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What changed in Ovid Therapeutics Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Ovid Therapeutics Inc.'s 2023 and 2024 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 2024 report.

+774 added−627 removedSource: 10-K (2025-03-11) vs 10-K (2024-03-08)

Top changes in Ovid Therapeutics Inc.'s 2024 10-K

774 paragraphs added · 627 removed · 190 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeUnder the terms of the agreement, we purchased shares of Graviton's preferred stock for $10.0 million and secured rights to develop their lead program OV888 (GV101) as well as a portfolio of ROCK2 inhibitors in mutually agreed upon rare CNS indications, excluding amyotrophic lateral sclerosis. The agreement provides us with worldwide rights, excluding China, Hong Kong, Macau and Taiwan.
Biggest changeGraviton License Agreement and Equity Purchase In April 2023, the Company entered into a collaboration and license agreement with Graviton (“Graviton Agreement”), whereby it secured from Graviton an exclusive license to develop and commercialize Graviton’s library of ROCK2 inhibitors including their lead program GV101 (OV888) in rare CNS disorders (excluding amyotrophic lateral sclerosis) worldwide (excluding China, Hong Kong, Macau and Taiwan).
Following the date of regulatory approval by the FDA of the first licensed product in the territory, which was received on March 18, 2022, Marinus issued, at the Company's option, 123,255 shares of Marinus common stock, par value $0.001 per share.
Following the date of regulatory approval by the FDA of the first licensed product in the territory which was received on March 18, 2022, Marinus issued, at the Company’s option, 123,255 shares of Marinus common stock, par value $0.001 per share, as payment.
Under the Marinus License Agreement, we granted Marinus an exclusive, non-transferable (except as expressly provided therein), royalty-bearing right and license under certain Ovid patents relating to ganaxolone to develop, make, have made, commercialize, promote, distribute, sell, offer for sale and import licensed products in the territory (which consists of the United States, the European Economic Area, United Kingdom and Switzerland) for the treatment of CDKL5 deficiency disorders.
Under the Marinus License Agreement, the Company granted Marinus an exclusive, non-transferable (except as expressly provided therein), royalty-bearing right and license under certain Ovid patents relating to ganaxolone to F-22 develop, make, have made, commercialize, promote, distribute, sell, offer for sale and import licensed products in the territory (which consists of the United States, the European Economic Area, United Kingdom and Switzerland) for the treatment of CDKL5 deficiency disorders.
Upon entry into the Northwestern Agreement, we paid an upfront non-creditable one-time license issuance fee of $75,000, and we are required to pay an annual license maintenance fee of $20,000, which will be creditable against any royalties payable to Northwestern following first commercial sale of licensed products under the agreement.
Upon entry into the Northwestern Agreement, the Company paid an upfront non-creditable one-time license issuance fee of $75,000 and is required to pay an annual license maintenance fee of $20,000, which will be creditable against any royalties payable to Northwestern following first commercial sale of licensed products under the agreement.
In consideration for the rights granted to us under the Northwestern agreement, we are required to pay to Northwestern up to an aggregate of $5.3 million upon the achievement of certain development and regulatory milestones for the first product covered by the Northwestern Patents, and, upon commercialization of any such products, will be required to pay to Northwestern a tiered royalty on net sales of such products by the Company, its affiliates or sublicensees, at percentages in the low to mid-single-digits, subject to standard reductions and offsets.
In consideration for the rights granted to the Company under the Northwestern agreement, the Company is required to pay to Northwestern up to an aggregate of $5.3 million upon the achievement of certain development and regulatory milestones for the first product covered by the Northwestern Patent Rights, and upon commercialization of any such products, will be required to pay to Northwestern a tiered royalty on net sales of such products by the Company, its affiliates or sublicensees, at percentages in the low to mid-single-digits, subject to standard reductions and offsets.
Royalties are payable on a country-by-country and product-by-product basis during the period beginning on the date of the first commercial sale of such product in such country and ending on the later to occur of the expiration of patent rights covering the product in such country and a specified anniversary of such first commercial sale.
Royalties on net sales, if any, are payable on a country-by-country and product-by-product basis during the period beginning on the date of the first commercial sale of such product in such country and ending on the later to occur of the expiration of patent rights covering the product in such country and a specified anniversary of such first commercial sale.
Our royalty obligations continue on a product-by-product and country-by-country basis until the later of the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country and ten years following the first commercial sale of such product in such country.
The Company’s royalty obligations continue on a product-by-product and country-by-country basis until the later of the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country and 10 years following the first commercial sale of such product in such country.
We retain the option to co-develop and co-commercialize the program with Healx (“Ovid Opt-In Right”) at the end of a positive readout of clinical phase 2B, and, in such case, would share net profits and losses in lieu of the milestones and royalty payments.
The Company will retain the option to co-develop and co-commercialize the program with Healx (“Ovid Opt-In Right”), at the end of a positive readout of clinical Phase 2B and would share net profits and losses in lieu of the milestones and royalty payments.
Under the terms of the Healx Agreement, Healx has secured a one-year option to investigate gaboxadol (OV101) as part of a potential combination therapy for Fragile X syndrome in a Phase 2A clinical trial, and as a treatment for other indications, for an upfront payment of $0.5 million, and fees to support prosecution and maintenance of our relevant intellectual property rights.
Under the terms of the Healx License and Option Agreement, Healx secured a one-year option to investigate gaboxadol (“OV101”) as part of a potential combination therapy for Fragile X syndrome in a Phase 1B/2A clinical trial, as well as a treatment for other indications, for an upfront payment of $0.5 million, and fees to support prosecution and maintenance of the Company’s relevant intellectual property rights.
At the end of the option period, Healx has the option to secure rights to an exclusive license under our relevant intellectual property rights, in exchange for an additional payment of $2.0 million (“Option Fee”), development and commercial milestone payments, and low to mid-tier double digit royalties.
At the end of the one-year option period, Healx had the option to secure rights to an exclusive license under the Company’s relevant intellectual property rights, in exchange for an additional payment of $2.0 million, development and commercial milestone payments, and low to mid-tier double-digit royalties.
We are responsible for all ongoing costs of filing, prosecuting and maintaining the Northwestern Patent Rights, but we also have the right to control such activities using our own patent counsel.
The Company is responsible for all ongoing costs of filing, prosecuting and maintaining the Northwestern Patent Rights, but also has the right to control such activities using its own patent counsel.
The license option will continue until the expiration of all relevant royalty terms. 15 2016 Northwestern License for OV329 In December 2016, we entered into a license agreement (“Northwestern Agreement”) with Northwestern University (“Northwestern”), pursuant to which Northwestern granted us an exclusive, worldwide license to patent rights in certain inventions (“Northwestern Patent Rights”) which relate to a specific compound (OV329) and related methods of use for such compound, along with certain know-how related to the practice of the inventions claimed in the Northwestern Patent Rights.
NOTE 10 – COMMITMENTS AND CONTINGENCIES License Agreements Northwestern University License Agreement In December 2016, the Company entered into a license agreement (“Northwestern Agreement”) with Northwestern University (“Northwestern”), pursuant to which Northwestern granted the Company an exclusive, worldwide license to patent rights of certain inventions (“Northwestern Patent Rights”) which relate to a specific compound and F-19 related methods of use for such compound, along with certain know-how related to the practice of the inventions claimed in the Northwestern Patent Rights.
Under the Northwestern agreement, we were granted exclusive rights to research, develop, manufacture and commercialize products utilizing the Northwestern Patent Rights for all uses, other than cancer.
The Company is developing OV329 under this agreement. Under the Northwestern Agreement, the Company was granted exclusive rights to research, develop, manufacture and commercialize products utilizing the Northwestern Patent Rights for all uses.
The Marinus License Agreement also provides for payment of royalties from Marinus to us in single-digits on net sales of each such licensed product sold. 2022 License and Option Agreement with Healx In February 2022, we entered into an exclusive license option agreement (“Healx Agreement”) with Healx, Ltd (“Healx” ) .
The Marinus License Agreement also provides for payment of royalties from Marinus to the Company in single-digits on net sales of each such licensed product sold.
If Ovid sublicenses a Northwestern Patent Right, it will be obligated to pay to Northwestern a specified percentage of sublicense revenue received by us, ranging from the high single-digits to the low-teens. The Northwestern Agreement requires that we use commercially reasonable efforts to develop and commercialize at least one product that is covered by the Northwestern Patent Rights.
If the Company sublicenses a Northwestern Patent Right, it will be obligated to pay to Northwestern a specified percentage of sublicense revenue received by the Company, ranging from the high single-digits to the low-teens.
Under the terms of the Amended Lundbeck Agreement, if Healx exercises its option, we will owe Lundbeck an equal share of all milestone and royalty payments received from Healx, if we choose not to exercise the Ovid Opt-In Right.
If the Company does not exercise the Ovid Opt-In Right, it will owe the third party an equal share of all milestone and royalty payments received.
In 2023, we sold a 13% stake in the royalty, regulatory and commercial milestone payments that we are eligible to receive under the RLT Agreement to Ligand for $30.0 million. Royalty payments are eligible on net sales across all regions and all future indications.
Additionally, the Company was entitled to receive tiered royalties beginning in the low double-digits, and up to 20% on sales of soticlestat if regulatory approval was achieved. In 2023, the Company sold a 13% stake in the royalty, regulatory and commercial milestone payments that the Company was eligible to receive under the RLT Agreement to Ligand for $30.0 million.
Graviton retains rights to licensed products in all fields of study outside of rare brain disorders. 14 2022 Research Collaboration and Equity Investment in Gensaic Under the terms of an equity agreement we entered into as an investor in Gensaic, we invested a total of $5.1 million in exchange for convertible preferred stock in Gensaic.
Gensaic Equity Agreement and Collaboration and Option Agreement In August 2022, the Company entered into an equity agreement and a collaboration and option agreement with Gensaic (“Gensaic Collaboration Agreement”). Under the terms of the equity agreement, the Company invested a total of $5.1 million in exchange for convertible preferred stock in Gensaic.
Unless earlier terminated, the Northwestern Agreement will remain in force until the expiration of our payment obligations thereunder. We have the right to terminate the agreement for any reason upon prior written notice or for an uncured material breach by Northwestern. Northwestern may terminate the agreement for our uncured material breach or insolvency. 2015 License Agreement with H.
The Company has the right to terminate the agreement for any reason upon prior written notice or for an uncured material breach by Northwestern. Northwestern may terminate the agreement for the Company’s uncured material breach or insolvency.
Healx will also be responsible for all commercialization costs of gaboxadol following the grant of a commercial license upon payment of the Option Fee.
Healx will assume all responsibility for, and costs of, both development and commercialization of gaboxadol following the exercise of the option.
If we choose to exercise the Ovid Opt-In Right, to co-develop and co-commercialize the program with Healx, we will owe an equal share of the net profit share to Lundbeck. Sales and Marketing Given our stage of development, we have not yet established a commercial organization or distribution capabilities.
Further, if the Company exercises the Ovid Opt-In Right to co-develop and co-commercialize the program, it will owe an equal share of any net profits to a third party with which it previously established a licensing agreement.
Under the terms of the AstraZeneca Exclusive License Agreement, we have obtained worldwide rights to a portfolio of early-stage, small molecule compounds targeting the KCC2 transporter, including our lead compound, OV350.
AstraZeneca AB License Agreement In December 2021, the Company entered into an exclusive license agreement with AstraZeneca AB (“AstraZeneca”), for a library of early-stage small molecules targeting the KCC2 transporter, including lead candidate OV350.
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Item 1. BUSINESS Overview Ovid is a biopharmaceutical company that is dedicated to meaningfully improving the lives of people affected by certain epilepsies and brain conditions with seizure symptoms. We believe that addressing these disorders represents a substantial scientific, medical and commercial opportunity.
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Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 26,301 $ 27,042 Marketable securities 26,774 78,792 Prepaid expenses and other current assets 2,865 3,763 Total current assets 55,940 109,598 Long-term equity investments 20,974 17,626 Restricted cash 1,931 1,931 Right-of-use asset, net 12,797 13,894 Property and equipment, net 433 769 Other assets 92 210 Total assets $ 92,167 $ 144,027 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,191 $ 3,703 Accrued expenses 5,994 6,524 Current portion, lease liability 1,336 1,246 Total current liabilities 10,522 11,473 Long-term liabilities: Lease liability 13,419 14,756 Royalty monetization liability — 30,000 Total liabilities 23,941 56,230 Stockholders ’ equity: Preferred stock, $0.001 par value; 10,000,000 shares authorized; Series A convertible preferred stock, 10,000 shares designated, 1,250 shares issued and outstanding at December 31, 2024 and 2023 — — Common stock, $0.001 par value; 125,000,000 shares authorized; 71,009,866 and 70,691,992 shares issued and outstanding at December 31, 2024 and 2023, respectively 71 71 Additional paid-in-capital 372,489 365,591 Accumulated other comprehensive income (loss) (35) 1 Accumulated deficit (304,299) (277,865) Total stockholders ’ equity 68,226 87,797 Total liabilities and stockholders ’ equity $ 92,167 $ 144,027 See accompanying notes to these consolidated financial statements F-3 OVID THERAPEUTICS INC.
