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What changed in PALISADE BIO, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of PALISADE BIO, INC.'s 2024 and 2025 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 2025 report.

+468 added−383 removedSource: 10-K (2025-12-31) vs 10-K (2024-12-31)

Top changes in PALISADE BIO, INC.'s 2025 10-K

468 paragraphs added · 383 removed · 246 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

119 edited+91 added−63 removed203 unchanged
Biggest changeIn addition, the ACA codified case law 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 FCA; • The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, therapeutic products and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the CMS, information related to payments and other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members; • Health Insurance Portability and Accountability Act of 1996 ("HIPAA") prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud or to 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, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery or payment for health care benefits, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
Biggest changeAnalogous state laws addressing these topics may also affect our arrangements; • Health Insurance Portability and Accountability Act of 1996 ("HIPAA") prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or 22 fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, a healthcare benefit program, regardless of whether the payor is public or private, in connection with the delivery or payment for health care benefits, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing, or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters.
The process required by the FDA before a new drug product candidate may be marketed in the U.S. generally involves the following: • Completion of preclinical laboratory tests and in vivo studies in accordance with the FDA’s Good Laboratory Practice ("GLP") regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations; • Submission to the FDA of an IND application, which allows human clinical trials to begin unless FDA objects (issues a “clinical hold”) within 30 calendar days; • Approval by an independent institutional review board ("IRB"), reviewing each proposed clinical trial and clinical site before each clinical trial may be initiated; • Performance of adequate and well-controlled human clinical trials in accordance with the protocol contained in the approved IND and in accordance with the FDA’s Good Clinical Practice ("GCP") regulations, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed product candidate for its intended use; • Preparation and submission to the FDA of an NDA for marketing approval that includes substantial evidence of safety and efficacy from results of preclinical testing and clinical trials; • Review of the product by an FDA advisory committee, if applicable; • Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the product candidate is produced to assess compliance with cGMP regulations and to assure that the facilities, methods and controls are adequate to preserve the product candidate’s identity, safety, strength, quality, potency and purity; • Potential FDA audit of the preclinical and clinical trial sites that generated the data supporting the NDA; and, • Payment of user fees and FDA review and approval of the ND A.
The process required by the FDA before a new drug product candidate may be marketed in the U.S. generally involves the following: • Completion of preclinical laboratory tests and in vivo studies in accordance with the FDA’s Good Laboratory Practice ("GLP") regulations and applicable requirements for the humane use of laboratory animals or other applicable regulations; • Submission to the FDA of an IND application, which allows human clinical trials to begin unless FDA objects (issues a “clinical hold”) within 30 calendar days; • Approval by an independent institutional review board ("IRB"), reviewing each proposed clinical trial and clinical site before each clinical trial may be initiated; • Performance of adequate and well-controlled human clinical trials in accordance with the protocol contained in the approved IND and in accordance with the FDA’s Good Clinical Practice ("GCP") regulations, and any additional requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed product candidate for its intended use; • Preparation and submission to the FDA of an new drug application ("NDA") for marketing approval that includes substantial evidence of safety and efficacy from results of preclinical testing and clinical trials; • Review of the product by an FDA advisory committee, if applicable; • Satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the product candidate is produced to assess compliance with cGMP regulations and to assure that the facilities, methods and controls are adequate to preserve the product candidate’s identity, safety, strength, quality, potency and purity; • Potential FDA audit of the preclinical and clinical trial sites that generated the data supporting the NDA; and, • Payment of user fees and FDA review and approval of the ND A.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted, to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted, to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, "the ACA") amended the intent requirement of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to commit a violation; • The federal civil and criminal false claims, including the civil FCA, and Civil Monetary Penalties Laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent, or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "ACA") amended the intent requirement of the federal Anti-Kickback Statute such that a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to commit a violation; • The federal civil and criminal false claims, including the civil False Claims Act ("FCA"), and Civil Monetary Penalties Laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent, or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.
The CVR entitled the holder (the “CVR Holder”) to receive, pro rata with the other CVR Holders, 80% of the net proceeds, if any and subject to certain minimum distribution limitations (“CVR Payment Amount”), received from the sale or licensing of the intellectual property owned, licensed or controlled by Seneca immediately prior to the closing of the Merger (the “Legacy Technology”); provided however that the CVR Holders are only entitled to receive such CVR Payment Amount if the sale or licensing of such Legacy Technology occurred on or before October 27, 2022 (“Legacy Monetization”).
The CVR entitled the holder (the “CVR Holder”) to receive, pro rata with the other CVR Holders, 80% of the net proceeds, if any and subject to certain minimum distribution limitations (“CVR Payment Amount”), received from the sale or licensing of the intellectual property owned, licensed or controlled by Seneca immediately prior to the closing of the Seneca Merger (the “Legacy Technology”); provided however that the CVR Holders are only entitled to receive such CVR Payment Amount if the sale or licensing of such Legacy Technology occurred on or before October 27, 2022 (“Legacy Monetization”).
Upon the enrollment of a patient in a Phase 3 clinical trial of ALTO-100, if it occurs, a milestone payment of $1.5 million will be due from Alto to us under the ATA.
Upon the enrollment of a patient in a Phase 3 clinical trial of ALTO-100, if it occurs, a milestone payment of $1.5 million will be due to us from Alto under the ATA.
In October of 2019, Neuralstem, Inc. changed its name to Seneca Biopharma, Inc. In April of 2021, we effected the Merger, whereby LBS became a wholly owned subsidiary of Seneca. In April of 2021, we changed our name from Seneca Biopharma, Inc. to Palisade Bio, Inc.
In October of 2019, Neuralstem, Inc. changed its name to Seneca Biopharma, Inc. In April of 2021, we effected the Seneca Merger, whereby LBS became a wholly owned subsidiary of Seneca. In April of 2021, we changed our name from Seneca Biopharma, Inc. to Palisade Bio, Inc.
Additionally, the ACA amended the intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation; and • State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and drug pricing and/or marketing expenditures; and state and local laws requiring the registration of pharmaceutical sales representatives and state laws governing the privacy and security of health information in certain circumstances, many of 21 which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Additionally, the ACA amended the intent requirement of certain of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation; and • State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and drug pricing and/or marketing expenditures; and state and local laws requiring the registration of pharmaceutical sales representatives and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
These organizations are responsible for various stages of drug development and manufacturing, including but not limited to: • API Production: High-quality synthesis of active ingredients under stringent regulatory standards. • Formulation Development: Design and development of stable and effective drug formulations suitable for clinical trials. • Clinical Trial Material Manufacturing: Production of investigational medicinal products in compliance with current Good Manufacturing Practice ("cGMP") regulations for use in clinical trials. • Packaging and Labeling: Secure and compliant packaging and labeling solutions for clinical trial materials, ensuring patient safety and regulatory adherence. • Quality Control and Assurance: Comprehensive testing and validation processes to ensure the safety, efficacy, and quality of the clinical supplies.
These organizations are responsible for various stages of drug development and manufacturing, including but not limited to: • API Production: High-quality synthesis of active ingredients under stringent regulatory standards. • Formulation Development: Design and development of stable and effective drug formulations suitable for clinical trials. 9 • Clinical Trial Material Manufacturing: Production of investigational medicinal products in compliance with current Good Manufacturing Practice ("cGMP") regulations for use in clinical trials. • Packaging and Labeling: Secure and compliant packaging and labeling solutions for clinical trial materials, ensuring patient safety and regulatory adherence. • Quality Control and Assurance: Comprehensive testing and validation processes to ensure the safety, efficacy, and quality of the clinical supplies.
Furthermore, applicable data protection laws, privacy policies and data protection obligations may require us to notify relevant stakeholders of security breaches, including affected individuals, customers, and regulators. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could result in a material adverse impact, including without limitation, regulatory investigations or enforcement actions. 26 Additional U.S.
Furthermore, applicable data protection laws, privacy policies and data protection obligations may require us to notify relevant stakeholders of security breaches, including affected individuals, customers, and regulators. Such disclosures are costly, and the disclosure or the failure to comply with such requirements could result in a material adverse impact, including without limitation, regulatory investigations or enforcement actions. Additional U.S.
For example, HIPAA, as amended by HITECH, and its implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information on certain health care providers, 24 health plans and health care clearinghouses, known as covered entities, as well as their business associates and covered subcontractors that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities.
For example, HIPAA, as amended by HITECH, and its implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information on certain health care providers, health plans and health care clearinghouses, known as covered entities, as well as their business associates and covered subcontractors that perform certain services that involve creating, receiving, maintaining or transmitting individually identifiable health information for or on behalf of such covered entities.
On October 22, 2021, Alto Neuroscience ("Alto") agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an asset transfer agreement ("ATA"). Alto is a U.S. based public, clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options.
On October 22, 2021, Alto Neuroscience ("Alto") agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an asset transfer agreement ("ATA"). 30 Alto is a U.S. based public, clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options.
Pursuant to the Newsoara Co-Development Agreement (and subsequent assignment agreement), LBS granted or licensed Newsoara an exclusive right under certain patents to develop, use, sell, offer to sell, import, and otherwise commercialize 8 licensed products (the “Newsoara Licensed Products”) for any and all indications in the People’s Republic of China, including the regions of Hong Kong and Macao, but excluding Taiwan (the “Territory”).
Pursuant to the Newsoara Co-Development Agreement (and subsequent assignment agreement), LBS granted or licensed Newsoara an exclusive right under certain patents to develop, use, sell, offer to sell, import, and otherwise commercialize licensed products (the “Newsoara Licensed Products”) for any and all indications in the People’s Republic of China, including the regions of Hong Kong and Macao, but excluding Taiwan (the “Territory”).
All employees are eligible for medical, dental, and vision insurance, paid and unpaid leaves, group life and personal accident insurance coverage as well as the option to participate in our 401(k) plan and supplemental group life and short-term disability coverage. Corporate Information The registrant was originally incorporated in 2001 in the State of Delaware under the name Neuralstem, Inc.
All employees are eligible for medical, dental, and vision insurance, paid and unpaid leaves, group life and personal accident insurance coverage as well as the option to participate in our 401(k) plan and supplemental group life and short-term disability coverage. 31 Corporate Information The registrant was originally incorporated in 2001 in the State of Delaware under the name Neuralstem, Inc.
It is illegal to pay, offer to pay or authorize the payment of anything of value, directly or indirectly, to any foreign government official, government staff member, official or employee of a public international organization, or a political party or political candidate for the purpose of influencing any act or decision of the foreign entity in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.
It is illegal to pay, offer to pay or authorize the payment of anything of value, directly or indirectly, to any foreign government official, government staff member, official or employee of a public international organization, or a political party or political candidate for the purpose of influencing any act or decision of the foreign entity in an attempt to obtain or 28 retain business or to otherwise influence a person working in an official capacity.
Post-Approval Requirements After approval, there also are continuing annual program user fee requirements for approved products, excluding, under certain circumstances, orphan products. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to cGMP regulations. Manufacturers are required to comply with applicable cGMP regulations, including quality control and quality assurance and maintenance of records and documentation.
Post-Approval Requirements After approval, there are continuing annual program user fee requirements for approved products, excluding, under certain circumstances, orphan products. Rigorous and extensive FDA regulation of pharmaceutical products continues after approval, particularly with respect to cGMP regulations. Manufacturers are required to comply with applicable cGMP regulations, including quality control and quality assurance and maintenance of records and documentation.
Investigational drugs and active pharmaceutical ingredients imported into Canada are also subject to regulation by Health Canada relating to their labeling and distribution. Progress reports detailing the results of the clinical trials must be submitted at least annually to Health Canada and the applicable REBs, and more frequently if serious adverse events occur.
Investigational drugs and active pharmaceutical ingredients imported into Canada are also subject to regulation by 29 Health Canada relating to their labeling and distribution. Progress reports detailing the results of the clinical trials must be submitted at least annually to Health Canada and the applicable REBs, and more frequently if serious adverse events occur.
If we elect to rely on the standard contractual clauses for data transfers, we may be required to incur significant time and resources to update our contractual arrangements and to comply with new obligations. Additionally, on September 8, 2020, the Swiss Data Protection Authority (the Federal Data Protection and Information Commissioner) concluded that the Swiss-U.S.
If we elect to rely on the standard contractual clauses for 27 data transfers, we may be required to incur significant time and resources to update our contractual arrangements and to comply with new obligations. Additionally, on September 8, 2020, the Swiss Data Protection Authority (the Federal Data Protection and Information Commissioner) concluded that the Swiss-U.S.
Before approving an NDA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate if it determines that the manufacturing processes and facilities are not in compliance with cGMP regulations or otherwise are not adequate to assure consistent production of the product 15 candidate within required specifications.
Before approving an NDA, the FDA will inspect the facilities at which the product candidate is manufactured. The FDA will not approve the product candidate if it determines that the manufacturing processes and facilities are not in compliance with cGMP regulations or otherwise are not adequate to assure consistent production of the product candidate within required specifications.
Similar regulations apply in Canada to a CTA as to an IND in the United States. If the CTA is deemed by Health Canada to be acceptable, a No 27 Objection Letter is issued. A Not Satisfactory Notice will be issued by Health Canada if significant deficiencies are identified or if timely responses to information requested have not been received.
Similar regulations apply in Canada to a CTA as to an IND in the United States. If the CTA is deemed by Health Canada to be acceptable, a No Objection Letter is issued. A Not Satisfactory Notice will be issued by Health Canada if significant deficiencies are identified or if timely responses to information requested have not been received.
Subsidiaries We two wholly owned subsidiaries, Suzhou Neuralstem Biopharmaceutical Co., Ltd. ("Suzhou"), organized under the laws of the People’s Republic of China, and LBS. Suzhou was established by Seneca to sponsor the non-GDP Phase 2 clinical trial of NSI-566 that was conducted between 2013 and 2016 in Beijing, China.
Subsidiaries We have two wholly owned subsidiaries, Suzhou Neuralstem Biopharmaceutical Co., Ltd. ("Suzhou"), organized under the laws of the People’s Republic of China, and LBS. Suzhou was established by Seneca to sponsor the non-GDP Phase 2 clinical trial of NSI-566 that was conducted between 2013 and 2016 in Beijing, China.
