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

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Paragraph-level year-over-year comparison of Rein Therapeutics, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+787 added−597 removedSource: 10-K (2025-04-07) vs 10-K (2024-04-15)

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

787 paragraphs added · 597 removed · 411 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

169 edited+128 added−59 removed176 unchanged
Biggest changeAn applicant seeking approval to market and distribute a new drug or biologic in the U.S. generally must satisfactorily complete each of the following steps, where applicable: • completion of preclinical laboratory tests and animal studies according to good laboratory practices (GLP) regulations or other applicable regulations; • manufacture and testing of the therapeutic or biologic moiety and its respective product formulation according to good manufacturing practices (cGMP), regulations or other applicable regulations; • submission to FDA of an investigational new drug application (IND) which must become effective before human clinical trials may begin and must be updated annually and amended when certain changes are made; • approval by an independent institutional review board (IRB) or ethics committee representing each clinical trial site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practices (GCPs) and other clinical-trial related regulations to evaluate the safety and efficacy of the investigational product for each proposed indication; • preparation and submission to FDA of an NDA or BLA requesting marketing approval for one or more proposed indications, including payment of application user fees; • review of the NDA or BLA by an FDA advisory committee, where applicable; 14 • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the drug or biologic and its respective finished product is produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; • satisfactory completion of any FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data submitted in support of the NDA or BLA; and • FDA review and approval of the NDA or BLA, which may be subject to additional post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy (REMS) and any other potential post-approval studies required by FDA.
Biggest changeA sponsor seeking approval to market and distribute a new drug or biological product in the U.S. must satisfactorily complete the following steps, where applicable: • completion of preclinical laboratory tests and animal studies according to good laboratory practices, or GLP, or other applicable regulations; • manufacture and testing of the therapeutic or biologic moiety and its respective product formulation according to good manufacturing practices, or cGMP, or other applicable regulations; • design of a clinical protocol and submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials may begin and must be updated annually and amended when certain changes are made; • approval by an independent institutional review board, or IRB, or ethics committee representing each clinical trial site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practices, or GCPs, and other clinical-trial related regulations to evaluate the safety and efficacy of the investigational drug product and the safety, purity and potency for the investigational biologic product for each proposed indication; • preparation and submission to the FDA of an NDA or BLA requesting marketing approval for one or more proposed indications; • payment of application and program fees pursuant to the Prescription Drug User Fee Act, or PDUFA; • review of the NDA or BLA by an FDA advisory committee, where applicable; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the drug or biologic and its respective finished product is produced to assess compliance with cGMP requirements to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; • satisfactory completion of any FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data submitted in support of the NDA or BLA; and • FDA review and approval of the NDA or BLA authorizing marketing of the drug or biological product for particular indications in the United States; and • compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and any other potential post-approval studies required by the FDA.
The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to FDA as part of the IND.
The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety and toxicology studies. The sponsor must submit the results of the preclinical studies, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND.
Clinical trials are conducted under protocols detailing the objectives of the study, inclusion and exclusion criteria, dosing procedures and the parameters to be used in monitoring the safety and effectiveness criteria to be evaluated. Each protocol, as well as any subsequent amendments, must be submitted to FDA as part of the IND.
Clinical trials are conducted under protocols detailing the objectives of the study, inclusion and exclusion criteria, dosing procedures and the parameters to be used in monitoring the safety and effectiveness criteria to be evaluated. Each protocol, as well as any subsequent amendments, must be submitted to the FDA as part of the IND.
This group may recommend continuation of the trial as planned, changes in trial conduct or cessation of the trial at designated checkpoints based on access to certain data from the study. FDA may, at any time while clinical trials are ongoing, impose a partial or complete clinical hold based on concerns for patient safety and/or noncompliance with regulatory requirements.
This group may recommend continuation of the trial as planned, changes in trial conduct or cessation of the trial at designated checkpoints based on access to certain data from the study. The FDA may, at any time while clinical trials are ongoing, impose a partial or complete clinical hold based on concerns for patient safety and/or noncompliance with regulatory requirements.
These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, or to document a clinical benefit in the case of drugs or biologics approved under FDA’s accelerated approval regulations and generate additional safety data regarding use of the product in a clinical setting.
These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication, or to document a clinical benefit in the case of drugs or biologics approved under the FDA’s accelerated approval regulations and generate additional safety data regarding use of the product in a clinical setting.
In certain instances, FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for the product.
In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA or BLA. Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for the product.
During the development of a new drug or biological product, sponsors have the opportunity to meet with FDA at certain points, including prior to submission of an IND, at the end of phase 2 and before submission of an NDA or BLA.