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Over the last decade, scientific understanding of the underlying biology of neuronal hyperexcitability and the related pathophysiology of epilepsy and many neurological disorders has improved. This understanding of disease, coupled with advances in preclinical research tools, is improving the predictive potential of translational research, and thereby, may increase the probability of successful clinical development of anti-seizure medicines (“ASMs”).
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Consolidated Statements of Operations (in thousands, except share and per share data) For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Revenue: License and other revenue $ 566 $ 392 Total revenue 566 392 Operating expenses: Research and development 36,767 28,588 General and administrative 25,684 31,085 Total operating expenses 62,451 59,673 Loss from operations (61,885) (59,281) Other income (expense), net 35,452 6,943 Loss before provision for income taxes (26,433) (52,339) Provision for income taxes — — Net loss $ (26,433) $ (52,339) Net loss per share of Series A preferred stock, basic and diluted $ (366.33) $ (728.64) Weighted-average Series A preferred stock shares outstanding, basic and diluted 1,250 1,250 Net loss per share of common stock, basic and diluted $ (0.37) $ (0.73) Weighted-average common stock shares outstanding, basic and diluted 70,905,422 70,580,604 See accompanying notes to these consolidated financial statements F-4 OVID THERAPEUTICS INC.
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Emerging science also indicates that addressing the underlying causes of hyperexcitability may have therapeutic applications in broad neurological disease well beyond epilepsy. The large global epilepsy market opportunity reflects significant unmet medical need and economic potential. Epilepsy therapeutics today represent an approximately $8 billion market globally.
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Consolidated Statements of Comprehensive Loss (in thousands) For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Net loss $ (26,433) $ (52,339) Other comprehensive income: Cumulative translation adjustment (42) — Unrealized gain on available-for-sale securities 7 1 Comprehensive loss $ (26,468) $ (52,338) See accompanying notes to these consolidated financial statements F-5 OVID THERAPEUTICS INC.
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Evidence supporting the opportunity includes the number of recent acquisitions of epilepsy assets and companies, several of which have been acquired for values greater than $1.0 billion. The unmet need of people affected by seizures remains significant. Approximately three million Americans live with epilepsies today and approximately 50 million people suffer from epilepsy worldwide.
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Consolidated Statement of Changes in Stockholders’ Equity (in thousands, except shares) Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Shares Amount Balance, December 31, 2023 1 $ — 70,691,992 $ 71 $ 365,591 $ 1 $ (277,866) $ 87,797 Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 317,874 — 622 — — 622 Stock-based compensation expense — — — — 6,276 — — 6,276 Other comprehensive loss — — — — — (36) — (36) Net loss — — — — — — (26,433) (26,433) Balance, December 31, 2024 1 $ — 71,009,866 $ 71 $ 372,489 $ (35) $ (304,299) $ 68,226 (in thousands, except shares) Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Shares Amount Shares Amount Balance, December 31, 2022 1 $ — 70,466,885 $ 70 $ 357,771 $ (42) $ (225,527) $ 132,273 Issuance of common stock from exercise of stock options and purchases from employee stock purchase plan — — 225,107 — 535 — — 535 Stock-based compensation expense — — — — 7,285 — — 7,285 Other comprehensive income — — — — — 43 — 43 Net loss — — — — — — (52,339) (52,339) Balance, December 31, 2023 1 $ — 70,691,992 $ 71 $ 365,591 $ 1 $ (277,866) $ 87,797 See accompanying notes to these consolidated financial statements F-6 OVID THERAPEUTICS INC.
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We have proven capabilities and expertise in the successful clinical development of ASMs. We have applied our knowledge to build a differentiated pipeline of medicines with potential first-in-class or best-in-class drug mechanisms of action (“MoA”) to treat epilepsies and brain disorders with seizure symptoms.
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Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Cash flows from operating activities: Net loss $ (26,433) $ (52,339) Adjustments to reconcile net loss to cash used in operating activities: Change in fair value of royalty monetization liability (30,000) — Unrealized (gain) loss on equity investments (3,349) (2,003) Change in accrued interest and accretion of discount on marketable securities (2,765) (2,172) Stock-based compensation expense 6,276 7,285 Depreciation and amortization expense 613 568 Noncash operating lease expense 1,097 1,028 Change in lease liability (1,246) (534) Change in operating assets and liabilities: — — Prepaid expenses and other current assets 899 (1,385) Accounts payable (512) 1,750 Accrued expenses (537) 2,021 Net cash used in operating activities (55,956) (45,781) Cash flows from investing activities: Purchase of marketable securities (73,246) (112,443) Sales/maturities of marketable securities 128,000 120,000 Purchase of long-term equity investment — (10,000) Purchases of property and equipment (71) (40) Software development and other costs (90) (97) Net cash provided by (used in) investing activities 54,594 (2,581) Cash flows from financing activities: Proceeds from exercise of options and employee stock purchase plan 622 535 Proceeds from royalty monetization agreement — 30,000 Net cash provided by financing activities 622 30,535 Net decrease in cash, cash equivalents and restricted cash (740) (17,826) Cash, cash equivalents and restricted cash, at beginning of period 28,972 46,799 Cash, cash equivalents and restricted cash, at end of period $ 28,232 $ 28,972 See accompanying notes to these consolidated financial statements F-7 OVID THERAPEUTICS, INC.
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Our pipeline has produced three programs with potential first-in-class MoAs, and one program with a potential best-in-class MoA. Currently, three of these programs are in clinical trials in humans. The fourth is in preclinical studies and is anticipated to advance into human safety studies in 2024.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – NATURE OF OPERATIONS Ovid Therapeutics Inc. (the “Company”) was incorporated under the laws of the state of Delaware, commenced operations on April 1, 2014, and maintains its principal executive office in New York, New York.
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An overview of these programs includes: • Soticlestat , a novel cholesterol 24 hydroxylase (“CH24”) inhibitor, which is currently being evaluated in two pivotal Phase 3 trials for Dravet syndrome and Lennox-Gastaut syndrome by Takeda Company Limited (“Takeda”). Takeda purchased our rights to soticlestat, and is conducting the pivotal trials.
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The Company is a biopharmaceutical company that is dedicated to developing small molecule medicines for brain conditions with significant unmet need.
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We maintain a significant financial interest in the potential approval and commercialization of soticlestat via potential regulatory and commercial milestones of up to $660.0 million and net sales-based royalty payments from low double digits up to 20%.
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The Company is currently focused on developing OV329, OV350, OV4071, OV4041 and OV888 (GV101) (to be evaluated pending review of emerging data from competitor and academic studies in CCM) (see Part I, Item 1 of the annual report on Form 10-K for the period ended December 31, 2024 for detailed program descriptions).
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We sold a 13% stake in the royalty, regulatory and commercial milestone payments that we are eligible to receive from Takeda to Ligand Pharmaceuticals Incorporated for $30.0 million. • OV888 (GV101), a highly selective inhibitor of rho associated coiled-coil containing protein kinase 2 (“ROCK2”), which is being developed as a potential first-in-class medicine to treat cerebral cavernous malformations (“CCM”), of which seizures are among common symptoms.
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Since its inception, the Company has devoted substantially all of its efforts to business development, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of convertible preferred stock, common stock and other equity instruments, the sale and/or licensing of certain assets and the licensing of certain intellectual property.
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OV888 (GV101) is completing a Phase 1 double-blind, multiple-ascending dose trial and is expected to initiate its Phase 2 program in 2024.
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The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and the ability to secure additional capital to fund operations.
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A higher dose cohort has been added to the Phase 1 trial and no serious adverse events have been observed. • OV329 , a highly potent next-generation GABA-aminotransferase inhibitor (“GABA-AT”), that is thought to potentially deliver preferable seizure reduction and dosing relative to prior medicines in the class.
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The Company’s major sources of cash have been licensing revenue, proceeds from various public and private offerings of its capital stock, option exercises and interest income. As of December 31, 2024, the Company had approximately $53.1 million in cash, cash equivalents and marketable securities.
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An oral formulation of OV329 is currently being evaluated in a Phase 1 study that uses biomarkers for efficacy and target engagement.
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Since inception, the Company has generated $223.5 million in revenue, primarily from the Company’s royalty, license and termination agreement (“RLT Agreement”) with Takeda Pharmaceutical Company Limited (“Takeda”).
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An intravenous formulation of OV329 is also in development for acute seizures and is expected to enter human safety studies in 2025. • OV350 , a potential first-in-class direct activator of the central nervous system (“CNS”), specific K-Cl co-transporter (“KCC2”) and is the most advanced of a unique portfolio of drugs leads which are direct KCC2 activator compounds.
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Historically, the Company has incurred recurring losses, has experienced recurring negative operating cash flows and has required significant cash resources to execute its business plans, which the Company expects will continue for the foreseeable future.
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Oral and intravenous (“IV”) formulations of several of these compounds have been prepared and have demonstrated activity in multiple preclinical disease models. We expect to file the first investigational new drug application (“IND”) from this portfolio in 2024. We believe this portfolio has the potential to deliver multiple INDs over the years to come.
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The Company has an accumulated deficit of $304.3 million as of December 31, 2024, working capital of $45.4 million and used $56.0 million of cash in operating activities for the year ended December 31, 2024.
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Collectively, these development programs are anticipated to create a range of value-creating milestones in the near- and mid-term for investors. 3 The Opportunity: Epilepsies and Neurological Disorders Although it is one of the earliest known maladies documented by humanity four millennia ago, epilepsy remains a common, and often intractable, medical diagnosis.
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The Company recorded a net loss of $26.4 million during the year ended December 31, 2024 and expects to incur losses in subsequent periods for at least the next several years.
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Approximately 50 million people globally experience epilepsy, including an estimated three million adults living with epilepsy in the United States. While modern drug discovery efforts have produced more than 30 ASMs over the last 100 years, a substantial number of epilepsy patients continue to experience breakthrough seizures that can cause enduring damage to the brain.
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The Company is highly dependent on its ability to find additional sources of funding through either equity offerings, debt financings, collaborations, strategic alliances, licensing agreements or a combination of any such transactions.
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Individuals who suffer from rare forms of refractory epilepsies may experience persistent seizure rates ranging from 50 - 90%. The seizures they suffer can have a devastating impact both upon patients and their families, by triggering permanent motor, cognitive and developmental delays, as well as epileptogenesis, which is a cascade of seizures begetting more seizures.
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Management believes that the Company’s existing cash, cash equivalents and marketable securities as of December 31, 2024 will be sufficient to fund its current operations through at least 12 months from the date of filing of the Company’s Annual Report on Form 10-K. Adequate additional funding may not be available to the Company on acceptable terms or at all.
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Some patients with developmental epileptic encephalopathies experience even greater rates of refractory seizures that are resistant to drug therapy. With an estimated 70% of epilepsy diagnoses occurring in people less than 20 years of age, the need to treat seizures early and effectively is critical to mitigate worsening and permanent later-life disabilities.
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The failure to raise capital as and when needed will have a negative impact on the Company’s financial condition and ability to pursue its business strategy.
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In the search for seizure control, approximately half of patients take a polypharmacy regimen of five or more ASMs, requiring careful management of drug side effects and interactions. The large population of patients requiring multiple drug therapies to control seizures, and persistent rates of breakthrough seizures, signal the urgent need for effective new medicines.
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If the Company is unable to raise capital on acceptable terms, the Company will be required to delay, reduce the scope of or eliminate research and development programs, or obtain funds through arrangements with collaborators or others that may require the Company to relinquish rights to certain drug candidates that the Company might otherwise seek to develop or commercialize independently.
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For these patients, new mechanisms of action that demonstrate improved efficacy, safety and tolerability profiles are optimal, as they may be more easily incorporated into existing treatment regimens without the fear of drug-to-drug interactions (“DDIs”).
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The Company is subject to other challenges and risks specific to its business and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: delays or problems in the supply of the Company’s product candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing intellectual property rights; complying with applicable regulatory requirements; and obtaining regulatory approval of any of the Company’s product candidates, among others.
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Scientific progress, including the availability of genetic testing, improved radiographic scanning tools, and more accurate means of measuring non-seizure symptoms are illuminating the underpinning seizure disorders. The great unmet medical need and scientific advancements have set the stage for a potential era of neurotherapeutics, which we believe will be led by ASMs.
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NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Basis of Presentation and Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of Ovid Therapeutics Inc. and its wholly owned subsidiaries, Ovid Therapeutics Australia Pty Ltd and Ovid Therapeutics Hong Kong Limited.
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The Ovid Strategy The science underlying the discovery and development of new drugs for the brain has changed fundamentally over the last decade. We believe that major developments in the understanding of the biology of these diseases means that key areas of unmet need, including many epilepsies and seizure disorders, are now addressable and offer significant medical potential.
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All material intercompany transactions and balances have been eliminated in consolidation.