The local bioactivation of PALI-2108 prodrug is designed to prevent the systemic toxicity inherent with immunosuppression and avoid the known tolerability issues of PDE4 inhibitors. 5 PALI-2108 for FSCD Studies have shown that patients with intestinal fibrosis exhibit elevated PDE4 B and D enzyme levels in intestinal tissues.
The local bioactivation of PALI-2108 prodrug is designed to prevent the systemic toxicity inherent with immunosuppression and avoid the known tolerability issues of PDE4 inhibitors. PALI-2108 for FSCD Studies have shown that patients with intestinal fibrosis exhibit elevated PDE4 B and D enzyme levels in intestinal tissues.
Such studies are conducted in accordance with applicable laws and GLP. Initiation of Human Testing In Canada, the process of conducting human clinical with a new drug cannot begin until a CTA has been submitted, and the required number of days has lapsed without objection from Health Canada.
Such studies are conducted in accordance with applicable laws and GLP. Initiation of Human Testing In Canada, the process of conducting human clinical trials with a new drug cannot begin until a CTA has been submitted, and the required number of days has lapsed without objection from Health Canada.
Even when HIPAA does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5 of the FTC Act.
Even when HIPAA does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5 of the 26 FTC Act.
The issuance of a Written Request does not require the sponsor to undertake the described trials. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. Other U.S.
The issuance of a Written Request does not require the sponsor to undertake the described trials. This is not a patent 21 term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. Other U.S.
Also, preclinical research using a chronic DSS-induced mouse model of intestinal fibrosis shows similarly decreased PDE4 enzyme levels and demonstrated that systemic administration of PDE4 inhibitors improve clinical symptoms and reduce known biomarkers of fibrosis associated with FSCD.
Also, preclinical research using a chronic DSS-induced mouse model of intestinal fibrosis shows similarly decreased PDE4 enzyme levels and demonstrated that systemic administration of PDE4 inhibitors improve clinical 5 symptoms and reduce known biomarkers of fibrosis associated with FSCD.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other requirements, the sponsor must develop methods for testing the identity, strength, quality, 14 potency and purity of the final product.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other requirements, the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final product.
Written IND safety reports must be promptly submitted to the FDA and the investigators for: serious and unexpected adverse events; any findings from other studies, in vivo laboratory tests or in vitro testing that suggest a significant risk for human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
IND safety reports must be promptly submitted to the FDA and the investigators for: serious and unexpected adverse events; any findings from other studies, in vivo laboratory tests or in vitro testing that suggest a significant risk for 13 human subjects; or any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.
In addition, under the Pediatric Research Equity Act ("PREA"), an NDA for a new active ingredient, indication, dosage form, dosage regimen, or route of administration, must contain data that are adequate to assess the safety and potential of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe.
In addition, under the Pediatric Research Equity Act ("PREA"), an NDA for a new active ingredient, indication, dosage form, dosage regimen, or route of administration, must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe.
PDE4 inhibitors are a clinically and commercially proven dual-acting anti-inflammatory and anti-fibrotic candidate, offering a unique approach to addressing both the inflammatory and fibrotic components of CD. With its innovative mechanism of action, PALI-2108 has the potential to transform the lives of individuals suffering from FSCD by providing a less invasive and more effective treatment alternative.
PDE4 inhibitors are clinically and commercially proven dual-acting anti-inflammatory and anti-fibrotic agents, offering a unique approach to addressing both the inflammatory and fibrotic components of CD. With its innovative mechanism of action, PALI-2108 has the potential to transform the lives of individuals suffering from FSCD by providing a less invasive and more effective treatment alternative.
Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred from the EEA to U.S. entities who had self-certified under the 25 Privacy Shield scheme.
Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred from the EEA to U.S. entities who had self-certified under the Privacy Shield scheme.
Under the terms of the Giiant License Agreement, we obtained the rights to develop, manufacture, and commercialize all compounds from Giiant, existing now and in the future, and any product containing or delivering any licensed compound, in any formulation or dosage for all human and non-human therapeutic uses for any and all indications worldwide, including those technologies that are the basis of PALI-2108.
Pursuant to the terms of the Giiant License Agreement, we obtained the rights to develop, manufacture, and commercialize all compounds from Giiant, existing now and in the future, and any product containing or delivering any licensed compound, in any formulation or dosage for all human and non-human therapeutic uses for any and all indications worldwide, including those technologies that are the basis of PALI-2108.
Healthcare providers and third-party payors play a primary role in the recommendation and use of pharmaceutical 20 products that are granted marketing approval.
Healthcare providers and third-party payors play a primary role in the recommendation and use of pharmaceutical products that are granted marketing approval.
Concurrent with our decision to terminate the development of LB1148, on October 20, 2023 we terminated two of our license agreements with Regents. As of December 31, 2024, the only license agreement remaining with Regents is that entered into with LBS in August 2015, as amended in December 2019 and September 2022 (the “2015 UC License”).
Concurrent with our decision to terminate the development of LB1148, on October 20, 2023 we terminated two of our license agreements with Regents. As of December 31, 2025, the only license agreement remaining with Regents is that entered into with LBS in August 2015, as amended in December 2019 and September 2022 (the “2015 UC License”).
NSI-189 – Exclusive License and Subsequent Exercise of Purchase Option Prior to the Merger, Seneca exclusively licensed certain patents and technologies, including a sublicense covering a synthetic intermediate, of our NSI-189 assets (“189 License”), along with a purchase option through December 16, 2023 (“Purchase Option”).
NSI-189 – Exclusive License and Subsequent Exercise of Purchase Option Prior to the Seneca Merger, Seneca exclusively licensed certain patents and technologies, including a sublicense covering a synthetic intermediate, of Seneca's NSI-189 assets (“189 License”), along with a purchase option through December 16, 2023 (“Purchase Option”).
REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks.
REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the 15 product outweigh the potential risks.
The product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. • Phase 3.
The product candidate is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
Discovery of previously unknown problems or the failure to comply with the applicable regulatory 17 requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Discovery of previously unknown problems or the failure to comply with the applicable regulatory 18 requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions.
Government Regulation and Product Approval In the U.S., the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act ("FDCA"), the Provincial Health Services Authority ("PHSA"), and regulations and guidance documents implementing these laws.
Government Regulation and Product Approval In the U.S., the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act ("FDCA"), the Public Health Services Authority ("PHSA"), and regulations and guidance documents implementing these laws.
It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023, and become enforceable on July 1, 2023.
It also creates a new California data protection agency specifically tasked to enforce the law, which would likely result in increased regulatory scrutiny of California businesses in the areas of data protection and security. The substantive requirements for businesses subject to the CPRA went into effect on January 1, 2023.
On October 22, 2024, Alto announced that its Phase 2b study of ALTO-100 in patients with major depressive disorder (MDD) did not meet its primary endpoint. Notwithstanding, ALTO-100 is being evaluated as an adjunctive treatment in a Phase 2b study in bipolar depression with topline data expected in 2026.
On October 22, 2024, Alto announced that its Phase 2b study of ALTO-100 in patients with major depressive disorder (MDD) did not meet its primary endpoint. Notwithstanding, ALTO-100 is being evaluated as an adjunctive treatment in a Phase 2b study in bipolar depression with topline data expected in the second half of 2026.
We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. 30
We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. 32
In the case of some product candidates for severe or life-threatening diseases, especially when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients. • Phase 2.
In the case of some product candidates for severe or life-threatening diseases, especially when the product candidate may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients with the indicated disease. • Phase 2.
Based on our clinical research and development, we believe that PALI-2108 has the potential to address many of these areas of needed improvement. Strategic Agreements and Collaborations Giiant License Agreement On September 1, 2023, we entered into a research collaboration and license agreement (the “Giiant License Agreement”) with Giiant.
Based on our clinical research and development, we believe that PALI-2108 has the potential to address many of these areas of needed improvement. Strategic Agreements and Collaborations Research Collaboration and License Agreement with Giiant On September 1, 2023, we entered into a research collaboration and license agreement, as amended, with Giiant Pharma, Inc. ("Giiant") (the “Giiant License Agreement”).
In addition, Alto will be required to pay us up to an aggregate of $4.5 million upon the achievement of certain development and regulatory approval milestones for NSI-189 (or a product containing or otherwise derived from NSI-189), which is now known as ALTO-100.
Pursuant to the ATA, Alto will be required to pay us up to an aggregate of $4.5 million upon the achievement of certain development and regulatory approval milestones for NSI-189 (or a product containing or otherwise derived from NSI-189), which is now known as ALTO-100.
Pursuant to the terms of the Giiant License Agreement, preclinical development of PALI-2108 was jointly undertaken by us and representatives of Giiant. Pursuant to the Giiant License Agreement, we paid, or reimbursed or advanced to Giiant, a portion of the joint development costs.
In accordance with the terms of the Giiant License Agreement, preclinical development of PALI-2108 was jointly undertaken by us and representatives of Giiant. Pursuant to the Giiant License Agreement, we paid, or reimbursed or advanced to Giiant, a portion of the joint development costs.
The following table summarizes the current stages of our clinical and research programs: Our Precision Medicine Approach We are developing a biomarker-based patient selection approach that we believe may aid clinicians in identifying patients who may better respond to PALI-2108, thereby improving the rate of clinical response previously demonstrated with enzyme phosphodiesterase-4 (“PDE4”) inhibitors.
The following table summarizes the current stages of our clinical and research programs: Our Precision Medicine Approach We are developing a biomarker-based patient selection approach that we believe may aid clinicians in identifying patients who may better respond to PALI-2108, thereby improving the rate of clinical response previously demonstrated with PDE4 inhibitors.
A Fast Track product may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
The FDA may also review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept those sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.
The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs regulations. 12 Concurrent with clinical trials, companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP regulations.
Concurrent with clinical trials, companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP regulations.
If approved for the treatment of patients with moderate-to-severe IBD, our portfolio of products would compete with TNF antibodies including Humira (AbbVie), Remicade (Johnson & Johnson), and Simponi (Johnson & Johnson); IL-12/23 and IL-23 antibodies including Stelara (Johnson & Johnson) and Skyrizi (AbbVie); α4ß7 antibody Entyvio (Takeda); JAK inhibitors including Xeljanz (Pfizer), Rinvoq (AbbVie); and S1P1 receptor modulating therapies including Zeposia (Bristol Myers Squibb).
If approved for the treatment of patients with moderate-to-severe IBD, our portfolio of products would compete with TNF antibodies including Humira (AbbVie) and its biosimilars, Remicade (Johnson & Johnson) and its biosimilars, and Simponi (Johnson & Johnson); IL-12/23 antibodies including Stelara (Johnson & Johnson) and its biosimilars; IL-23 antibodies including Skyrizi (AbbVie), Tremfya (Johnson & Johnson) and Omvoh (Eli Lilly); α4ß7 antibody 10 Entyvio (Takeda); JAK inhibitors including Xeljanz (Pfizer) and Rinvoq (AbbVie); and S1P1 receptor modulating therapies including Zeposia (Bristol Myers Squibb) and Pelsipity (Pfizer).
We received no upfront fees for the license. NSI-532.IGF-1 is a pre-clinical cell therapy being investigated as a potential therapy for prevention and treatment of Alzheimer’s disease. The University of Michigan shall bear 100% of the costs for patent filing, prosecution, maintenance, and enforcement of the patent rights.
NSI-532.IGF-1 is a pre-clinical cell therapy being investigated as a potential therapy for prevention and treatment of Alzheimer’s disease. The University of Michigan shall bear 100% of the costs for patent filing, prosecution, maintenance, and enforcement of the patent rights.
We currently have an agreement with ThermoFisher Scientific to supply us with the Newsoara Licensed Product as required under the Newsoara Co-Development Agreement. The agreement with ThermoFisher Scientific is a non-specific master services agreement that allows us to alter the scope of services as needed.
We currently have an agreement with a third-party to supply us with the Newsoara Licensed Products as required under the Newsoara Co-Development Agreement. The agreement is a non-specific master services agreement that allows us to alter the scope of services as needed.
The FDCA, PHSA and their corresponding regulations govern, among other things, the testing, manufacturing, safety, purity, potency, labeling, packaging, storage, record keeping, distribution, reporting, advertising and other promotional practices involving pharmaceutical products. Consent from the FDA is required before conducting human clinical testing of drug products.
The FDCA, PHSA and their corresponding regulations govern, among other things, the development, testing, manufacturing, safety, effectiveness, purity, potency, labeling, packaging, storage, quality control, record keeping, distribution, post-approval monitoring and reporting, sampling, advertising and other promotional practices and export and import involving pharmaceutical products. Consent from the FDA is required before conducting human clinical testing of drug products.
Co-Development and Distribution Agreement with Newsoara LBS entered into a co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”).
Co-Development and Distribution Agreement with Newsoara Prior to the completion of the Seneca Merger, LBS entered into a co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”).
The Newsoara Licensed Products only include the drug asset referred to as LB1148. The right includes the right to grant sublicenses to third parties, subject to LBS’ written consent, provided that both parties agreed that Newsoara would be permitted to use a certain partner for development purposes.
The Newsoara Licensed Products only include the drug asset LB1148, which we ceased developing in August of 2023. The right includes the right to grant sublicenses to third parties, subject to LBS’ written consent, provided that both parties agreed that Newsoara would be permitted to use a certain partner for development purposes.
Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vivo animal studies to assess the potential safety and activity of the product candidate and to establish a rationale for therapeutic use.
Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vivo animal studies to assess the potential safety and activity of the product candidate and to establish a rationale for therapeutic use. The conduct of the preclinical tests must comply with federal regulations and requirements including GLPs regulations.
Specifically, new drugs and biologics are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to both the product and the specific indication for which it is being studied.
Specifically, new drugs and biologics are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition.
Expedited Development and Review Programs The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria.
The Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biologics that meet certain criteria.
Emerging biotech companies have similar agility and focus to us allowing them to explore novel approaches. We compete with these emerging companies for funding, talent, and market attention. Generic and biosimilar manufacturers are developing generic versions of existing IBD drugs and biosimilars are a threat to the market. As patents expire, competition intensifies.
We compete with these emerging companies for funding, talent, and market attention. Generic and biosimilar manufacturers are developing generic versions of existing IBD drugs and biosimilars are a threat to the market. As patents expire, competition intensifies.