During the development of a new drug or biological product, sponsors have the opportunity to meet with the FDA at certain points, including prior to submission of an IND, at the end of phase 2 and before submission of an NDA or BLA.
FDA will not approve the product unless it determines that the manufacturing processes and facilities comply with cGMP regulatory requirements and are adequate to ensure consistent production of the product within required specifications.
The FDA will not approve the product unless it determines that the manufacturing processes and facilities comply with cGMP regulatory requirements and are adequate to ensure consistent production of the product within required specifications.
Additionally, FDA may refer any NDA or BLA, including applications for novel product candidates which present difficult questions of safety or efficacy, to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts.
Additionally, the FDA may refer any NDA or BLA, including applications for novel product candidates which present difficult questions of safety or efficacy, to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts.
FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making final decisions on approval.
The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making final decisions on approval.
FDA also may require submission of a REMS, if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the drug or biological product.
The FDA also may require submission of a REMS, if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the drug or biological product.
Sponsors must submit a pediatric study plan to FDA outlining the proposed pediatric study or studies they plan to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. FDA must then review the information submitted, consult with the sponsor, and agree upon a final plan.
Sponsors must submit a pediatric study plan to FDA outlining the proposed pediatric study or studies they plan to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The FDA must then review the information submitted, consult with the sponsor, and agree upon a final plan.
FDA or the applicant may request an amendment to the plan at any time.
The FDA or the applicant may request an amendment to the plan at any time.
The approval process is lengthy and often difficult, and FDA may refuse to approve an NDA or a BLA if the applicable regulatory criteria are not satisfied, or may require additional clinical or other data and information.
The approval process is lengthy and often difficult, and the FDA may refuse to approve an NDA or a BLA if the applicable regulatory criteria are not satisfied or may require additional clinical or other data and information.
A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for FDA to reconsider the application.
A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.
If and when those deficiencies have been addressed to FDA’s satisfaction in a resubmission of the NDA or BLA, FDA will issue an approval letter. FDA has committed to reviewing such resubmissions in response to an issued CRL in either two or six months depending on the type of information included.
If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA or BLA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in response to an issued CRL in either two or six months depending on the type of information included.
Even with the submission of this additional information, however, FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If a product receives regulatory approval from FDA, the approval is limited to the conditions of use (e.g., patient population, indication) described in FDA-approved labeling.
Even with the submission of this additional information, however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If a product receives regulatory approval from the FDA, the approval is limited to the conditions of use (e.g., patient population, indication) described in FDA-approved labeling.
Further, depending on the specific risk(s) to be addressed, FDA may require that contraindications, warnings, or precautions be included in the product labeling (including specific safety-related label warnings).
Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings, or precautions be included in the product labeling (including specific safety-related label warnings).
FDA may also require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization or impose other conditions, including distribution and use restrictions, or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.
The FDA may also require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization or impose other conditions, including distribution and use restrictions, or other risk management mechanisms under a REMS, which can materially affect the potential market and profitability of the product.
FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements, and FDA review and approval.
The FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements, and FDA review and approval.
Expedited Programs for Serious Conditions FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include Fast Track Designation, Breakthrough Therapy Designation, Priority Review Designation and accelerated approval.
Expedited Programs for Serious Conditions The FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include Fast Track Designation, Breakthrough Therapy Designation, Priority Review Designation and accelerated approval.
To be eligible for a Fast Track Designation, FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need by providing a therapy where none exists or a therapy that may be potentially superior to existing therapy based on efficacy or safety factors.
To be eligible for a Fast Track Designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need by providing a therapy where none exists or a therapy that may be potentially superior to existing therapy based on efficacy or safety factors.
FDA also may review sections of the NDA or BLA for a fast track product on a rolling basis before the complete application is submitted if the sponsor and FDA agree on a schedule for the submission of the application sections and the sponsor pays any required user fees upon submission of the first section of the NDA or BLA.
The FDA also may review sections of the NDA or BLA for a fast track product on a rolling basis before the complete application is submitted if the sponsor and the FDA agree on a schedule for the submission of the application sections and the sponsor pays any required user fees upon submission of the first section of the NDA or BLA.
Fast Track Designation may be rescinded by FDA if the designation is no longer supported by data emerging from the clinical trial process. Fast Track Designation does not guarantee product approval.
Fast Track Designation may be rescinded by the FDA if the designation is no longer supported by data emerging from the clinical trial process. Fast Track Designation does not guarantee product approval.
Breakthrough Therapy Designation may be rescinded by FDA if the designation is no longer supported. Breakthrough Therapy Designation does not guarantee product approval. FDA may designate a product for Priority Review if it is a drug or biologic that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness.
