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What changed in SPRUCE BIOSCIENCES, INC.'s 10-K — 2022 vs 2023

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

+448 added−444 removedSource: 10-K (2024-03-18) vs 10-K (2023-03-16)

Top changes in SPRUCE BIOSCIENCES, INC.'s 2023 10-K

448 paragraphs added · 444 removed · 355 edited across 7 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

254 edited+68 added−71 removed511 unchanged
Biggest changeFuture growth would impose significant added responsibilities on members of management, including: ▪ identifying, recruiting, integrating, maintaining, and motivating additional employees; ▪ managing our internal development efforts effectively, including the clinical and regulatory review process for tildacerfont and any future product candidates, while complying with our contractual obligations to contractors and other third parties; and ▪ improving our operational, financial and management controls, reporting systems and procedures. 62 Table of Contents In addition, we initiated enrollment in CAHmelia-203, our ongoing placebo-controlled, double-blind Phase 2b clinical trial in adult patients with classic CAH with highly elevated levels of A4 at baseline, and in CAHmelia-204, our second Phase 2b clinical trial in adult patients with classic CAH on supraphysiologic doses of glucocorticoids with normal or near normal levels of A4 at baseline focused on glucocorticoid reduction.
Biggest changeFuture growth would impose significant added responsibilities on members of management, including: ▪ identifying, recruiting, integrating, maintaining, and motivating additional employees; ▪ managing our internal development efforts effectively, including the clinical and regulatory review process for tildacerfont and any future product candidates, while complying with our contractual obligations to contractors and other third parties; and ▪ improving our operational, financial and management controls, reporting systems and procedures.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, tildacerfont and any future product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain regulatory approval for, and commercialize, tildacerfont and any future product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.
The exclusivity period in the EU can be reduced to six years if, at the end of the fifth year, it is established that a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
The market exclusivity period in the EU can be reduced to six years if, at the end of the fifth year, it is established that a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.
Our relationships with customers, healthcare providers and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations. If we or our employees, independent contractors, consultants, commercial partners, or vendors violate these laws, we could face substantial penalties.
If we or our employees, independent contractors, consultants, commercial partners, or vendors violate these laws, we could face substantial penalties. Our relationships with customers, healthcare providers, and third-party payors may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and other healthcare laws and regulations.
For example, companies may face temporary or definitive bans on processing of personal data and other corrective actions; fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
For example, under GDPR, companies may face temporary or definitive bans on processing of personal data and other corrective actions; fines of up to 20 million Euros under the EU GDPR / 17.5 million pounds sterling under the UK GDPR or, in each case, 4% of annual global revenue whichever is greater; or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
The facilities used by our contract manufacturers to manufacture tildacerfont and any future product candidates must be approved by the applicable regulatory authorities, including the FDA, pursuant to inspections that will be conducted after an NDA or comparable foreign regulatory marketing application is submitted.
The facilities used by our contract manufacturers to manufacture tildacerfont and any future product candidates must be approved by the applicable regulatory authorities, including the FDA or comparable foreign regulatory authorities, pursuant to inspections that will be conducted after an NDA or comparable foreign regulatory marketing application is submitted.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; ▪ HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, which impose requirements on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, and their respective business 65 Table of Contents associates that perform services for them that involve the use, or disclosure of, individually identifiable health information as well as their covered subcontractors; and ▪ the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to 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, as well as ownership and investment interests held by physicians and their immediate family members.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; ▪ HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, which impose requirements on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, and their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information as well as their covered subcontractors; and ▪ the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information 66 Table of Contents related to 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, as well as ownership and investment interests held by physicians and their immediate family members.
In addition, pursuant to our 2020 Employee Stock Purchase Plan (ESPP), the number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year continuing through January 1, 2030, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (ii) 441,280 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).
In addition, pursuant to our 2020 Employee Stock Purchase Plan, the number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year continuing through January 1, 2030, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (ii) 441,280 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).
If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with any such obligations, this could result in enforcement actions that could include investigations, fines, penalties, audits and inspections, litigation (including class-action claims), additional reporting requirements and/or oversight, temporary or permanent bans on all or some processing of personal data, or orders to destroy or not use personal data.
If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with any such obligations, this could result in enforcement actions that could include investigations, fines, penalties, audits and inspections, litigation (including class-action claims) and arbitration, additional reporting requirements and/or oversight, temporary or permanent bans on all or some processing of personal data, or orders to destroy or not use personal data.
Collaborations are subject to numerous risks, which may include that: ▪ collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; ▪ collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; ▪ collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with tildacerfont and any future product candidates; ▪ a collaborator with marketing, manufacturing, and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; ▪ we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; ▪ collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ▪ disputes may arise between us and a collaborator that causes the delay or termination of the research, development, or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; ▪ collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; ▪ collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; ▪ we may not be able to obtain intellectual property rights in technologies or products resulting from the collaboration; under certain situations, the collaborators may provide us with an option to negotiate a license to such developed technologies or products, however, we may not be able to negotiate such license; and ▪ a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Collaborations are subject to numerous risks, which may include that: ▪ collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; ▪ collaborators may not pursue development and commercialization of our products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities; ▪ collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with tildacerfont and any future product candidates; ▪ a collaborator with marketing, manufacturing, and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; ▪ we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; ▪ collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation 89 Table of Contents that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; ▪ disputes may arise between us and a collaborator that causes the delay or termination of the research, development, or commercialization of our current or future products or that results in costly litigation or arbitration that diverts management attention and resources; ▪ collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future products; ▪ collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; ▪ we may not be able to obtain intellectual property rights in technologies or products resulting from the collaboration; under certain situations, the collaborators may provide us with an option to negotiate a license to such developed technologies or products, however, we may not be able to negotiate such license; and ▪ a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware (and any appellate court therefrom) is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative claim or cause of action brought on our behalf; (ii) any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders; (iii) any claim or cause of action against us or any of our current or former directors, officers, or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws (in each case as may be amended from time to time); (v) any claim or cause of action as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any claim or cause 93 Table of Contents of action against us or any of our current or former directors, officers, or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware (and any appellate court therefrom) is the sole and exclusive forum for the 95 Table of Contents following types of actions or proceedings under Delaware statutory or common law: (i) any derivative claim or cause of action brought on our behalf; (ii) any claim or cause of action for breach of a fiduciary duty owed by any of our current or former directors, officers, or other employees to us or our stockholders; (iii) any claim or cause of action against us or any of our current or former directors, officers, or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce, or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws (in each case as may be amended from time to time); (v) any claim or cause of action as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any claim or cause of action against us or any of our current or former directors, officers, or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.
For example, we may be subject to the following: state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor; 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; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing; state and local laws requiring the registration of pharmaceutical sales and medical representatives; and state and foreign laws, such as the European Union General Data Protection Regulation (GDPR) governing 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.
For example, we may be subject to the following: state and foreign anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third party payors, including private insurers, or that apply regardless of payor; state and foreign 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; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures, or drug pricing; state and local laws requiring the registration of pharmaceutical sales and medical representatives; and state and foreign laws, such as the European Union General Data Protection Regulation (“GDPR”) governing 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.
Among the provisions of the Affordable Care Act of importance to our potential product candidates are that it established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents; expands eligibility criteria for Medicaid programs; increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; created a new Medicare Part D coverage gap discount program; established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services (CMS) to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
Among the provisions of the Affordable Care Act of importance to our potential product candidates are that it established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents; expands eligibility criteria for Medicaid programs; increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program; created a new Medicare Part D coverage gap discount program; established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare and Medicaid Innovation at the Centers for Medicare & Medicaid Services (“CMS”) to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act and the civil monetary penalties statute; ▪ the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), which created new federal civil and criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by any trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act and the civil monetary penalties statute; ▪ the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal civil and criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, including private third-party payors and knowingly and willfully falsifying, concealing or covering up by any trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services.
We plan to seek regulatory approval for tildacerfont and any future product candidates internationally and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including: ▪ differing regulatory requirements in foreign countries, including differing reimbursement, pricing and insurance regimes; ▪ the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; 58 Table of Contents ▪ unexpected changes in tariffs, trade barriers, price and exchange controls, and other 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 internationally; ▪ foreign taxes, including withholding of payroll taxes; ▪ foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; ▪ difficulties staffing and managing foreign operations; ▪ workforce uncertainty in countries where labor unrest is more common than in the United States; ▪ potential liability under the U.S.
We plan to seek regulatory approval for tildacerfont and any future product candidates internationally and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including: ▪ differing regulatory requirements in foreign countries, including differing reimbursement, pricing and insurance regimes; ▪ the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally; ▪ unexpected changes in tariffs, trade barriers, price and exchange controls, and other 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 internationally; ▪ foreign taxes, including withholding of payroll taxes; ▪ foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; ▪ difficulties staffing and managing foreign operations; ▪ workforce uncertainty in countries where labor unrest is more common than in the United States; ▪ potential liability under the U.S.
If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If a prolonged government shutdown occurs, or if global health concerns prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
In addition, we have encountered difficulties in opening clinical trial sites and enrolling patients in our two ongoing Phase 2b clinical trials. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.
In addition, we have encountered difficulties in opening clinical trial sites and enrolling patients in our two Phase 2b clinical trials. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether.
One of our strategies is to pursue clinical development of tildacerfont in additional endocrine disorders, including, but not limited to, pediatric classic CAH and a subpopulation of females with PCOS. The endocrine disorders we are targeting are all rare disorders and, as a result, the market size for the treatment of patients with such disorders is limited.
One of our strategies is to pursue clinical development of tildacerfont in additional endocrine disorders, including, but not limited to, pediatric classic CAH and females with PCOS. The endocrine disorders we are targeting are all rare disorders and, as a result, the market size for the treatment of patients with such disorders is limited.
For example, patients about whom we or the third parties upon whom we rely to obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. We also publish privacy policies and other statements regarding data privacy and security.
For example, patients about whom we or the third parties upon which we rely to obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. We also publish privacy policies and other statements regarding data privacy and security.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash and cash equivalents may be threatened and could have a material adverse effect on our business and financial condition.
Although a substantial amount of our efforts are focused on the clinical development, potential regulatory approval and commercialization of tildacerfont, a key element of our long-term strategy is to in-license, acquire, develop, market, and commercialize a portfolio of products to treat patients with endocrine disorders.
Although a substantial amount of our efforts is focused on the clinical development, potential regulatory approval and commercialization of tildacerfont, a key element of our long-term strategy is to in-license, acquire, develop, market, and commercialize a portfolio of products to treat patients with endocrine disorders.
Undesirable side effects caused by tildacerfont and any future product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.
Undesirable side effects caused by tildacerfont and any future product candidates could cause us or regulatory authorities to interrupt, delay, terminate or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.
We cannot be certain that any of our or our licensors’ patent searches or analyses, including but not limited to the identification of relevant patents, analysis of the scope of relevant patent claims or determination of the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction, because: ▪ some patent applications in the United States may be maintained in secrecy until the patents are issued; ▪ patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived; ▪ pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, tildacerfont, and any future product candidates or the use of tildacerfont and any future product candidates; 82 Table of Contents ▪ identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases, and the difficulty in assessing the meaning of patent claims; ▪ patent applications in the United States are typically not published until 18 months after the priority date; and ▪ publications in the scientific literature often lag behind actual discoveries.