These procedures, while necessary, pose significant risks and can greatly impact the quality of life. Given the lack of effective treatment options, we believe PALI-2108 has the potential to provide a much needed first-in-class therapy for these patients.
Existing treatment approaches are primarily invasive, including balloon dilation, strictureplasty, and, in more severe cases, bowel resection. These procedures, while necessary, pose significant risks and can greatly impact the quality of life. Given the lack of effective treatment options, we believe PALI-2108 has the potential to provide a much needed first-in-class therapy for these patients.
Our other subsidiary is LBS, which is our operating entity. 28 Contingent Value Right Immediately prior to the closing of the Merger, Seneca issued each share of its common stock held by Seneca stockholders of record, one contingent value right (“CVR”).
Contingent Value Right Immediately prior to the closing of the Seneca Merger, Seneca issued each share of its common stock held by Seneca stockholders of record, one contingent value right (“CVR”).
As of December 31, 2024, Suzhou has no employees or other operations. We are currently in the process of dissolving the Suzhou subsidiary.
As of December 31, 2025, Suzhou has no employees or other operations. We are currently in the process of dissolving the Suzhou subsidiary. Our other subsidiary is LBS, which is our operating entity.
The implementation of current and future cost containment measures or other healthcare reforms may adversely affect our operations and prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of current and future cost containment measures or other healthcare reforms may adversely affect our operations and prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
The sponsor can request the FDA to designate the product for Fast Track status any time before receiving NDA approval, but ideally no later than the pre-NDA meeting.
Fast Track designation 16 applies to both the product and the specific indication for which it is being studied. The sponsor can request the FDA to designate the product for Fast Track status any time before receiving NDA approval, but ideally no later than the pre-NDA meeting.
Thus, based on the research conducted on these mouse models, we demonstrated that PALI-2108 has preferential colon activation. This preferential colon activation offers a unique approach to delivering the PDE4 inhibitor locally within the colon.
Specifically, we utilized Dextran Sodium Sulfate (“DSS”)-induced UC mouse models and target engagement in oxazolone-induced colitis. Thus, based on the research conducted on these mouse models, we demonstrated that PALI-2108 has preferential colon activation. This preferential colon activation offers a unique approach to delivering the PDE4 inhibitor locally within the colon.
We operate in a competitive landscape within the biopharmaceutical industry. Our focus on PDE4 inhibitor prodrugs that are locally acting and the use of precision medicine for IBD presents both opportunities and challenges. While PDE4 inhibitors that are systemically available have been demonstrated to have significant efficacy, most have demonstrated dose-limiting toxicity.
Our focus on PDE4 inhibitor prodrugs that are locally acting and the use of precision medicine for IBD presents both opportunities and challenges. While PDE4 inhibitors that are systemically available have been demonstrated to have significant efficacy, most have demonstrated dose-limiting toxicity. Also, precision medicine has been successfully applied in oncology and its adoption in IBD remains an unmet need.
An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug.
Approval to market and distribute these drugs is obtained by filing an abbreviated new drug application ("ANDA"), with the FDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug.
As we progress through the research and clinical trials of our lead product candidates, our strategy for manufacturing and supply chain management is designed to ensure the highest quality, compliance, and efficiency in producing our product candidates. 9 To support the clinical manufacture of the product candidates we are developing we engage a network of third-party Contract Development and Manufacturing Organizations ("CDMOs") and Contract Manufacturing Organizations ("CMOs").
As we progress through the research and clinical trials of our lead clinical product candidate, our strategy for manufacturing and supply chain management is designed to ensure the highest quality, compliance, and efficiency in producing our product candidates.
Given our stage of development, we have not yet established a commercial organization or distribution capabilities. Manufacturing and Supply We do not currently own or operate facilities for product manufacturing, testing, storage, and distribution. We rely on third parties for our clinical supply of our API used in PALI-2108 and to supply the Newsoara Licensed Products to Newsoara.
Given our stage of development, we have not yet established a commercial organization or distribution capabilities. Manufacturing and Supply We do not currently own or operate facilities for product manufacturing, testing, storage, and distribution.
License Agreements with the Regents of the University of California We entered into three license agreements, as amended, with the Regents of the University of California (“Regents”) for exclusive commercial rights to certain patents, technology and know-how related to LB1148.
LBS is obligated to approve Newsoara manufacturing rights without undue refusal or delay. License Agreements with the Regents of the University of California Prior to the Seneca Merger, LBS entered into three license agreements, as amended, with the Regents of the University of California (“Regents”) for exclusive commercial rights to certain patents, technology and know-how related to LB1148.
Establishments may be subject to periodic, unannounced inspections by government authorities to ensure compliance with cGMP regulations and other laws. Discovery of problems may result in a government entity placing restrictions on a product, manufacturer or holder of an approved NDA, and may extend to requiring withdrawal of the product from the market.
Discovery of problems may result in a government entity placing restrictions on a product, manufacturer or holder of an approved NDA, and may extend to requiring withdrawal of the product from the market.
In the case of such applications accepted for filing between four and five years after approval of the reference drug, the 30-Month Stay of approval triggered by a timely patent infringement lawsuit is extended by the amount of time necessary to extend the stay until 7 ½ years after the approval of the reference drug NDA. 19 New Clinical Trial (3-Year) Exclusivity A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular indication or condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical trials (other than bioavailability studies) was essential to the approval of the application or supplemental application and was conducted/sponsored by the applicant.
New Clinical Trial (3-Year) Exclusivity A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular indication or condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical trials (other than bioavailability studies) was essential to the approval of the application or supplemental application and was conducted/sponsored by the applicant.
Health Reform The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.
Furthermore, efforts to ensure that business activities and business arrangements comply with applicable healthcare laws and regulations can be costly for manufacturers of branded prescription products. 23 Health Reform The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.
Of the full-time employees, three employees are engaged in primarily research and development activities and five employees are primarily engaged in finance, corporate strategy and business development, and other general administrative functions.
Human Capital Resources Overview As of March 18, 2026, we have 14 full-time employees and no part-time employees. Of the full-time employees, three employees are engaged in primarily research and development activities and five employees are primarily engaged in finance, corporate strategy and business development, and other general administrative functions.
There can be no assurance that CVR holders will receive CVR Payment Amounts from the sale of the NSI-189 assets. NSI-532.IGF-1 On October 27, 2022, we entered an agreement to license NSI-532.IGF-1 to the Regents of the University of Michigan ("University of Michigan") for maintaining NSI-532.IGF-1 cell lines, continued development, maintaining patent protection, and seeking licensees.
NSI-532.IGF-1 On October 27, 2022, we entered an agreement to license NSI-532.IGF-1 to the Regents of the University of Michigan ("University of Michigan") for maintaining NSI-532.IGF-1 cell lines, continued development, maintaining patent protection, and seeking licensees. We received no upfront fees for the license.
Broadly equivalent requirements and controls typically apply in other countries to the submission of marketing authorization applications and, post-approval, to the holding of such marketing authorizations.
Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. Broadly equivalent requirements and controls typically apply in other countries to the submission of marketing authorization applications and, post-approval, to the holding of such marketing authorizations.
Additionally, diagnosed prevalent cases of CD are anticipated to rise from 1,626,752 in 2022 to 1,695,580 in 2032, with an AGR of 0.42%. The U.S. is again projected to lead in prevalence in 2032, with 755,802 cases, whereas Japan is projected to have the fewest diagnosed prevalent cases of CD at 44,732.
The U.S. is projected to have the highest number of diagnosed incident cases of CD in 2032, with 68,815 cases, while France is projected to report the fewest at 4,560 cases. Additionally, diagnosed prevalent cases of CD are anticipated to rise from 1,626,752 in 2022 to 1,695,580 in 2032, with an AGR of 0.42%.
In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA(s).
In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevant NDA(s). 19 ANDA Approval Process for Generic Drugs Hatch-Waxman also established an abbreviated FDA approval process for generic drugs that are shown to be pharmaceutically equivalent and bioequivalent to drugs previously approved by the FDA through the NDA process.
Phase I Clinical Study of PALI-2108 in Canada On October 9, 2024, Health Canada issued a No Objection Letter for our Phase 1 human clinical study of PALI-2108 for the treatment of UC. We officially began studying on November 7, 2024.
The clinical study included an open-label UC patient cohort with multiple dosing arms in which we will evaluate the pharmacodynamics ("PD") of PALI-2108 in healthy volunteers. On October 9, 2024, Health Canada issued a No Objection Letter for our Phase 1 human clinical study of PALI-2108 for the treatment of UC. We officially began the study on November 7, 2024.
Additionally, a drug may be eligible for designation as a Breakthrough Therapy if the product is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints.
Sponsors can also request designation of a drug candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe degree and rate of physician and patient adoption of a product, if approved, will depend on a number of factors, including but not limited to: • patient demand for approved products that treat the indication for which they are approved; • the effectiveness of a product compared to other available therapies or treatment regimens; • the availability of coverage and adequate reimbursement from managed care plans and other healthcare payors; • the cost of treatment in relation to alternative treatments and willingness to pay on the part of patients; • insurers’ willingness to see the applicable indication as a disease worth treating; • proper administration by physicians or patients; • patient satisfaction with the results, administration and overall treatment experience; • limitations or contraindications, warnings, precautions or approved indications for use different than those sought by us that are contained in the final approved labeling; • any requirement of an authoritative regulatory body to undertake a risk evaluation and mitigation strategy; • the effectiveness of our sales, marketing, pricing, reimbursement and access, government affairs, and distribution efforts; • adverse publicity about a product or favorable publicity about competitive products; • new government regulations and programs, including price controls and/or limits or prohibitions on ways to commercialize drugs, such as increased scrutiny on direct-to-consumer advertising of pharmaceuticals; and 36 • potential product liability claims or other product-related litigation.
Biggest changeThe degree and rate of physician and patient adoption of a product, if approved, will depend on a number of factors, including but not limited to: • patient demand for approved products that treat the indication for which they are approved; • the effectiveness of a product compared to other available therapies or treatment regimens; • the availability of coverage and adequate reimbursement from managed care plans and other healthcare payors; • the cost of treatment in relation to alternative treatments and willingness to pay on the part of patients; • insurers’ willingness to see the applicable indication as a disease worth treating; • proper administration by physicians or patients; • patient satisfaction with the results, administration and overall treatment experience; • limitations or contraindications, warnings, precautions or approved indications for use different than those sought by us that are contained in the final approved labeling; • any requirement of an authoritative regulatory body to undertake a risk evaluation and mitigation strategy; • the effectiveness of our sales, marketing, pricing, reimbursement and access, government affairs, and distribution efforts; • adverse publicity about a product or favorable publicity about competitive products; • new government regulations and programs, including price controls and/or limits or prohibitions on ways to commercialize drugs, such as increased scrutiny on direct-to-consumer advertising of pharmaceuticals; and • potential product liability claims or other product-related litigation. 38 If any of our product candidates are approved for use but fail to achieve the broad degree of physician and patient adoption necessary for commercial success, our operating results and financial condition will be adversely affected, which may delay, prevent or limit our ability to generate revenue and continue our business.
Some of the factors that may cause the market price of our shares to fluctuate include, but are not limited to: • failure of our product candidates to show safety and/or efficacy in our clinical trials; • our ability to obtain timely regulatory approvals for our product candidates, and delays or failures to obtain such approvals; 44 • the results of our clinical trials, including our decision to pause or terminate any such trials; • failure of our product candidates, if approved, to achieve commercial success; • the entry into, or termination of, or breach by partners of key agreements, including the Giiant License Agreement, and employment agreements with our named executive officers; • the initiation of, material developments in, or conclusion of any litigation to enforce or defend any intellectual property rights or defend against the intellectual property rights of others; • announcements of any financings; • announcements by commercial partners or competitors of new commercial products, clinical progress or the lack of, significant contracts, commercial relationships or capital commitments; • failure to elicit meaningful stock analyst coverage and downgrades of our stock by analysts; and • the loss of key personnel.
Some of the factors that may cause the market price of our shares to fluctuate include, but are not limited to: • failure of our product candidates to show safety and/or efficacy in our clinical trials; • our ability to obtain timely regulatory approvals for our product candidates, and delays or failures to obtain such approvals; • the results of our clinical trials, including our decision to pause or terminate any such trials; • failure of our product candidates, if approved, to achieve commercial success; • the entry into, or termination of, or breach by partners of key agreements, including the Giiant License Agreement, and employment agreements with our named executive officers; • the initiation of, material developments in, or conclusion of any litigation to enforce or defend any intellectual property rights or defend against the intellectual property rights of others; • announcements of any financings; • announcements by commercial partners or competitors of new commercial products, clinical progress or the lack of, significant contracts, commercial relationships or capital commitments; • failure to elicit meaningful stock analyst coverage and downgrades of our stock by analysts; and • the loss of key personnel.
The clinical and commercial success of our product candidates may depend upon maintaining successful relationships with third-party partners, which are subject to a number of significant risks, including the following: • our partners’ ability to execute their responsibilities in a timely, cost-efficient and compliant manner; • reduced control over delivery and manufacturing schedules; • price increases; • manufacturing deviations from internal or regulatory specifications; • quality incidents; • the failure of partners to perform their obligations for technical, market or other reasons; • misappropriation of our product candidates; and • other risks in potentially meeting our product commercialization schedule or satisfying the requirements of our end-users.
The clinical and commercial success of our product candidates may 46 depend upon maintaining successful relationships with third-party partners, which are subject to a number of significant risks, including the following: • our partners’ ability to execute their responsibilities in a timely, cost-efficient and compliant manner; • reduced control over delivery and manufacturing schedules; • price increases; • manufacturing deviations from internal or regulatory specifications; • quality incidents; • the failure of partners to perform their obligations for technical, market or other reasons; • misappropriation of our product candidates; and • other risks in potentially meeting our product commercialization schedule or satisfying the requirements of our end-users.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, natural disasters, terrorism, war, and telecommunication and electrical failures.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), 55 malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, natural disasters, terrorism, war, and telecommunication and electrical failures.