Breakthrough Therapy Designation may be rescinded by the FDA if the designation is no longer supported. Breakthrough Therapy Designation does not guarantee product approval. The FDA may designate a product for Priority Review if it is a drug or biologic that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness.
FDA determines at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed drug or biologic qualifies for Priority Review.
The FDA determines at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed drug or biologic qualifies for Priority Review.
A Priority Review Designation is intended to direct overall attention and resources to the evaluation of such applications and to shorten FDA’s goal for taking action on a marketing application from ten months to six months for an original BLA or NDA from the date of filing.
A Priority Review Designation is intended to direct overall attention and resources to the evaluation of such applications and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months for an original BLA or NDA from the date of filing.
Finally, FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit.
Finally, the FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit.
FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality (IMM), and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.
The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality (IMM), and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.
For drugs granted accelerated approval, FDA generally requires sponsors to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit.
For drugs granted accelerated approval, the FDA generally requires sponsors to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product’s clinical benefit.
Failure to conduct required post-approval studies with due diligence, failure to confirm a clinical benefit during the post-approval studies, or dissemination of false or misleading promotional materials would allow FDA to withdraw the product approval on an expedited basis.
Failure to conduct required post-approval studies with due diligence, failure to confirm a clinical benefit during the post-approval studies, or dissemination of false or misleading promotional materials would allow the FDA to withdraw the product approval on an expedited basis.
Post Approval Requirements Following approval of a new product, the manufacturer and the approved product are subject to pervasive and continuing regulation by FDA, governing, among other things, manufacturing and quality-related compliance, monitoring and recordkeeping activities, reporting of adverse experiences with the product and product problems to FDA, product sampling and distribution, manufacturing and promotion and advertising.
Post Approval Requirements Following approval of a new product, the manufacturer and the approved product are subject to pervasive and continuing regulation by the FDA, governing, among other things, manufacturing and quality-related compliance, monitoring and recordkeeping activities, reporting of adverse experiences with the product and product problems to FDA, product sampling and distribution, manufacturing and promotion and advertising.
FDA and other agencies, including state regulatory bodies, actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
The FDA and other agencies, including state regulatory bodies, actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
The manufacturing facilities for our product candidates must meet cGMP regulatory requirements and satisfy FDA or comparable foreign regulatory authorities before any product is approved and our commercial products can be manufactured.
The manufacturing facilities for our product candidates must meet cGMP regulatory requirements and satisfy the FDA or comparable foreign regulatory authorities before any product is approved and our commercial products can be manufactured.
Once an approval of a drug/biologic product is granted, FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained, or if problems occur after the product reaches the market.
Once an approval of a drug/biologic product is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained, or if problems occur after the product reaches the market.
Only one patent applicable to an approved drug is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with FDA, reviews and approves the application for any patent term extension or restoration.
Only one patent applicable to an approved drug is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent. The U.S. Patent and Trademark Office, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.
A drug is a new chemical entity if FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.
During the exclusivity period, FDA may not accept for review an abbreviated new drug application, or a 505(b)(2) NDA submitted by another company for another version of such drug. However, an application may be submitted after four years if it contains a certification of patent invalidity, non-infringement, or unenforceability for the listed drug.
During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or a 505(b)(2) NDA submitted by another company for another version of such drug. However, an application may be submitted after four years if it contains a certification of patent invalidity, non-infringement, or unenforceability for the listed drug.
This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit FDA from approving competitor products for drugs that fall outside the scope of the exclusivity.
This three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving competitor products for drugs that fall outside the scope of the exclusivity.
For FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product and (for products administered multiple times) that the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
In addition, if a product candidate that has Orphan Drug Designation subsequently receives the first FDA approval for that drug for the disease for which it has such designation, the product may receive seven-year orphan drug exclusivity, which means that FDA may not approve any other applications to market the same drug for the same indication for seven years following product approval unless the subsequent product candidate is demonstrated to be clinically superior.
In addition, if a product candidate that has Orphan Drug Designation subsequently receives the first FDA approval for that drug for the disease for which it has such designation, the product may receive seven-year orphan drug exclusivity, which means that the FDA may not approve any other applications to market the same drug for the same indication for seven years following product approval unless the subsequent product candidate is demonstrated to be clinically superior.
The EU regulatory regime under Directive 93/42/EEC, or the Medical Devices Directive, was replaced by Regulation (EU) 2017/745 on medical devices, or the Medical Devices Regulation as of May 26, 2021, subject to the transitional provisions for medical devices to remain on the EU market for a limited period if they were certified or, if certification was not required, a EU declaration of conformity had been drawn up under the Medical Devices Directive.