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Our team has proven expertise in understanding MoAs that underlie seizures and shaping potential therapies to treat rare epilepsies and disorders with seizures. Specifically, we have built a pipeline focused on treating the extrinsic or intrinsic causes of neuronal hyperexcitability.
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F-8 (B) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
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This know-how affords us an ability to build Ovid in a manner focused on delivering successive, novel medicines for epilepsies and seizure-related neurological conditions. Our strategy is to create sustainable, long-term value by advancing an exciting and differentiated pipeline of small molecules that culminates in a fully integrated neurotherapeutics company with multiple commercial medicines and clinical stage programs.
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Actual results could differ materially from those estimates. (C) Marketable Securities Marketable securities consist of investments in U.S. treasury instruments which are considered available-for-sale securities. The Company classifies its marketable securities with maturities of less than one year from the balance sheet date as current assets on its consolidated balance sheets.
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Over time, we intend to seek to expand our current pipeline of predominantly ASMs to include additional franchises of neurology programs via focused clinical development and business development activities. This corporate strategy is underpinned by specific research and development, financial and business development strategies.
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The Company classifies its marketable securities with original maturities of less than three months as cash equivalents on its consolidated balance sheets. Unrealized gains and losses on these securities that are determined to be temporary are reported as a separate component of accumulated other comprehensive income (loss) in stockholders’ equity.
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In addition, our Company seeks to protect shareholder value by creating multiple sources of potential revenue via clinical and commercial milestones from our pipeline, strategic collaborations and partnerships. Our approach to building an epilepsy franchise has already resulted in success, namely the development and subsequent repurchase of our rights to soticlestat by Takeda.
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(D) Restricted Cash The Company classifies as restricted cash all cash pledged as collateral to secure long-term obligations and all cash for which use is otherwise limited by contractual provisions. Amounts are reported as non-current unless restrictions are expected to be released in the next 12 months.
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In 2017, we in-licensed a 50% stake in soticlestat for $26.0 million, and further invested $57.0 million in designing and executing soticlestat’s early and mid-stage clinical trials.
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(E) Long-term Equity Investments Long-term equity investments consist of equity investments in the preferred shares of Gensaic, Inc., formerly M13 Therapeutics, Inc. (“Gensaic”), and Graviton Bioscience Corporation (“Graviton”), both privately held corporations.
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In 2021, following encouraging Phase 2 findings, which we delivered six months ahead of schedule, we entered into a Royalty, License and Termination Agreement (“RLT Agreement”) through which we sold back our rights to soticlestat to Takeda.
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The preferred shares are not considered in-substance common stock, and the investments are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified within long-term equity investments on the consolidated balance sheets with adjustments recognized in other income (expense), net on the consolidated statements of operations.
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The RLT Agreement provided us with $196.0 million paid in Q1 2021 and, if soticlestat is approved and successfully commercialized, we are eligible to receive up to $660.0 million in sales and regulatory milestone payments and low double-digits up to 20% of potential net sales-based tiered royalty payments. The RLT Agreement provides us with a potential stream of non-dilutive capital.
Added
The Company has determined that these equity investments do not have a readily determinable fair value and elected the measurement alternative. Therefore, the carrying amount of the equity investments will be adjusted to fair value at the time of the next observable price change for the identical or similar investment of the same issuer, or when an impairment is recognized.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

156 edited+81 added−59 removed290 unchanged
Biggest changeEvents that may prevent successful or timely completion of clinical development include: • our inability to generate sufficient preclinical, toxicology or other data to support the initiation of clinical trials; • our inability to develop and validate disease-relevant clinical endpoints; • delays in reaching a consensus with regulatory authorities on trial design; 31 • delays in reaching agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical trial sites; • delays in opening investigational sites; • delays or difficulty in recruiting and enrollment of suitable patients to participate in our clinical trials; • imposition of a clinical hold by regulatory authorities because of a serious adverse event, concerns with a class of drug candidates or after an inspection of our clinical trial operations or trial sites; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • occurrence of serious adverse events associated with the drug candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; or • business interruptions resulting from global geopolitical tensions, including the ongoing war between Russia and Ukraine and war in Israel, any other war or the perception that hostilities may be imminent, including terrorism, natural disasters or public health crises.
Biggest changeEvents that may prevent successful or timely completion of clinical development include: • our inability to generate sufficient preclinical, toxicology or other data to support the initiation of clinical trials; • our inability to develop and validate disease-relevant clinical endpoints; • delays in reaching a consensus with regulatory authorities on trial design; • delays in reaching agreement on acceptable terms with prospective clinical research organizations (“CROs”) and clinical trial sites; • delays in opening investigational sites; • delays or difficulty in recruiting and enrollment of suitable patients to participate in our clinical trials; • imposition of a clinical hold by regulatory authorities because of a serious adverse event, concerns with a class of drug candidates or after an inspection of our clinical trial operations or trial sites; • delays in having patients complete participation in a trial or return for post-treatment follow-up; • occurrence of serious adverse events associated with the drug candidate that are viewed to outweigh its potential benefits; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; or • business interruptions resulting from global geopolitical tensions, including tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, and any other war or the perception that hostilities may be imminent, terrorism, natural disasters or public health crises. 31 Further, clinical endpoints for certain diseases we are targeting, including brain conditions with significant unmet need, have not been established, and accordingly, we may have to develop new modalities or modify existing endpoints to measure efficacy, which may increase the time it takes for us to commence or complete clinical trials.
If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.
If disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could in the future negatively affect our financial condition and our ability to pursue our business strategy.
At the state level, legislatures have increasingly passed and implemented regulations designed to control pharmaceutical and biological product pricing, including pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
At the state level, legislatures have increasingly passed and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Further, because of our hybrid-work policies, information that is normally protected, including company confidential information, may be less secure.
Further, because of our hybrid-work policies, information that is normally protected, including confidential company information, may be less secure.
Among other things, these provisions: • establish a classified board of directors such that not all members of the board are elected at one time; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from the board; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; • limit who may call stockholder meetings; • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and • require the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
Among other things, these provisions: • establish a classified board of directors such that not all members of the board are elected at one time; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from the board of directors; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; • limit who may call stockholder meetings; • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a stockholder rights plan, or so-called “poison pill,” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and • require the approval of the holders of at least 66 2/3% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
Any potential acquisition or strategic partnership may entail numerous risks, including: • increased operating expenses and cash requirements; • the assumption of additional indebtedness or contingent liabilities; • assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel; • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition; • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs; 39 • challenges related to integrating acquired businesses or entering into or realizing the benefits of strategic transactions generally; and • risks associated with potential international acquisition transactions, including in countries where we do not currently have a material presence.
Any potential acquisition or strategic partnership may entail numerous risks, including: • increased operating expenses and cash requirements; • the assumption of additional indebtedness or contingent liabilities; • assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel; • the diversion of our management’s attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition; • retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships; • risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing drugs or drug candidates and regulatory approvals; • our inability to generate revenue from acquired technology and/or drugs sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs; • challenges related to integrating acquired businesses or entering into or realizing the benefits of strategic transactions generally; and • risks associated with potential international acquisition transactions, including in countries where we do not currently have a material presence.
Even if we identify drug candidates that initially show promise, we may fail to in-license or acquire these assets and may also fail to successfully develop and commercialize such drug candidates for many reasons, including the following: • the research methodology used may not be successful in identifying potential drug candidates; • competitors may develop alternatives that render any drug candidate we develop obsolete; • any drug candidate we develop may nevertheless be covered by third parties’ patents or other exclusive rights; • a drug candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; • a drug candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and • a drug candidate may not be accepted as safe and effective by physicians, patients, the medical community or third-party payors, even if approved.
Even if we identify drug candidates that initially show promise, we may fail to in- 32 license or acquire these assets and may also fail to successfully develop and commercialize such drug candidates for many reasons, including the following: • the research methodology used may not be successful in identifying potential drug candidates; • competitors may develop alternatives that render any drug candidate we develop obsolete; • any drug candidate we develop may nevertheless be covered by third parties’ patents or other exclusive rights; • a drug candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria; • a drug candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and • a drug candidate may not be accepted as safe and effective by physicians, patients, the medical community or third-party payors, even if approved.
The degree of market acceptance of our current or future drug candidates, if approved for commercial sale, will depend on a number of factors, including but not limited to: • the efficacy and potential advantages compared to alternative treatments and therapies; • the safety profile of our drug candidate compared to alternative treatments and therapies; • effectiveness of sales and marketing efforts; • the strength of our relationships with patient communities; • the cost of treatment in relation to alternative treatments and therapies, including any similar generic treatments; • our ability to offer such drug for sale at competitive prices; • the convenience and ease of administration compared to alternative treatments and therapies; 35 • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the strength of marketing and distribution support; • the availability of third-party coverage and adequate reimbursement; • the prevalence and severity of any side effects; and • any restrictions on the use of the drug together with other medications.
The degree of market acceptance of our current or future drug candidates, if approved for commercial sale, will depend on a number of factors, including but not limited to: • the efficacy and potential advantages compared to alternative treatments and therapies; • the safety profile of our drug candidate compared to alternative treatments and therapies; • effectiveness of sales and marketing efforts; • the strength of our relationships with patient communities; • the cost of treatment in relation to alternative treatments and therapies, including any similar generic treatments; • our ability to offer such drug for sale at competitive prices; • the convenience and ease of administration compared to alternative treatments and therapies; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the strength of marketing and distribution support; • the availability of third-party coverage and adequate reimbursement; • the prevalence and severity of any side effects; and • any restrictions on the use of the drug together with other medications.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our drug candidates, we may: • be delayed in obtaining marketing approval, if at all; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; • be subject to additional post-marketing testing requirements; • be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements; • have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy (“REMS”); • be subject to the addition of labeling statements, such as warnings or contraindications; • be sued; or • experience damage to our reputation.
Additionally, if the results of our clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our drug candidates, we may: • be delayed in obtaining marketing approval, if at all; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; • be subject to additional post-marketing testing requirements; • be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements; • have regulatory authorities withdraw, or suspend, their approval of the drug or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy; • be subject to the addition of labeling statements, such as warnings or contraindications; • be sued; or • experience damage to our reputation.
Our current and future collaborations could subject us to a number of risks, including: • we may be required to undertake the expenditure of substantial operational, financial and management resources; • we may be required to issue equity securities that would dilute our stockholders’ percentage of ownership; 38 • we may be required to assume substantial actual or contingent liabilities; • we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our drug candidates; • strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new version of a drug candidate for clinical testing; • strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs; • strategic collaborators may not commit adequate resources to the marketing and distribution of our drug candidates, limiting our potential revenues from these products; • we rely on our current collaborators to manufacture drug substance and drug product and may do so with respect to future collaborators, which could result in disputes or delays; • disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or commercialization of our drug candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources; • disputes may arise between us and our current or future collaborators regarding any termination of any collaboration, license, or other business development arrangement in which we may enter; • strategic collaborators may experience financial difficulties; • strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • business combinations or significant changes in a strategic collaborator’s business strategy may also adversely affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement; • strategic collaborators could decide to move forward with a competing drug candidate developed either independently or in collaboration with others, including our competitors; and • strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our drug candidates.
Our current and future collaborations could subject us to a number of risks, including: • we may be required to undertake the expenditure of substantial operational, financial and management resources; • we may be required to issue equity securities that would dilute our stockholders’ percentage of ownership; • we may be required to assume substantial actual or contingent liabilities; • we may not be able to control the amount and timing of resources that our strategic collaborators devote to the development or commercialization of our drug candidates; • strategic collaborators may delay clinical trials, provide insufficient funding, terminate a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new version of a drug candidate for clinical testing; • strategic collaborators may not pursue further development and commercialization of products resulting from the strategic collaboration arrangement or may elect to discontinue research and development programs; • strategic collaborators may not commit adequate resources to the marketing and distribution of our drug candidates, limiting our potential revenues from these products; • we rely on our current collaborators to manufacture drug substance and drug product and may do so with respect to future collaborators, which could result in disputes or delays; • disputes may arise between us and our strategic collaborators that result in the delay or termination of the research, development or commercialization of our drug candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources; 37 • disputes may arise between us and our current or future collaborators regarding any termination of any collaboration, license, or other business development arrangement in which we may enter; • strategic collaborators may experience financial difficulties; • strategic collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information or expose us to potential litigation; • business combinations or significant changes in a strategic collaborator’s business strategy may also adversely affect a strategic collaborator’s willingness or ability to complete its obligations under any arrangement; • strategic collaborators could decide to move forward with a competing drug candidate developed either independently or in collaboration with others, including our competitors; and • strategic collaborators could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing our drug candidates.
If we, or our licensees, are not able to obtain the required regulatory approvals, we, or our licensees, will not be able to commercialize our drug candidates, and our ability to generate revenue will be adversely affected. • Because the results of preclinical studies or earlier clinical trials are not necessarily predictive of future results, our drug candidates may not have favorable results in planned or future preclinical studies or clinical trials, or may not receive regulatory approval. • Interim topline and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures, which could result in material changes in the final data. • Preclinical studies and clinical trials are very expensive, time consuming and difficult to design and implement and involve uncertain outcomes.