We cannot be certain that any of our or our licensors’ patent searches or analyses, including but not limited to the identification of relevant patents, analysis of the scope of relevant patent claims or determination of the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction, because: ▪ some patent applications in the United States may be maintained in secrecy until the patents are issued; ▪ patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived; ▪ pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, tildacerfont, and any future product candidates or the use of tildacerfont and any future product candidates; ▪ identification of third-party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases, and the difficulty in assessing the meaning of patent claims; ▪ patent applications in the United States are typically not published until 18 months after the priority date; and ▪ publications in the scientific literature often lag behind actual discoveries.
We have no products approved for commercial sale and have not generated any revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred significant net losses since our inception.
We have no products approved for commercial sale and have not generated any product revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. As a result, we are not profitable and have incurred significant net losses since our inception.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: ▪ the scope of rights granted under the license agreement and other interpretation-related issues; ▪ whether and the extent to which our technology and processes infringe on intellectual property rights of the licensor that are not subject to the license agreement; ▪ our right to sublicense intellectual property rights to third parties under collaborative development relationships; 77 Table of Contents ▪ our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of tildacerfont, and what activities satisfy those diligence obligations; and ▪ the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: 79 Table of Contents ▪ the scope of rights granted under the license agreement and other interpretation-related issues; ▪ whether and the extent to which our technology and processes infringe on intellectual property rights of the licensor that are not subject to the license agreement; ▪ our right to sublicense intellectual property rights to third parties under collaborative development relationships; ▪ our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of tildacerfont, and what activities satisfy those diligence obligations; and ▪ the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
Tildacerfont and any future product candidates could fail to receive regulatory approval for many reasons, including the following: 45 Table of Contents ▪ serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by people using drugs similar to tildacerfont and any future product candidates; ▪ the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; ▪ the FDA or comparable foreign regulatory authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States; ▪ we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any of its proposed indications; ▪ the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ▪ we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ▪ the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ▪ the data collected from clinical trials of tildacerfont and any future product candidates may not be sufficient to satisfy the FDA or comparable foreign regulatory authorities to support the submission of an NDA or other comparable submissions in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere, requiring, in the case of adult patients with classic CAH, additional clinical trials beyond our two ongoing Phase 2b clinical trials prior to any such approval; ▪ the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and ▪ the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Tildacerfont and any future product candidates could fail to receive regulatory approval for many reasons, including the following: ▪ serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by people using drugs similar to tildacerfont and any future product candidates; ▪ the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval; ▪ the FDA or comparable foreign regulatory authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States; ▪ we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any of its proposed indications; ▪ the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ▪ we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ▪ the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ▪ the data collected from clinical trials of tildacerfont and any future product candidates may not be sufficient to satisfy the FDA or comparable foreign regulatory authorities to support the submission of an NDA or other comparable submissions in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere, requiring, in the case of adult patients with classic CAH, additional clinical trials beyond our ongoing Phase 2b clinical trial prior to any such approval; ▪ the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and ▪ the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
These risks and uncertainties include the following: ▪ the United States Patent and Trademark Office (USPTO) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction; ▪ patent applications may not result in any patents being issued; 74 Table of Contents ▪ patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or may otherwise not provide any competitive advantage; ▪ our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates; ▪ other parties may have or may seek to design around our claims or develop technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same composition of matter, methods or formulations or by claiming subject matter that could dominate our patent position; ▪ any successful opposition to any patents owned by or licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop; ▪ because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to tildacerfont, any future product candidates, and other proprietary technologies and their uses; ▪ an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013; ▪ there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and ▪ countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop, and market competing product candidates in those countries.
These risks and uncertainties include the following: ▪ the United States Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the noncompliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction; ▪ patent applications may not result in any patents being issued; 76 Table of Contents ▪ patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or may otherwise not provide any competitive advantage; ▪ our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use and sell our potential product candidates and may limit, interfere with, or eliminate our ability to obtain patents related to tildacerfont; ▪ other parties may have or may seek to design around our claims or develop technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications and patents, either by claiming the same composition of matter, methods or formulations or by claiming subject matter that could dominate our patent position; ▪ any successful opposition to any patents owned by or licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop; ▪ because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to tildacerfont, any future product candidates, and other proprietary technologies and their uses; ▪ an interference proceeding can be provoked by a third party or instituted by the USPTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013; as such, subject matter covered in patents or patent applications that we or our licensors have filed before March 16, 2013 may be challenged and invalidated under an interference proceeding; ▪ there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; and ▪ countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop, and market competing product candidates in those countries.
If these additional shares of common stock, and the shares of common stock issuable pursuant to such pre-funded warrants and warrants, are resold, or if it is perceived that they will be resold, in the public market, the trading price of our common stock could decline.
If these additional shares of common stock, and the shares of common stock issued or issuable pursuant to such pre-funded warrants and warrants, are resold, or if it is perceived that they will be resold, in the public market, the trading price of our common stock could decline.
If these additional shares of common stock, and the shares of common stock issuable pursuant to such pre-funded warrants and warrants, are resold, or if it is perceived that they will be resold, in the public market, the trading price of our common stock could decline.
If these additional shares of common stock, and the shares of common stock issued or issuable pursuant to such pre-funded warrants and warrants, are resold, or if it is perceived that they will be resold, in the public market, the trading price of our common stock could decline.
The degree of market acceptance of tildacerfont or any future products, if approved, will depend on a number of factors, including: ▪ the clinical indications for which such product candidate is approved; ▪ physicians and patients considering the product as a safe and effective treatment; ▪ the potential and perceived advantages of the product over alternative treatments; ▪ the prevalence and severity of any side effects; ▪ product labeling or product insert requirements of the FDA or other regulatory authorities; ▪ limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities; ▪ the timing of market introduction of the product as well as competitive products; ▪ the cost of treatment in relation to alternative treatments; ▪ the availability of coverage and adequate reimbursement by third-party payors and government authorities; ▪ the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government authorities; ▪ relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and ▪ the effectiveness of our sales and marketing efforts and those of any collaboration or distribution partner on whom we rely for sales in foreign jurisdictions.
The degree of market acceptance of tildacerfont or any future products, if approved, will depend on a number of factors, including: ▪ the clinical indications for which such product candidate is approved; ▪ physicians and patients considering the product as a safe and effective treatment; ▪ the potential and perceived advantages of the product over alternative treatments; ▪ the prevalence and severity of any side effects; ▪ product labeling or product insert requirements of the FDA or other regulatory authorities; ▪ limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities; ▪ the timing of market introduction of the product as well as competitive products; ▪ the cost of treatment in relation to alternative treatments; 55 Table of Contents ▪ the availability of coverage and adequate reimbursement by third-party payors and government authorities; ▪ the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government authorities; ▪ relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and ▪ the effectiveness of our sales and marketing efforts and those of any collaboration or distribution partner on whom we rely for sales in foreign jurisdictions.
Any claims of patent infringement asserted by third parties would be time-consuming and could: ▪ result in costly litigation; ▪ divert the time and attention of our technical personnel and management; ▪ cause development delays; ▪ prevent us from commercializing tildacerfont or any future product candidates until the asserted patent expires or is finally held invalid, unenforceable, or not infringed in a court of law; ▪ require us to develop non-infringing technology, which may not be possible on a cost-effective basis; ▪ require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property; ▪ require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be willfully infringing; and/or ▪ require us to enter into royalty or license agreements, which may not be available on commercially reasonable terms, or at all.
Any claims of patent infringement asserted by third parties would be time-consuming and could: ▪ result in costly litigation; ▪ divert the time and attention of our technical personnel and management; ▪ cause development delays; ▪ prevent us from commercializing tildacerfont or any future product candidates until the asserted patent expires or is finally held invalid, unenforceable, or not infringed in a court of law; ▪ require us to develop non-infringing technology, which may not be possible on a cost-effective basis; ▪ require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property; 84 Table of Contents ▪ require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be willfully infringing; and/or ▪ require us to enter into royalty or license agreements, which may not be available on commercially reasonable terms, or at all.
Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, and the deductibility of expenses under the Tax Act, the CARES Act, the Inflation Reduction Act or future reform legislation could have a material impact on the value of our net deferred tax assets, could result in significant one-time charges, and could increase our future tax expense. 71 Table of Contents Risks Related to Our Reliance on Third Parties We depend on intellectual property licensed from Lilly, the termination of which could result in the loss of significant rights, which would harm our business.
Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, and the deductibility of expenses under the Tax Act, the CARES Act, the Inflation Reduction Act or future reform legislation could have a material impact on the value of our net deferred tax assets, could result in significant one-time charges, and could increase our future tax expense. 73 Table of Contents Risks Related to Our Reliance on Third Parties We depend on intellectual property licensed from Lilly, the termination of which could result in the loss of significant rights, which would harm our business.
If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to complete development of, obtain regulatory approval for or successfully commercialize tildacerfont and any future product candidates.
If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, suspended, varied, delayed, or terminated and we may not be able to complete development of, obtain regulatory approval for or successfully commercialize tildacerfont and any future product candidates.
Foreign Corrupt Practices Act of 1977 (FCPA) or comparable foreign regulations; ▪ challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; ▪ production shortages resulting from any events affecting raw material supply or manufacturing capabilities internationally; and ▪ business interruptions resulting from geo-political actions, including war and terrorism.
Foreign Corrupt Practices Act of 1977 (“FCPA”) or comparable foreign regulations; ▪ challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; ▪ production shortages resulting from any events affecting raw material supply or manufacturing capabilities internationally; and ▪ business interruptions resulting from geo-political actions, including war and terrorism.
We may continue to be a smaller reporting company even after we are no longer an emerging growth company, which would allow us to take advantage of many of the same exemptions available to emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley Act), and reduced disclosure obligations regarding executive compensation.
We may continue to be a smaller reporting company even after we are no longer an emerging growth company, which would allow us to take advantage of many of the same exemptions available to emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), and reduced disclosure obligations regarding executive compensation.
For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including being permitted to provide only two years of audited financial statements, in addition to any required financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Annual Report on Form 10-K, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any 89 Table of Contents golden parachute payments not previously approved.
For as long as we continue to be an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including being permitted to provide only two years of audited financial statements, in addition to any required financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this Annual Report on Form 10-K, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
In addition, quarantines, shelter-in-place, and similar government orders, or the perception that such orders, shutdowns, or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at our third-party manufacturing facilities upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our product candidates.
In addition, quarantines, shelter-in-place, and similar government orders, or the perception that such orders, shutdowns, or other restrictions on the conduct of business operations could occur, related to infectious diseases could impact personnel at our third-party manufacturing facilities upon which we rely, or the availability or cost of materials, which could disrupt the supply chain for our product candidates.
The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents.
The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Although the CCPA exempts some data processed in the context of clinical trials, the CCPA increases compliance costs and potential liability with respect to other personal data we maintain about California residents.