The EU regulatory regime under Directive 93/42/EEC, or the Medical Devices Directive, was replaced by Regulation (EU) 2017/745 on medical devices, or the Medical Devices Regulation as of May 26, 2021, subject to the transitional provisions for medical devices to remain on the EU market for a limited period if they were certified or, if certification was not required, the EU declaration of conformity had been drawn up under the Medical Devices Directive.
We make these reports available through the “SEC Filings” section of our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission, or the SEC.
We make these reports available through the “SEC Filings” section of our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission, or SEC.
Department of Health and Human Services for re-disclosure to the public, as well as ownership and investment interests held by physicians and their immediate family members; 29 • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • analogous state laws and regulations, including: state anti-kickback and false claims laws; state laws requiring pharmaceutical companies to comply with specific compliance standards, restrict financial interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments to health care providers or marketing expenditures; and state laws governing privacy, security and breaches of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; • the Travel Act of 1961, which has been used as a tool in the health care context to target kickback schemes involving private insurance that would not otherwise be prohibited under the anti-kickback statute, makes it unlawful for a facility to use interstate commerce with the intent, among other things, to distribute proceeds of “unlawful activity” and thereafter do some act to further such distribution (“unlawful activity” includes bribery under the state law in which the activity was committed); and • laws and regulations prohibiting bribery and corruption, such as the FCPA, which, among other things, prohibits U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations or foreign government-owned or affiliated entities, candidates for foreign public office, and foreign political parties or officials thereof.
Department of Health and Human Services for re-disclosure to the public, as well as ownership and investment interests held by physicians and their immediate family members; • federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; • analogous state laws and regulations, including: state anti-kickback and false claims laws; state laws requiring pharmaceutical companies to comply with specific compliance standards, restrict financial interactions between pharmaceutical companies and healthcare providers or require pharmaceutical companies to report information related to payments to health care providers or marketing expenditures; and state laws governing privacy, security and breaches of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts; • the Travel Act of 1961, which has been used as a tool in the health care context to target kickback schemes involving private insurance that would not otherwise be prohibited under the anti-kickback statute, makes it unlawful for a facility to use interstate commerce with the intent, among other things, to distribute proceeds of “unlawful activity” and thereafter do some act to further such distribution (“unlawful activity” includes bribery under the state law in which the activity was committed); and • laws and regulations prohibiting bribery and corruption, such as the FCPA, which, among other things, prohibits U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations or foreign government-owned or affiliated entities, candidates for foreign public office, and foreign political parties or officials thereof.
These laws, some of which will apply only if and when we have an approved product, include: • federal false claims, false statements and civil monetary penalties laws prohibiting, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment of government funds or knowingly making, or causing to be made, a false statement to get a false claim paid; • federal healthcare program anti-kickback law, which prohibits, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid; • The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • FDCA, which among other things, strictly regulates drug marketing, prohibits manufacturers from marketing such products prior to approval or for off-label use and regulates the distribution of samples; • federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; • federal Open Payments (or federal “sunshine” law), which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with certain healthcare providers to the Center for Medicare & Medicaid Services within the U.S.
These laws, some of which will apply only if and when we have an approved product, include: • federal false claims, false statements and civil monetary penalties laws prohibiting, among other things, any person from knowingly presenting, or causing to be presented, a false claim for payment of government funds or knowingly making, or causing to be made, a false statement to get a false claim paid; • federal healthcare program anti-kickback law, which prohibits, among other things, persons from offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for, or the purchasing or ordering of, a good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid; • The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, in addition to privacy protections applicable to healthcare providers and other entities, prohibits executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • FDCA, which among other things, strictly regulates drug marketing, prohibits manufacturers from marketing such products prior to approval or for off-label use and regulates the distribution of samples; 31 • federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs; • federal Open Payments (or federal “sunshine” law), which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with certain healthcare providers to the Center for Medicare & Medicaid Services within the U.S.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls; • safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about a product; • mandated modification of promotional materials and labeling, and issuance of corrective information; • fines, warning letters, untitled letters, or other enforcement-related letters or clinical holds on post- approval clinical trials; • refusal of FDA to approve pending NDAs/BLAs or supplements to approved NDAs/BLAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; • injunctions or the imposition of civil or criminal penalties; and • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.
Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market, or product recalls; • safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about a product; • mandated modification of promotional materials and labeling, and issuance of corrective information; • fines, warning letters, untitled letters, or other enforcement-related letters or clinical holds on post- approval clinical trials; • refusal of the FDA to approve pending NDAs/BLAs or supplements to approved NDAs/BLAs, or suspension or revocation of product approvals; 21 • product seizure or detention, or refusal to permit the import or export of products; • injunctions or the imposition of civil or criminal penalties; and • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or mandated modification of promotional materials and labeling and the issuance of corrective information.