If we, or our licensees or collaborators, are not able to obtain the required regulatory approvals, we, or our licensees or collaborators, will not be able to commercialize our drug candidates, and our ability to generate revenue will be adversely affected. • Because the results of preclinical studies or earlier clinical trials are not necessarily predictive of future results, our drug candidates may not have favorable results in planned or future preclinical studies or clinical trials, or may not receive regulatory approval. • Interim topline and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures, which could result in material changes in the final data. • Preclinical studies and clinical trials are very expensive, time consuming and difficult to design and implement and involve uncertain outcomes.
We will be a smaller reporting company and may take advantage of the scaled-back disclosures available to smaller reporting companies for so long as (i) the market value of our voting and non-voting ordinary shares held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) (a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of our voting and non-voting ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We will be a smaller reporting company and may take advantage of the scaled-back disclosures available to smaller reporting companies for so long as (i) the market value of our voting and non-voting ordinary shares held by non-affiliates is less than $250.0 million measured on the last business day of our most recently completed second fiscal quarter or (ii) (a) our annual revenue is less than $100.0 million during the most recently completed fiscal year and (b) the market value of 55 our voting and non-voting ordinary shares held by non-affiliates is less than $700.0 million measured on the last business day of our most recently completed second fiscal quarter.
In addition, it is possible that as we test our drug candidates in larger, longer and more extensive clinical programs, or as use of these drug candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by subjects.
In addition, it is possible that illnesses, injuries, discomforts or other adverse events that were observed in earlier trials, as well as conditions that did not occur or went undetected in previous trials will be reported by 33 subjects as we test our drug candidates in larger, longer and more extensive clinical programs, or, as use of these drug candidates becomes more widespread if they receive regulatory approval.
Any such delay or abandonment could harm our business, financial condition, results of operations and prospects. Interim topline and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures, which could result in material changes in the final data.
Any such delay or abandonment could harm our business, financial condition, results of operations and prospects. 30 Interim topline and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures, which could result in material changes in the final data.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by many of the individual countries in and outside of Europe with which we will need to comply. Many biopharmaceutical companies have found the process of marketing their own products in foreign countries to be very challenging.
We have no prior experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by many of the individual countries in and outside of Europe with which we will need to comply. 36 Many biopharmaceutical companies have found the process of marketing their own products in foreign countries to be very challenging.
Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. More established companies may have a competitive advantage over us due to their greater size, resources and institutional experience.
Potential competitors also include academic institutions, government agencies and other public and 34 private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization. More established companies may have a competitive advantage over us due to their greater size, resources and institutional experience.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would harm our business, financial condition, results of operations and prospects.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may 43 not achieve or sustain profitability, which would harm our business, financial condition, results of operations and prospects.
These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 42 2011, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect until 2032 unless additional Congressional action is taken.
These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to the statute, will remain in effect until 2032 unless additional congressional action is taken.
Significant disruptions of our, our third-party vendors’ and/or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive data, which could result in financial, legal, regulatory, business and reputational harm to us.
Significant disruptions of our, our third-party vendors’ and/or business partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, 52 misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive data, which could result in financial, legal, regulatory, business and reputational harm to us.
Our business strategy is based on acquiring or in-licensing compounds directed at rare epilepsies, seizure-related disorders, and rare neurological disorders. As a result, we intend to periodically explore a variety of possible additional strategic collaborations in an effort to gain access to additional drug candidates or resources.
Our business strategy is based on acquiring or in-licensing compounds directed at certain epilepsies, seizure-related disorders, and rare neurological disorders. As a result, we intend to periodically explore a variety of possible additional strategic collaborations in an effort to gain access to additional drug candidates or resources.
We plan to continuously review our strategies and modify as necessary based on attractive areas of interest and assets that we choose to pursue. We intend to develop our portfolio of drug candidates by in-licensing and entering into collaborations with leading biopharmaceutical companies or academic institutions for new drug candidates.
We plan to continuously review our strategies and modify as necessary based on attractive areas of interest and assets that we choose to pursue. We intend to develop our portfolio of drug candidates by in-licensing and entering into collaborations with biopharmaceutical companies or academic institutions for new drug candidates.
These estimates have been derived from a variety of sources, including the scientific literature, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these 34 disorders. The number of patients may turn out to be lower than expected.
These estimates have been derived from a variety of sources, including the scientific literature, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these disorders. The number of patients may turn out to be lower than expected.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. 43 Obtaining orphan drug designations is important to our business strategy; however, obtaining an orphan drug designation can be difficult and we may not be successful in doing so.
A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Obtaining orphan drug designations is important to our business strategy; however, obtaining an orphan drug designation can be difficult and we may not be successful in doing so.
Orphan drug exclusive marketing rights in the United States also may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
Orphan drug exclusive marketing rights in the United States also may be lost if the FDA later 42 determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.
We cannot assure you that there will not be additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.
The stock market in general and the market for biopharmaceutical or pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
In addition, the stock market in general and the market for biopharmaceutical or pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies, which has resulted in decreased stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects.
Although there are limited exemptions for clinical trial data under the CCPA (and the other similar state privacy laws), the CCPA and other similar laws may impact (possibly significantly) our business activities depending on how it is interpreted, should we become subject to the CCPA in the future.
Although there are limited exemptions for clinical trial data under the CCPA (and the other similar state privacy laws), the CCPA and other similar laws may impact (possibly significantly) our business activities depending on how it is interpreted, should we become subject to the CCPA and other state comprehensive privacy laws in the future.
Our NOL carryforwards are significantly limited such that if we achieve profitability in future periods, we may not be able to utilize most of the NOL carryforwards, which could have a material adverse effect on cash flow and results of operations.
Our NOL carryforwards are significantly limited such that even if we achieve profitability in future periods, we may not be able to utilize most of the NOL carryforwards, which could have a material adverse effect on cash flow and results of operations.
Risks Related to the Development and Commercialization of Our Drug Candidates We are very early in our development efforts. If we are unable to successfully develop, receive regulatory approval for and commercialize our drug candidates, or successfully develop any other drug candidates, or experience significant delays in doing so, our business will be harmed.
Risks Related to the Development and Commercialization of Our Drug Candidates We are early in our drug development efforts. If we are unable to successfully develop, receive regulatory approval for and commercialize our drug candidates, or successfully develop any other drug candidates, or experience significant delays in doing so, our business will be harmed.
Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data. Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
Additionally, certain data privacy and security obligations will require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data. Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
As a result, if we earn net taxable income, our ability to use our pre-change NOLs and certain other 28 tax attributes to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes.
As a result, if we earn net taxable income, our ability to use our pre-change NOLs and certain other tax attributes to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes.
The United States Patent Office recently developed new regulations and procedures to govern 45 administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.
The United States Patent Office recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective on March 16, 2013.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. We are required, under Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls over financial reporting and disclosure controls and procedures. We are required, under Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
If any future licensees fail to perform their obligations to develop and obtain regulatory approvals for the licensed products, we may not be able to commercialize our products in the affected countries, or our ability to do so may be substantially delayed.
If any future licensees or collaborators fail to perform their obligations to develop and obtain regulatory approvals for the licensed products, we may not be able to commercialize our products in the affected countries, or our ability to do so may be substantially delayed.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or 58 prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors.
If we, or our licensees, are not able to obtain the required regulatory approvals, we, or our licensees, will not be able to commercialize our drug candidates, and our ability to generate revenue will be adversely affected. We do not have any drugs that have received regulatory approval.
If we, or our licensees or collaborators, are not able to obtain the required regulatory approvals, we, or our licensees or collaborators, will not be able to commercialize our drug candidates, and our ability to generate revenue will be adversely affected. We do not have any drugs that have received regulatory approval.
If we seek approval of our current or future drug candidates outside of the United States, we expect that we will be subject to additional risks in commercialization including: • different regulatory requirements for approval of therapies in foreign countries; • reduced protection for intellectual property rights; • the potential requirement of additional clinical studies in international jurisdictions; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; 36 • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • foreign reimbursement, pricing and insurance regimes; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical tensions, including the ongoing war between Russia and Ukraine and the war in Israel, any other war or the perception that hostilities may be imminent, terrorism, natural disasters or public health crises.
If we seek approval of our current or future drug candidates outside of the United States, we expect that we will be subject to additional risks in commercialization including: • different regulatory requirements for approval of therapies in foreign countries; • reduced protection for intellectual property rights; • the potential requirement of additional clinical studies in international jurisdictions; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • foreign reimbursement, pricing and insurance regimes; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical tensions including tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, and any other war or the perception that hostilities may be imminent, terrorism, natural disasters or public health crises.
The shifting compliance environment and the need to build and maintain robust and expandable systems to 41 comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
One third-party payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage, and adequate reimbursement, for the drug. Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
One third-party payor’s determination to provide coverage for a drug does not assure that other payors will also provide coverage, and adequate reimbursement, for the drug. 40 Additionally, a third-party payor’s decision to provide coverage for a therapy does not imply that an adequate reimbursement rate will be approved.
In addition, any negative results we may report in clinical trials 33 of our drug candidate may make it difficult or impossible to recruit and retain patients in other clinical trials of that same drug candidate.
In addition, any negative results we may report in clinical trials of our drug candidate may make it difficult or impossible to recruit and retain patients in other clinical trials of that same drug candidate.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in 59 which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock. 48 Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our current and any future drug candidates.
If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of our common stock. 47 Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our current and any future drug candidates.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the 28 market price of our common stock.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be stockholders’ sole source of gain for the foreseeable future.
Because we are focused on addressing seizure-related disorders and rare neurological disorders, there are limited patient pools from which to draw in order to complete our clinical trials in a timely and cost-effective manner. Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials.
Because we are focused on addressing rare neurological disorders, there are limited patient pools from which to draw in order to complete our clinical trials in a timely and cost-effective manner. Furthermore, our efforts to build relationships with patient communities may not succeed, which could result in delays in patient enrollment in our clinical trials.
If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their drug earlier than might otherwise be the case. 46 Intellectual property rights do not necessarily address all potential threats to our business.
If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their drug earlier than might otherwise be the case. 45 Intellectual property rights do not necessarily address all potential threats to our business.
Any significant delay in the supply of a drug candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could 49 considerably delay completion of our clinical trials, product testing and potential regulatory approval of our drug candidates.
Any significant delay in the supply of a drug candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third-party manufacturer could 48 considerably delay completion of our clinical trials, product testing and potential regulatory approval of our drug candidates.
The market price for our common stock may be influenced by many factors, including: • results of clinical trials of our current and any future drug candidates or those of our competitors; • the success of competitive drugs or therapies; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • the level of expenses related to our current and any future drug candidates or clinical development programs; • the results of our efforts to discover, develop, acquire or in-license additional drug candidates; • actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; • our inability to obtain or delays in obtaining adequate drug supply for any approved drug or inability to do so at acceptable prices; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; 56 • significant lawsuits, including patent or stockholder litigation; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions; and • the other factors described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including: • results of clinical trials of our current and any future drug candidates or those of our competitors; • the success of competitive drugs or therapies; • regulatory or legal developments in the United States and other countries; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; 57 • the level of expenses related to our current and any future drug candidates or clinical development programs; • the results of our efforts to discover, develop, acquire or in-license additional drug candidates; • actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; • our inability to obtain or delays in obtaining adequate drug supply for any approved drug or inability to do so at acceptable prices; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • variations in our financial results or those of companies that are perceived to be similar to us; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • general economic, industry and market conditions, including supply chain disruptions and inflationary pressure; and • the other factors described in this “Risk Factors” section.
Risks Related to Being a Public Company We are a “smaller reporting company” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors. We are currently a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Risks Related to Being a Public Company We are a “smaller reporting company” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors. We are currently a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended.
The PPACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti- 40 Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act; • the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private); • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their implementing regulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act; Other Modifications to HIPAA, published in January 2013, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform certain services on behalf of a covered entity that involves the use or disclosure of individually identifiable health information and their subcontractors that use, disclose or otherwise process individually identifiable health information; • Physician Payments Sunshine Act, which is part of the PPACA, that require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services (“CMS”), information related to: (i) payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate family members; • state and foreign law equivalents of each of the above federal laws, state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and/or information regarding drug pricing, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers, state laws and regulations that require drug manufacturers to file reports relating to drug pricing and marketing information, and state and local laws that require the registration of pharmaceutical sales representatives; and • state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
The PPACA provides, and recent government cases against pharmaceutical and medical device manufacturers support, the view that federal Anti-Kickback Statute violations and certain marketing practices, including off-label promotion, may implicate the False Claims Act; • HIPAA, which created additional federal criminal statutes that prohibit a person from knowingly and willfully executing a scheme or making false or fraudulent statements to defraud any healthcare benefit program, regardless of the payor (e.g., public or private); • HIPAA, as amended by HITECH, and their implementing regulations, and as amended again by the final HIPAA omnibus rule, Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under HITECH and the Genetic Information Nondiscrimination Act, published in January 2013, which imposes certain requirements relating to the privacy, security and transmission of 39 individually identifiable health information without appropriate authorization by entities subject to the rule, such as health plans, healthcare clearinghouses and certain healthcare providers, known as covered entities, and their respective business associates, individuals or entities that perform certain services on behalf of a covered entity that involves the use or disclosure of individually identifiable health information and their subcontractors that use, disclose or otherwise process individually identifiable health information; • Physician Payments Sunshine Act, which is part of the PPACA, requires that certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, information related to: (i) payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals; and (ii) ownership and investment interests held by physicians and their immediate family members; • state and foreign law equivalents of each of the above federal laws, state laws that require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and/or information regarding drug pricing, state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or to adopt compliance programs as prescribed by state laws and regulations, or that otherwise restrict payments that may be made to healthcare providers, state laws and regulations that require drug manufacturers to file reports relating to drug pricing and marketing information, and state and local laws that require the registration of pharmaceutical sales representatives; and • state and foreign laws that govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have any additional material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC or other regulatory authorities.
Therefore, we cannot predict with any certainty the schedule for commencement 32 and completion of future clinical trials.
Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials.
If we are unable to raise additional capital when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise develop and market ourselves.
If we are unable to raise additional capital when needed, we will be required to delay, limit, reduce or terminate our drug development or future commercialization efforts, or grant rights to develop and market drug candidates that we would otherwise develop and market ourselves.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, including but not limited to a security incident involving personal information regarding our patients or employees, we may experience adverse consequences, such as disruptions to our business, harm to our reputation, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections), additional reporting requirements, and/or oversight, or we may otherwise be subject to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, including but not limited to a security incident involving personal information regarding our patients or employees, we may experience adverse consequences, such as disruptions to our business, harm to our reputation, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections), additional reporting requirements, and/or oversight, or we may otherwise be subject to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.
This could result in increased 53 costs to us, and result in significant legal and financial exposure and/or reputational harm.
This could result in increased costs to us, and result in significant legal and financial exposure and/or reputational harm.
Additionally, the Takeda standstill provisions and transfer restrictions in the RLT Agreement may delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. We may be subject to securities litigation, which is expensive and could divert management attention.
Additionally, the Takeda standstill provisions and transfer restrictions in the RLT Agreement may delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. We may be subject to securities litigation, which is expensive and could divert management attention.
It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the PPACA and our business. Other legislative changes have been proposed and adopted since the PPACA was enacted.
It is unclear how any such challenges and the healthcare reform measures of the current administration will impact the PPACA and our business. Other legislative changes have been proposed and adopted since the PPACA was enacted.
We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret 50 protection and allow our potential competitors to access and exploit our proprietary technology.
We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret 49 protection and allow our potential competitors to access and exploit our proprietary technology.
To the extent that we issue additional equity securities, our stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. In addition, we may issue equity or debt securities as consideration for obtaining rights to additional compounds.
To the extent that we issue additional equity securities, our stockholders may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. In addition, we may issue equity or debt securities as consideration for obtaining rights to additional compounds.
If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties. • Coverage and adequate reimbursement may not be available for our current or any future drug candidates, which could make it difficult for us to sell profitably, if approved. • If we are unable to obtain and maintain patent protection for our current or any future drug candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets. • We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful. • We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of our current and any future drug candidates. • We intend to rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business. 26 • We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations. • We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage.
If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties. • Coverage and adequate reimbursement may not be available for our current or any future drug candidates, which could make it difficult for us to sell profitably, if approved. • If we are unable to obtain and maintain patent protection for our current or any future drug candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets. • We may be involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be expensive, time consuming and unsuccessful. • We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of our current and any future drug candidates. • We intend to rely on third parties to conduct, supervise and monitor our preclinical studies and clinical trials, and if those third parties perform in an unsatisfactory manner, it may harm our business. • We may need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations. • We may be subject to numerous and varying privacy and security laws, and our failure to comply could result in penalties and reputational damage. • We have previously identified material weaknesses in our internal control over financial reporting.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, clinical trial data and financial information (collectively, sensitive data).
In the ordinary course of business, we and the third parties with whom we work collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, clinical trial data and financial information (collectively, sensitive data).
In order to commercialize any product that achieves regulatory approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.
We are early in our drug development efforts. In order to commercialize any product that achieves regulatory approval, we will need to build a commercial organization or successfully outsource commercialization, all of which will require substantial investment and significant marketing efforts before we have the ability to generate any revenue from drug sales.
In certain circumstances, our third-party 30 licensees are responsible for obtaining regulatory approvals in the countries covered by the license, and we are dependent on their efforts in order to achieve the necessary approvals in order to commercialize our products.
In certain circumstances, our third-party licensees or collaborators are responsible for obtaining regulatory approvals in the countries covered by the license, and we are dependent on their efforts in order to achieve the necessary approvals in order to commercialize our products.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain. We have never declared or paid cash dividends on our capital stock.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be stockholders ’ sole source of gain. We have never declared or paid cash dividends on our capital stock.
Further, we, the FDA or an IRB may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s current GCP regulations, that we are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our IND applications or the conduct of these trials.
Further, we, the FDA, IRB or similar foreign regulatory agency may suspend our clinical trials at any time if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including the FDA’s GCP regulations, that we are exposing participants to unacceptable health risks, or if the FDA finds deficiencies in our IND applications or the conduct of these trials.
We and our CROs will be required to comply with good laboratory practices (“GLPs”) and GCPs, which are regulations and guidelines enforced by the FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Council for Harmonization guidelines for any of our drug candidates that are in preclinical and clinical development.
We and our CROs will be required to comply with GLPs and GCPs, which are regulations and guidelines enforced by the FDA and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Council for Harmonization guidelines for any of our drug candidates that are in preclinical and clinical development.
In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For the years ended December 31, 2023 and 2022, we recorded no U.S. federal or state income tax provision, based on pre-tax losses of $52.3 million and $54.2 million, respectively.
In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. For the years ended December 31, 2024 and 2023, we recorded no U.S. federal or state income tax provision, based on pre-tax losses of $26.4 million and $52.3 million, respectively.
We do currently have research coverage offered by several industry or financial analysts, although two analysts have withdrawn research coverage recently. We do not have any control over these analysts. If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline.
We currently have research coverage offered by several industry or financial analysts. We do not have any control over these analysts. If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.
Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which they might otherwise receive a premium for their shares.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
Some provisions of our charter documents and the DGCL may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would benefit our stockholders and may prevent attempts by our stockholders to replace or remove our current management.
In these circumstances, the market price of our common stock could decline and you may lose all or part of your investment. We cannot assure you that any of the events discussed below will not occur. Summary of Selected Risks Associated with Our Business Our business faces significant risks and uncertainties.
In these circumstances, the market price of our common stock could decline and stockholders may lose all or part of their investment. We cannot assure you that any of the events discussed below will not occur. Summary of Select Risks Associated with Our Business Our business faces significant risks and uncertainties.
We are subject to stringent and evolving privacy and security laws, regulations, contractual obligations, industry standards, policies, and other obligations, and our failure or perceived failure to comply with such obligations could result in regulatory investigations or actions, litigation (including class actions), fines and penalties, disruptions of our business operations, loss of revenue or profits, reputational damage and other adverse business consequences.
We and the third parties with whom we work are subject to stringent and evolving privacy and security laws, regulations, contractual obligations, industry standards, policies, and other obligations, and our failure or perceived 53 failure to comply with such obligations could result in regulatory investigations or actions, litigation (including class actions), fines and penalties, disruptions of our business operations, loss of revenue or profits, reputational damage and other adverse business consequences.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
Failure to 56 remedy material weaknesses in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
However, our business development activities and research activities may present attractive opportunities outside of epilepsies and seizure-related disorders and we may choose to pursue drug candidates in other areas of interest including other disorders that we believe would be in the best interest of the Company and our stockholders.
However, our business development activities and research activities may present attractive opportunities outside of our current areas of focus and we may choose to pursue drug candidates in other areas of interest including other disorders that we believe would be in the best interest of the Company and our stockholders.
Registration of these shares would result in the shares becoming freely tradable without restriction under the Securities Act except for shares held by our affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. Item 1B. Unresolved Staff Comments None.
Registration of these shares would result in the shares becoming freely tradable without restriction under the Securities Act except for shares held by our affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.
Our ability to generate revenue from drug sales depends heavily on our, or any current or future collaborators’, success in the following areas, including but not limited to: • timely and successfully completing preclinical and clinical development of our current and future drug candidates; • obtaining regulatory approvals for our current and future drug candidates for which we successfully complete clinical trials; • launching and commercializing any drug candidates for which we obtain regulatory approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; • qualifying for coverage and adequate reimbursement by government and third-party payors for any drug candidates for which we obtain regulatory approval, both in the United States and internationally; 29 • developing, validating and maintaining a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for our current and future drug candidates that is compliant with current good manufacturing practices (“cGMP”); • establishing and maintaining supply and manufacturing relationships with third parties that can provide an adequate amount and quality of drugs and services to support clinical development, as well as the market demand for our current and future drug candidates, if approved; • obtaining market acceptance, if and when approved, of our current or any future drug candidates as a viable treatment option by physicians, patients, third-party payors and others in the medical community; • effectively addressing any competing technological and market developments; • implementing additional internal systems and infrastructure, as needed; • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations pursuant to such arrangements; • obtaining and maintaining orphan drug exclusivity for any of our current and future drug candidates for which we obtain regulatory approval; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; • avoiding and defending against third-party interference or infringement claims; and • securing appropriate pricing in the United States, the European Union and other countries.
Our ability to generate revenue from drug sales depends heavily on our, or any current or future collaborators’, success in the following areas, including but not limited to: • timely and successfully completing preclinical and clinical development of our current and future drug candidates; • obtaining regulatory approvals for our current and future drug candidates for which we successfully complete clinical trials; • launching and commercializing any drug candidates for which we obtain regulatory approval by establishing a sales force, marketing and distribution infrastructure or, alternatively, collaborating with a commercialization partner; • qualifying for coverage and adequate reimbursement by government and third-party payors for any drug candidates for which we obtain regulatory approval, both in the United States and internationally; • developing, validating and maintaining a commercially viable, sustainable, scalable, reproducible and transferable manufacturing process for our current and future drug candidates that is compliant with cGMP; • establishing and maintaining supply and manufacturing relationships with third parties that can provide an adequate amount and quality of drugs and services to support clinical development, as well as the market demand for our current and future drug candidates, if approved; • obtaining market acceptance, if and when approved, of our current or any future drug candidates as a viable treatment option by physicians, patients, third-party payors and others in the medical community; • effectively addressing any competing technological and market developments; • implementing additional internal systems and infrastructure, as needed; • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations pursuant to such arrangements; • obtaining and maintaining orphan drug exclusivity for any of our current and future drug candidates for which we obtain regulatory approval; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; • avoiding and defending against third-party interference or infringement claims; and • securing appropriate pricing in the United States, the European Union and other regions. 29 If we are not successful with respect to one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize the drug candidates we develop, which would materially harm our business.
This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “PPACA”), amended the intent requirement of the federal Anti-Kickback Statute.
This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers on the other. The Patient Protection and Affordable Care Act, as amended by the PPACA, amended the intent requirement of the federal Anti-Kickback Statute.
Claims that we have misappropriated the confidential information or trade 47 secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects. See the section herein titled “Legal Proceedings” for additional information.
Claims that we have misappropriated the confidential information or trade 46 secrets of third parties could have a similar negative impact on our business, financial condition, results of operations and prospects. See the section herein titled “Item 3. Legal Proceedings” for additional information.
Because we are incorporated in Delaware, we are governed by the 59 provisions of Section 203 of the Delaware General Corporation Law (the “DGCL”), which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders.
Because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which may discourage, delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders.
On August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.
For example, on August 16, 2022, IRA was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in PPACA marketplaces through plan year 2025.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest change“Risk Factors,” to this Annual Report on Form 10-K “ Significant disruptions of our information technology systems or data security incidents could result in significant financial, legal, regulatory, business and reputational harm to us .” 60 Governance Our board of directors maintains oversight of our most significant risks and our processes to identify, manage and mitigate those risks.
Biggest change“Risk Factors,” to this Annual Report on Form 10-K titled “ If our information technology systems or data, or those of the third parties with whom we work, are or were compromised, we could experience adverse impacts resulting from such compromise, including, but not limited to, regulatory investigations or actions, litigation, fines and penalties, interruptions to our operations such as our clinical trials, claims that we breached our data protection obligations, harm to our reputation, and a loss of future customers or sales and other adverse consequences .” 61 Governance Our board of directors maintains oversight of our most significant risks and our processes to identify, manage and mitigate those risks.
Depending on the nature of the services provided, the sensitivity of the systems and data at issue, and the identity of the provider, our vendor contracting processes may include imposing certain contractual provisions related to privacy and cybersecurity. For a description about our cybersecurity risks, refer to Item 1A.