The Phase 2 proof-of-concept clinical trial is a randomized, placebo-controlled, dose escalation trial which will evaluate the safety and efficacy of tildacerfont titrated to 200 mg QD compared to placebo at 12 weeks of treatment in subjects with PCOS and elevated adrenal androgens as measured by dehydroepiandrosterone sulfate (DHEAS) levels at baseline.
The Phase 2 proof-of-concept clinical trial is a randomized, placebo-controlled, dose escalation trial which will evaluate the safety and efficacy of tildacerfont titrated to 200 mg QD compared to placebo at 12 weeks of treatment in subjects with PCOS and elevated adrenal androgens as measured by dehydroepiandrosterone sulfate (“DHEAS”) levels at baseline.
We do not currently have any long-term agreement with a manufacturer to produce raw materials, active pharmaceutical ingredients (APIs), and the finished products of tildacerfont or the associated packaging used in our current product format and we may rely on single source suppliers for clinical supply of API and drug product of tildacerfont.
We do not currently have any long-term agreement with a manufacturer to produce raw materials, active pharmaceutical ingredients (“APIs”), and the finished products of tildacerfont or the associated packaging used in our current product format and we may rely on single source suppliers for clinical supply of API and drug product of tildacerfont.
In particular, each indication for which we are evaluating tildacerfont is a rare endocrine disorder with limited patient populations from which to draw participants in clinical trials. For example, we estimate the total classic CAH populations are approximately 20,000 to 30,000 people in the United States, approximately 50,000 people in the European Union (EU), and approximately 145,000 people in China.
In particular, each indication for which we are evaluating tildacerfont is a rare endocrine disorder with limited patient populations from which to draw participants in clinical trials. For example, we estimate the total classic CAH populations are approximately 20,000 to 30,000 people in the United States, approximately 50,000 people in the European Union (“EU”) and approximately 145,000 people in China.
In addition, quarantines, shelter-in-place, and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at our CROs, which could disrupt our clinical timelines, which could have a material adverse impact on our business, prospects, financial condition, and results of operations. 72 Table of Contents We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of tildacerfont and any future product candidates, if approved, and these third parties may fail to obtain and maintain regulatory approval for their facilities, fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.
In addition, quarantines, shelter-in-place, and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to infectious diseases could impact personnel at our CROs, which could disrupt our clinical timelines, which could have a material adverse impact on our business, prospects, financial condition, and results of operations. 74 Table of Contents We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of tildacerfont and any future product candidates, if approved, and these third parties may fail to obtain and maintain regulatory approval for their facilities, fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.
Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance, and we may not obtain such coverage or adequate reimbursement. Moreover, we focus our clinical development of tildacerfont on treatments for rare endocrine disorders with relatively small patient populations.
Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, or comparable foreign healthcare programs, and commercial payors is critical to new product acceptance, and we may not obtain such coverage or adequate reimbursement. Moreover, we focus our clinical development of tildacerfont on treatments for rare endocrine disorders with relatively small patient populations.
Assuming we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use tildacerfont or any future product candidate unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost.
If we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use tildacerfont or any future product candidate unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost.
In addition, we may rely in part on preclinical, clinical and quality data generated by clinical research organizations (CROs) and other third parties for regulatory submissions for tildacerfont and any future product candidates. While we have or will have agreements governing these third parties’ services, we have limited influence over their actual performance.
In addition, we may rely in part on preclinical, clinical and quality data generated by clinical research organizations (“CROs”) and other third parties for regulatory submissions for tildacerfont and any future product candidates. While we have or will have agreements governing these third parties’ services, we have limited influence over their actual performance.
In January 2022, Neurocrine requested a rehearing of the USPTO's decision to deny the post-grant review and also filed a request that the Procedural Opinion Panel (POP) review the case. Additionally, in February 2022, Neurocrine filed a petition requesting the USPTO to institute an administrative proceeding involving the post-grant review of the patentability of United States Patent 11,007,201.
In January 2022, Neurocrine requested a rehearing of the USPTO’s decision to deny the post-grant review and also filed a request that the Procedural Opinion Panel (“POP”) review the case. Additionally, in February 2022, Neurocrine filed a petition requesting the USPTO to institute an administrative proceeding involving the post-grant review of the patentability of United States Patent 11,007,201.
Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access.
Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access.
If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
If we or our employees, independent contractors, consultants, commercial partners and vendors violate these laws, we may be subject to investigations, enforcement actions and/or significant penalties, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, monetary fines, imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal or comparable foreign healthcare programs, contractual damages, public reprimands, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Compliance with data privacy and security obligations could require us to take on more onerous requirements in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or the third parties upon whom we rely ability to operate in certain jurisdictions.
Compliance with data privacy and security obligations could require us to take on more onerous requirements in our contracts, require us to engage in costly compliance exercises, restrict our ability to collect, use and disclose data, or in some cases, impact our or the third parties upon which we rely ability to operate in certain jurisdictions.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability, or commercialization of the particular product candidate or product and our company in general.
Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability, or commercialization of the particular product candidate or product and our company in general.
An ownership change analysis covering periods through December 31, 2021 concluded that an ownership change occurred in May 2016 and in August 2020. As a result of the ownership changes, we derecognized NOL-related deferred tax assets down to the amount expected to be realized.
An ownership change analysis covering periods through December 31, 2023 concluded that an ownership change occurred in May 2016 and in August 2020. As a result of the ownership changes, we derecognized NOL-related deferred tax assets down to the amount expected to be realized.
Our ability to use our remaining NOL carryforwards may be further limited if we experience a Section 382 ownership change as a result of future changes in our stock ownership. As of December 31, 2022, we recorded a full valuation allowance on our net deferred tax assets.
Our ability to use our remaining NOL carryforwards may be further limited if we experience a Section 382 ownership change as a result of future changes in our stock ownership. As of December 31, 2023, we recorded a full valuation allowance on our net deferred tax assets.
By way of example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the Tax Act), included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” For example, on June 17, 2021, the United States Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the "individual mandate" was repealed by Congress.
By way of example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (the “Tax Act”), included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” For example, on June 17, 2021, the United States Supreme Court dismissed a challenge on procedural grounds that argued the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.
The applicable period is seven years in the United States and ten years in the EU, which may be extended by six months and two years, respectively, in the case of product candidates that have complied with the respective regulatory agency’s agreed upon pediatric investigation plan.
The applicable period is seven years in the United States and ten years in the EU, which may be extended by six months and two years, respectively, in the case of product candidates that have complied with the respective regulatory authority’s agreed upon pediatric investigation plan.
If we are deemed by the FDA, DOJ, or other governmental authorities to have engaged in the promotion of tildacerfont or any future product candidate for off-label use, we could be subject to certain prohibitions or other restrictions on the sale or marketing and other operations or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.
If we are deemed by the FDA, DOJ, or other governmental authorities, or comparable foreign regulatory authorities, to have engaged in the promotion of tildacerfont or any future product candidate for off-label use, we could be subject to certain prohibitions or other restrictions on the sale or marketing and other operations or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, these factors include: 87 Table of Contents ▪ the commencement, enrollment or results of our ongoing and planned clinical trials of tildacerfont or any future clinical trials we may conduct of tildacerfont and any future product candidates, or changes in the development status of tildacerfont and any future product candidates; ▪ acceptance by the FDA and EMA of the clinical trial design of our planned and ongoing clinical trials of tildacerfont; ▪ acceptance by the FDA and EMA of data from our two Phase 2b clinical trials or any future clinical trials we conduct; ▪ any delay in our regulatory filings for tildacerfont and any future product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; ▪ adverse results or delays in clinical trials as a result of the COVID-19 pandemic, patient engagement, protocol amendments or otherwise; ▪ our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial; ▪ adverse regulatory decisions, including failure to receive regulatory approval for tildacerfont and any future product candidates; ▪ changes in laws or regulations applicable to tildacerfont and any future product candidates, including but not limited to clinical trial requirements for approvals; ▪ the failure to obtain coverage and adequate reimbursement of tildacerfont and any future product candidates, if approved; ▪ changes on the structure of healthcare payment systems; ▪ adverse developments concerning our manufacturers; ▪ our inability to obtain adequate product supply for any approved drug product or inability to do so at acceptable prices; ▪ our inability to establish collaborations if needed; ▪ our failure to commercialize tildacerfont and any future product candidates; ▪ additions or departures of key scientific or executive management personnel; ▪ unanticipated serious safety concerns related to the use of tildacerfont and any future product candidates; ▪ introduction of new products or services offered by us or our competitors, or the release or publication of clinical trial results from competing product candidates; ▪ announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors; ▪ our ability to effectively manage our growth; ▪ the size and growth, if any, of the markets for classic CAH in adult and pediatric patients and a subpopulation of females with PCOS, and other rare endocrine disorders that we may target; ▪ actual or anticipated variations in quarterly or annual operating results; ▪ our cash position; ▪ our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; ▪ publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; 88 Table of Contents ▪ changes in the market valuations of similar companies; ▪ overall performance of the equity markets; ▪ issuances of debt or equity securities; ▪ sales of our common stock by us or our stockholders in the future; ▪ trading volume of our common stock; ▪ changes in accounting practices; ▪ ineffectiveness of our internal controls; ▪ 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; ▪ geopolitical and macroeconomic conditions, including the COVID-19 pandemic, the military conflict in Ukraine and Russia, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures; and ▪ other events or factors, many of which are beyond our control.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, these factors include: ▪ the commencement, enrollment or results of our ongoing and planned clinical trials of tildacerfont or any future clinical trials we may conduct of tildacerfont and any future product candidates, or changes in the development status of tildacerfont and any future product candidates; ▪ acceptance by the FDA and EMA of the clinical trial design of our planned and ongoing clinical trials of tildacerfont; ▪ acceptance by the FDA and EMA of data from our Phase 2b clinical trial or any future clinical trials we conduct; ▪ any delay in our regulatory filings for tildacerfont and any future product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; ▪ adverse results or delays in clinical trials as a result of outbreaks of contagious diseases (such as the COVID-19 pandemic), patient engagement, protocol amendments or otherwise; ▪ our decision to initiate a clinical trial, not to initiate a clinical trial, or to terminate an existing clinical trial; 90 Table of Contents ▪ adverse regulatory decisions, including failure to receive regulatory approval for tildacerfont and any future product candidates; ▪ changes in laws or regulations applicable to tildacerfont and any future product candidates, including but not limited to clinical trial requirements for approvals; ▪ the failure to obtain coverage and adequate reimbursement of tildacerfont and any future product candidates, if approved; ▪ changes on the structure of healthcare payment systems; ▪ adverse developments concerning our manufacturers; ▪ our inability to obtain adequate product supply for any approved drug product or inability to do so at acceptable prices; ▪ our inability to establish collaborations if needed; ▪ our failure to commercialize tildacerfont and any future product candidates; ▪ additions or departures of key scientific or executive management personnel; ▪ unanticipated serious safety concerns related to the use of tildacerfont and any future product candidates; ▪ introduction of new products or services offered by us or our competitors, or the release or publication of clinical trial results from competing product candidates; ▪ announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by us or our competitors; ▪ our ability to effectively manage our growth; ▪ the size and growth, if any, of the markets for classic CAH in adult and pediatric patients and females with PCOS, and other rare endocrine disorders that we may target; ▪ actual or anticipated variations in quarterly or annual operating results; ▪ our cash position; ▪ our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; ▪ publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; ▪ changes in the market valuations of similar companies; ▪ overall performance of the equity markets; ▪ issuances of debt or equity securities; ▪ sales of our common stock by us or our stockholders in the future; ▪ trading volume of our common stock; ▪ changes in accounting practices; ▪ ineffectiveness of our internal controls; ▪ 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; ▪ geopolitical and macroeconomic conditions, including relating to contagious disease outbreaks, the ongoing wars in Ukraine and Israel, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures; and 91 Table of Contents ▪ other events or factors, many of which are beyond our control.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our stockholders.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high 87 Table of Contents or not in the best interest of our company or our stockholders.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security, including our processing of personal data. For example, our processing of personal data is or may become subject in certain circumstances to the EU GDPR and/or the UK GDPR.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security, including our processing of personal data. For example, our processing of personal data is or may become subject in certain circumstances to the GDPR.