Phase 2a Clinical Trial We completed a randomized, double-blind, placebo-controlled, Phase 2a clinical trial that was conducted at 36 centers in the U.S. to evaluate LTI-01 in patients with infected, non-draining pleural effusions. The primary endpoint in the trial was treatment failure, defined as death or referral to surgery by checklist within seven days from commencement of dosing.
Phase 2a Clinical Trial We completed a randomized, double-blind, placebo-controlled, Phase 2a clinical trial that was conducted at 36 centers in the U.S. to evaluate LTI-01 in patients with infected, non-draining pleural effusions. The primary endpoint in the trial was treatment failure, defined as death or referral to surgery by checklist within seven days from 8 commencement of dosing.
Imposition of a clinical hold could cause significant delays or difficulties in initiating and/or completing planned clinical trials in a timely manner. Certain long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may initiate or continue after an IND for an investigational product candidate is submitted to FDA and human clinical trials have been initiated.
Imposition of a clinical hold could cause significant delays or difficulties in initiating and/or completing planned clinical trials in a timely manner. Certain long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may initiate or continue after an IND for an investigational product candidate is submitted to the FDA and human clinical trials have been initiated.
For example, subject to the requirements set out in Directive 89/105/EEC relating to the transparency of measures regulating the pricing of medicinal products for human use and their inclusion in the scope of national health 28 insurance systems, EU Member States have the legal competence to set national measures of an economic nature on the marketing of medicinal products in order to control public health expenditure on such products.
For example, subject to the requirements set out in Directive 89/105/EEC relating to the transparency of measures regulating the pricing of medicinal products for human use and their inclusion in the scope of national health insurance systems, EU Member States have the legal competence to set national measures of an economic nature on the marketing of medicinal products in order to control public health expenditure on such products.
In addition, the GDPR includes restrictions on cross-border data transfers, and recent court decisions and regulatory guidance have substantially increased the compliance burden and legal uncertainty associated with transferring the personal data of EEA individuals to third countries outside of the EEA whose data protection laws are not believed to be adequate by European standards (although the recent EU-US Data Privacy Framework offers a new route for data transfers from the EU to be made lawfully to the US). 31 Further, the GDPR provides for opening clauses in certain areas, which enable the legislators of member states of the EU to implement additional requirements to the GDPR in national law, whereby national laws may partially deviate from the GDPR and impose different obligations from country to country, so that we do not expect to operate in a uniform legal landscape in the EEA.
In addition, the GDPR includes restrictions on cross-border data transfers, and recent court decisions and regulatory guidance have substantially increased the compliance burden and legal uncertainty associated with transferring the personal data of EEA individuals to third countries outside of the EEA whose data protection laws are not believed to be adequate by European standards (although the recent EU-US Data Privacy Framework offers a new route for data transfers from the EU to be made lawfully to the US). 35 Further, the GDPR provides for opening clauses in certain areas, which enable the legislators of member states of the EU to implement additional requirements to the GDPR in national law, whereby national laws may partially deviate from the GDPR and impose different obligations from country to country, so that we do not expect to operate in a uniform legal landscape in the EEA.
We believe that this protection of AEC2s has the potential to improve IPF patients’ underlying disease. 6 The soluble Receptor of Advanced Glycation End-products, or sRAGE, is a prognostic marker of IPF disease progression and is produced by AEC1s. Low levels of sRAGE at diagnosis predict poor survival in IPF and as IPF patients’ disease worsens, sRAGE declines.
We believe that this protection of AEC2s has the potential to improve IPF patients’ underlying disease. The soluble Receptor of Advanced Glycation End-products, or sRAGE, is a prognostic marker of IPF disease progression and is produced by AEC1s. Low levels of sRAGE at diagnosis predict poor survival in IPF and as IPF patients’ disease worsens, sRAGE declines.
With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.
With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that 13 may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.
In the SAD cohorts, 21 of 24 subjects administered LTI-03 experienced treatment emergent adverse events, or TEAE, the most frequent of which were mild dry coughs related to LTI-03. In two MAD cohorts, 12 subjects were administered LTI-03 by inhalation once daily for up to 14 days at 20 mg and 40 mg.
In the SAD cohorts, 21 of 24 subjects administered LTI-03 experienced treatment emergent adverse events, or TEAE, the most frequent of which were mild dry coughs related to LTI-03. In two MAD cohorts, 40 subjects were administered LTI-03 by inhalation once daily for up to 14 days at 20 mg and 40 mg.
Breakthrough Therapy Designation provides all the features of Fast Track Designation in addition to intensive guidance on an efficient development program beginning as early as Phase 18 1, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate.