Although we have taken steps to protect our trade secrets and unpatented know-how by entering into confidentiality agreements with third parties, and intellectual property assignment and protection agreements with officers, directors, employees, and certain consultants and advisors, there can be no assurance that such agreements will not be breached or enforced by courts, 42 that we would have adequate remedies for any breach, including injunctive and other equitable relief, or that our trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by us or our agents and representatives, or be independently discovered by our competitors.
Although we have taken steps to protect our trade secrets and unpatented know-how by entering into confidentiality agreements with third parties, and intellectual property assignment and protection agreements with officers, directors, employees, and certain consultants and advisors, there can be no assurance that such agreements will not be breached or enforced by courts, that we would have adequate remedies for any breach, including injunctive and other equitable relief, or that our trade secrets and unpatented know-how will not otherwise become known, inadvertently disclosed by us or our agents and representatives, or be independently discovered by our competitors.
Although we have entered into a commercial supply agreement to provide us with such drug substances or products for our current Phase 1 clinical trial, our future ability to develop and commercialize, if approved, our product candidates is dependent on our ability to obtain the APIs and other substances and materials used in our product candidates successfully from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization.
Although we have entered into a supply agreement to provide us with such drug substances or products for our current Phase 1 clinical trial, our future ability to develop and commercialize, if approved, our product candidates is dependent on our ability to obtain the APIs and other substances and materials used in our product candidates successfully from third parties and to have finished products manufactured by third parties in accordance with regulatory requirements and in sufficient quantities for preclinical and clinical testing and commercialization.
In particular, our suppliers may be impacted by epidemics, pandemics or other disease outbreaks or public health emergencies and general macroeconomic conditions, including inflationary pressures, economic slowdown or 39 recession, relatively high interest rates, imposed tariffs, changes in monetary policy, potential U.S. federal government shutdowns, geopolitical conflicts and financial institution instability, all of which may result in supply delays and cost increases.
In particular, our suppliers may be impacted by epidemics, pandemics or other disease outbreaks or public health emergencies and general macroeconomic conditions, including inflationary pressures, economic slowdown or recession, relatively high interest rates, imposed tariffs, changes in monetary policy, potential U.S. federal government shutdowns, geopolitical conflicts and financial institution instability, all of which may result in supply delays and cost increases.
If that were to happen, the market price of our common stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. 46 Our Board has broad discretion to issue additional securities, which might dilute the net tangible book value per share of our common stock for existing stockholders.
If that were to happen, the market price of our common stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Our Board has broad discretion to issue additional securities, which might dilute the net tangible book value per share of our common stock for existing stockholders.
In addition, we, any partner with which we may collaborate, Health Canada, any similar regulatory authority, state and local agencies, counterpart agencies in foreign countries, or the applicable Institutional Review Board ("IRB") at our trial sites, may suspend, delay, require modifications to or terminate our clinical trials, once begun, at any time.
In addition, we, any partner with which we may collaborate, the FDA, Health Canada, or any similar regulatory authority, state and local agencies, counterpart agencies in foreign countries, or the applicable Institutional Review Board ("IRB") at our trial sites, may suspend, delay, require modifications to or terminate our clinical trials, once begun, at any time.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications or inappropriate disclosure of confidential or 49 proprietary information, we could incur liability and the further development and commercialization of our products and product candidates could be delayed. Item 1B. Unresolved Staff Comments. None
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our products and product candidates could be delayed. Item 1B. Unresolved Staff Comments. None.
If we fail to comply with these obligations, Giiant may have the ability to terminate the license, subject to certain requirements as more fully set forth in the Giiant License Agreement. If the license granted thereunder were to be terminated, our business, financial condition, operating results, and prospects would be materially adversely affected.
If we 49 fail to comply with these obligations, Giiant may have the ability to terminate the license, subject to certain requirements as more fully set forth in the Giiant License Agreement. If the license granted thereunder were to be terminated, our business, financial condition, operating results, and prospects would be materially adversely affected.
We depend on our license agreement with Giiant to permit us to use patents and patent applications relating to PALI-2108. Termination of these rights or the failure to comply with our obligations under the license agreement could materially harm our business and prevent us from developing or commercializing PALI-2108, our lead product candidate.
We depend on our license agreement with Giiant to permit us to use patents and patent applications relating to PALI-2108. Termination of these rights or the failure to comply with our obligations under the license agreement could materially harm our business and prevent us from developing or commercializing PALI-2108, our lead clinical product candidate.
Our success depends on the development and clinical success of PALI-2108, which is subject to a number of risks, including: • the continued enforceability of our research collaboration and license agreement with Giiant; • timely and successful completion of required clinical trials, which may be significantly slower or costlier than we anticipate and/or produces results that do not achieve the primary or secondary endpoints of the trial(s); • our ability to develop and implement clinical trial designs and protocols; • the successful initiation and completion of our current planned clinical trials and any additionally required preclinical studies, if any; • our ability to retain third-party CROs on terms acceptable to us for the conduct and oversight of our anticipated clinical trials, including our Phase 1 clinical trial for PALI-2108; • our ability to fund the development costs related to PALI-2108’s clinical development; • the approval by Health Canada or other regulatory authorities to commence the marketing of our product candidates; • the ability for us and third-parties, if applicable, to achieve and maintain compliance with our contractual obligations and applicable regulatory requirements; • the ability of our contract manufacturers to manufacture sufficient supply of our product candidates to meet the required clinical trial supplies and any additional required preclinical studies; • the ability of our contract manufacturers to remain in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing facilities and processes that are compliant with cGMP regulations; • our ability to obtain favorable labeling for our product candidates through regulators that allows for successful commercialization; • acceptance by physicians, insurers, payors, and patients of the beneficial quality, safety and efficacy of our product candidates, if approved, including relative to alternative and competing treatments; • our ability to price our product candidates to recover our development costs and applicable milestone or royalty payments, and generate a satisfactory profit margin; and • our ability and our applicable collaboration and licensing partners’ ability to establish and enforce intellectual property rights related to our product candidates and technologies.
Our success depends on the development and clinical success of PALI-2108, which is subject to a number of risks, including: • the continued enforceability of our research collaboration and license agreement with Giiant; • timely and successful completion of required clinical trials, which may be significantly slower or costlier than we anticipate and/or produces results that do not achieve the primary or secondary endpoints of the trial(s); • our ability to develop and implement clinical trial designs and protocols; • the successful initiation and completion of our current planned clinical trials and any additionally required preclinical studies, if any; • our ability to retain third-party CROs on terms acceptable to us for the conduct and oversight of our current and anticipated clinical trials; • our ability to fund the development costs related to PALI-2108’s clinical development; • the approval by the FDA, Health Canada, or other regulatory authorities to commence the marketing of our product candidates; • the ability for us and third-parties, if applicable, to achieve and maintain compliance with our contractual obligations and applicable regulatory requirements; • the ability of our contract manufacturers to manufacture sufficient supply of our product candidates to meet the required clinical trial supplies and any additional required preclinical studies; • the ability of our contract manufacturers to remain in good standing with regulatory agencies and to develop, validate and maintain commercially viable manufacturing facilities and processes that are compliant with cGMP regulations; • our ability to obtain favorable labeling for our product candidates through regulators that allows for successful commercialization; • acceptance by physicians, insurers, payors, and patients of the beneficial quality, safety and efficacy of our product candidates, if approved, including relative to alternative and competing treatments; 33 • our ability to price our product candidates to recover our development costs and applicable milestone or royalty payments, and generate a satisfactory profit margin; and • our ability and our applicable collaboration and licensing partners’ ability to establish and enforce intellectual property rights related to our product candidates and technologies.
Because of these and similar uncertainties, it is possible that our product candidates will not reach commercialization. If we are unable to successfully develop and commercialize our product candidates, including our lead product candidate, PALI-2108, we will be unable to generate revenue or build a sustainable or profitable business.
Because of these and similar uncertainties, it is possible that our product candidates will not reach commercialization. If we are unable to successfully develop and commercialize our product candidates, including our lead clinical product candidate, PALI-2108, we will be unable to generate revenue or build a sustainable or profitable business.
The claims may require us to initiate or defend protracted and costly litigation on behalf of customers, licensees, and other parties regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages 43 on behalf of those parties or may be required to obtain licenses for the products they use.
The claims may require us to initiate or defend protracted and costly litigation on behalf of customers, licensees, and other parties regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of those parties or may be required to obtain licenses for the products they use.
If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to obtain regulatory approvals or commercialize our 31 proposed product candidates.
If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to obtain regulatory approvals or commercialize our proposed product candidates.
We expect that our operations and development of PALI-2108 will require substantially more capital than we currently have, and we cannot guarantee when or if we will be able to secure such additional funding . We have historically funded our operations and prior development efforts through the sale of our securities.
We expect that our operations and development of PALI-2108 will require more capital than we currently have, and we cannot guarantee when or if we will be able to secure such additional funding . We have historically funded our operations and prior development efforts through the sale of our securities.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to 48 make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity.
Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity.
In that event, we could still be a smaller reporting company if our annual revenues are below $100 million and we have a public float of less than $700 million. 45 We do not anticipate paying any dividends in the foreseeable future. We do not anticipate paying any dividends in the foreseeable future.
In that event, we could still be a smaller reporting company if our annual revenues are below $100 million and we have a public float of less than $700 million. We do not anticipate paying any dividends in the foreseeable future. We do not anticipate paying any dividends in the foreseeable future.
While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.
While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs 56 and our business operations.
In addition, any debt financing may subject us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
In addition, any debt financing may subject 50 us to fixed payment obligations and covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
We may choose to discontinue development or commercialization any of our product candidates, or may choose not to commercialize product candidates in approved indications, at any time during development or after approval, which could adversely affect us and our operations.
We may choose to discontinue the development or commercialization any of our product candidates, or may choose not to commercialize product candidates in approved indications, at any time during development or after approval, which could adversely affect us and our operations.
On April 5, 2024, we effected a 1-for-15 reverse stock split and we were notified by the Nasdaq Stock Market that as of April 19, 2024, we were back in compliance with the Bid Price Rule.
On April 5, 2024, we effected a 1-for-15 reverse stock split and we were notified by the Nasdaq that as of April 19, 2024, we were back in compliance with the Bid Price Rule.
There may be future changes that result in reductions in potential coverage and reimbursement levels for our product candidates, if approved and commercialized, and we cannot predict the scope of any future changes or the impact that those changes would have on our operations. 35 If future reimbursement for PALI-2108, subject to approval, is substantially less than projected, or rebate obligations associated with them are substantially greater than expected, our future net revenue and profitability, if any, could be materially diminished.
There may be future changes that result in reductions in potential coverage and reimbursement levels for our product candidates, if approved and commercialized, and we cannot predict the scope of any future changes or the impact that those changes would have on our operations. 37 If future reimbursement for PALI-2108, subject to approval, is substantially less than projected, or rebate obligations associated with them are substantially greater than expected, our future net revenue and profitability, if any, could be materially diminished.
If we fail to obtain regulatory approvals, or if there are significant changes in regulatory policies that result in increased litigation and judicial scrutiny leading to unexpected delays and increased cost, we may not be able to market PALI-2108 and our operations will be adversely affected. 34 If clinical studies of PALI-2108 do not yield successful results, we may discontinue the development of PALI-2108.
If we fail to obtain regulatory approvals, or if there are significant changes in regulatory policies that result in increased litigation and judicial scrutiny leading to unexpected delays and increased cost, we may not be able to market PALI-2108 and our operations will be adversely affected. 36 If clinical studies of PALI-2108 do not yield successful results, we may discontinue the development of PALI-2108.
Although we have no knowledge of any such claims being alleged to date, if such claims were to arise, litigation may be necessary to defend against any such claims.
Although we have no knowledge of any such claims being alleged, if such claims were to arise, litigation may be necessary to defend against any such claims.
We are entitled under our Certificate of Incorporation to issue up to 280,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Shares of our blank check preferred stock provide our Board with broad authority to determine voting, dividend, conversion, and other rights of such preferred stock.
We are entitled under our Certificate of Incorporation to issue up to 300,000,000 shares of common stock and 7,000,000 “blank check” shares of preferred stock. Shares of our blank check preferred stock provide our Board with broad authority to determine voting, dividend, conversion, and other rights of such preferred stock.
There are a number of continued listing requirements that we must satisfy in order to maintain our listing on The Nasdaq Stock Market, including the requirement to maintain a minimum bid price of at least $1.00 (the “Bid Price Rule”).
There are a number of continued listing requirements that we must satisfy in order to maintain our listing on Nasdaq, including the requirement to maintain a minimum bid price of at least $1.00 (the “Bid Price Rule”).
Risks Related to Our Development, Commercialization and Regulatory Approval of Our Product Candidates Our business depends on the successful clinical development, regulatory approval, and commercialization of our therapeutic compounds, including our lead asset PALI-2108. On October 9, 2024, Health Canada approved our Canadian Clinical Trial Application (“CTA”) to commence a Phase 1 clinical trial for PALI-2108 in Canada.
Risks Related to Our Development, Commercialization and Regulatory Approval of Our Product Candidates Our business depends on the successful clinical development, regulatory approval, and commercialization of our lead asset PALI-2108. On October 9, 2024, Health Canada approved our Canadian Clinical Trial Application (“CTA”) to commence a Phase 1 clinical trial for PALI-2108 in Canada.
Our common stock could be delisted from the Nasdaq Stock Market if we are unable to maintain compliance with the Nasdaq Stock Market’s continued listing standards. Our common stock is listed on the Nasdaq Stock Market.
Our common stock could be delisted from the Nasdaq Stock Market if we are unable to maintain compliance with the Nasdaq Stock Market’s continued listing standards. Our common stock is listed on The Nasdaq Stock Market LLC (“Nasdaq”).
Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with our Board, they would apply even if the offer may be considered beneficial by some stockholders.
Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirors to negotiate with our Board of Directors ("Board" or "Board of Directors"), they would apply even if the offer may be considered beneficial by some stockholders.
Even if successfully completed, we must complete a number of additional clinical trials prior to obtaining regulatory approval to commercialize our product candidates. Accordingly, we cannot make assurances that we will ever be able to generate sufficient revenue through the sale of any product candidates, if approved, to internally fund our business.
We must also complete a number of additional clinical trials prior to obtaining regulatory approval to commercialize our product candidates. Accordingly, we cannot make assurances that we will ever be able to generate sufficient revenue through the sale of any product candidates, if approved, to internally fund our business.