We will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common 92 Table of Contents stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
For example, in February 2022, we entered into an Open Market Sales Agreement SM (the Sales Agreement) with Jefferies, LLC (Jefferies), pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal.
For example, in February 2022, we entered into an Open Market Sales Agreement SM (the “Sales Agreement”) with Jefferies, LLC (“Jefferies”), pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal.
If we are found to have promoted such off-label uses, we may receive warning letters from the FDA and comparable foreign authorities and become subject to significant liability, which would materially harm our business.
If we are found to have promoted such off-label uses, we may receive warning letters from the FDA and comparable foreign authorities, incur penalties, and become subject to significant liability, which would materially harm our business.
The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging 55 Table of Contents in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business.
The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business.
In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA and other governmental authorities have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed in order to resolve enforcement actions.
In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA and other governmental authorities, including comparable foreign authorities, have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed in order to resolve enforcement actions.
In addition, even after a drug is granted orphan exclusivity and approved, the FDA and the European Commission can subsequently approve a different drug for the same condition or the same drug for a different condition, which may subject the orphan-exclusive product to off-label competition.
In addition, even after a drug is granted orphan designation and approved, the FDA and the European Commission can subsequently approve a different drug for the same condition or the same drug for a different condition, which may subject the orphan-exclusive product to off-label competition.
Risks Related to Ownership of Our Common Stock An active, liquid and orderly trading market for our common stock may not be sustained. Prior to the closing of our initial public offering (IPO) in October 2020, there was no public market for shares of our common stock. An active trading market for our shares may not be sustained.
Risks Related to Ownership of Our Common Stock An active, liquid and orderly trading market for our common stock may not be sustained. Prior to the closing of our IPO in October 2020, there was no public market for shares of our common stock. An active trading market for our shares may not be sustained.
To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time, including through the registration statement on Form S-3, as amended, declared effective in February 2022, covering the sale of up to $200.0 million of our securities (the Shelf Registration).
To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time, including through the registration statement on Form S-3, as amended, declared effective in February 2022, covering the sale of up to $200.0 million of our securities (the “Shelf Registration”).
We may engage third parties for clinical trials outside of the United States, to sell our products internationally once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations and other regulatory approvals. We have direct or indirect 70 Table of Contents interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations.
We may engage third parties for clinical trials outside of the United States, to sell our products internationally once we enter a commercialization phase, and/or to obtain necessary permits, licenses, patent registrations and other regulatory approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations.
Violations, including actual or alleged promotion of our products for unapproved or off-label uses, are subject to enforcement letters, inquiries, and investigations, and civil and criminal sanctions by the FDA, DOJ, or comparable foreign bodies.
Violations, including actual or alleged promotion of our products for unapproved or off-label uses, are subject to enforcement letters, inquiries, and investigations, and civil and criminal sanctions by the FDA, DOJ, or comparable foreign authorities.
Our patent applications may not result in patents being issued which protect tildacerfont, any future product candidates, and other proprietary technologies we may develop or which effectively prevent others from commercializing competitive technologies and products.
Our patent applications may not result in patents being issued which protect tildacerfont and uses thereof, any future product candidates, and other proprietary technologies we may develop or which effectively prevent others from commercializing competitive technologies and products.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. 95 Table of Contents Item 1B. Unresolv ed Staff Comments. None.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. 97 Table of Contents Item 1B. Unresolv ed Staff Comments. None.
For example, we believe that tildacerfont has the potential to bring therapeutic benefit to patients suffering from endocrine disorders where the underlying pathophysiology supports a need to reduce excess secretion of or hyperresponsiveness to adrenocorticotropic hormone (ACTH), including, but not limited to, non-classic CAH and a subpopulation of females with PCOS due to adrenal hyperandrogenism.
For example, we believe that tildacerfont has the potential to bring therapeutic benefit to patients suffering from endocrine disorders where the underlying pathophysiology supports a need to reduce excess secretion of or hyperresponsiveness to adrenocorticotropic hormone (“ACTH”), including, but not limited to, non-classic CAH and females with PCOS due to adrenal hyperandrogenism.
For example: ▪ others may be able to make compounds that are similar to tildacerfont and any future product candidates but that are not covered by the claims of our patents; ▪ we might not have been the first to make the inventions covered by our pending patent applications; 75 Table of Contents ▪ we might not have been the first to file patent applications for these inventions; ▪ others may independently develop similar or alternative technologies or duplicate any of our technologies; ▪ any patents that we obtain may not provide us with any competitive advantages; ▪ we may not develop additional proprietary technologies that are patentable; ▪ our competitors might conduct research and development activities in countries where we do not have patent rights or where patent protection is weak and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ▪ we cannot ensure that any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our products; ▪ we cannot ensure that we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents that we own or license expire; or ▪ the patents of others may have an adverse effect on our business.
For example: ▪ others may be able to make compounds that are similar to tildacerfont and any future product candidates but that are not covered by the claims of our patents; 77 Table of Contents ▪ others may be able to make and use tildacerfont and any future product candidates in countries where valid enforceable patents are not obtained; ▪ we might not have been the first to make the inventions covered by our pending patent applications; ▪ we might not have been the first to file patent applications for these inventions; ▪ others may independently develop similar or alternative technologies or duplicate any of our technologies; ▪ any patents that we obtain may not provide us with any competitive advantages; ▪ we may not develop additional proprietary technologies that are patentable; ▪ our competitors might conduct research and development activities in countries where we do not have patent rights or where patent protection is weak and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ▪ we cannot ensure that any of our patents, or any of our pending patent applications, if issued, or those of our licensors, will include claims having a scope sufficient to protect our products; ▪ we cannot ensure that we will be able to successfully commercialize our products on a substantial scale, if approved, before the relevant patents that we own or license expire; ▪ others may obtain patents that cover the use or manufacture of tildacerfont; or ▪ the patents of others may have an adverse effect on our business.
Under the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but may only be used to offset 80% of our taxable income annually. Similar rules may apply under state tax laws.
Under the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), federal NOL carryforwards generated in tax years beginning after December 31, 2017 may be carried forward indefinitely but may only be used to offset 80% of our taxable income annually. Similar rules may apply under state tax laws.
In the United States, provided all maintenance fees are timely paid, a patent generally has a term of 20 years from its application filing date or earliest claimed non-provisional filing date. Extensions may be available under certain circumstances, but the life of a patent and, correspondingly, the protection it affords is limited.
In the United States, provided all maintenance fees are timely paid, a patent generally has a term of 20 years from its application filing date or earliest claimed non-provisional filing date. Extensions may be available under certain circumstances, such as patent term adjustments, but the life of a patent and, correspondingly, the protection it affords is limited.
In the ordinary course of our business, we and the third parties upon which we rely collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) proprietary, confidential, and sensitive data, including personal data (such as health-related data), intellectual property, and trade secrets (collectively, sensitive data).
In the ordinary course of our business, we and the third parties upon which we rely collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) proprietary, confidential, and sensitive data, including personal data (such as health-related data including in the context of clinical trials), intellectual property, and trade secrets (collectively, sensitive data).
For example, the CARES Act modified certain provisions of the Tax Act and the recently enacted Inflation Reduction Act of 2022 includes provisions that will impact the U.S. federal income taxation of corporations, including imposing a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock.
For example, the CARES Act modified certain provisions of the Tax Act and the recently enacted Inflation Reduction Act of 2022 includes provisions that will impact the U.S. 72 Table of Contents federal income taxation of corporations, including imposing a minimum tax on the book income of certain large corporations and an excise tax on certain corporate stock repurchases that would be imposed on the corporation repurchasing such stock.
Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidate to patients in clinical trials would be jeopardized.
Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidate to patients in clinical trials 75 Table of Contents would be jeopardized.
Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution, i.e., committed inequitable conduct. Third parties may also raise similar claims before the USPTO, even outside the context of litigation.
Grounds for an unenforceability assertion could include an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution, i.e., committed 86 Table of Contents inequitable conduct. Third parties may also raise similar claims before the USPTO, even outside the context of litigation.
If these policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences. Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
If these policies or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences. Obligations related to data privacy and security (and individuals’ data privacy and security expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same 78 Table of Contents evidence would be insufficient to invalidate the claim if first presented in a district court action.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties. Our new corporate headquarters are located at 611 Gateway Boulevard, Suite 740, South San Francisco, California 94080, where we occupy approximately 6,500 square feet of office space pursuant to a lease entered in December 2022, which began in December 2022 and expires in February 2028.
Biggest changeItem 2. Pro perties. Our corporate headquarters are located at 611 Gateway Boulevard, Suite 740, South San Francisco, California 94080, where we occupy approximately 6,500 square feet of office space pursuant to a lease entered in December 2022, which began in December 2022 and expires in February 2028. We believe our existing facility meets our current needs.
Removed
Our previous corporate headquarters were located at 2001 Junipero Serra Boulevard, Suite 640, Daly City, California 94014, where we occupied approximately 8,000 square feet of office space pursuant to a lease entered into in February 2020, which began in September 2020 and was terminated effective December 31, 2022. We believe our existing facility meets our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine S afety Disclosures. Not applicable. 96 Table of Contents PART II
Biggest changeItem 4. Mine S afety Disclosures. Not applicable. 99 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 96 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 97 Item 6. [Reserved ] 98 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 99 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 111 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 99 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 100 Item 6. [Reserved ] 101 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 102 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 115 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEach of the investors represented that it was an “accredited investor” as defined in Regulation D of the Securities Act and that it was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. 97 Table of Contents Use of Proceeds We commenced our IPO pursuant to the registration statement on Form S-1, as amended (File No. 333-48924), that was declared effective on October 8, 2020 and a registration statement on Form S-1 MEF (File No. 333-249397), which was effective on filing on October 8, 2020, and registered an aggregate of 6,900,000 shares of our common stock.
Biggest changeUse of Proceeds We commenced our IPO pursuant to the registration statement on Form S-1, as amended (File No. 333-48924), that was declared effective on October 8, 2020 and a registration statement on Form S-1 MEF (File No. 333-249397), which was effective on filing on October 8, 2020, and registered an aggregate of 6,900,000 shares of our common stock.