Depending on the nature of the services provided, the sensitivity of the systems and data at issue, and the identity of the provider, our vendor contracting processes may include imposing certain contractual provisions related to privacy and cybersecurity. For a description of our cybersecurity risks, refer to the risk factor in Item 1A.
Our Director of Information Technology is responsible for monitoring third-party specialists, helping to integrate cybersecurity risk considerations into our overall risk management strategy and communicating key priorities to relevant personnel. Our Chief Operating Officer is responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes and reviewing security assessments and other security-related reports.
Our Director of Information Technology is responsible for monitoring third-party specialists, helping to integrate cybersecurity risk considerations into our overall risk management strategy and communicating key priorities to relevant personnel. Our Senior Vice President of Finance and Financial Planning is responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes and reviewing security assessments and other security-related reports.
The audit committee of our board of directors (the “Audit Committee”) has responsibility for oversight of our management of cybersecurity risks. Our cybersecurity risk assessment and management processes are implemented and maintained by certain management, including our Director of Information Technology, who reports to our Chief Operating Officer.
The audit committee of our Board of Directors (the “Audit Committee”) has responsibility for oversight of our management of cybersecurity risks. Our cybersecurity risk assessment and management processes are implemented and maintained by certain management, including our Director of Information Technology, who reports to our Senior Vice President of Finance and Financial Planning.
In addition, our Incident Response Policy includes reporting to the Audit Committee for certain cybersecurity incidents. The Incident Response Policy is managed and maintained by our Director of Information Technology, with oversight from our Chief Operating Officer.
In addition, our Incident Response Policy includes reporting to the Audit Committee for certain cybersecurity incidents. The Incident Response Policy is managed and maintained by our Director of Information Technology, with oversight from our Senior Vice President of Finance and Financial Planning.
Our information security function is led by our Director of Information Technology, with the support of our third-party specialists. Our information security function helps identify, assess and manage risks from cybersecurity threats by monitoring and evaluating our threat environment using various methods, including automated tools, domain name system filtering, antivirus protection, vulnerability scanning and penetration testing.
Our information security function helps identify, assess and manage risks from cybersecurity threats by monitoring and evaluating our threat environment using various methods, 60 including automated tools, domain name system filtering, antivirus protection, vulnerability scanning and penetration testing.
The Audit Committee receives periodic updates from our Chief Operating Officer regarding the status of our cybersecurity program and our posture to identify and mitigate risks to our information security.
The Audit Committee receives periodic updates from our Senior Vice President of Finance and Financial Planning regarding the status of our cybersecurity program and our posture to identify and mitigate risks to our information security.
Our Incident Response Policy is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our Chief Operating Officer. Our Chief Operating Officer and other senior management work with our incident response team to help mitigate and remediate cybersecurity incidents in which case they are notified.
Our Incident Response Policy is designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including our Senior Vice President of Finance and Financial Planning. Our Senior Vice President of Finance and Financial Planning and, if escalated, other senior management, work with our incident response team to help mitigate and remediate cybersecurity incidents.
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Our information security function is led by our Director of Information Technology, overseen by our Senior Vice President of Finance and Financial Planning, with the support of our third-party specialists.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeMine Safety Disclosures Not applicable. 61 PART II
Biggest changeMine Safety Disclosures Not applicable. 62 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to pay dividends will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial conditions, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Recent Sales of Unregistered Securities None. 62 Item 6. [Reserved]
Biggest changeAny future determination to pay dividends will be made at the discretion of our board of directors and will depend on then-existing conditions, including our financial conditions, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Recent Sales of Unregistered Securities None. Item 6. [Reserved] 63 Item 7.
The following graph shows a comparison from December 31, 2018 through December 31, 2023, of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The graph assumes an initial investment of $100 on December 31, 2018.
The following graph shows a comparison from December 31, 2019 through December 31, 2024, of the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The graph assumes an initial investment of $100 on December 31, 2019.
The comparisons in the graph are not intended to forecast or be indicative of possible future performance of our common stock. Holders of Record As of March 5, 2024, we had approximately 14 holders of record of our common stock.
The comparisons in the graph are not intended to forecast or be indicative of possible future performance of our common stock. Holders of Record As of March 7, 2025, we had approximately 14 holders of record of our common stock.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
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This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections.
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Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
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You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
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Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” Overview We are a biopharmaceutical company dedicated to developing small molecule medicines for brain conditions with significant unmet need. Our approach to achieve this goal is scientifically driven, patient focused, and coupled with an integrated and disciplined approach to research, clinical development and business development.
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Our team has significant experience with and understanding of epilepsies and other neurological conditions, and we continue to gain insight into the ways the different molecular mechanisms and pathways underlying these disorders impact the symptoms patients experience.
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We have developed a differentiated pipeline of drug candidates containing three novel MoAs to target seizures and believe we are the only company that holds a portfolio of direct activators of KCC2. Two of our programs are in clinical trials in humans, and a third will begin a clinical trial in the second quarter of 2026.
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We are initially pursuing therapeutic drug candidates for epilepsy and psychosis in Parkinson’s disease and Lewy body dementia. If successfully developed and marketed to treat these conditions, we intend to explore these drug candidates for broader neurologic indications.
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Our cohesive focus in brain conditions with significant unmet need reinforces our belief that we can develop and produce multiple novel medicines, scale our infrastructure, positively impact patients’ lives and create long-term stockholder value.
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Since our inception in April 2014, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team, acquiring assets and raising capital. During the years ended December 31, 2024 and 2023, we generated $0.6 million and $0.4 million of royalty and licensing revenue, respectively.
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We have otherwise primarily funded our business through the sale of our capital stock and through the entry into the RLT Agreement with Takeda, which resulted in a one-time up-front payment of $196.0 million in 2021 and the entry into a Royalty Monetization Agreement (the “Ligand Agreement”) with Ligand Pharmaceuticals Incorporated (“Ligand”), which resulted in a one-time up-front payment of $30.0 million in 2023.
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Through December 31, 2024, we have raised net proceeds of $275.4 million from the sale of our preferred and common stock. As of December 31, 2024, we had $53.1 million in cash, cash equivalents and marketable securities. We recorded net losses of $26.4 million and $52.3 million for the years ended December 31, 2024 and 2023, respectively.
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As of December 31, 2024, we had an accumulated deficit of $304.3 million. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
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Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on our other research and development and commercial development activities.
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We expect our expenses will increase substantially over time as we: • continue the ongoing and planned preclinical and clinical development of our drug candidates; • build a portfolio of drug candidates through the development, acquisition or in-license of drugs, drug candidates or technologies; • initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future; • seek marketing approvals for our current and future drug candidates that successfully complete clinical trials; • establish a sales, marketing and distribution infrastructure to commercialize any drug candidate for which we may obtain marketing approval; • develop, maintain, expand and protect our intellectual property portfolio; • implement operational, financial and management systems; and 64 • attract, hire and retain additional administrative, clinical, regulatory, manufacturing, commercial and scientific personnel.
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Significant Risks and Uncertainties The global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with public health crises and global geopolitical tensions, like tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Added
The resulting fluctuations in inflation rates may materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results.
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Relatively high interest rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Furthermore, economic conditions have produced downward pressure on share prices.
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Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain relatively high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, global geopolitical tensions as a result of tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, worsening global macroeconomic conditions, as well as potential future conditions, which may be impacted by the implementation of tariffs by the United States and other countries, and employee availability and wage increases, which may result in additional stress on our working capital resources.
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Moreover, there is great uncertainty with respect to potential changes in trade regulations, tariffs, sanctions and export controls which also increase volatility in the global economy.
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In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: identifying, acquiring or in-licensing products or product candidates; obtaining regulatory approval of product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; the challenges of protecting and enhancing our intellectual property rights; and complying with applicable regulatory requirements.
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Financial Operations Overview Revenue We have generated revenue primarily under the RLT Agreement and the Ligand Agreement, as well as nominal amounts from other licensing and royalty agreements.
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We have not generated any revenue from commercial drug sales and we do not expect to generate any revenue from commercial drug sales unless or until we obtain regulatory approval and commercialize one or more of our current or future drug candidates, or if we become entitled to revenue from our licensing agreements.
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In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments.
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Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include, among other things: • employee-related expenses, including salaries, benefits and stock-based compensation expense; • fees paid to consultants for services directly related to our drug development and regulatory efforts; • expenses incurred under agreements with contract research organizations, as well as contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials; • costs associated with preclinical activities and development activities; • costs associated with technology and intellectual property licenses; and • milestone payments and other costs and payments under licensing agreements, research agreements and collaboration agreements.
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Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of 65 specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
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Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials.
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The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct.
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The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will depend on a variety of factors that include, but are not limited to, the following: • number of clinical trials required for approval and any requirement for extension trials; • per patient trial costs; • number of patients who participate in the clinical trials; • number of sites included in the clinical trials; • countries in which the clinical trial is conducted; • length of time required to enroll eligible patients; • number of doses that patients receive; • drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies; • duration of patient follow-up; and • efficacy and safety profile of the drug candidates.
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In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability.
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We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.
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General and Administrative Expenses General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation expense, related to our executive, finance, business development and support functions.
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Other general and administrative expenses include costs associated with operating as a public company, generation and maintenance of intellectual property, travel expenses, conferences, professional fees for auditing, tax and legal services and facility-related costs.
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Other Income (Expense), net Other income (expense), net, consists primarily of interest income, accretion of discount on short-term investments, and unrealized gains/losses on long-term equity investments, changes in the values of long-term investments and the royalty monetization liability under the Ligand Agreement, and loss related to a fraudulent funds transfer. 66 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table summarizes the results of our operations for the periods indicated: (in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $ Revenue: License and other revenue $ 566 $ 392 $ 175 Total revenue 566 392 175 Operating expenses: Research and development 36,767 28,588 8,179 General and administrative 25,684 31,085 (5,401) Total operating expenses 62,451 59,673 2,778 Loss from operations (61,885) (59,281) (2,604) Other income (expense), net 35,452 6,943 28,509 Loss before provision for income taxes (26,433) (52,339) 25,905 Provision for income taxes — — — Net loss $ (26,433) $ (52,339) $ 25,905 Revenue Revenue of $0.6 million and $0.4 million was recognized for the years ended December 31, 2024 and 2023, respectively, related to a royalty agreement.
Added
Research and Development Expenses (in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $ Preclinical and clinical development expenses $ 23,965 $ 14,605 $ 9,360 Payroll and payroll-related expenses 9,889 10,541 (652) Other expenses 2,913 3,442 (529) Total research and development $ 36,767 $ 28,588 $ 8,179 Research and development expenses were $36.8 million for the year ended December 31, 2024 compared to $28.6 million for the year ended December 31, 2023.
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The increase of $9.4 million in preclinical and development expenses was due to additional activities related to our ongoing development programs, primarily relating to OV350, OV888 (GV101) and OV329.
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The decrease in payroll and payroll-related expenses was primarily due to the impact of an organizational restructuring in 2024, which resulted in approximately $1.7 million in severance costs during the period ended December 31, 2024 compared to approximately $0.2 million for the same period in 2023.
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General and Administrative Expenses (in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Change $ Payroll and payroll-related expenses $ 13,835 $ 17,131 $ (3,296) Legal and professional fees 6,573 7,610 (1,037) General office expenses 5,275 6,344 (1,069) Total general and administrative $ 25,684 $ 31,085 $ (5,401) 67 General and administrative expenses were $25.7 million for the year ended December 31, 2024 compared to $31.1 million for the year ended December 31, 2023.
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The decrease of $5.4 million was primarily due to the impact of the organizational restructuring in 2024, which resulted in approximately $1.8 million in severance costs during the period compared to approximately $1.5 million for the same period in 2023.
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Additionally, resulting from the restructuring, non-severance payroll and related expenses were reduced by approximately $3.7 million between the years ended December 31, 2024 and 2023. Legal and professional fees and general office expenses were primarily reduced by cost-cutting efforts.
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Other Income (Expense), net Other income (expense), net was $35.5 million for the year ended December 31, 2024, comprised of a $30.0 million decrease in fair value of the royalty monetization liability resulting from Takeda’s reported negative soticlestat Phase 3 study results and announcement of program discontinuation, $3.9 million in interest and accretion income on investments in U.S. treasuries, $1.8 million loss on a fraudulent funds transfer and a net $3.3 million unrealized gain on long-term equity investments.
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For the year ended December 31, 2023, other income (expense), net of $6.9 million was comprised of $4.9 million in interest and accretion income on investments in U.S. treasuries and $2.0 million of unrealized loss on long-term equity investments.
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Liquidity and Capital Resources Overview As of December 31, 2024 and 2023, we had total cash, cash equivalents and marketable securities of $53.1 million and $105.8 million, respectively.
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We believe that our cash, cash equivalents and marketable securities as of December 31, 2024 are sufficient to fund our existing and planned operating expenses and capital expenditure requirements into the second half of 2026. Similar to other development-stage biotechnology companies, we have generated limited revenue.