Further, there can be no assurance that PALI-2108 will be shown to be safe and effective in clinical trials or receive applicable regulatory approvals. On June 28, 2024, the U.S.
Further, there can be no assurance that PALI-2108 will be shown to be safe and effective throughout our clinical trials or receive applicable regulatory approvals. On June 28, 2024, the U.S.
In addition, regulatory approval for clinical trials and eventual drug approval in the U.S. is a complex process, influenced by several factors, including: 32 • the adequacy and relevance of the Phase 1 trial data in supporting progression to Phase 2, as evaluated by the FDA; • the ability of the trial to meet safety, efficacy, and other scientific requirements set by the FDA, which may differ from those of Health Canada; • whether the foreign clinical trial was conducted under an FDA-recognized regulatory authority, and whether FDA oversight is possible through monitoring or inspection of clinical sites; and • the FDA’s consideration of the risk-benefit ratio for continuing clinical development in the U.S., particularly based on data from a non-U.S. population.
Moreover, the FDA will assess whether the trial design, patient population, endpoints, and other factors meet the standards expected for clinical trials conducted within the U.S. 34 In addition, regulatory approval for clinical trials and eventual drug approval in the U.S. is a complex process, influenced by several factors, including: • the adequacy and relevance of the Phase 1 trial data in supporting progression to Phase 2, as evaluated by the FDA; • the ability of the trial to meet safety, efficacy, and other scientific requirements set by the FDA, which may differ from those of Health Canada; • whether the foreign clinical trial was conducted under an FDA-recognized regulatory authority, and whether FDA oversight is possible through monitoring or inspection of clinical sites; and • the FDA’s consideration of the risk-benefit ratio for continuing clinical development in the U.S., particularly based on data from a non-U.S. population.
We are currently conducting a Phase 1 clinical trial of PALI-2108 in Canada, and the FDA or applicable foreign regulatory authorities may not accept data from such trials, or any other trial we conduct outside of the U.S. We have commenced a Phase 1 clinical trial for ulcerative colitis in Canada.
We are currently conducting a Phase 1 clinical trial of PALI-2108 in Canada, and the FDA or applicable foreign regulatory authorities may not accept data from such trials, or any other trial we conduct outside of the U.S. We are conducting a Phase 1 clinical trial of PALI-2108 in Canada.
We are likely to rely on third-party CROs to conduct and oversee our other anticipated clinical trials and other aspects of product development.
We intend to rely on third-party CROs to conduct and oversee our other anticipated clinical trials and other aspects of product development.
Our future success depends to a significant extent on the continued services of our key employees, including our senior scientific, technical and managerial personnel. We do not maintain key person life insurance for any of our executives.
Our success depends on attracting and retaining senior management and scientists with relevant expertise. Our future success depends to a significant extent on the continued services of our key employees, including our senior scientific, technical and managerial personnel. We do not maintain key person life insurance for any of our executives.
We have used and we intend to use the proceeds from our previous offerings and any future offerings, to, among other uses, advance PALI-2108 through clinical development, advancing the remainder of the existing portfolio through preclinical studies and into INDs or their equivalent in foreign jurisdictions, our research and development activities and for general working capital needs.
We have used and we intend to use the proceeds from our previous offerings and any future offerings, to, among other things, advance PALI-2108 through preclinical and clinical development and into INDs or their equivalent in foreign jurisdictions, fund our research and development activities, and for general working capital needs.
If approved in a jurisdiction, PALI-2108 may also require the completion of post-market studies. The process of completing clinical testing and obtaining the required approvals is expected to take a number of years and require the use of substantial resources.
The results of our human clinical testing of PALI-2108 may not meet applicable regulatory requirements. If approved in a jurisdiction, PALI-2108 may also require the completion of post-market studies. The process of completing clinical testing and obtaining the required approvals is expected to take a number of years and require the use of substantial resources.
For example, to execute our business plan, we will need to: • Execute product development activities using unproven technologies; • Build, maintain, and protect a strong intellectual property portfolio; • Demonstrate safety and efficacy of our drug candidates in multiple human clinical studies; • Receive approval from Health Canada and/or approval from similar foreign regulatory bodies, such as the FDA; • Retain qualified CROs to oversee and manage our Phase 1 clinical trial for PALI-2108 and future clinical trials; • Gain market acceptance for the development and commercialization of any drugs we develop; • Ensure our products are reimbursed by commercial and/or government payors at a rate that permits commercial viability; • Develop and maintain successful strategic relationships with suppliers, distributors, and commercial licensing partners; • Manage our spending and cash requirements as our expenses will increase in the near term if we add programs and additional preclinical and clinical trials; and • Effectively market any products for which we obtain marketing approval.
For example, to execute our business plan, we will need to: • execute product development activities using unproven technologies; • build, maintain, and protect a strong intellectual property portfolio; • demonstrate safety and efficacy of our product candidates in multiple human clinical studies; • receive approval from the FDA and/or approval from similar foreign regulatory bodies; • retain qualified CROs to oversee and manage the continued development of PALI-2108 through current and future clinical trials; • gain market acceptance for the development and commercialization of any drugs we develop; • ensure our products are reimbursed by commercial and/or government payors at a rate that permits commercial viability; • develop and maintain successful strategic relationships with suppliers, distributors, and commercial licensing partners; • manage our spending and cash requirements as our expenses will increase in the near term if we add programs and additional preclinical and clinical trials; and • effectively market any products for which we obtain marketing approval. 43 If we are unsuccessful in accomplishing these objectives, we may not be able to develop our proposed products, raise capital, expand our business or continue our operations.
Even if patents or other intellectual property rights have issued or will issue, we cannot guarantee that the claims of these patents and other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us in every country of commercial significance that we may target.
Even if patents or other intellectual property rights have issued or will issue, we cannot guarantee that the claims of these patents and other rights are or will be held valid or enforceable by the courts, through injunction or otherwise, or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us in every country of commercial significance that we may target. 48 Our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and prior art make it patentable.
In addition, impact on the operations of the FDA or comparable foreign regulatory authorities could negatively affect our planned trials and approval processes. Finally, economic conditions and business activity may be negatively impacted and may not recover as quickly as anticipated. 47 Unstable economic and market conditions may have serious adverse consequences on our business, financial condition, and stock price.
In addition, impact on the operations of the FDA or comparable foreign regulatory authorities could negatively affect our planned trials and approval processes. Finally, economic conditions and business activity may be negatively impacted and may not recover as quickly as anticipated. Global economic conditions may have an adverse effect on our business.
Although we are currently in compliance with the Bid Price Rule, we have been unable to comply with this rule in the past. For example, in October 2023, we were notified that we were no longer in compliance with the Bid Price Rule and had 180 days to cure such deficiency.
For example, in October of 2023, we were notified that we were no longer in compliance with the Bid Price Rule and had 180 days to cure such deficiency.
The material weakness was due to a lack of controls in the financial closing and reporting process, including a lack of segregation of duties and the documentation and design of formalized processes and procedures surrounding the creation and posting of journal entries and account reconciliations. 41 If our remaining material weakness, which management concluded is still present as of the date of these financial statements, is not remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our consolidated financial statements and a failure to meet our reporting and financial obligations.
If our remaining material weakness, which management concluded is still present as of the date of these financial statements, is not remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our consolidated financial statements and a failure to meet our reporting and financial obligations.
There are substantial risks in drug development, and, as a result, we may not be able to successfully develop any product candidate. including our lead product candidate, PALI-2108. We have initiated a Phase 1 clinical trial of PALI-2108 in our target indication of IBD.
There are substantial risks in drug development, and, as a result, we may not be able to successfully develop any product candidate, including our lead clinical product candidate, PALI-2108. We have commenced our clinical trials of PALI-2108 for the treatment of UC and CD.
It is also possible that we may be required to conduct additional trials in the U.S. to address any concerns regarding the applicability of the foreign trial data to the U.S. population or regulatory environment.
It is also possible that we may be required to conduct additional trials in the U.S. to address any concerns regarding the applicability of the foreign trial data to the U.S. population or regulatory environment. There can be no assurance that we will successfully obtain FDA approval to initiate a Phase 2 clinical trial in the U.S.
For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.
For example, over the last several years the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical employees and stop critical activities. In addition, federal employees recently have been subject to termination in connection with cost reduction efforts by the federal government.
As of December 31, 2024, we had outstanding, common stock or securities convertible into common stock, totaling 9,567,496 shares. As a result, we are authorized to issue up to an additional 270,432,507 shares of common stock or common stock equivalents under our Certificate of Incorporation.
As of December 31, 2025, we had outstanding, common stock or securities convertible into common stock, totaling 248,491,985 shares. As a result, we are authorized to issue up to an additional 51,508,015 shares of common stock or common stock equivalents under our Certificate of Incorporation.
Further, any such actions could adversely impact our current and future arrangements with our foreign suppliers, including our current Chinese drug manufacturer, which could increase the cost or reduce the supply of material available to us or delay the procurement or supply of such material used in our clinical trial.
Further, any such actions could adversely impact our current and future arrangements with our foreign suppliers, including our current Chinese drug manufacturer, which could increase the cost or reduce the supply of material available to us or delay the procurement or supply of such material used in our clinical trial. 47 Risks Related to Our Financial Operations We have a history of net operating losses, and we expect to continue to incur net operating losses and may never achieve profitability.
We expect that our operating losses will continue for the foreseeable future as we continue our drug development and discovery efforts. To achieve profitability, we must, either directly or through licensing and/or partnering relationships, meet certain milestones, successfully develop and obtain regulatory approval for one or more drug candidates and effectively manufacture, market and sell any drugs we successfully develop.
To achieve profitability, we must, either directly or through licensing and/or partnering relationships, meet certain milestones, successfully develop and obtain regulatory approval for one or more product candidates and effectively manufacture, market and sell any drugs we successfully develop.
Identifying and qualifying subjects to participate in our current and anticipated future clinical trials is critical to our success. Our inability to enroll patients in our clinical trials on a timely basis could result in the trials being delayed or never completed.
Our inability to enroll patients in our clinical trials on a timely basis could result in the trials being delayed or never completed.
If we are not able to obtain additional capital in the future or on acceptable terms, we may need to curtail our anticipated clinical trials as well as our operations. 33 Our product candidates, including our lead product candidate, PALI-2108, may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.
Our product candidates, including our lead clinical product candidate, PALI-2108, may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.
Future sales in the public market of shares of our common stock, including shares issued upon exercise of our outstanding stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital.
Future sales in the public market of shares of our common stock, including shares issued upon exercise of our outstanding stock options or warrants, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital. 52 Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.
Our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and prior art make it patentable. We do not have outstanding issued patents covering all of the recent developments in our technology and we are unsure of the patent protection that we will be successful in obtaining, if any.
We do not have outstanding issued patents covering all of the recent developments in our technology and we are unsure of the patent protection that we will be successful in obtaining, if any.
If we fail to develop and maintain supply and other technical relationships with these third parties, we may be unable to continue to develop or commercialize our products and product candidates, which could adversely affect us and our business. 40 We are dependent on our contract suppliers and manufacturers for day-to-day compliance with applicable laws and cGMP regulations for production of our proposed products and API.
If we fail to develop and maintain supply and other technical relationships with these third parties, we may be unable to continue to develop or commercialize our products and product candidates, which could adversely affect us and our business.
If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Risks Related to Our Dependence on Third Parties We anticipate relying on third-party CROs and other third parties to conduct and oversee our clinical trials.
If another prolonged government shutdown occurs, it could significantly impact the ability of the FDA and other governmental agencies to review and process our regulatory submissions in a timely manner, which could have a material adverse effect on our business.
General Risk Factors Our business could be adversely affected by the effects of health pandemics or epidemics, such as the COVID-19 pandemic, which could cause significant disruptions in our operations and those of our current or future CMOs, CROs, and other third parties upon whom we rely.
Any increase in the number of shares outstanding as a result of the exercise of outstanding options, the vesting or settlement of outstanding stock awards, or the purchase of shares pursuant to the employee stock purchase plan will cause stockholders to experience additional dilution, which could cause our stock price to fall. 53 General Risk Factors Our business could be adversely affected by the effects of health pandemics or epidemics, such as the COVID-19 pandemic, which could cause significant disruptions in our operations and those of our current or future CMOs, CROs, and other third parties upon whom we rely.
As of June 30, 2024, the last business day of our most recently completed second fiscal quarter, our public float was less than $250 million and therefore, we qualify as a smaller reporting company under SEC rules.
We take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could result in our common stock being less attractive to investors. As of the last business day of our most recently completed second fiscal quarter, our public float was less than $250 million and therefore, we qualify as a smaller reporting company under SEC rules.
In addition, government funding of other government agencies or comparable foreign regulatory authorities on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. 38 Disruptions at the FDA and other, other government agencies or comparable foreign regulatory authorities may also slow the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect our business.
Disruptions at the FDA and other government agencies or comparable foreign regulatory authorities may also slow the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect our business.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates. We are currently enrolling subjects in the Phase 1 clinical trial of PALI-2108 in Canada.
We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates. Identifying and qualifying subjects to participate in our current and anticipated future clinical trials is critical to our success.
Thus, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area.
While we have announced positive results from the SAD, MAD and FE cohorts in healthy volunteers, as well as the UC cohort portion of the study, and have dosed patients in an exploratory Phase 1b cohort in FSCD, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the biopharmaceutical area.
Although we are in compliance with the Bid Price Rule as of the date of this Annual Report on Form 10-K, on March 17, 2025, our stock price began trading below $1.00.
Although we are in compliance with the Bid Price Rule as of the date of this Annual Report on Form 10-K, we have been unable to comply with this rule in the past.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management. Provisions in our certificate of incorporation, as amended (“Certificate of Incorporation”), and bylaws, as amended (“Bylaws”) may delay or prevent an acquisition or a change in management.
Provisions in our certificate of incorporation, as amended (“Certificate of Incorporation”), and bylaws, as amended (“Bylaws”) may delay or prevent an acquisition or a change in management.
Our failure to comply with these regulations and policies may require us to repeat clinical trials, which would be costly and delay the regulatory approval process.