There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b)(4) on October 9, 2020. Purchases of Equity Securities by the Issuer and Affiliated Parties None.
There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC pursuant to Rule 424(b)(4) on October 9, 2020. Purchases of Equity Securities by the Issuer and Affiliated Parties None. 100 Table of Contents
Holders of Common Stock As of March 10, 2023, we had 39,746,116 shares of common stock outstanding held by 44 holders of record, one of which was Cede & Co., a nominee for Depository Trust Company (DTC).
Holders of Common Stock As of March 14, 2024, we had 41,149,160 shares of common stock outstanding held by 36 holders of record, one of which was Cede & Co., a nominee for Depository Trust Company (“DTC”).
Removed
Recent Sales of Unregistered Securities In February 2023, we entered into a securities purchase agreement with several institutional and accredited investors, including holders of more than 5% of our total common stock outstanding on the date of the securities purchase agreement, pursuant to which we issued and sold 16,116,000 shares of common stock, pre-funded warrants to purchase 800,000 shares of common stock, and warrants to purchase 12,687,000 shares of common stock for gross proceeds of $53.6 million, before deducting offering expenses payable by us.
Removed
The purchase price per share of common stock and warrant was $3.17 per share (the “Purchase Price”) and the purchase price for the pre-funded warrants was the Purchase Price minus $0.01 per pre-funded warrant.
Removed
The pre-funded warrants have a per share exercise price of $0.01 and the warrants have an exercise price of $3.96 per share, in each case subject to proportional adjustments in the event of stock splits or combinations or similar events. The pre-funded warrants and the warrants will be exercisable for a period of five years following the date of issuance.
Removed
For each of the securities issued and sold, we relied on the exemption from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder.

Item 7. Management's Discussion & Analysis

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

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Biggest changeResults of Operations Comparisons of the Year Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the periods presented (in thousands): Year Ended December 31, 2022 2021 Change Operating expenses: Research and development $ 35,198 $ 30,698 $ 4,500 General and administrative 12,085 11,368 717 Total operating expenses 47,283 42,066 5,217 Loss from operations (47,283 ) (42,066 ) (5,217 ) Interest expense (420 ) (345 ) (75 ) Interest and other income, net 1,523 119 1,404 Net loss $ (46,180 ) $ (42,292 ) $ (3,888 ) Research and Development Expenses The following table sets forth research and development expenses for the periods presented (in thousands): Year Ended December 31, 2022 2021 Change External expenses: Clinical development $ 24,085 $ 18,774 $ 5,311 Manufacturing 3,316 4,036 (720 ) Preclinical studies 397 1,591 (1,194 ) Other research and development 391 400 (9 ) Internal expenses: Personnel 6,610 5,557 1,053 Allocated overhead 399 340 59 Total research and development expenses $ 35,198 $ 30,698 $ 4,500 Research and development expenses increased by $4.5 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeResults of Operations Comparisons of the Year Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the periods presented (in thousands): Year Ended December 31, 2023 2022 Change Collaboration revenue $ 10,089 $ — $ 10,089 Operating expenses: Research and development 49,432 35,198 14,234 General and administrative 12,650 12,085 565 Total operating expenses 62,082 47,283 14,799 Loss from operations (51,993 ) (47,283 ) (4,710 ) Interest expense (483 ) (420 ) (63 ) Interest and other income, net 4,557 1,523 3,034 Net loss $ (47,919 ) $ (46,180 ) $ (1,739 ) Research and Development Expenses The following table sets forth research and development expenses for the periods presented (in thousands): Year Ended December 31, 2023 2022 Change External expenses: Clinical development $ 32,354 $ 24,085 $ 8,269 Manufacturing 3,855 3,316 539 Preclinical studies 490 397 93 Other research and development 1,272 391 881 Internal expenses: Personnel 11,130 6,610 4,520 Facilities and other 331 399 (68 ) Total research and development expenses $ 49,432 $ 35,198 $ 14,234 108 Table of Contents Research and development expenses increased by $14.2 million during the year ended December 31, 2023 compared to the year ended December 31, 2022.
We have no products approved for commercial sale and have not generated any revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of tildacerfont and any future product candidates.
We have no products approved for commercial sale and have not generated any product revenue to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of tildacerfont and any future product candidates.
We expect our expenses will increase significantly in connection with our ongoing activities, as we: ▪ advance tildacerfont through our ongoing Phase 2b clinical trials in adult patients with classic CAH; ▪ advance clinical development of tildacerfont in additional indications, including pediatric classic CAH and a subpopulation of females with PCOS; ▪ pursue regulatory approvals of tildacerfont in patients with classic CAH and a subpopulation of females with PCOS; ▪ build a highly specialized commercial organization to support the commercialization of tildacerfont, if approved, in the United States; ▪ seek strategic collaborations to benefit from the resources of biopharmaceutical companies specialized in either relevant disease areas or geographies in markets outside the United States; ▪ identify additional indications and formulations for which to investigate tildacerfont in the future and expand our pipeline of product candidates; ▪ implement operational, financial, and management information systems; ▪ hire additional personnel; and ▪ obtain, maintain, expand, and protect our intellectual property portfolio.
We expect our expenses will increase significantly in connection with our ongoing activities, as we: ▪ advance tildacerfont through our ongoing Phase 2b clinical trials in adult patients with classic CAH; ▪ advance clinical development of tildacerfont in additional indications, including pediatric classic CAH and PCOS; ▪ pursue regulatory approvals of tildacerfont in patients with classic CAH and PCOS; ▪ build a highly specialized commercial organization to support the commercialization of tildacerfont, if approved, in the United States; ▪ seek strategic collaborations to benefit from the resources of biopharmaceutical companies specialized in either relevant disease areas or geographies in markets outside the United States; ▪ identify additional indications and formulations for which to investigate tildacerfont in the future and expand our pipeline of product candidates; ▪ implement operational, financial, and management information systems; ▪ hire additional personnel; and ▪ obtain, maintain, expand, and protect our intellectual property portfolio.
Also, in February 2022, we entered into the Sales Agreement with Jefferies, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal (the Offering).
Also, in February 2022, we entered into the Sales Agreement with Jefferies, pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal (the “Offering”).
Pursuant to the terms of the Lilly License Agreement, Lilly granted us an exclusive, worldwide, royalty bearing, sublicensable license under certain technology, patent rights, know-how, and proprietary materials, which we refer to collectively as the Lilly IP, and such patents, the Lilly Licensed Patents, relating to the CRF1 receptor antagonist compounds either listed in the Lilly License Agreement or covered by patent rights controlled by Lilly, which we refer to collectively as the Lilly Compounds, to research, develop, commercialize, make, have made, use, sell, offer to sell, and import the Lilly Compounds and any products containing a Lilly Compound, including any products containing a Lilly Compound and one or more additional active pharmaceutical ingredients (APIs) other than a Lilly Compound, which we refer to collectively as the Lilly Licensed Products, for all pharmaceutical uses, including all diagnostic, therapeutic, and prophylactic uses, for human or animal administration.
Pursuant to the terms of the Lilly License Agreement, Lilly granted us an exclusive, worldwide, royalty bearing, sublicensable license under certain technology, patent rights, know-how, and proprietary materials, which we refer to collectively as the Lilly IP, and such patents, the Lilly Licensed Patents, relating to the CRF1 receptor antagonist compounds either listed in the Lilly License Agreement or covered by patent rights controlled by Lilly, which we refer to collectively as the Lilly Compounds, to research, develop, commercialize, make, have made, use, sell, offer to sell, and import the Lilly Compounds and any products containing a Lilly Compound, including any products containing a Lilly Compound and one or more additional active pharmaceutical ingredients (“APIs”) other than a Lilly Compound, which we refer to collectively as the Lilly Licensed Products, for all pharmaceutical uses, including all diagnostic, therapeutic, and prophylactic uses, for human or animal administration.
General and administrative expenses also include legal fees, professional fees, insurance costs, facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC, and those of the Nasdaq Stock Market, Inc. (Nasdaq) listing rules.
General and administrative expenses also include legal fees, professional fees, insurance costs, facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC, and those of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing rules.
We could be an emerging growth company until December 31, 2025, although circumstances could cause us to lose that status earlier, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act or if we have total annual gross revenue of $1.235 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three year period before that time, we would cease to be an emerging growth company immediately. 110 Table of Contents
We could be an emerging growth company until December 31, 2025, although circumstances could cause us to lose that status earlier, including if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act or if we have total annual gross revenue of $1.235 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three year period before that time, we would cease to be an emerging growth company immediately. 114 Table of Contents
Overview We are a late-stage biopharmaceutical company focused on developing and commercializing novel therapies for rare endocrine disorders with significant unmet medical need. We are initially developing our wholly-owned product candidate, tildacerfont, as the potential first non-steroidal therapy to offer markedly improved disease control and reduce steroid burden for patients suffering from classic congenital adrenal hyperplasia (CAH).
Overview We are a late-stage biopharmaceutical company focused on developing and commercializing novel therapies for rare endocrine disorders with significant unmet medical need. We are initially developing our wholly-owned product candidate, tildacerfont, as the potential first non-steroidal therapy to offer markedly improved disease control and reduce steroid burden for patients suffering from classic congenital adrenal hyperplasia (“CAH”).
Upon delivery of an issuance notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the shares at market prices by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Global Select Market (Nasdaq), the existing trading market for our common stock.
Upon delivery of an issuance notice and subject to the terms and conditions of the Sales Agreement, Jefferies may sell the shares at market prices by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through Nasdaq, the existing trading market for our common stock.
Such payments are for predetermined fixed amounts, are paid only upon the first occurrence of each such event and are due shortly after achieving the applicable milestone. In addition, we are required to pay Lilly tiered royalties on annual worldwide net sales of Lilly Licensed Products, with rates ranging from mid-single-digits to sub-teens (the Lilly Royalties).
Such payments are for predetermined fixed amounts, are paid only upon the first occurrence of each such event and are due shortly after achieving the applicable milestone. In addition, we are required to pay Lilly tiered royalties on annual worldwide net sales of Lilly Licensed Products, with rates ranging from mid-single-digits to sub-teens (the “Lilly Royalties”).
These expenses include: ▪ external expenses, consisting of: o clinical development—expenses associated with clinical research organizations (CROs) engaged to manage and conduct clinical trials and other outside services; o preclinical studies—expenses associated with preclinical studies and clinical pharmacology; o manufacturing—expenses associated with contract manufacturing; labeling, packaging, and distribution of clinical trial supplies, and consulting; o other research and development—expenses associated with business operations, quality and regulatory compliance; and ▪ internal expenses, consisting of personnel, including expenses for salaries, bonuses, benefits, stock-based compensation, as well as allocation of certain expenses.
These expenses include: ▪ external expenses, consisting of: o clinical development—expenses associated with clinical research organizations (“CROs”) engaged to manage and conduct clinical trials and other outside services; o preclinical studies—expenses associated with preclinical studies and clinical pharmacology; o manufacturing—expenses associated with contract manufacturing; labeling, packaging, and distribution of clinical trial supplies, and other outside services; o other research and development—expenses associated with business operations, quality and regulatory compliance; and ▪ internal expenses, consisting of personnel, including expenses for salaries, bonuses, benefits, stock-based compensation, as well as allocation of certain expenses.