Breakthrough Therapy Designation provides all the features of Fast Track Designation in addition to intensive guidance on an efficient development program beginning as early as Phase 1, and the FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate.
The GDPR provides for substantial penalties to which we could be subject in the event of any non-compliance, including fines of up to €10 million or up to two percent of our total worldwide annual revenues, whichever is greater, for certain comparatively minor offenses, or up to €20 million or up to four percent of our total worldwide annual revenues, whichever is greater, for more serious offenses.
The GDPR provides for substantial penalties to which we could be subject in the event of any non-compliance, including fines of up to €10.0 million or up to two percent of our total worldwide annual revenues, whichever is greater, for certain comparatively minor offenses, or up to €20.0 million or up to four percent of our total worldwide annual revenues, whichever is greater, for more serious offenses.
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. • Phase 3: Clinical trials are undertaken with an expanded patient population to further evaluate dosage, and to provide substantial evidence of clinical efficacy and safety in an expanded patient population, often at geographically dispersed clinical study sites.
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials. • Phase 3: Clinical trials are undertaken with an expanded patient population to further evaluate dosage, and to provide substantial evidence of clinical efficacy and safety in an expanded patient population, often 16 at geographically dispersed clinical study sites.
Two approved drugs, nintedanib and pirfenidone, have been shown to reduce the rate of lung function decline, but unfortunately provide only modest clinical benefit in IPF patients. Neither drug is curative, and significant side effects or intolerance can occur with the use of pirfenidone and nintedanib.
Two approved drugs, nintedanib (OFEV ® ) and pirfenidone, have been shown to reduce the rate of lung function decline, but unfortunately provide only modest clinical benefit in IPF patients. Neither drug is curative, and significant side effects or intolerance can occur with the use of pirfenidone and nintedanib.
We do not have long-term agreements with any of these third-party contract manufacturers. If any of our product candidates are approved by any regulatory agency, we intend to enter into agreements with a third-party contract manufacturer and one or more back-up manufacturers for the commercial production of our product candidates.
We do not have long-term agreements with any of these third-party contract manufacturers. 9 If any of our product candidates are approved by any regulatory agency, we intend to enter into agreements with a third-party contract manufacturer and one or more back-up manufacturers for the commercial production of our product candidates.
Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Products for Human Use, or the CHMP.
Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in 26 response to questions asked by the Committee for Medicinal Products for Human Use, or CHMP.
We expect LTI-01 to be the first to file Biologics License Application, or BLA, in the U.S., which provides for the potential of 12 years exclusivity. The drug is made using a complex process which would likely be difficult to duplicate.
LTI-01 Program We expect LTI-01 to be the first to file Biologics License Application, or BLA, in the U.S., which provides for the potential of 12 years exclusivity. The drug is made using a complex process which would likely be difficult to duplicate.
In addition, the applicant must show that 21 the biosimilar and reference products have the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meet standards designed to assure product safety, purity, and potency.
In addition, the applicant must show that the biosimilar and reference products have the same mechanism of action for the conditions of use on the label, route of administration, dosage and strength, and the production facility must meet standards designed to assure product safety, purity, and potency.
In case of diverging views among the member states, a coordination procedure at EU level applies, leading ultimately to a uniform decision binding on the member states. 25 On April 26, 2023, the European Commission presented a draft for a comprehensive reform of the pharmaceutical legislation.
In case of diverging views among the member states, a coordination procedure at EU level applies, leading ultimately to a uniform decision binding on the member states. On April 26, 2023, the European Commission presented a draft for a comprehensive reform of the pharmaceutical legislation.
Rest of the World Regulation For other countries outside of the EU and the U.S., such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from jurisdiction to jurisdiction.
Rest of the World Regulation For other countries outside of the EU, UK and the U.S., such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from jurisdiction to jurisdiction.
The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and 19 process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products.
The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products.
Periods of Authorization and Renewals 27 A marketing authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state.
Periods of Authorization and Renewals A marketing authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (PDMA), which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states.
The role of the relevant ethics committees in the assessment procedure continues to be governed by the national law of the concerned EU Member State. However, overall related timelines have been defined by the Clinical Trials Regulation.
The role of the relevant ethics committees in the assessment procedure continues to be governed by the 25 national law of the concerned EU Member State. However, overall related timelines have been defined by the Clinical Trials Regulation.
Biosimilars and Reference Product Exclusivity for Biological Products In March 2010, the Patient Protection and Affordable Care Act was enacted in the U.S. and included the Biologics Price Competition and Innovation Act of 2009 (BPCIA).
Biosimilars and Reference Product Exclusivity for Biological Products In March 2010, the Patient Protection and Affordable Care Act was enacted in the U.S. and included the Biologics Price Competition and Innovation Act of 2009, or BPCIA.