Our failure to comply with these regulations and policies may require us to repeat clinical trials, which would be costly and delay the regulatory approval process. In the event that we are unable to retain a qualified CRO for any of our anticipated clinical trials, it would delay planned clinical operations and result in additional cost and expense.
Since that time, we have not yet demonstrated an ability to successfully complete any clinical trials and have never completed the development of any product candidate, nor have we ever generated any revenue from product sales.
We have never completed the development of any product candidate through to commercialization, nor have we ever generated any revenue from product sales.
Risks Related to Our Business We have a limited operating history and have never generated any revenues from product sales. We are a biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business to date and to assess our future viability.
We are a biopharmaceutical company with a limited operating history that may make it difficult to evaluate the success of our business and to assess our future viability. While we were initially formed in 2001, our operations have historically been limited to business planning, raising capital and other research and development activities related to our product candidates.
Although we commenced a Phase 1 clinical trial in Canada, there can be no assurances that gaining regulatory approval in Canada will result in regulatory approval from any other regulatory agency, including the FDA of the U.S. The results of our human clinical testing of PALI-2108 may not meet applicable regulatory requirements.
Although we are conducting a Phase 1 clinical trial in Canada, there can be no assurances that we will gain regulatory approval from the FDA, or any other regulatory agency, to conduct our Phase 2 and/or Phase 3 clinical trials in the U.S., or other foreign jurisdictions.
If we are unable to cure such deficiency, we may be subject to delisting. If we fail to comply with the Bid Price Rule in the future, or any of the other continued listing requirements, there can be no assurance that we will be able to regain compliance.
We can provide no assurances that we will continue to comply with the Bid Price Rule or the other continued listing requirements of Nasdaq.
Notwithstanding our current compliance with the Bid Price Rule, in the event that our common stock trades below $1.00 for 30 consecutive business days, Nasdaq may notify us that we are no longer in compliance with the Bid Price Rule and may have 180 days to cure such deficiency.
On April 30, 2025, we were notified again that we were no longer in compliance with the Bid Price Rule and had 180 calendar days to cure such deficiency.
The delisting of our common stock would likely adversely affect the market liquidity and market price of our common stock and our ability to obtain financing for the continuation of our operations and/or result in the loss of confidence by investors.
The delisting of our common stock by Nasdaq could adversely affect the liquidity of our common stock, our ability to raise capital, create increased volatility in our common stock, and result in a loss of current or future coverage by analysts and/or diminish the interest of institutional investors to invest in our common stock.
On November 7, 2024, we commenced the Phase 1 clinical trial of PALI-2108.
On November 7, 2024, we commenced the Phase 1 clinical trial of PALI-2108. On May 27, 2025, we announced positive results from the SAD, MAD and FE cohorts in healthy volunteers and on August 7, 2025 and September 17, 2025, we announced positive results from the UC cohort portion of the study.
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For example, we are currently enrolling and dosing subjects in our initial Phase 1 clinical trial of PALI-2108 in Canada. We may experience delays or difficulties in finding suitable trial subjects, or in completing enrollment. Such delays may result in increased costs and the failure to complete the Phase 1 clinical trial of PALI-2108 in Canada in a timely manner.
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The clinical study successfully met its primary endpoints of safety, tolerability, and PK. On October 16, 2025, we dosed our first patients in an exploratory Phase 1b cohort in FSCD while we complete longer-term chronic safety and toxicology studies.
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Moreover, the FDA will assess whether the trial design, patient population, endpoints, and other factors meet the standards expected for clinical trials conducted within the U.S.
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The exploratory Phase 1b cohort in FSCD evaluates the safety, tolerability, PK, and PD of once-daily oral dosing of PALI-2108 over a 14-day treatment period as well as tissue-level pharmacology and molecular responses using paired ileal biopsies and peripheral blood mononuclear cells.
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There can be no assurance that we will successfully obtain FDA approval to initiate a Phase 1 clinical trial in the U.S. or that if our Canadian trial is successful, a subsequent Phase 2 trial.
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We believe we currently have sufficient capital to fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108 for UC that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108 CD that is expected in 2028.
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There can be no assurances that we will be able to complete enrollment for our anticipated Phase 1 clinical trial for PALI-2108, and if we fail to do so, we may not be able to complete the trial on a timely basis, or at all.
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Notwithstanding the foregoing, we may need to 35 secure additional funding. If we are not able to obtain additional capital in the future or on acceptable terms, we may need to curtail our anticipated clinical trials as well as our operations.
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Based on our existing cash resources and our current business plan, we do not have adequate capital to fund our anticipated operations through the completion of the development of PALI-2108. As a result, we will need to secure additional funding.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Audit Committee, which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit Committee receives updates, as needed, on cybersecurity and information technology matters and related risk exposures.
Biggest changeThe audit committee of our Board (the ("Audit Committee"), which is comprised solely of independent directors, has been designated by our Board to oversee cybersecurity risks. The Audit Committee receives updates, as needed, on cybersecurity and information technology matters and related risk exposures. Item 2. Pro perties. None.
Additional information on cybersecurity risks faced by us are discussed in Part I, Item 1A, “Risk Factors,” under the headings “ If our information systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences ” and “ Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cybersecurity. ” Governance Our Board, as a whole and at the committee level, has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage, and mitigate those risks.
Additional information on cybersecurity risks faced by us are discussed in Part I, Item 1A, “Risk Factors,” under the headings “ If our information systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences ” and “ Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cybersecurity. ” 57 Governance Our Board, as a whole and at the committee level, has oversight for the most significant risks facing us and for our processes to identify, prioritize, assess, manage, and mitigate those risks.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the results of litigation and claims cannot be predicted with certainty, we do not believe we are a party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business.
Biggest changeWe do not believe there are any claims or actions pending against the Company through December 31, 2025 , which will have, individually or in aggregate, a material adverse effect on our business, liquidity, financial position, or results of operations.
Item 3. Legal Proceedings. We are not a party to any material legal proceedings at this time. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities.
Item 3. Legal Proceedings. From time to time, we may be involved in various lawsuits, legal proceedings or claims that arise in the ordinary course of our business.
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 51 PART II
Litigation, legal proceedings or claims, however, are subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm our business because of defense and settlement costs, diversion of management resources, and other factors. Item 4. Mine Saf ety Disclosures. Not applicable. 58 PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 51 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 Item 6. [Reserved] 52 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 53 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 58 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 59 Item 6. [Reserved] 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 68 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe offers, sales and issuances of the securities described herein were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act or Rule 506 of D promulgated under the Securities Act as transactions by an issuer not involving a public offering.
Biggest changeAs of December 31, 2025, we have not issued any shares of our common stock under the CCF Funding Agreement The sales of the securities described above were exempt from registration under the Securities Act under Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. No underwriters were involved in the sales.
Holders As of March 20, 2025 there were 137 holders of record of our common stock, which does not include stockholders who hold shares in street name or stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid cash dividends on our common stock.
Holders As of March 18, 2026, there were 134 holders of record of our common stock, which does not include stockholders who hold shares in street name or stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid cash dividends on our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the Nasdaq Capital Market under the symbol "PALI." On March 20, 2025, the last reported sale price our common stock on the Nasdaq Capital Market was $0.78 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the Nasdaq Capital Market under the symbol "PALI." On March 18, 2026, the last reported sale price our common stock on the Nasdaq Capital Market was $1.97 per share.
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Recent Sales of Unregistered Equity Securities On October 1, 2024, we issued 3,000 restricted common shares to a consultant. The common stock shares were fully vested on the grant date and valued at $3.45 per share on the date of issuance.
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Recent Sales of Unregistered Equity Securities On December 17, 2025, we entered into a Research Program Funding Agreement (the "CCF Funding Agreement") with the Crohn’s & Colitis Foundation (the “CCF”), in which the CCF agreed to provide up to a $0.5 million investment in return for shares of our common stock.
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The recipients of securities in the above transaction(s) acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions.
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The funding is payable in three tranches (“CCF Milestone Payment(s)”) subject to the achievement of three specified milestones.
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Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about the Company. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
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For each CCF Milestone Payment received, we must issue shares of our common stock equal to the CCF Milestone Payment amount divided by 80% of the closing price of our common stock on the date of the respective CCF Milestone Payment cash receipt date.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following table shows a summary of our cash flows for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Net cash used in operating activities $ (12,193 ) $ (11,133 ) Net cash used in investing activities — (4 ) Net cash provided by financing activities 9,582 11,186 Net Cash Used in Operating Activities Cash used in operations increased by approximately $1.1 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to an increase in net loss, partially offset by favorable changes in operating assets and liabilities. 58 Cash used in operating activities was approximately $12.2 million for the year ended December 31, 2024, which reflects a $14.4 million net loss adjusted for (i) approximately $1.4 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $0.7 million non-cash expense recognized for stock-based compensation and related charges, (b) an approximately $0.1 million non-cash expense associated with the issuance of our common stock as payment for vendor services provided, (c) an approximately $0.1 million non-cash expense related to the amortization of our operating lease right of use asset, and (d) an approximately $0.2 million non-cash gain recognized for the remeasurement of the contingent consideration liability associated with the Giiant Milestone Payments.
Biggest changeCash used in operating activities was approximately $10.8 million for the year ended December 31, 2025, which reflects an approximately $16.8 million net loss adjusted for (i) approximately $1.6 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $4.0 million non-cash expense recognized for stock-based compensation and related charges, (b) an approximately $0.3 million non-cash expense recognized for the fair value remeasurement of certain financial instrument liabilities, primarily our contingent consideration obligation, partially offset by an approximately $0.2 million payment of our contingent consideration obligation, (c) an approximately $0.1 million non-cash expense recognized for the discount on the common shares to be issued pursuant to the CCF Funding Agreement, (d) an approximately $0.1 million non-cash expense related to the amortization of our operating lease right of use asset, and (e) an approximately $0.1 million non-cash expense related to the write-off of certain deferred equity issuance costs associated with our shelf registration statement that expired in April of 2025.
Any reference to “Leading Biosciences, Inc.” or “LBS” refers to our operations prior to the completion of our merger with Seneca Biopharma, Inc. ("Seneca") on April 27, 2021 (the "Merger").
Any reference to “Leading Biosciences, Inc.” or “LBS” refers to our operations prior to the completion of our merger with Seneca Biopharma, Inc. ("Seneca") on April 27, 2021 (the "Seneca Merger").
We believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations: Accrued research and development expenses We expense research and development costs as incurred pursuant to Accounting Standards Codification ("ASC") 730, Research and Development Costs .
We believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations: 66 Accrued research and development expenses We expense research and development costs as incurred pursuant to Accounting Standards Codification ("ASC") 730, Research and Development Costs .
Research and Development Expenses The research and development expenses include: • salaries and employee-related costs, including stock-based compensation; • laboratory and vendor expenses related to the execution of preclinical and clinical trials; • expenses under agreements with third-party contract research organizations ("CROs"), investigative clinical trial sites that conduct research and development activities on our behalf, and consultants; • costs related to develop and manufacture preclinical study and clinical trial material; and • regulatory expenses.
FINANCIAL OVERVIEW Research and Development Expenses Our research and development expenses include: • salaries and employee-related costs, including stock-based compensation; • laboratory and vendor expenses related to the execution of preclinical and clinical trials; • expenses under agreements with third-party contract research organizations ("CROs"), investigative clinical trial sites that conduct research and development activities on our behalf, and consultants; • costs related to develop and manufacture preclinical study and clinical trial material; and • regulatory expenses.
Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, CROs, clinical site, contract manufacturing organizations (“CMOs”) and research laboratories in connection with our preclinical development, process development, manufacturing, clinical development, and regulatory activities.
Our direct research and development expenses are tracked by product candidate and consist primarily of external costs, such as fees paid under third-party license agreements and to outside consultants, CROs, clinical sites, contract manufacturing organizations (“CMOs”) and research laboratories in connection with our preclinical development, process development, manufacturing, clinical development, and regulatory activities.
At the end of each reporting period, we re-measure the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the consolidated statements of operations.
At the end of each reporting period, we remeasure the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the consolidated statements of operations.
The change in the fair value of the contingent consideration obligation of approximately $54,000 for the year ended December 31, 2024 was primarily due to the reduction in the milestone payments that would be due to Giiant upon the achievement of certain development milestones pursuant to the amendment to the Giiant License Agreement, partially offset by an increase in management's projected likelihood of success in achieving each of the defined milestones as a result of our commencement of a Phase 1 trial in November of 2024.
The change in the fair value of the contingent consideration obligation for the year ended December 31, 2024 was a gain of approximately $0.1 million and was primarily due to the reduction in the milestone payments that would be due to Giiant upon the achievement of certain development milestones pursuant to an amendment to the Giiant License Agreement, partially offset by an increase in management's projected likelihood of success in achieving each of the defined milestones as a result of our commencement of a Phase 1 trial in November of 2024.
With the approval to commence the Phase 1 clinical trial of PALI-2108, which we received from Health Canada on October 9, 2024, pursuant to the Giiant License Agreement we have assumed all development, manufacturing, regulatory and commercialization activities and costs of PALI-2108.
With the approval to commence the Phase 1 clinical trial of PALI-2108, which we received from Health Canada on October 9, 2024, pursuant to terms of the research and collaboration agreement that we have with Giiant ("Giiant License Agreement"), we have assumed all development, manufacturing, regulatory and commercialization activities and costs of PALI-2108.
As needed, we manage third parties that are engaged to conduct our (i) research activities, (ii) preclinical, clinical and translational science development activities, and (iii) process development.
As needed, we manage third parties that are engaged to conduct our (i) research activities, (ii) 61 preclinical, clinical and translational science development activities, (iii) drug manufacturing activities, and (iv) process development.
Liquidity and Capital Resources Since our inception, we have financed our operations through the sales of our securities, issuance of debt, the exercise of common stock warrants, and to a lesser degree, grants and research contracts as well as the licensing of our intellectual property to third parties.
Liquidity and Capital Resources We expect to incur substantial losses for the foreseeable future. Since our inception, we have financed our operations through the sales of our securities, issuance of debt, the exercise of common stock warrants, and to a lesser degree, grants and research contracts as well as the licensing of our intellectual property to third parties.
The February 2024 Warrant Inducement closed on February 1, 2024 for net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of approximately $2.5 million, less cash equity issuance costs of approximately $0.3 million. Cash Flows As of December 31, 2024, we had $9.8 million in cash, cash equivalents and restricted cash.