Also, in February 2022, we entered into an Open Market Sales Agreement SM (the Sales Agreement) with Jefferies LLC (Jefferies) pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal.
Also, in February 2022, we entered into an Open Market Sales Agreement SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which we may elect to issue and sell, from time to time, shares of common stock having an aggregate offering price of up to $21.0 million under the Shelf Registration through Jefferies acting as the sales agent and/or principal.
We may prepay amounts outstanding under the Term Loan at any time provided certain notification conditions are met, in which case, all outstanding principal plus accrued and unpaid interest, the Supplemental Final Payment, a prepayment fee of 1% or 2% of the principal amount of the First Tranche, and any bank expenses become due and payable.
We may prepay amounts outstanding under the Term Loan at 106 Table of Contents any time provided certain notification conditions are met, in which case, all outstanding principal plus accrued and unpaid interest, the Supplemental Final Payment, a prepayment fee of 1% or 2% of the principal amount of the First Tranche, and any bank expenses become due and payable.
In October 2020, we consummated our initial public offering (IPO) and issued 6,900,000 shares of common stock for net proceeds of $93.4 million, after deducting underwriting discounts and commissions and offering expenses.
In October 2020, we consummated our initial public offering (“IPO”) and issued 6,900,000 shares of common stock for net proceeds of $93.4 million, after deducting underwriting discounts and commissions and offering expenses.
In addition to the upfront payment, we are entitled to receive up to an aggregate of approximately $65.0 million (at exchange rates in effect on the date of the Kaken License Agreement) upon the achievement of specified milestones related to the development, regulatory approval and commercialization of tildacerfont in Japan, including the achievement of specified net sales thresholds, if approved.
In addition to the upfront payment, we are entitled to receive up to an aggregate of approximately $65.0 105 Table of Contents million (at exchange rates in effect on the date of the Kaken License Agreement) upon the achievement of specified milestones related to the development, regulatory approval and commercialization of tildacerfont in Japan, including the achievement of specified net sales thresholds, if approved.
Following the interest-only period, the outstanding Term Loan balance will be payable in (i) 37 consecutive monthly payments after the end of the interest-only period and continuing on the same day of each month thereafter, in amounts that would fully amortize such Term Loan balance, as of the first business day of the first month following the amended interest-only period, over the repayment period, plus (ii) monthly payments of accrued but unpaid interest.
Following the interest-only period, the outstanding Term Loan balance is payable in (i) 37 consecutive monthly payments after the end of the interest-only period and continuing on the same day of each month thereafter, in amounts that would fully amortize such Term Loan balance, as of the first business day of the first month following the amended interest-only period, over the repayment period, plus (ii) monthly payments of accrued but unpaid interest.
We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including: ▪ the progress, costs, trial design, results of, and timing of our ongoing and planned clinical trials of tildacerfont; ▪ the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; ▪ the number and characteristics of product candidates that we may pursue; ▪ our ability to manufacture sufficient quantities of tildacerfont; ▪ our plan to expand our research and development activities; ▪ the costs associated with manufacturing tildacerfont and establishing clinical and commercial supplies, and sales, marketing, and distribution capabilities; ▪ the costs associated with commercialization; ▪ the costs of acquiring, licensing, or investing in product candidates; ▪ our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights; ▪ our need and ability to retain key management and hire scientific, technical, business, and medical personnel; 107 Table of Contents ▪ the effect of competing products and product candidates and other market developments; ▪ the timing, receipt, and amount of sales from tildacerfont and any future product candidates, if approved; ▪ our need to implement additional internal systems and infrastructure, including financial and reporting systems; ▪ the economic and other terms, timing of, and success of any collaboration, licensing, or other arrangements which we may enter in the future; and ▪ the effects of the disruptions to and volatility in the credit and financial markets in the United States and worldwide from geopolitical and macroeconomic events, including the COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures.
We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including: ▪ the progress, costs, trial design, results of, and timing of our ongoing and planned clinical trials of tildacerfont; ▪ the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals; ▪ the number and characteristics of product candidates that we may pursue; ▪ our ability to manufacture sufficient quantities of tildacerfont; ▪ our plan to expand our research and development activities; ▪ the costs associated with manufacturing tildacerfont and establishing clinical and commercial supplies, and sales, marketing, and distribution capabilities; 110 Table of Contents ▪ our ability to enter into favorable out-licensing agreements for the development and commercialization of tildacerfont; ▪ the costs associated with commercialization; ▪ the costs of acquiring, licensing, or investing in product candidates; ▪ our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights; ▪ our need and ability to retain key management and hire scientific, technical, business, and medical personnel; ▪ the effect of competing products and product candidates and other market developments; ▪ the timing, receipt, and amount of sales from tildacerfont and any future product candidates, if approved; ▪ our need to implement additional internal systems and infrastructure, including financial and reporting systems; ▪ the economic and other terms, timing of, and success of any collaboration, licensing, or other arrangements which we may enter in the future; and ▪ the effects of the disruptions to and volatility in the credit and financial markets in the United States and worldwide from geopolitical and macroeconomic events, including the COVID-19 pandemic, the wars in Ukraine and Israel and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures.
The payment obligations under the Lilly License Agreement are contingent upon future events, such as our achievement of specified milestones or generating product sales. In addition to royalty payments on future sales, we are also 108 Table of Contents required to pay up to an aggregate of $23.0 million upon the achievement of certain milestones.
The payment obligations under the Lilly License Agreement are contingent upon future events, such as our achievement of specified milestones or generating product sales. In addition to royalty payments on future sales, we are also required to pay up to an aggregate of $23.0 million upon the achievement of certain milestones.
Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from macroeconomic events, such as the COVID-19 pandemic, the ongoing Russia-Ukraine conflict and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.
Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from macroeconomic events, such as the COVID-19 pandemic, the wars in Ukraine and Israel and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability.
This Annual Report on Form 10-K shall not constitute an offer to sell or 106 Table of Contents solicitation of an offer to buy the shares, nor shall there be any sale of the shares in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of such state or jurisdiction.
This Annual Report on Form 10-K shall not constitute an offer to sell or solicitation of an offer to buy the shares, nor shall there be any sale of the shares in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of such state or jurisdiction.
PDCO also granted a waiver for the treatment of CAH in patients less than one year of age. Beyond classic CAH, we believe tildacerfont has potential utility in polycystic ovary syndrome (PCOS), and in a range of diseases where the underlying biology supports a need to reduce excess secretion of or hyperresponsiveness to adrenocorticotropic hormone (ACTH).
PDCO also granted a waiver for the treatment of CAH in patients less than one year of age. Beyond classic CAH, we believe tildacerfont has potential utility in polycystic ovary syndrome (“PCOS”), and in a range of diseases where the underlying biology supports a need to reduce excess secretion of or hyperresponsiveness to adrenocorticotropic hormone (“ACTH”).
In March 2021, we entered into a First Amendment to Loan and Security Agreement (the First Amendment) which increased the aggregate principal amount of the Term Loan to $30.0 million, of which $20.0 million was immediately available under the first tranche (the First Tranche) and $10.0 million was available under the second tranche through December 31, 2022 (the Second Tranche) subject to the completion of certain clinical or financial milestones.
In March 2021, we entered into a First Amendment to Loan and Security Agreement (the “First Amendment”) which increased the aggregate principal amount of the Term Loan to $30.0 million, of which $20.0 million was immediately available under the first tranche (the “First Tranche”) and $10.0 million was available under the second tranche through December 31, 2022 (the “Second Tranche”) subject to the completion of certain clinical or financial milestones.
PCOS is a hormonal disorder common among females of reproductive age affecting nearly five million females in the United States and approximately 115 million 99 Table of Contents females worldwide. PCOS is characterized by elevated levels of androgens, cysts in the ovaries, and irregular periods.
PCOS is a hormonal disorder common among females of reproductive age affecting nearly five million females in the United States and approximately 115 million females worldwide. PCOS is characterized by elevated levels of androgens, cysts in the ovaries, and irregular periods.
The final payment is due on the maturity date and includes all outstanding principal plus accrued unpaid interest and an end of term payment totaling $0.3 million (the Supplemental Final Payment which is 6.0% of the original funded principal amount of the First Tranche).
The final payment is due on the Maturity Date and includes all outstanding principal plus accrued unpaid interest and an end of term payment totaling $0.3 million, which is 6.0% of the original funded principal amount of the First Tranche (the “Supplemental Final Payment”).
As of December 31, 2022, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.
As of December 31, 2023, we were unable to estimate the timing or likelihood of achieving these milestones or generating future product sales.
We believe that the following discussion addresses our most critical accounting estimates, which are 109 Table of Contents those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments.
The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.
The JOBS Act permits emerging growth companies to take advantage of an extended transition 113 Table of Contents period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies.
Under the terms of the agreement, we will receive an upfront payment of $15.0 million from Kaken and will be eligible to receive additional payments upon the achievement of future development and commercial milestones, as well as tiered double-digit royalties on net sales in Japan.
Under the terms of the Kaken License Agreement, we received an upfront payment of $15.0 million from Kaken in April 2023 and will be eligible to receive additional payments upon the achievement of future development and commercial milestones, as well as tiered double-digit royalties on net sales in Japan.
Pursuant to the First Amendment, the Term Loan will mature on January 1, 2026. In May 2022, we entered into a Second Amendment to Loan and Security Agreement (the Second Amendment) which amended the milestones for the Second Tranche, added a liquidity covenant for the Second Tranche and amended the interest and prepayment terms.
Pursuant to the First Amendment, the Term Loan will mature on January 1, 2026 (the “Maturity Date”). In May 2022, we entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”) which amended the milestones for the Second Tranche, added a liquidity covenant for the Second Tranche and amended the interest and prepayment terms.
As of December 31, 2022, we have not issued any shares of common stock under the Sales Agreement.
As of December 31, 2023, we have not issued any shares of common stock under the Sales Agreement.
Loan Agreement with Silicon Valley Bank (SVB) In September 2019, we entered into a Loan and Security Agreement, as subsequently amended (the Loan Agreement), with SVB providing for a term loan (the Term Loan) for an aggregate principal amount of $4.5 million.
Loan Agreement with Silicon Valley Bank In September 2019, we entered into a Loan and Security Agreement, as subsequently amended (the “Loan Agreement”), with SVB providing for a term loan (the “Term Loan”) for an aggregate principal amount of $4.5 million.
We have also granted to Kaken a right of first negotiation with respect to the development, manufacturing and commercialization of tildacerfont for CAH in China (including Hong Kong, Taiwan, and Macau), South Korea and other specified southeastern Asian countries, and for indications other than CAH.
We will retain all rights to tildacerfont in all other geographies. We have also granted to Kaken a right of first negotiation with respect to the development, manufacturing and commercialization of tildacerfont for CAH in China (including Hong Kong, Taiwan, and Macau), South Korea and other specified southeastern Asian countries, and for indications other than CAH.