In these cases, we might seek to promote our products in collaboration with 9 marketing partners or rely on relationships with one or more companies with large established sales forces and distribution systems.
In these cases, we might seek to promote our products in collaboration with marketing partners or rely on relationships with one or more companies with large established sales forces and distribution systems.
On the other hand, orphan market exclusivity can be extended to a maximum of twelve years if an approved pediatric investigation plan (PIP) has been completed.
On the other hand, orphan market exclusivity 28 can be extended to a maximum of twelve years if an approved pediatric investigation plan (PIP) has been completed.
Principal Product Candidates LTI-03 LTI-03 is a novel peptide drug, the sequence of which is derived from the endogenous protein Cav1, that protects lung epithelial cells and inhibits multiple pro-fibrotic pathways in IPF patients. IPF is a progressive, fatal, age-associated lung disease with a median survival from diagnosis of two to five years.
Principal Product Candidates LTI-03 LTI-03 is a novel peptide drug, the sequence of which is derived from the endogenous protein Cav1, that protects lung epithelial cells and inhibits multiple pro-fibrotic pathways in IPF patients. IPF is a progressive, fatal, age-associated lung disease with a median survival from diagnosis of three to five years.
The patent and technology license agreement with UT System, or the UTHSCT Agreement, provides us access to patents and technology related to the development of LTI-01 and LTI-03.
The patent and technology license agreement with UT System, or the UTHSCT Agreement, provides us 11 access to patents and technology related to the development of LTI-01 and LTI-03.
The Hatch-Waxman Amendments permit restoration of the patent term up to five years as compensation for patent term lost during FDA regulatory review process.
The Hatch-Waxman 22 Amendments permit restoration of the patent term up to five years as compensation for patent term lost during FDA regulatory review process.
Under the terms of the Taiho Agreement, we, in part through our participation in a joint development committee with Taiho, will participate in overseeing the development and commercialization of LTI-01 in Japan. In consideration for the exclusive, royalty-bearing license and other rights contained in the Taiho Agreement, Taiho made a non-refundable, non-creditable payment to Lung of $5.0 million.
Under the terms of the Taiho Agreement, we, in part through our participation in a joint development committee with Taiho, will participate in overseeing the development and commercialization of LTI-01 in Japan. In consideration for the exclusive, royalty-bearing license and other rights contained in the Taiho Agreement, Taiho made a non-refundable, non-creditable payment to us of $5.0 million.
Fast Track Designation provides opportunities for more frequent interactions with FDA review team to expedite development and review of the product.
Fast Track Designation provides opportunities for more frequent 19 interactions with the FDA review team to expedite development and review of the product.
We are aware of several marketed and investigational products in our leading disease areas, including but not limited to: • IPF: There are currently two approved branded products for the treatment of IPF; Esbriet, marketed by Roche Holding AG, and Ofev, marketed by Boehringer Ingelheim GmbH.
We are aware of several marketed and investigational products in our leading disease areas, including but not limited to: • IPF: There are currently two approved branded products for the treatment of IPF; Esbriet (pirfenidone), marketed by Roche Holding AG, and Ofev (nintedanib), marketed by Boehringer Ingelheim GmbH.
Companies that we are aware of that are targeting the treatment of various fibrosis indications include larger companies with significant financial resources such as AbbVie Inc., Boehringer Ingelheim GmbH, Bristol Myers Squibb Company, Gilead Sciences, Inc., Roche Holding AG, Novartis AG, and Pliant Therapeutics, Inc.
Companies that we are aware of that are targeting the treatment of various fibrosis indications include larger companies with significant financial resources such as AbbVie Inc., Boehringer Ingelheim GmbH, Bristol Myers Squibb Company, Gilead Sciences, Inc., Roche Holding AG, and Novartis AG.
The pending applications in the LTI-03 program are directed to methods for treating diseases or disorders, including fibrosis, methods for increasing viability of lung epithelial cells, and formulations, including dry powder formulations, as well as therapeutic uses of LTI-03 for other indications interest and diagnostic methods.
The pending applications in the LTI-03 program are directed to methods for treating diseases or disorders, including fibrosis, methods for increasing viability of lung epithelial cells, and formulations, including dry powder and extended-release formulations, as well as therapeutic uses of LTI-03 for other indications interest and diagnostic methods.
The secondary objective was to evaluate the pharmacokinetics of SAD and MAD daily doses for 14 days of inhaled LTI-03. In four SAD cohorts, 24 subjects were administered LTI-03 by inhalation at single doses of 20 mg, 40 mg, and 80 mg.
The secondary objective was to evaluate the pharmacokinetics of SAD and MAD daily doses for 14 days of inhaled LTI-03. In four SAD cohorts, 32 subjects were administered LTI-03 by inhalation at single doses of 20 mg, 40 mg, and 80 mg.