The transaction closed on February 1, 2024 for net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of approximately $2.5 million, less cash equity issuance costs of approximately $0.3 million. Cash Flows As of December 31, 2025, we had $133.4 million in cash, cash equivalents and restricted cash.
General and Administrative Expenses General and administrative expenses consist primarily of salary and employee-related costs and benefits, professional fees for legal, intellectual property, investor and public relations, accounting and audit services, insurance costs, director and committee fees, and general corporate expenses.
General and Administrative Expenses Our general and administrative expenses consist primarily of (i) salary and employee-related costs and benefits, including stock-based compensation, (ii) professional fees for legal, intellectual property, investor and public relations, accounting and audit services, insurance costs, director and committee fees, and (iii) general corporate expenses.
Through the first nine months of 2024, the nature of our research and development expenses 54 incurred related primarily to the preclinical activities associated with our joint development of PALI-2108 with our collaboration partner, Giiant.
Through the majority of 2024, the nature of our research and development expenses incurred related primarily to the preclinical activities associated with our joint development of PALI-2108 with our collaboration partner, Giiant Pharma Inc. ("Giiant").
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period.
GAAP requires us to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period.
Net cash used in operating activities was approximately $12.2 million for the year ended December 31, 2024, which includes a $14.4 million net loss adjusted for $1.4 million of net cash inflows related to changes in operating assets and liabilities and certain non-cash items impacting the net loss.
Net cash used in operating activities was approximately $10.8 million for the year ended December 31, 2025, which includes a $16.8 million net loss adjusted for $1.6 million of net cash inflows related to changes in operating assets and liabilities and certain non-cash items impacting the net loss.
Net Cash Provided by Financing Activities For the year ended December 31, 2024, cash provided by financing activities of approximately $9.6 million was attributable to net cash proceeds of approximately $2.2 million from the exercise of common stock warrants in conjunction with the February 2024 Warrant Inducement and net cash proceeds of approximately $7.9 million from the May 2024 Offering and December 2024 Offering, partially offset by payments made on our insurance financing arrangements of approximately $0.4 million.
For the year ended December 31, 2024, cash provided by financing activities of approximately $9.6 million was attributable to net cash proceeds of approximately $2.2 million from the exercise of common stock warrants in conjunction with our warrant inducement transaction in February 2024, net cash proceeds of approximately $3.5 million from our private placement financing completed in May of 2024, and cash proceeds net of underwriting discounts and commissions and cash equity issuance costs of approximately $4.4 million from our underwritten public offering of stock completed in December of 2024, partially offset by payments made on our insurance financing arrangements of approximately $0.4 million.
Therefore, we expect our clinical research and development costs directly attributable to the clinical trials of PALI-2108 to continue to increase in 2025, offset by a decrease in joint development costs associated with the Giiant License Agreement.
Therefore, our clinical research and development costs directly attributable to the clinical trials of PALI-2108 were higher in 2025 as compared to 2024, offset by a decrease in joint development costs associated with the Giiant License Agreement.
Cash used in operating activities was approximately $11.1 million or the year ended December 31, 2023, which reflects an approximately $12.3 million net loss adjusted for (i) approximately $0.4 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) a $0.6 million non-cash expense recognized for stock-based compensation and related charges, (b) a $0.1 million non-cash expense related to the amortization of our operating lease right of use asset, and (c) a non-cash expense of $0.2 million related to the remeasurement of certain liabilities recorded at fair value.
Cash used in operating activities was approximately $12.2 million for the year ended December 31, 2024, which reflects an approximately $14.4 million net loss adjusted for (i) approximately $1.4 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of (a) an approximately $0.7 million non-cash expense recognized for stock-based compensation and related charges, (b) an approximately $0.1 million non-cash expense associated with the issuance of our common stock as payment for vendor services provided, and (c) an approximately $0.1 million non-cash expense related to the amortization of our operating lease right of use asset.
Reverse Stock Split On April 5, 2024, we effected a 1-for-15 reverse stock split of our issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, our stockholders received one share of our common stock for every 15 shares each stockholder held immediately prior to the effective time of the Reverse Stock Split.
As a result of the Reverse Stock Split, each our stockholders received one share of our common stock for every 15 shares such stockholder held immediately prior to the effective time of the Reverse Stock Split.
There may be instances in which payments made to our service providers will temporarily exceed the level of services provided and result in a prepayment of the research and development expenses.
We accrue for research and development expenses for which the estimated services have been provided but we have not yet been invoiced as of the balance sheet date. There may be instances in which payments made to our service providers will temporarily exceed the level of services provided and result in a prepayment of the research and development expenses.
We intend to use the net proceeds from these recent financings for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of IBD.
We intend to use the net proceeds from the July 2025 Warrant Inducement Transaction for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of UC and CD.
Recently Issued and Adopted Accounting Pronouncements See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
The change in the revaluation of the liability in the years ended December 31, 2025 and December 31, 2024 is recognized in research and development expenses in the consolidated statements of operations. Recently Issued and Adopted Accounting Pronouncements See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Insurance Financing Arrangement In June 2024, we entered into an agreement to finance an insurance policy that renewed in May 2024. The insurance financing arrangement is payable over a 9-month period with the first payment having been payable on June 30, 2024. As of December 31, 2024, the aggregate remaining balance under our insurance financing arrangement was $79,000.
Contractual Obligation s Insurance Financing Arrangement In June of 2025, we entered into an agreement to finance an insurance policy that renewed in May of 2025. The insurance financing arrangement is secured by the associated insurance policy and is payable over a 9-month period commencing with the first payment that was payable on June 30, 2025.
In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each 60 period. If the actual timing of the performance of services or the level of effort varies from its estimate, we adjust the accrual or prepaid expense balance accordingly.
If the actual timing of the performance of services or the level of effort varies from its estimate, we adjust the accrual or prepaid expense balance accordingly.
Pursuant to the Warrant Inducement Agreements, the exercise price of each Existing Warrant was reduced to $10.97 per share.
Pursuant to the February 2024 Warrant Inducement Agreements, the exercise price of each February 2024 Existing Warrant was reduced to $10.97 per share. In consideration for the immediate exercise of the February 2024 Existing Warrants, each of the 64 February 2024 Warrant Holders received one replacement warrant for each February 2024 Existing Warrant exercised.
The net cash inflow from operating assets and liabilities was primarily attributable to (i) a $0.7 million cash inflow from the decrease in prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of our prepaid insurance policies, and (ii) a $0.3 million cash inflow from an increase in accrued compensation and benefits, partially offset by (i) a $0.5 million cash outflow for accounts payable and accrued liabilities due to the timing of payments, and (ii) a $0.1 million cash outflow related to payments of our operating lease.
The net cash inflow from operating assets and liabilities was primarily attributable to (i) a net cash inflow of approximately $0.5 million from prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of our prepaid insurance policies, (ii) an approximately $0.6 million increase in accounts payable and accrued liabilities, primarily due to higher clinical trial-related expenses and translational science expenses as a result of increased clinical trial activity, partially offset by lower accrued joint development expenses associated with the Giiant License Agreement, and (iii) an approximately $0.6 million increase in accrued compensation and benefits due to an increase in the employee bonus accrual, which will be paid in 2026.
OVERVIEW We are a clinical-stage biopharmaceutical company focused on developing and advancing novel therapeutics for patients living with autoimmune, inflammatory, and fibrotic diseases. Our lead product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Fibrostenotic Crohn's disease ("FSCD").
OVERVIEW We are a clinical-stage biopharmaceutical company developing next-generation, once-daily, oral phosphodiesterase-4 (“PDE4”) inhibitor prodrugs designed for targeted delivery to the terminal ileum and colon. Our lead clinical product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD").
Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the fourth quarter of 2025 we will require additional financing to continue at our expected level of operations.
Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than anticipated. Further, beyond the readout expected in 2028, we will require additional financing to continue at our expected level of operations, including a Phase 3 clinical trial and possible commercialization of PALI-2108 for the treatment of UC and CD.
For the year ended December 31, 2024, we recognized no license revenue.
We recognized no preclinical joint development costs for the year ended December 31, 2025.
Finally, associated with the Giiant License Agreement entered into on September 1, 2023, the year ended December 31, 2023 included transaction costs of approximately $0.2 million and non-cash expense of approximately $0.2 million for the initial recording of the fair value of the contingent consideration obligation, compared to a small non-cash gain recognized for a decrease in the fair value of the contingent consideration obligation in the year ended December 31, 2024, resulting in a net favorable impact year-over-year of approximately $0.4 million.
We recognized an approximate $0.4 million non-cash loss on the fair value remeasurement of the contingent consideration obligation for the year ended December 31, 2025, compared to an approximate $0.1 million non-cash gain on the fair value remeasurement of the contingent consideration obligation for the year ended December 31, 2024, resulting in a net non-cash year-over-year loss of approximately $0.4 million.
Gross cash proceeds from the January 2023 Offering were approximately $2.5 million and net cash proceeds were approximately $2.2 million after deducting cash equity issuance costs of approximately $0.3 million. Refer to Note 5, Stockholders' Equity in Part II Item 8 of this Annual Report on Form 10-K for further details of our recent equity transactions.
We intend to use the net proceeds from the offering for working capital and general corporate purposes, including the development of PALI-2108 for the treatment of UC and CD. Refer to Note 5, Stockholders' Equity in Part II Item 8 of this Annual Report on Form 10-K for further details of our recent equity transactions.
The significant assumptions used in the calculation of the fair value as of December 31, 2024 included a discount rate of 9.29% and management's updated projections of the likelihood of success in achieving each of the defined milestones based on empirical, published industry data.
The significant assumptions used in the calculation of the fair value as of December 31, 2025 included a discount rate of 15.26% and management's updated projections of the likelihood of success in achieving the one remaining defined milestone based on empirical, published industry data. 67 As of December 31, 2025 and December 31, 2024, the entire amount of contingent consideration obligation of approximately $0.3 million and $0.2 million, respectively, was classified as a noncurrent liability in the consolidated balance sheets.
Warrant Exercises During the year ended December 31, 2024, we received gross cash proceeds of approximately $2.5 million for the exercise of outstanding common stock warrants.
Warrant Exercises During the years ended December 31, 2025 and December 31, 2024, total gross cash proceeds from the exercise of outstanding common stock warrants was approximately $7.6 million and $2.5 million, respectively, primarily as a result of the transactions described below.
Research and Development Expenses Research and development expenses increased by approximately $2.2 million, or 31%, from approximately $6.9 million for the year ended December 31, 2023 to approximately $9.1 million for the year ended December 31, 2024, primarily due to (i) an increase in joint development expenses directly related to PALI-2108 of approximately $3.6 million, from approximately $0.7 million for the year ended December 31, 2023 to approximately $4.3 million for the year ended December 31, 2024, and (ii) an approximately $1.0 million increase in drug manufacturing costs for the preclinical and clinical trials of PALI-2108.
CMC expenses increased from approximately $1.0 million for the year ended December 31, 2024 to approximately $1.9 million for the year ended December 31, 2025, primarily due to increased activity related to our upcoming clinical trials. Preclinical joint development expenses were approximately $4.3 million for the year ended December 31, 2024.
On January 30, 2024, we entered into warrant inducement agreements (the “Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “Warrant Holders”) of certain of our remaining outstanding common stock purchase warrants issued pursuant to: (i) the May 2022 Offering, (ii) the January 2023 Offering, and (iii) the April 2023 Offering, as well as certain outstanding common stock purchase warrants outstanding from the August 2022 Offering (the "August 2022 Warrants") (collectively, the “Existing Warrants”).
On January 30, 2024, we entered into warrant inducement agreements (the “February 2024 Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “February 2024 Warrant Holders”) of certain of existing common stock warrants (the “February 2024 Existing Warrants”) to exercise the February 2024 Existing Warrants to purchase up to an aggregate of 228,162 shares of our common stock.
If we fail to obtain the needed capital, we will be forced to delay, scale back, or eliminate some or all of our development activities, or potentially cease our operations. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”).
Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The preparation of financial statements in conformity with U.S.
In May 2024, we completed a private placement for net cash proceeds of approximately $3.5 million consisting of gross cash proceeds of $4.0 million, less cash equity issuance costs of approximately $0.5 million. 53 In February 2024, we completed a warrant inducement transaction for net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of $2.5 million, less cash equity issuance costs of approximately $0.3 million.
The transaction closed on July 25, 2025 for net cash proceeds of approximately $3.4 million consisting of gross cash proceeds of $3.9 million, less cash equity issuance costs of approximately $0.5 million.
Assuming the trial meets its primary objectives, we plan to initiate a Phase 1b/2a clinical study in UC patients in the first quarter of 2026. In addition to conducting clinical studies in Canada, we anticipate filing an Investigational New Drug Application (“IND”) with the United States Food and Drug Administration (“FDA”) during 2025.
In addition to conducting clinical studies in Canada, we anticipate data from the exploratory Phase 1b cohort in FSCD together with results from the Phase 1/1b UC program will support Investigational New Drug Application (“IND”) submissions to the United States Food and Drug Administration ("FDA") for a Phase 2 UC study in the second quarter of 2026 and a Phase 2 CD study in the second half of 2026.
Other than the remaining insurance financing arrangement payments due in 2025, as of December 31, 2024 we have no other minimum debt payments required in 2025 or thereafter. Future Liquidity Needs We have incurred significant operating losses and negative cash flows from operations since our inception.
As of December 31, 2025, the aggregate remaining balance under our insurance financing arrangement of approximately $0.1 million will be paid in the first quarter of 2026. Other than the remaining insurance financing arrangement payments due in 2026, as of December 31, 2025 we have no other minimum debt payments required in 2026 or thereafter.
If our IND is approved, we anticipate commencing clinical trials of PALI-2108 in the United States ("U.S.") during the first quarter of 2026. Financial Results Our operating loss for the year ended December 31, 2024 was approximately $14.9 million, which consisted of research and development expense and general and administrative expense of approximately $9.1 million and $5.8 million, respectively.
Financial Results Our operating loss for the year ended December 31, 2025 was approximately $18.1 million, which consisted of research and development expenses and general and administrative expenses of approximately $10.2 million and $7.9 million, respectively.