The increase was primarily due to higher cash payments driven by increased clinical development activities associated with the progression of clinical trials of tildacerfont in adult classic CAH, pediatric classic CAH, and PCOS. Additionally, there were higher personnel-related payments driven by increased headcount and higher payments for increased professional services, including legal, finance and accounting.
There were higher cash payments driven by increased clinical development activities associated with the progression of clinical trials of tildacerfont in adult classic CAH, pediatric classic CAH, and PCOS. Additionally, there were higher personnel-related payments driven by increased headcount and higher payments for increased professional services, including legal, finance and accounting.
Material Agreements License Agreement with Eli Lilly and Company (Lilly) In May 2016, we entered into a license agreement (the Lilly License Agreement) with Lilly.
Material Agreements License Agreement with Eli Lilly and Company In May 2016, we entered into a license agreement (the “Lilly License Agreement”) with Eli Lilly and Company (“Lilly”).
In February 2022, the U.S. Securities and Exchange Commission (SEC) declared effective a registration statement on Form S-3 (the Shelf Registration), covering the sale of up to $200.0 million of our securities.
In February 2022, the U.S. Securities and Exchange Commission (SEC”) declared effective a registration statement on Form S-3 (the “Shelf Registration”), covering the sale of up to $200.0 million of our securities.
By leveraging our existing Phase 1 program, which includes safety, tolerability, and pharmacokinetics of tildacerfont, we have initiated P.O.W.E.R., a Phase 2 proof-of-concept, placebo-controlled, dose escalation trial which will evaluate the safety and efficacy of tildacerfont titrated to 200 mg QD compared to placebo at 12 weeks of treatment in subjects with PCOS and elevated adrenal androgens as measured by dehydroepiandrosterone sulfate (DHEAS) levels at baseline.
By leveraging our existing Phase 1 program, which includes safety, tolerability, and pharmacokinetics of tildacerfont, we initiated and completed POWER, a Phase 2 proof-of-concept, placebo-controlled, dose escalation trial which will evaluate the safety and efficacy of tildacerfont titrated to 200 mg QD compared to placebo at 12 weeks of treatment in subjects with PCOS and elevated adrenal androgens as measured by dehydroepiandrosterone sulfate (“DHEAS”) levels at baseline.
For example, on March 10, 2023, the Federal Deposit Insurance Corporation (FDIC) took control and was appointed receiver of Silicon Valley Bank (SVB).
For example, on March 10, 2023, the Federal Deposit Insurance Corporation (“FDIC”) took control and was appointed receiver of Silicon Valley Bank (“SVB”).
Material Cash Requirements As of December 31, 2022, future payments of principal and interest on the Term Loan, which commenced repayment in January 2023 and matures in January 2026, were $5.6 million.
Material Cash Requirements As of December 31, 2023, future payments of principal and interest on the Term Loan, which commenced repayment in January 2023 and matures in January 2026, were $3.7 million.
Kaken’s obligation to pay royalties will 102 Table of Contents continue for ten years after the first commercial sale in Japan or, if later, until the expiration of regulatory exclusivity of tildacerfont or the expiration of the last valid claim of a Company-licensed patent covering tildacerfont in Japan (the Royalty Term).
Kaken’s obligation to pay royalties will continue for ten years after the first commercial sale in Japan or, if later, until the expiration of regulatory exclusivity of tildacerfont or the expiration of the last valid claim of a Company-licensed patent covering tildacerfont in Japan (the “Royalty Term”).
We are subject to customary affirmative and restrictive covenants under the Loan Agreement. Our obligations under the Loan Agreement are secured by a first priority security interest in substantially all of our current and future assets, other than intellectual property.
We are subject to customary affirmative and restrictive covenants under the Loan Agreement. Our obligations under the Loan Agreement are secured by a first priority security interest in substantially all of our current and future assets, other than intellectual property. We also agreed not to encumber our intellectual property assets, except as permitted by the Loan Agreement.
Cash Used in Investing Activities For the year ended December 31, 2022, cash provided by investing activities was $23.7 million, consisting primarily of proceeds from maturities of available for sale securities of $60.5 million offset by purchases of available for sale securities of $36.8 million.
For the year ended December 31, 2022, cash provided by investing activities was $23.7 million, consisting primarily of proceeds from maturities of investments of $60.5 million offset by purchases of investments of $36.8 million.
As of December 31, 2022 and 2021, we had an accumulated deficit of $149.3 million and $103.1 million, respectively, and we do not expect positive cash flows from operations for the foreseeable future.
As of December 31, 2023 and 2022, we had an accumulated deficit of $197.2 million and $149.3 million, respectively, and we do not expect positive cash flows from operations for the foreseeable future.
For a description of the terms of the Loan Agreement, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Material Agreements — Loan Agreement" above. As of December 31, 2022, the total lease liability for our non-cancelable operating lease for office space, which terminates in February 2028 unless renewed, was $1.7 million.
For a description of the terms of the Loan Agreement, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Material Agreements — Loan Agreement" above. 111 Table of Contents As of December 31, 2023, the total undiscounted lease payments for our non-cancelable operating lease for office space, which terminates in February 2028 unless renewed, was $1.5 million.
We believe, based on our current operating plan, that our cash, cash equivalents and investments as of December 31, 2022, along with proceeds received from the February 2023 private placement, will be sufficient to fund our operations and debt obligations for at least 12 months following the issuance date of our financial statements included elsewhere in this Annual Report.
We believe, based on our current operating plan, that our cash and cash equivalents as of December 31, 2023 will be sufficient to fund our operations and debt obligations for at least 12 months following the issuance date of our financial statements included elsewhere in this Annual Report.
We have initiated CAHptain, a Phase 2 open-label clinical trial, which will utilize a sequential three cohort design, to evaluate the safety, efficacy, and pharmacokinetics of tildacerfont in children two to 17 years of age with classic CAH.
We initiated CAHptain, a Phase 2 open-label clinical trial, which will utilize a sequential three cohort design, to evaluate the safety, efficacy, and pharmacokinetics of tildacerfont in children two to 17 years of age with classic CAH. The clinical trial enrolled 30 patients and we reported topline results in March 2024.
Since inception through December 31, 2022, we have raised aggregate gross proceeds of $224.5 million, including $103.5 million from our IPO in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock and $5.0 million from the issuance of debt. In February 2023, we raised aggregated gross proceeds of $53.6 million in a private placement financing.
Since inception through December 31, 2023, we have raised aggregate gross proceeds of $293.1 million, including $103.5 million from our IPO in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $5.0 million from the issuance of debt, $53.6 million from a private placement financing in February 2023, and the $15.0 million upfront payment from Kaken received in April 2023.
Since inception through December 31, 2022, we have raised aggregate gross proceeds of $224.5 million, including $103.5 million from our IPO in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, and $5.0 million from the issuance of debt. In February 2023, we raised aggregated gross proceeds of $53.6 million in a private placement financing.
Since inception through December 31, 2023, we have raised aggregate gross proceeds of $293.1 million, including $103.5 million from our IPO in October 2020, $116.0 million from the sale of our redeemable convertible preferred stock, $5.0 million from the issuance of debt, $53.6 million from a private placement financing in February 2023, and $15.0 million from the Kaken upfront payment received in April 2023.
We may seek to raise capital through equity or debt financings, collaborative agreements or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all.
We may seek to raise capital through equity or debt financings, collaborative agreements, potentially including agreements to out-license rights to develop and commercialize tildacerfont, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all.
(Kaken) entered into an exclusive licensing agreement for the development and commercialization of tildacerfont for the treatment of CAH in Japan.
(“Kaken”) entered into an exclusive licensing agreement for the development and commercialization of tildacerfont for the treatment of CAH in Japan (the “Kaken License Agreement”).
Upon such expiration, the license granted to us with respect to such country shall become fully paid-up, royalty-free, perpetual and irrevocable. In addition, the Lilly Royalties may be reduced upon the occurrence of certain events. License Agreement with Kaken Pharmaceutical Co. Ltd.
Upon such expiration, the license granted to us with respect to such country shall become fully paid-up, royalty-free, perpetual and irrevocable. In addition, the Lilly Royalties may be reduced upon the occurrence of certain events. License Agreement with Kaken On January 5, 2023, we entered into the Kaken License Agreement with Kaken.
We also agreed not to encumber our intellectual property assets, except as permitted by the Loan Agreement. 103 Table of Contents The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain obligations under the Loan Agreement and the occurrence of a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral.
The Loan Agreement also contains customary indemnification obligations and customary events of default, including, among other things, our failure to fulfill certain obligations under the Loan Agreement and the occurrence of a material adverse change in our business, operations, or condition (financial or otherwise), a material impairment of the prospect of repayment of any portion of the loan, or a material impairment in the perfection or priority of lender’s lien in the collateral or in the value of such collateral.
We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of tildacerfont. Since inception, we have incurred significant losses and negative cash flows from operations.
We believe that this strategy allows us to maintain a more efficient infrastructure by 103 Table of Contents eliminating the need for us to invest in our own manufacturing facilities, equipment, and personnel while also enabling us to focus our expertise and resources on the development of tildacerfont.
We anticipate topline results from the Phase 2 proof-of-concept clinical trial in the first half of 2023. Since our inception in November 2014, we have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of, and manufacturing development for, our product candidate, tildacerfont.
Since our inception in November 2014, we have focused primarily on raising capital, establishing and protecting our intellectual property portfolio, organizing and staffing our company, business planning, and conducting preclinical and clinical development of, and manufacturing development for, our product candidate, tildacerfont.
We may instruct Jefferies to not sell the shares if the sales cannot be transacted at or above the price we designate in any issuance notice. We are not obligated to make any sales of the shares under the Sales Agreement. As of December 31, 2022, we have not issued any shares of common stock pursuant to the Sales Agreement.
We may instruct Jefferies to not sell the shares if the sales cannot be transacted at or above the price we designate in any issuance notice. We are not obligated to make any sales of the 109 Table of Contents shares under the Sales Agreement.
As of December 31, 2022 and 2021, we had cash, cash equivalents and investments of $79.1 million and $121.4 million, respectively.
As of December 31, 2023, we had cash and cash equivalents of $96.3 million. As of December 31, 2022, we had cash, cash equivalents and investments of $79.1 million.
Pursuant to the Kaken License Agreement, Kaken is required to make an upfront payment to us of $15.0 million.
Pursuant to the Kaken License Agreement, Kaken made an upfront payment to us of $15.0 million in April 2023.
The overall increase in research and development expenses was primarily related to an increase in clinical development activities associated with the progression of clinical trials of tildacerfont in adult classic CAH, pediatric classic CAH, and PCOS, partially offset by decreases in preclinical studies and manufacturing.
The overall increase in research and development expenses was primarily related to the progression of clinical trials of tildacerfont in adult classic CAH, pediatric classic CAH, and PCOS.
We will continue to require additional capital to develop tildacerfont and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses.
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our clinical development programs, and to a lesser extent, general and administrative expenses.
Funding Requirements To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize tildacerfont or any future product candidates, and we do not know when, or if at all, that will occur.
We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize tildacerfont or any future product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop tildacerfont and fund operations for the foreseeable future.
During the years ended December 31, 2022 and 2021, we incurred net losses of $46.2 million and $42.3 million, respectively, and used $41.7 million and $35.9 million of cash in operations, respectively.
