 2022 and for the second closing on August 9, 2022. The remaining amount of principal and interest on the 2022 Notes was repaid in the first quarter of 2023.
Interest Expense Interest expense consists of interest accrued on our financed directors and officers’ insurance as well as imputed interest on the commitment fees related to the share subscription facility. Interest expense related to the 2021 Notes and 2022 Notes is included in the estimate of fair value of the convertible notes.
Interest expense related to the 2021 Notes and 2022 Notes was included in the estimate of fair value of the convertible notes.
Financing Activities During the years ended December 31, 2022 and 2021, net cash provided by financing activities was $8.8 million and $20.3 million, respectively. For 2021, net cash consisted primarily of net proceeds from the Merger in June 2021 and net proceeds from the issuance of the 2021 Notes.
The decrease primarily resulted from the change in net loss between 2022 and 2023 and the timing of vendor invoicing and payments primarily associated with research and development activities. Financing Activities During the years ended December 31, 2023 and 2022, net cash provided by financing activities was $8.7 million and $8.8 million, respectively.
Going Concern We have generated limited revenues and have incurred significant operating losses since our inception and, as of December 31, 2022, we have an accumulated deficit of $110.9 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future.
Also, GEM Global is entitled to be reimbursed for legal or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss. Going Concern We have generated limited revenues and have incurred significant operating losses since our inception and, as of December 31, 2023, we have an accumulated deficit of $121.6 million.
We may never become profitable. We require substantial additional funding to support our continuing operations and pursue our growth strategy.
We have incurred and expect to continue to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor relations and other expenses. We may never become profitable. 69 We require substantial additional funding to support our continuing operations and pursue our growth strategy.
The Company issued to the investors (i) 2022 Notes in the aggregate principal amount of $8.48 million for an aggregate purchase price of $8.0 million and (ii) warrants to purchase 466,788 shares of the Company’s common stock in the aggregate at an exercise price of $14.17 per share.
At the first closing under the SPA, which occurred on October 25, 2023, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $612,000 for an aggregate purchase price of $566,667 and (ii) warrants to purchase 1,255,697 shares of the Company’s common stock in the aggregate.
The first funding of $4.0 million occurred on July 1, 2022 and the second funding of $4.0 million occurred on August 9, 2022 At December 31, 2022, $4.2 million of 2022 Notes remained outstanding. 80 Cash Flows for the years ended December 31, 2022 and 2021 The following table summarizes our cash flows for each of the periods presented: Year Ended December 31, 2022 2021 Net cash used in operating activities $ (17,887,439 ) $ (8,242,177 ) Net cash provided by investing activities 4,500 - Net cash provided by financing activities 8,765,905 20,312,699 Net increase (decrease) in cash and cash equivalents $ (9,117,034 ) $ 12,070,522 Operating Activities During the years ended December 31, 2022 and 2021, we used cash in operating activities of $17.9 million and $8.2 million, respectively, primarily resulting from the clinical advancement of our product candidates, the timing of vendor invoicing and payments, legal and accounting fees, and costs related to operating as a public company.
For additional information on risks associated with our substantial capital requirements, please read the section titled “ Risk Factors ” included elsewhere in this Annual Report on Form 10-K. 80 Cash Flows for the years ended December 31, 2023 and 2022 The following table summarizes our cash flows for each of the periods presented: Year Ended December 31, 2023 2022 Net cash used in operating activities $ (10,779,982 ) $ (17,887,439 ) Net cash provided by investing activities - 4,500 Net cash provided by financing activities 8,755,884 8,765,905 Net decrease in cash and cash equivalents $ (2,024,098 ) $ (9,117,034 ) Operating Activities During the years ended December 31, 2023 and 2022, we used cash in operating activities of $10.8 million and $17.9 million, respectively.
The warrants have an exercise price of $14.17 (original exercise price), a 30% premium to the conversion price, and are exercisable for five years following issuance of the 2022 Notes.
These warrants have an exercise price equal to $12.60 per share and are exercisable for five years from the commencement of sales in the offering.
Under the Notes, commencing on September 29, 2022 and continuing monthly on the first day of each month beginning November 1, 2022, we are obligated to redeem one fifteenth (1/15 th ) of the original principal amount under the applicable Note, plus accrued but unpaid interest.
Beginning ninety days following issuance of the notes at the first closing and second closing, respectively, the Company is obligated to redeem monthly one third of the original principal amount under the applicable note, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the holder of such note.
The Company issued to the investors (i) 2021 Notes in the aggregate principal amount of $15.9 million for an aggregate purchase price of $15.0 million and (ii) warrants to purchase 54,174 shares of the Company’s common stock in the aggregate at an exercise price of $152.60 per share. The 2021 Notes were satisfied in October 2022.
At the second closing under the SPA, which occurred on November 28, 2023, the Company issued to the investors referenced above, (i) additional notes in the aggregate principal amount of $1,224,000 for an aggregate purchase price of $1,133,333 and (i) additional warrants to purchase 2,511,394 shares of the common stock in the aggregate.
Removed
(formerly known as Covistat, Inc.), a clinical stage pharmaceutical company that is developing a compound utilized in our overdose protection program for the treatment of COVID-19. Our lead product candidate, PF614, is an extended release TAAP prodrug of oxycodone.
Added
The true-up payments compensate the holder for the difference between the value of a share and the conversion price in effect at the time of redemption, multiplied by the number of shares paid. The true-up payments totaling $0.6 million were paid on May 12, 2023.
Removed
We have incurred significant operating losses since inception. Our net loss was $24.2 million for the year ended December 31, 2022 and as of December 31, 2022, we had an accumulated deficit of $110.9 million.
Added
In connection with each of the first and second closings of the 2022 Notes we also issued warrants to purchase 38,900 shares of the Company’s common stock.
Removed
The 2021 Notes were satisfied on October 10, 2022. The warrants have an exercise price of $15.60 and are exercisable for five years following issuance. The warrants were originally priced at a 30% premium to the conversion price and were subject to downward adjustments based on certain issuances of the Company’s common stock.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBecause of the short-term nature of our money market fund, a sudden change in market interest rates would not be expected to have a material impact on our financial position or results of operations. Inflation Risk We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein. 84
Biggest changeBecause of the short-term nature of our money market fund, a sudden change in market interest rates would not be expected to have a material impact on our financial position or results of operations. Inflation Risk We do not believe that inflation and changing prices had a significant impact on our results of operations for any periods presented herein.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are exposed to market risk in the ordinary course of our business. These risks primarily relate to changes in interest rates and inflation. Interest Rate Risk Our cash and cash equivalents as of December 31, 2022 consisted of cash and a money market fund account.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are exposed to market risk in the ordinary course of our business. These risks primarily relate to changes in interest rates and inflation. Interest Rate Risk Our cash and cash equivalents as of December 31, 2023, consisted of cash and a money market fund account.

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