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We have incurred losses and experienced negative operating cash flows in most years since our inception and anticipate that we will continue to incur losses for at least the next several years. We incurred net losses of $26.4 million and $52.3 million for the years ended December 31, 2024 and 2023, respectively.
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As of December 31, 2024, we had an accumulated deficit of $304.3 million and working capital of $45.4 million.
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At-the-Market Offering Program In November 2023, we filed a new shelf registration statement on Form S-3 (Registration No. 333-275307) that allows us to sell up to an aggregate of $250.0 million of our common stock, preferred stock, convertible debt securities and/or warrants (the “S-3 Registration Statement”), which includes a prospectus covering the issuance and sale of up to $75.0 million of common stock pursuant to our at-the-market (“ATM”) program.
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During the years ended December 31, 2024 and 2023, we did not sell any shares under our ATM program. As of December 31, 2024, we had up to $250.0 million available under our S-3 Registration Statement, including up to $75.0 million available pursuant to our ATM program.
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As of the date of this Form 10-K, our public float was less than $75.0 million.
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As a result, we are subject to the limitations of General Instruction I.B.6 to Form S-3 until such time as our public float exceeds $75 million, which means we only have the capacity to sell shares up to one-third of our public float under the S-3 Registration Statement, including the ATM program, in any twelve-month period.
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We will remain constrained by the limitations of General Instruction I.B.6 to Form S-3 until such time as our public float exceeds $75 million, at which time the number of securities we may sell under a Form S-3 registration statement will no longer be limited by limitations of General Instruction I.B.6 to Form S-3.
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Future Funding Requirements We expect our expenses to continue to increase in connection with our ongoing activities, particularly as we conduct clinical trials of, and seek marketing approval for, our product candidates and advance our other programs.
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Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, clinical costs, legal and other regulatory expenses and general overhead costs. We have based our estimates on assumptions that may prove to be incorrect, and we could use our capital resources sooner than we currently expect.
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Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain. We cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability.
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We have no products approved for commercial sale and have not generated any revenues from product sales to date. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through 68 a combination of equity offerings, debt financings and additional funding from license and collaboration arrangements.
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Except for any obligations of our collaborators to reimburse us for research and development expenses or to make milestone or royalty payments under our agreements with them, we will not have any committed external source of liquidity.
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To the extent that we raise additional capital through future equity offerings or debt financings, ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.
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Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. There can be no assurance that such financings will be obtained on terms acceptable to us, if at all.
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Additionally, while the long-term economic impact of geopolitical tensions, including tensions between China and Taiwan, the ongoing war between Russia and Ukraine and the war involving Israel, is difficult to assess or predict, each of these events has caused significant disruptions to the global financial markets and contributed to a general global economic slowdown.
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Furthermore, inflation rates have increased recently to levels not seen in decades, which may also be impacted by the implementation of tariffs by the United States and other countries. Moreover, there is great uncertainty with respect to potential changes in trade regulations, tariffs, sanctions and export controls which also increase volatility in the global economy. In addition, the U.S.
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Federal Reserve has raised interest rates in response to concerns about inflation. Relatively high interest rates and fluctuations in inflation, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks.
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If the disruptions and slowdown deepen or persist, we may not be able to access additional capital on favorable terms, or at all, which could negatively affect our future ability to pursue our business strategy.
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If we raise additional funds through collaborations, strategic alliances or licensing agreements with third parties for one or more of our current or future drug candidates, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us.
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Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy.
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We may be required to take additional actions beyond the cost preservation measures initiated to address our liquidity needs, including exploring other strategic options, continuing to further reduce operating expense or delaying, reducing the scope of, discontinuing or altering our research and development activities. See “ Item 1A. Risk Factors ” for additional risks associated with our capital requirements.
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Material Cash Requirements As of December 31, 2024, we had no material non-cancelable purchase commitments with service providers, as we have generally contracted on a cancelable, purchase order basis.
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We cannot estimate whether we will receive or the timing of any potential contingent payments upon the achievement by us of clinical, regulatory and commercial events, as applicable, or royalty payments that we may be required to make under license agreements we have entered into with various entities pursuant to which we have in-licensed certain intellectual property as contractual obligations or commitments, including agreements with AstraZeneca, Gensaic and Northwestern.
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Pursuant to these license agreements, we have agreed to make milestone payments up to an aggregate of $660.3 million upon the achievement of certain development, regulatory and sales milestones. We excluded these contingent payments from the consolidated financial statements given that the timing, probability, and amount, if any, of such payments cannot be reasonably estimated at this time.
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In September 2021, we entered into a ten year lease agreement for our corporate headquarters with a term commencing in March 2022 for approximately 19,000 square feet of office space at Hudson Commons in New York, New York. The lease provides for monthly rental payments over the lease term.
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The base rent under the lease is currently $2.3 million per year. Rent payments commenced in January 2023, and will continue for ten years following the rent commencement date.
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We issued a letter of credit in the amount of $1.9 million in association with the execution of the lease agreement, which is reflected as restricted cash on the consolidated balance sheets.
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Payment obligations under the lease agreement include approximately $2.3 million in the 12 months subsequent to December 31, 2024 and approximately $19.3 million over the remainder of the agreement.
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For additional information see Note 5 to our consolidated financial statements under the heading ‘Leases.’ 69 Cash Flows The following table summarizes our cash flows for the periods indicated: (in thousands) Year Ended December 31, 2024 Year Ended December 31, 2023 Net cash (used in) provided by: Operating activities $ (55,956) $ (45,781) Investing activities 54,594 (2,581) Financing activities 622 30,535 Net decrease in cash, cash equivalents, and restricted cash $ (740) $ (17,827) Net Cash Used in Operating Activities Net cash used in operating activities was $56.0 million for the year ended December 31, 2024, which consisted of net loss of $26.4 million offset by $29.4 million, net, of various noncash charges, most significantly a $30.0 million in change in fair value of the royalty monetization liability with Ligand.
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Net cash used in operating activities was $45.8 million for the year ended December 31, 2023, which consisted of net loss of $52.3 million offset by a net of $4.2 million of various noncash charges, most significantly $7.3 million in stock-based compensation expense.
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Net Cash Provided by (Used in) Investing Activities Net cash provided by investing activities was $54.6 million for the year ended December 31, 2024, which was primarily related to our purchases and sales/maturities of investments in U.S. treasuries and the purchase of a long-term equity investment.
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For the year ended December 31, 2023, $2.6 million was used in investing activities, primarily comprised of purchases and sales/maturities of investments in U.S. treasuries.
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Net Cash Provided by Financing Activities Net cash provided by financing activities was $0.6 million for the year ended December 31, 2024, which was comprised of proceeds from the exercise of options and purchases made under our employee stock purchase plan.

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Item 7. Management's Discussion & Analysis

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

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources ” for more information. 7 Ovid pipeline Our efforts have already brought drug candidates from POC into late-stage patient clinical trials.
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This discussion and analysis and other parts of this Annual Report on Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections.
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Today, we are one of the few companies that has researched and developed three distinct MoAs to target seizures and we believe we are the only company that has a portfolio of direct activators of KCC2.
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Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
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We believe this pipeline of potential first-in-class or best-in-class mechanisms differentiates us and provides the foundation for a productive franchise of potential small molecule neurotherapeutics for epilepsies, psychoses and other mood disorders. The following table (Figure 1) sets forth our drug candidate programs and their development status, their respective MoAs, and anticipated near-term milestones.
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You should carefully read the “Risk Factors” section of this Annual Report on Form 10-K to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
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In the event we are unable to raise capital or enter into partnerships or co-development opportunities as and when needed, we will be required to delay, reduce the scope of or eliminate research and development programs. Figure 1. Ovid Therapeutics Pipeline NOTE: Ovid has a Phase 2-ready ROCK2 inhibitor, OV888 (GV101), in collaboration with Graviton Bioscience.
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Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” Overview We are a biopharmaceutical company dedicated to meaningfully improving the lives of people affected by certain epilepsies and brain conditions with seizure symptoms.
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This program was cleared by regulators toinitiate Phase 2 but is currently paused while Ovid monitors the outcome of regulatory interactions by competitors. OV329 - A next-generation GABA-AT inhibitor OV329 is a clinical-stage, next-generation GABA-AT inhibitor that we are developing for the treatment of adult and pediatric drug-resistant epilepsies.
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Our approach to achieve this goal is scientifically driven, patient focused, and coupled with an integrated and disciplined approach to research, clinical development and business development.
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OV329 represents a potential best-in-class GABA-AT inhibitor and was designed to supplant vigabatrin (“VGB”), which is an approved therapeutic globally for the treatment of infantile spasms. VGB was a first-generation medicine that demonstrated substantial seizure reduction, however, its clinical and commercial use was limited by lack of a therapeutic window.
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Our team has significant experience with and understanding of rare epilepsies and neurological conditions, and we continue to gain insight into the ways the different molecular mechanisms and pathways underlying these disorders impact the symptoms patients suffer.
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Specifically, VGB was proven to generate deleterious and irreversible ocular effects in some patients, including retinal degradation and irreversible vision loss that led to significant post-market restrictions and monitoring. We believe OV329 to be an improved GABA-AT inhibitor with a different chemical structure, potency, binding, PK and PD profile as compared to VGB.
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We have set out to be a leader in the field, and have developed a differentiated pipeline containing four novel mechanisms of action to target different causes of certain epilepsies and brain conditions with seizure symptoms. We have built a scalable scientific platform with efficient development capabilities in epilepsies and conditions with seizure symptoms that focuses on clear, clinical endpoints.
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OV329 has been shown to deliver increased potency and efficacy in the target binding site. In preclinical research it was demonstrated to be 100-fold more potent than VGB.
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Three of our programs are in clinical trials in humans, and the fourth is in preclinical development and anticipated to advance into human safety studies in 2024. We are initially pursuing therapeutic assets for rare disorders as they can leverage accelerated development programs.
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We are actively studying an oral pill of OV329 in a Phase 1 trial that has multiple biomarkers to measure clinical effect and target engagement, in addition to evaluating safety, tolerability and PK. We believe that OV329 has the potential to be a therapeutic option for adult and pediatric drug-resistant epilepsies, including several DEEs.
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If successfully developed and marketed in rare conditions, we intend to explore these assets for broader neurologic indications. Our cohesive focus in certain epilepsies and brain conditions with seizure symptoms reinforces our belief that we can develop and produce multiple novel medicines, scale our infrastructure, and thereby succeed in our mission.
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A benefit of our OV329 program is that it acts upon a validated drug target for seizures. Specifically, it works by substantially reducing the activity of GABA-AT, a key enzyme responsible for the degradation of the brain’s major inhibitory neurotransmitter, GABA. OV329 leads to increased concentrations of GABA by inhibiting its metabolism.
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Since our inception in April 2014, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team, acquiring operating assets and raising capital. During the years ended December 31, 2023 and 2022, we generated $0.4 million and $1.5 million of royalty and licensing revenue, respectively.
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Given that epilepsy is characterized by excessive neuronal excitation, the increased levels of GABA may suppress this excitatory signaling and thus reduce seizures.
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We have otherwise primarily funded our business through the sale of our capital stock and through the closing of the RLT Agreement with Takeda, which resulted in a one-time up-front payment of $196.0 million in 2021. Through December 31, 2023, we have raised net proceeds of $275.4 million from the sale of our convertible preferred and common stock.
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OV329 profile Based upon preclinical data supporting OV329, we believe it has the potential to provide (in comparison to VGB) greater seizure reduction efficacy and improved tolerability and safety profiles without sedation, and lower dosing in comparison to existing therapeutics. 8 To support OV329’s anti-convulsant profile, nine animal seizure models have demonstrated its seizure reducing effects (see Figure 2 below).
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As of December 31, 2023, we had $105.8 million in cash, cash equivalents and marketable securities. We recorded net loss of $52.3 million and $54.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $277.9 million.
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These findings from both chronic and acute seizure models provide additional confidence about the therapeutic potential of OV329 in humans. The PD profile of OV329 is differentiated from VGB. Preclinical research has shown that OV329 induces phasic (synaptic) and tonic (extra-synaptic) inhibition of GABA-AT.
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We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on our other research and development and commercial development activities.
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This produced more GABA in the synapse and environmental milieu, potentially contributing to more durable inhibitory effects. Figure 2. Nine preclinical animal models reaffirm OV329 seizure reduction activity, including resistant seizure models OV329 safety profile To date, OV329 has exhibited acceptable tolerability in humans in our Phase 1 study.
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We expect our expenses will increase substantially over time as we: • continue the ongoing and planned preclinical and clinical development of our drug candidates; • build a portfolio of drug candidates through the development, acquisition or in-license of drugs, drug candidates or technologies; • initiate preclinical studies and clinical trials for any additional drug candidates that we may pursue in the future; • seek marketing approvals for our current and future drug candidates that successfully complete clinical trials; • establish a sales, marketing and distribution infrastructure to commercialize any drug candidate for which we may obtain marketing approval; • develop, maintain, expand and protect our intellectual property portfolio; 63 • implement operational, financial and management systems; and • attract, hire and retain additional administrative, clinical, regulatory, manufacturing, commercial and scientific personnel.