Since inception, we have incurred significant losses and negative cash flows from operations. During the years ended December 31, 2023 and 2022, we incurred net losses of $47.9 million and $46.2 million, respectively, and used $33.3 million and $41.7 million of cash in operations, respectively.
We expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company, as we advance tildacerfont through clinical development and regulatory approval. 104 Table of Contents Interest Expense Interest expense consists of interest incurred and non-cash amortization of debt discount and issuance costs in connection with the Term Loan.
We expect that our general and administrative expenses will continue to increase in the foreseeable future as additional administrative personnel and services are required to manage these functions of a public company, and as we advance tildacerfont through clinical development and potential regulatory approval.
We believe, based on our current operating plan, that our cash, cash equivalents and investments as of December 31, 2022, along with proceeds received from the February 2023 private placement and the $15.0 million 100 Table of Contents upfront payment due to us under the Kaken License Agreement, will be sufficient to fund our operations and debt obligations for at least 12 months following the issuance date of our financial statements included elsewhere in this Annual Report.
We believe, based on our current operating plan, that our cash and cash equivalents as of December 31, 2023 will be sufficient to fund our operations and debt obligations for at least 12 months following the issuance date of our financial statements included elsewhere in this Annual Report.
Payments associated with licensing agreements to acquire exclusive licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternate commercial use are expensed as incurred. JOBS Act We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act).
Payments associated with licensing agreements to acquire exclusive licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternate commercial use are expensed as incurred.
The increase was primarily due to a $0.8 million gain on the termination of the Daly City lease in December 2022 and higher yield earned on investment balances in 2022. Liquidity and Capital Resources Liquidity Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations.
The increase was primarily due to higher yield earned on investment balances in 2023. Liquidity and Capital Resources Liquidity Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations. We anticipate that we will continue to incur net losses for the foreseeable future.
Interest Expense Interest expense increased by $0.1 million during the year ended December 31, 2022 compared to the year ended December 31, 2021 and was related to higher interest on the Term Loan in 2022. 105 Table of Contents Interest and Other Income, Net Interest and other income, net increased by $1.4 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Interest Expense Interest expense was fairly consistent during the year ended December 31, 2023 compared to the year ended December 31, 2022 and was related to the Term Loan. Interest and Other Income, Net Interest and other income, net increased by $3.0 million during the year ended December 31, 2023 compared to the year ended December 31, 2022.
The shares will be sold pursuant to the Shelf Registration, and offerings of the shares will be made only by means of the prospectus supplement.
We have also agreed to provide Jefferies with customary indemnification and contribution rights. The shares will be sold pursuant to the Shelf Registration, and offerings of the shares will be made only by means of the prospectus supplement.
Preclinical expenses decreased due to the completion of certain trials, while manufacturing expenses decreased due to the timing of planned manufacturing activities related to clinical drug supply. There was also an increase in personnel expenses attributable to an increase in headcount.
There was also an increase in personnel expenses attributable to an increase in headcount, an increase in manufacturing expenses due to timing of planned manufacturing activities related to clinical drug supply and an increase in other research and development to support clinical development operations.
We have agreed to pay Jefferies commissions for its services of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Sales Agreement. We have also agreed to provide Jefferies with customary indemnification and contribution rights.
As of December 31, 2023, we have not issued any shares of common stock pursuant to the Sales Agreement. We have agreed to pay Jefferies commissions for its services of acting as agent of 3.0% of the gross proceeds from the sale of the shares pursuant to the Sales Agreement.
As of December 31, 2022, management believes that we are in compliance with all covenants under the Loan Agreement and there has been no material adverse change. Components of Results of Operations Operating Expenses We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.
As of December 31, 2023, management believes that we are in compliance with all covenants under the Loan Agreement and there has been no material adverse change.
Summary Statements of Cash Flows The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods presented below (in thousands): Year Ended December 31, 2022 2021 Change Net cash used in operating activities $ (41,683 ) $ (35,877 ) $ (5,806 ) Net cash provided by (used in) investing activities 23,692 (79,168 ) 102,860 Net cash provided by (used in) financing activities (241 ) 643 (884 ) Net decrease in cash, cash equivalents, and restricted cash $ (18,232 ) $ (114,402 ) $ 96,170 Cash Used in Operating Activities Net cash used in operating activities increased by $5.8 million during the year ended December 31, 2022 compared to the year ended December 31, 2021.
Summary Statements of Cash Flows The following table sets forth the primary sources and uses of cash, cash equivalents, and restricted cash for the periods presented below (in thousands): Year Ended December 31, 2023 2022 Change Net cash used in operating activities $ (33,275 ) $ (41,683 ) $ 8,408 Net cash provided by investing activities 55,777 23,692 32,085 Net cash provided by (used in) financing activities 49,140 (241 ) 49,381 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 71,642 $ (18,232 ) $ 89,874 Cash Used in Operating Activities Net cash used in operating activities decreased by $8.4 million during the year ended December 31, 2023 compared to the year ended December 31, 2023.
To date, these expenses have been incurred to advance tildacerfont. These expenses will primarily consist of expenses for the conduct of clinical trials as well as manufacturing costs for clinical material supply. We expect that significant additional spending will be required to progress tildacerfont through clinical development and regulatory approval.
To date, these expenses have been incurred to advance tildacerfont. These expenses will primarily consist of expenses for the conduct of clinical trials as well as manufacturing costs for clinical drug supply.
If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on our business and financial condition. 101 Table of Contents The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted; however, any continued or renewed disruption resulting from these factors could negatively impact our business.
We have identified a subpopulation of patients where elevated levels of adrenal androgens are the cause of disease. We believe that tildacerfont may present a novel mechanism to reduce ACTH and provide a therapeutic option for females with PCOS.
We believe that tildacerfont may present a novel mechanism to reduce ACTH and provide a therapeutic option for females with PCOS.
The Term Loan is subject to a floating per annum interest rate equal to the greater of (a) 0.50% above the Prime Rate (as defined in the Loan Agreement) or (b) 3.75%.
The Loan Agreement provided for monthly cash interest-only payments following the funding date of each respective tranche and continuing thereafter through December 31, 2022. The Term Loan is subject to a floating per annum interest rate equal to the greater of (a) 0.50% above the Prime Rate (as defined in the Loan Agreement) or (b) 3.75%.
We have agreed to supply Kaken’s clinical drug supply requirements of tildacerfont pursuant to a clinical supply agreement that the parties will enter into within ninety days of the effective date of the Kaken License Agreement.
We have agreed to supply Kaken’s clinical drug supply requirements of tildacerfont pursuant to a clinical supply agreement that the parties plan to consummate.
(Kaken) On January 5, 2023, we entered into a Collaboration and License Agreement (the Kaken License Agreement) with Kaken. Under the terms of the Kaken License Agreement, we granted to Kaken the exclusive right to develop, manufacture and commercialize our product candidate, tildacerfont, for the treatment of CAH in Japan.
Under the terms of the Kaken License Agreement, we granted to Kaken the exclusive right to develop, manufacture and commercialize our product candidate, tildacerfont, for the treatment of CAH in Japan. Pursuant to the Kaken License Agreement, Kaken will be responsible for securing and maintaining regulatory approvals necessary to commercialize tildacerfont in Japan.
Cash Provided by Financing Activities For the year ended December 31, 2022, cash used in financing activities was $0.2 million, consisting primarily of payments of deferred offering costs offset by proceeds received from issuance of shares pursuant to our employee stock purchase plan.
For the year ended December 31, 2022, cash used in financing activities was $0.2 million, consisting primarily of payments of deferred offering costs offset by proceeds received from issuance of shares pursuant to our employee stock purchase plan. 112 Table of Contents Segments We operate and manage our business as one operating segment, which is the business of developing and commercializing novel therapies for rare endocrine disorders with significant unmet medical need.
Research and development expenses are recognized as they are incurred, including licenses of intellectual property that have no alternative future use at the time of the acquisition.
We expect that significant additional spending will be required to progress tildacerfont through clinical development and potential regulatory approval. 107 Table of Contents Research and development expenses are recognized as they are incurred, including licenses of intellectual property that have no alternative future use at the time of the acquisition.
In addition to the COVID-19 pandemic, global economic and business activities continue to face widespread macroeconomic uncertaintie s, including recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, labor shortages, inflation and monetary supply shifts, recession risks and potential disruptions from the ongoing Russia-Ukraine conflict and related sanctions.
During the three months ended June 30, 2023, all of the pre-funded warrants were exercised for 800,000 shares of common stock. 104 Table of Contents Global economic and business activities continue to face widespread macroeconomic uncertainties, including recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, labor shortages, inflation and monetary supply shifts, recession risks and potential disruptions from the ongoing wars in Ukraine and Israel and related sanctions.
Segments We operate and manage our business as one operating segment, which is the business of developing and commercializing novel therapies for rare endocrine disorders with significant unmet medical need. Critical Accounting Policies and Estimates Our accounting policies are more fully described in Note 2 of the financial statements to this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates Our accounting policies are more fully described in Note 2 of the financial statements to this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qu alitative Disclosures About Market Risk. Interest Rate Risk Our cash, cash equivalents and investments as of December 31, 2022 consisted of $79.1 million in bank deposits, money market funds, U.S. treasury securities and corporate bonds. Such interest-earning instruments carry a degree of interest rate risk.
Biggest changeItem 7A. Quantitative and Qu alitative Disclosures About Market Risk. Interest Rate Risk Our cash and cash equivalents as of December 31, 2023 consisted of $96.3 million in bank deposits and money market funds. Previously, we have held U.S treasury securities and corporate bonds. Such interest-earning instruments carry a degree of interest rate risk.
While we believe our cash, cash equivalents and investments do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. Additionally, the interest rate for our Term Loan is variable.
While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. Additionally, the interest rate for our Term Loan is variable.
As of December 31, 2022 and 2021, a hypothetical 1% change in interest rates would not have had a material effect on our financial statements. We do not currently engage in hedging transactions to manage our exposure to interest rate risk. Foreign Currency Exchange Risk Our operations include activities in the United States.
As of December 31, 2023 and 2022, a hypothetical 1% change in interest rates would not have had a material effect on our financial statements. We do not currently engage in hedging transactions to manage our exposure to interest rate risk. Foreign Currency Exchange Risk Our operations include activities in the United States.
While we are seeing, and expect to continue to see, record inflation due to, among other things, the COVID-19 pandemic and other geopolitical and macroeconomic events, such as the ongoing military conflict between Ukraine and Russia and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, as of December 31, 2022, we do not expect anticipated changes in inflation to have a material effect on our business, financial condition or results of operations for future reporting periods. 111 Table of Contents
While we are seeing, and expect to continue to see, record inflation due to, among other things, the COVID-19 pandemic and other geopolitical and macroeconomic events, such as the ongoing military conflict between Ukraine and Russia and related sanctions, and recent and potential future disruptions in access to bank deposits or lending commitments due to bank failures, as of December 31, 2023, we do not expect anticipated changes in inflation to have a material effect on our business, financial condition or results of operations for future reporting periods. 115 Table of Contents

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