For the year ended December 31, 2023, cash provided by financing activities of approximately $11.2 million was primarily attributable to net cash proceeds of approximately $8.8 million from the January 2023 Offering, the April 2023 Offering, and the September 2023 Offering.
Net cash provided by financing activities was approximately $134.4 million for the year ended December 31, 2025. As of December 31, 2025, we have $133.4 million in cash, cash equivalents and restricted cash.
Other income (expense) Other income, net, of approximately $0.4 million for the year ended December 31, 2024 includes dividend income of approximately $0.5 million from our short-term investments of excess cash in money market funds with maturities of three months or less, partially offset by other non-cash losses of less than $0.1 million associated primarily with the write-off of certain other receivable balances.
Other income (expense) Other income, net, increased by approximately $0.9 million, or 197%, from approximately $0.4 million for the year ended December 31, 2024 to approximately $1.3 million for the year ended December 31, 2025, primarily as a result of an approximately $0.9 million increase in dividend income, due to the increased investment of excess cash in money market accounts after the October 2025 Offering, and other non-cash losses of less than $0.1 million associated primarily with the write-off of certain other receivable balances for the year ended December 31, 2024 that did not repeat in 2025, partially offset by a non-cash loss of approximately $0.1 million recognized for the year ended December 31, 2025 that related to the fair value of the milestone liabilities recognized upon our entering into the CCF Funding Agreement (Note 5, Stockholders' Equity in Part II Item 8 of this Annual Report on Form 10-K for further details).
Partially offsetting these increases in joint development expenses and drug manufacturing costs was a decrease in clinical trial-related expenses of approximately $1.3 million for the year ended December 31, 2024, compared to the year ended December 31, 2023.
In addition, during the year ended December 31, 2025, we recognized a reduction in joint development costs of $1.1 million that was related to funds received by us from Giiant pursuant to the joint development plan, resulting in a net decrease in preclinical joint development expenses of approximately $5.4 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.
Associated with our clinical trials of LB1148, which we ceased developing in August of 2023, we recognized clinical vendor costs, translational research costs, investigator site fees and regulatory activity costs of approximately $2.5 million for the year ended December 31, 2023, compared to costs specific to the clinical trials of PALI-2108 of approximately $1.2 million for the year ended December 31, 2024.
We recognized clinical trial-related expenses of approximately $4.0 million for the year ended December 31, 2025, compared to clinical trial-related expenses of $1.5 million for the year ended December 31, 2024, an increase of approximately $2.5 million due to the commencement of our Phase 1 clinical trial of PALI-2108 in November of 2024.
General and Administrative Expenses General and administrative expenses decreased by approximately $0.4 million, or 7%, from approximately $6.2 million for the year ended December 31, 2023 to approximately $5.8 million for the year ended December 31, 2024, 56 primarily driven by (i) a decrease insurance costs of approximately $0.2 million, due to lower insurance premiums, (ii) a decrease in our Board and Board committee fees of approximately $0.2 million, due to reduction in the size of our Board and Board committee membership in the first quarter of 2024, (iii) a decrease of approximately $0.2 million related to patent costs, license and maintenance fees, and subscription fees recognized in 2023 that did not repeat in 2024, and (iii) a decrease in professional fees, primarily accounting fees, of approximately $0.5 million for the year ended December 31, 2024, compared to the for the year ended December 31, 2023.
General and Administrative Expenses Our general and administrative expenses increased by approximately $2.1 million, or 36%, from approximately $5.8 million for the year ended December 31, 2024 to approximately $7.9 million for the year ended December 31, 2025, primarily as a result of (i) an approximately $1.7 million increase in general and administrative employee-related expenses due to an approximately $1.4 million increase in non-cash share-based compensation expense and an approximately $0.3 million increase in salaries and benefits and annual bonuses, (ii) an approximately $0.4 million increase in professional fees and legal expenses, (iii) an approximately $0.1 million increase in shareholder services due to the special meetings of stockholders held in 2025, and (iv) an approximately $0.1 million increase in general operating expenses.
We are currently conducting a Phase 1 human clinical trial of our lead product candidate, PALI-2108, for the treatment of UC. The Phase 1 clinical trial is being conducted in Canada. We anticipate announcing topline data from this study during the second quarter of 2025.
During 2025, we announced positive results from our Phase 1 human clinical trial of PALI-2108 for the treatment of UC conducted in Canada. The Phase 1 clinical study of PALI-2108 was a single-center, randomized, double-blinded, placebo-controlled clinical study focused on safety, tolerability, and pharmacokinetics (“PK”) in both healthy volunteers and UC patients.
To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $9.8 million as of December 31, 2024, we believe we have sufficient cash to fund our currently planned operations through the fourth quarter of 2025.
Future Liquidity Needs We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability.
Removed
Net cash provided by financing activities was approximately $9.6 million for the year ended December 31, 2024. Recent Financings In December 2024, we completed an underwritten public offering for net cash proceeds of $4.1 million consisting of gross cash proceeds of $5.0 million less cash equity issuance costs of approximately $0.9 million.
Added
The clinical study included an open-label UC patient cohort with multiple dosing arms in which we evaluated the pharmacodynamics ("PD") of PALI-2108. On October 16, 2025, we dosed our first patients in an exploratory Phase 1b cohort in Fibrostenotic Crohn's disease ("FSCD") while we complete longer-term chronic safety and toxicology studies.
Removed
Based on our cash and cash equivalents balance of $9.8 million as of December 31, 2024, we believe we have sufficient cash to fund our currently planned operations through the fourth quarter of 2025. Giiant License Agreement On September 1, 2023, we entered into a research collaboration and license agreement (the "Giiant License Agreement") with Giiant Pharma Inc. (“Giiant”).
Added
The exploratory Phase 1b cohort in FSCD is expected to be followed by the initiation of Phase 2 clinical programs to assess PALI-2108’s efficacy, safety, and tolerability in patients with moderate to severe UC, as well as those with CD.
Removed
Under the terms of the Giiant License Agreement, we obtained the rights to develop, manufacture, and commercialize all compounds from Giiant, existing now and in the future, and any product containing or delivering any licensed compound, in any formulation or dosage for all human and non-human therapeutic uses for any and all indications worldwide, including those technologies that are the basis of PALI-2108.
Added
Crohn's and Colitis Foundation Research Funding Agreement On December 17, 2025, we entered into a Research Program Funding Agreement (the “CCF Funding Agreement”) with the Crohn’s & Colitis Foundation (the “CCF”), in which the CCF agreed to provide up to a $0.5 million investment to support our Phase 1b research program related to PALI-2108 in exchange for shares of our common stock. 60 October 2025 Offering On October 2, 2025, we closed on an underwritten public offering to issue and sell 197,154,844 shares of common stock and common stock equivalents for net proceeds, including the full exercise of the underwriter's over-allotment option, of approximately $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million (the "October 2025 Offering").
Removed
Pursuant to the terms of the Giiant License Agreement, preclinical development of PALI-2108 was jointly undertaken by us and representatives of Giiant. Pursuant to the Giiant License Agreement, we paid, or reimbursed or advanced to Giiant, a portion of the joint development costs.
Added
July 2025 Warrant Inducement Transaction On July 23, 2025, we entered into a warrant inducement agreement with an existing holder of certain of our common stock warrants to exercise their existing common stock warrants to purchase an aggregate of 4,318,905 shares of our common stock.
Removed
Additionally, per the terms of the Giiant License Agreement, we will pay (i) certain milestone payments (in cash or stock at our sole election) (the "Giiant Milestone Payments") and (ii) royalty payments upon sales or sublicenses to third parties, with such milestone and royalty payments (the "Giiant License Payments") subject to a payment cap (the "Payment Cap").
Added
We expect our clinical research and development costs will continue to increase in 2026 as we advance PALI-2108 through clinical studies in UC and CD.
Removed
On August 2, 2024, we entered into an amendment to the Giiant License Agreement with Giiant (the "Giiant License Agreement Amendment"). Pursuant to the Giiant License Agreement Amendment, we agreed to increase the amount of joint development costs we would reimburse or advance to Giiant pursuant to the Giiant License Agreement.
Added
Reverse Stock Split On April 5, 2024, we effected a 1-for-15 reverse stock split of our issued and outstanding common stock (the "Reverse Stock Split").
Removed
As consideration for the increase, Giiant agreed to (i) a reduction in the Giiant Milestone Payments that would be due to them upon the achievement of certain development milestones, and (ii) a decrease to the Payment Cap applied to future Giiant License Payments, as set forth in the original Giiant License Agreement.
Added
Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock-based awards and common stock warrants included in this Annual Report on Form 10-K, including the exercise or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split.
Removed
There were no other changes to the terms of the original Giiant License Agreement as a result of the Giiant License Agreement Amendment that would have a material impact on our results of operations, financial position or future cash flows.
Added
Results of Operations The following table summarizes our results of operations for the year ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, Change 2025 2024 $ % Operating expenses: Research and development $ 10,192 $ 9,063 $ 1,129 12 % General and administrative 7,864 5,796 2,068 36 % Total operating expenses 18,056 14,859 3,197 22 % Loss from operations (18,056 ) (14,859 ) (3,197 ) 22 % Other (expense) income: Interest expense (10 ) (12 ) 2 (17 )% Other income, net 1,285 433 852 197 % Total other income, net 1,275 421 854 203 % Net loss $ (16,781 ) $ (14,438 ) $ (2,343 ) 16 % Research and Development Expenses Our research and development expenses increased by approximately $1.1 million, or 12%, from approximately $9.1 million for the year ended December 31, 2024 to approximately $10.2 million for the year ended December 31, 2025.
Removed
FINANCIAL OVERVIEW License Revenue We generated no revenues from the sale of our product candidates for any of the periods presented. For the year ended December 31, 2023, we recognized license revenue of approximately $0.3 million from the co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”).
Added
The increase is primarily attributable to (i) an approximately $2.8 million increase in research and development employee-related expenses, (ii) an approximately $2.5 million net increase in clinical trial-related expenses associated with the Phase 1 clinical trial of PALI-2108, (iii) an approximately $0.9 million increase in chemistry, manufacturing and controls ("CMC") expenses, and (iv) and an approximately $0.4 million net non-cash loss associated with an increase in the fair value of the contingent consideration obligation pursuant to the Giiant License Agreement.
Removed
Research and development expenses recognized in the year ended December 31, 2023 consisted primarily of costs directly incurred for the clinical development of our legacy product candidate, LB1148. On August 9, 2023, based on the results of the efficacy and safety data of the U.S. Phase 2 PROFILE study of LB 1148, we terminated the development of LB1148.
Added
These increases were partially offset by an approximately $5.4 million decrease in expenses that were directly related to the preclinical joint development of PALI-2108.
Removed
Restructuring Costs In order to better utilize our resources on the implementation of our refocused business plans and corporate strategy, we committed to a reduction-in-workforce on October 27, 2023 (the "2023 RIF"). The 2023 RIF consisted of a 25% reduction in our employee workforce, specifically research and development employees that were no longer deemed critical for our development of PALI-2108.
Added
Research and development employee-related expenses increased approximately $2.8 million for the year ended 62 December 31, 2025, compared to the year ended December 31, 2024, primarily due to an approximately $1.9 million increase in non-cash share-based compensation expense and an approximately $0.9 million increase in research and development salaries and benefits expense as a result of a 133% increase in research and development headcount necessary to support our PALI-2108 development strategy subsequent to the October 2025 Offering, and to a lesser extent, an increase in employee annual bonuses.
Removed
We have outsourced to a third-party CRO many of the clinical trial activities related to our Phase 1 clinical trial of PALI-2108, which commenced in November of 2024.
Added
On October 16, 2025, the first of the milestones pursuant to the Giiant License Agreement was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a FSCD cohort. Accordingly, the Company settled this a milestone payment to Giiant in cash in the amount of approximately $0.2 million.
Removed
Going Concern Our management has evaluated all conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued, including: (i) our available cash as of the date of this filing will not be sufficient to fund our anticipated level of operations for the next 12 months; (ii) we will require additional financing by the end of 2025 to continue at our expected level of operations; and (iii) if we fail to obtain the needed capital, we will be forced to delay, scale back, or eliminate some or all of our development activities or perhaps cease operations.
Added
These increases were partially offset by an approximately $0.2 million decrease in consultant and contract labor expenses.
Removed
In the opinion of management, these factors, among others, raise substantial doubt about our ability to continue as a going concern as of the filing date of this Annual Report on Form 10-K and for one year from the issuance of the consolidated financial statements.
Added
Management believes the October 2025 Offering for net proceeds of $127.6 million will provide sufficient capital to 63 fund our operations through major clinical development milestones including a Phase 2 primary efficacy readout of PALI-2108 for UC that is expected in the second half of 2027 and a Phase 2 primary efficacy readout of PALI-2108 for CD that is expected in 2028.
Removed
Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock-based awards and common stock warrants included in this Annual Report on Form 10-K, including the exercise or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split. 55 Results of Operations The following table summarizes our results of operations for the year ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, Change 2024 2023 $ % License revenue $ — $ 250 $ (250 ) n/a Operating expenses: Research and development 9,063 6,893 2,170 31 % General and administrative 5,796 6,202 (406 ) (7 )% Restructuring costs — 225 (225 ) n/a Total operating expenses 14,859 13,320 1,539 12 % Loss from operations (14,859 ) (13,070 ) (1,789 ) 14 % Other (expense) income: Interest expense (12 ) (15 ) 3 (20 )% Other income, net 433 785 (352 ) (45 )% Total other income, net 421 770 (349 ) (45 )% Net loss $ (14,438 ) $ (12,300 ) $ (2,138 ) 17 % License revenue During the year ended December 31, 2023, we recognized license revenue of approximately $0.3 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement.
Added
Sources of Liquidity Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of our products, if approved for commercial sale. We will require additional funding to conduct future clinical activities.
Removed
During the year ended December 31, 2024, we recognized no license revenue.
Added
We may seek additional funding through public and private financings, debt financings, collaboration agreements, strategic alliances and licensing agreements.
Removed
With the commencement of our clinical trials of PALI-2108 in November of 2024, in 2025 we expect an increase in costs directly associated with the clinical trials of PALI-2108.

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Other PALI 10-K year-over-year comparisons