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There have been no drug-associated serious adverse events reported and minor and transient adverse events, such as headache. Additionally, to characterize OV329’s potential safety profile relative to VGB, our preclinical efforts sought to extensively study safety and tolerability, including any potential ocular changes. We are cleared to study OV329 in humans with daily dosing for 28 days.
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Significant Risks and Uncertainties The global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with public health crises and global geopolitical tensions, like the ongoing war between Russia and Ukraine and the war in Israel, may have a material adverse effect on our business, financial condition, results of operations and growth prospects.
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Toxicology that enables our Phase 2 program is expected to be completed by third quarter 2025.
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The resulting high inflation rates may materially affect our business and corresponding financial position and cash flows. Inflationary factors, such as increases in the cost of our clinical trial materials and supplies, interest rates and overhead costs may adversely affect our operating results.
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We have demonstrated that the tissue clearance of OV329 is rapid, which when coupled with its potency and irreversible binding, leads us to believe that the accumulation in the back of the eye does not occur as it does with VGB, which has a longer half-life.
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High interest rates also present a recent challenge impacting the U.S. economy and could make it more difficult for us to obtain traditional financing on acceptable terms, if at all, in the future. Furthermore, economic conditions have produced downward pressure on share prices.
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In 2024, we presented results at the American Epilepsy Society meeting of a head-to-head animal study evaluating whether OV329 could be found to accumulate in mouse retinas and brains, as has been previously shown to occur with VGB. The preferential accumulation of VGB in the eye is thought to be a contributing factor in VGB’s ocular toxicity.
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Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience increases in the near future (especially if inflation rates remain high or begin to rise again) on our operating costs, including our labor costs and research and development costs, due to supply chain constraints, global geopolitical tensions as a result of the ongoing war between Russia and Ukraine and the war in Israel, worsening global macroeconomic conditions and employee availability and wage increases, which may result in additional stress on our working capital resources.
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The findings (summarized in Figure 3 below), found that OV329 cleared and remained undetectable in the retinas, eyes, and brains of mice after 48 hours of continuous exposure via a sub-cutaneous osmotic pump, suggesting a lack of accumulation. In contrast, ocular accumulation of VGB was confirmed within this period.
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In addition, we are subject to other challenges and risks specific to our business and our ability to execute on our strategy, as well as risks and uncertainties common to companies in the pharmaceutical industry with development and commercial operations, including, without limitation, risks and uncertainties associated with: identifying, acquiring or in-licensing products or product candidates; obtaining regulatory approval of product candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements.
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These results replicate previously published findings that indicate VGB preferentially and rapidly accumulates within mouse tissue and plasma, including retina, visual cortex, and brain at sub-therapeutic doses (70 mg/kg). In contrast, a therapeutic dose of OV329 in animals (5 mg/kg) did not show signs of ocular accumulation in the same study design. 9 Figure 3.
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Financial Operations Overview Revenue We have generated revenue primarily under the RLT Agreement, as well as nominal amounts from other licensing agreements and royalties.
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OV329 clears brain and eye tissue rapidly and does not accumulate like VGB 1 Tsai, J., et al. (2024). Evaluation of the Potential Accumulation of OV329 in the Brain, Retina, and Eye Following Continuous Infusion .
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We have not generated any revenue from commercial drug sales and we do not expect to generate any revenue from commercial drug sales unless or until we obtain regulatory approval and commercialize one or more of our current or future drug candidates, or if we become entitled to revenue from our licensing agreements.
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Poster presented at the 2024 Epilepsy Pipeline Conference These results complement previously presented studies which showed that therapeutic doses of OV329 (3 mg/kg) did not result in retinal tissue pathology at 45 days in Sprague-Dawley rats, an animal model that investigates structural and functional ocular toxicity (see Figure 4).
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In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments.
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In contrast, VGB did show retinal cell degradation at the therapeutic dose in animals of 300 mg/kg at 45 days. We applied a clinically translatable rodent model of albino Sprague-Dawley rats to determine if any ocular changes could be observed associated with the predicted therapeutic doses of OV329 and VGB, as compared to placebo.
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Research and Development Expenses Research and development expenses consist primarily of costs incurred for our research activities, including our product discovery efforts and the development of our product candidates, which include, among other things: • employee-related expenses, including salaries, benefits and stock-based compensation expense; • fees paid to consultants for services directly related to our drug development and regulatory effort; • expenses incurred under agreements with contract research organizations, as well as contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials; • costs associated with preclinical activities and development activities; • costs associated with technology and intellectual property licenses; • milestone payments and other costs and payments under licensing agreements, research agreements and collaboration agreements; and • depreciation expense for assets used in research and development activities.
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This rodent model is an accepted proxy by the FDA for the ocular effects seen in humans treated with VGB. Figure 4 (below) demonstrates the results of our research.
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Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of 64 specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.
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After 45 days of dosing with the therapeutic dose of VGB and an expected therapeutic dose of OV329 (3 mg/kg), the model showed no ocular effect in animals taking OV329, whereas disruption in retinal cells was seen in animals taking the therapeutic dose of VGB (300 mg/kg).
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Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials.
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In this short-term model, OV329’s ocular profile appears similar to placebo, and no disruption to the retina was seen at the anticipated therapeutic dose. These models must be confirmed in human studies, though they lead us to believe that OV329 may offer significant seizure reduction benefit with a therapeutic window not provided by VGB. 10 Figure 4.
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The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct.
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No ocular changes seen in rodents treated with expected therapeutic dose of OV329 (3 mg/kg) Human studies and biomarker strategy Our Phase 1 trial of OV329 is currently ongoing with CMAX Clinical Research in Adelaide, Australia, with topline data expected in the third quarter of 2025.
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The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will depend on a variety of factors that include, but are not limited to, the following: • number of clinical trials required for approval and any requirement for extension trials; • per patient trial costs; • number of patients who participate in the clinical trials; • number of sites included in the clinical trials; • countries in which the clinical trial is conducted; • length of time required to enroll eligible patients; • number of doses that patients receive; • drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies; • duration of patient follow-up; and • efficacy and safety profile of the drug candidate.
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The trial is being conducted in two parts, including: a single-ascending dose and a multiple-ascending dose portion. Endpoints will evaluate the PK profile, safety, tolerability and target engagement associated with escalating doses of OV329 in healthy volunteers.
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In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability.
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Two surrogate biomarkers are being applied in the study, including: (1) transcranial magnetic stimulation (“TMS”), which is being measured as a corollary for clinical biological effect and (2) magnetic resonance spectrometry (“MRS”), which will be used to measure target engagement.
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We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.
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Initial biomarker data from the most recently completed multiple-ascending dose cohort suggests encouraging directional signs of target engagement and clinical effects as measured by the above stated biomarkers. These findings indicate signs of increased GABAergic activity consistent with the intended mechanism of action by inhibiting GABA-aminotransferase.
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General and Administrative Expenses General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and stock-based compensation expense, related to our executive, finance, business development and support functions. Other general and administrative expenses include costs associated with operating as a public company, travel expenses, conferences, professional fees for auditing, tax and legal services and facility-related costs.
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Previous studies have reported that MRS measurement of GABA concentration levels increase following treatment with GABA-AT inhibitors, which has been shown to correlate with seizure reduction efficacy in existing GABA-AT inhibitor programs. These metrics coupled with safety, data and pharmacokinetic data may inform mid- to late-stage development of the program.
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Other Income (Expense), net Other income (expense), net, consists primarily of interest income and accretion of discount on short-term investments and unrealized gains/losses on long-term equity investments. 65 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes the results of our operations for the periods indicated: Year Ended December 31, 2023 Year Ended December 31, 2022 Change $ (in thousands) Revenue: License and other revenue $ 392 $ 1,503 $ (1,111) Total revenue 392 1,503 (1,111) Operating expenses: Research and development 28,588 24,618 3,970 General and administrative 31,085 32,433 (1,348) Total operating expenses 59,673 57,051 2,622 Loss from operations (59,281) (55,548) (3,733) Other income (expense), net 6,943 1,379 5,563 Loss before provision for income taxes (52,339) (54,169) 1,830 Provision for income taxes — — — Net loss $ (52,339) $ (54,169) $ 1,830 Revenue Revenue of $0.4 million was recognized for the year ended December 31, 2023 related to royalties.
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Upon results from the Phase 1 program, we anticipate OV329 could be further studied for the potential treatment of drug-resistant epilepsies, including adult epilepsies and DEEs. OV350 and KCC2 direct activator portfolio In late 2021, we in-licensed a portfolio of more than 100 molecules from AstraZeneca AB (“AstraZeneca”), which are direct activators of the KCC2.
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Revenue was $1.5 million for the year ended December 31, 2022 related to licensing and other agreements.
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Since that time, we have extensively characterized the library for bioavailability, formulation amenability and therapeutic potential. As a result, we now have four unique programs that we intend to successively progress into human clinical studies. These include OV350, OV4071 and OV4041 and another undisclosed program.
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Research and Development Expenses Year Ended December 31, 2023 Year Ended December 31, 2022 Change $ (in thousands) Preclinical and development expenses $ 14,605 $ 9,715 $ 4,883 Payroll and payroll-related expenses 10,541 11,498 (957) Other expenses 3,442 3,405 37 Total research and development $ 28,588 $ 24,618 $ 3,963 Research and development expenses were $28.6 million for the year ended December 31, 2023 compared to $24.6 million for the year ended December 31, 2022.
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Based upon our phenotype screens, disease model studies, and published evidence, we believe this portfolio offers broad therapeutic potential in a range of potential brain conditions and symptoms including psychosis, other behavior and mood disorders, and seizures. This may include neurodegenerative and neurodevelopmental diseases that exhibit the above mentioned symptoms.
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The increase of $4.9 million in preclinical and development expenses was due to additional activities related to our ongoing development programs, primarily relating to OV888 (GV101) and OV329.
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Given the broad therapeutic relevance of KCC2 in many brain disorders, it is our desire to unlock the full value of KCC2 for shareholders and patients.
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The decrease of $1.0 million in payroll and payroll-related expenses was primarily due to the impact of a reorganization in early 2022 which resulted in approximately $1.0 million in severance costs during the period. 66 General and Administrative Expenses Year Ended December 31, 2023 Year Ended December 31, 2022 Change $ (in thousands) Payroll and payroll-related expenses $ 17,131 $ 16,071 $ 1,060 Legal and professional fees 7,610 9,253 (1,643) General office expenses 6,345 7,108 (763) Total general and administrative $ 31,085 $ 32,432 $ (1,347) General and administrative expenses were $31.1 million for the year ended December 31, 2023 compared to $32.4 million for the year ended December 31, 2022.
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We will explore doing so through our own development efforts and via potential development partners. 11 KCC2: A fundamental target in the CNS KCC2 is a fundamental biological target expressed exclusively in the CNS and is central to maintaining synaptic inhibition.
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The decrease of $1.3 million was primarily due to reduced legal and professional fees and general office expenses, partially offset by an increase in non-cash compensation expenses.
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Hundreds of publications link KCC2 dysregulation directly or indirectly to various medical conditions and symptoms associated with excessive neural excitation. KCC2 is an ion co-transporter that regulates chloride extrusion in neurons. A functioning chloride gradient is essential to GABA being inhibitory in neural synapses.
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Other Income (Expense), net Other income (expense), net was $6.9 million for the year ended December 31, 2023, comprised of $4.9 million in interest and accretion income on investments in U.S. treasuries and $2.0 million of unrealized gain on long-term equity investments.
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By directly activating KCC2, our development programs seek to restore GABAergic inhibition and bring hyper-excited neurons into homeostasis. We believe that our KCC2 portfolio represents the only small molecule library within the broad biopharmaceutical industry that directly activates this unique ion co-transporter. Other companies have tried to activate KCC2.
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For the year ended December 31, 2022, other income (expense), net of $1.4 million was comprised of $1.8 million in interest and accretion income on investments in U.S. treasuries and $0.4 million of unrealized loss on long-term equity investments.
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To our knowledge none, apart from us, have been successful, though some companies may potentiate the co-transporter, which will likely have different clinical effects. KCC2 direct activator library Our KCC2 direct activator portfolio includes four programs in active characterization and development, which we believe are suitable for pharmaceutical development.
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Liquidity and Capital Resources Overview As of December 31, 2023 and 2022, we had total cash, cash equivalents and marketable securities of $105.8 million and $129.0 million, respectively.
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We have characterized and translated multiple candidates from the KCC2 portfolio for development in epilepsy as well as other possible neurological conditions associated with psychiatric, neurodegeneration and neurodevelopmental disorders. Phenotypic screens and confirmatory animal disease models suggest that our programs, including: OV350, OV4071 and OV4041, have potential therapeutic properties associated with anti-psychosis, anxiolytic and anticonvulsant response.

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