Similarly, an IRB can suspend or terminate approval of a clinical trial if the clinical trial is not being conducted in accordance with the clinical protocol, GCP, or other IRB requirements or, if the drug has been associated with unexpected serious harm to patients.
An IRB can suspend or terminate approval of a clinical trial if the clinical trial is not being conducted in accordance with the clinical protocol, GCP, or other IRB requirements or, if the drug or biologic has been associated with unexpected serious harm to patients.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: • the initiation, progress, timing, costs and results of clinical trials and preclinical studies for our product candidates; • the clinical development plans we establish for these product candidates; • the timelines of our clinical trials and the overall costs to finish the clinical trials; • the number and characteristics of product candidates that we develop; • the outcome, timing and cost of meeting regulatory requirements established by the FDA, and other comparable foreign regulatory authorities; • whether we are able to enter into collaboration agreements and the terms of any such agreements; • the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; • the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us or our product candidates; • the effect of competing technological and market developments; • the cost and timing of completion of outsourced manufacturing activities; and • the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own.
Biggest changeOur future funding requirements, both near and long-term, will depend on many factors, including, but not limited to: • the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for our current and future product candidates; • the number of clinical trials required for regulatory approval of our current and future product candidates; • the costs, timing, and outcome of regulatory review of any of our current and future product candidates; • the cost of manufacturing clinical and commercial supplies of our current and future product candidates; • the costs and timing of future commercialization activities, including manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval; 37 • the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights; • our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement; • the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; • expenses to attract, hire and retain, skilled personnel; • the costs of operating as a public company; • if our product candidates are approved, our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payors; • the effect of competing technological and market developments; • the extent to which we acquire or invest in businesses, products, and technologies; and • unfavorable global economic conditions, which may exacerbate the magnitude of the factors discussed above.
We are conducting and may in the future choose to conduct clinical trials for current or future product candidates outside of the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials. We are conducting and may in the future choose to conduct one or more clinical trials outside the U.S.
We are conducting and may in the future choose to conduct clinical trials for current or future product candidates outside of the U.S., and the FDA and comparable foreign regulatory authorities may not accept data from such trials. We may in the future choose to conduct one or more clinical trials outside the U.S.
If approved, our product candidates that are regulated as biologics may face competition from biosimilars approved through an abbreviated regulatory pathway. The Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of the Patient Protection and Affordable Care Act, or the ACA, to establish an abbreviated pathway for the biosimilar and interchangeable biological products.
If approved, our product candidates that are regulated as biologics may face competition from biosimilars approved through an abbreviated regulatory pathway. The Biologics Price Competition and Innovation Act of 2009, or BPCIA, was enacted as part of the Patient Protection and Affordable Care Act, or ACA, to establish an abbreviated pathway for the biosimilar and interchangeable biological products.
Orphan Drug Designation for LTI-03 for IPF and U.S. and European Union, or EU, Orphan Drug Designation for LTI-01 for pleural empyema, we may be unable to obtain and maintain Orphan Drug Designation for our other product candidates and, even if we obtain such designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved.
Orphan Drug Designation for LTI-03 for IPF and U.S. and European Union, or the EU, Orphan Drug Designation for LTI-01 for pleural empyema, we may be unable to obtain and maintain Orphan Drug Designation for our other product candidates and, even if we obtain such designation, we may not be able to realize the benefits of such designation, including potential marketing exclusivity of our product candidates, if approved.
The FDA may not approve an ANDA for a generic drug until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or the FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE.
The FDA may not approve an ANDA for a generic drug until any applicable period of non-patent exclusivity for the reference-listed drug has expired. The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE.
Foreign Corrupt Practices Act, or the FCPA, prohibits any U.S. individual or business entity from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business entity from paying, offering, authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.
Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.
If a third-party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to: • infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business; • substantial damages for infringement, which we may have to pay if a court decides that the product candidate or technology at issue infringes on or violates the third-party’s rights and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees; • a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using our proprietary technologies, unless the third-party licenses its product rights to us, which it is not required to do; • if a license is available from a third-party, we may have to pay substantial royalties, upfront fees and other amounts, and/or grant cross-licenses to intellectual property rights for our products and any license that is available may be non-exclusive, which could result in our competitors gaining access to the same intellectual property; and • redesigning our product candidates or processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
If a third-party claims that we infringe its intellectual property rights, we may face a number of issues, including, but not limited to: • infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business; 86 • substantial damages for infringement, which we may have to pay if a court decides that the product candidate or technology at issue infringes on or violates the third-party’s rights and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees; • a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using our proprietary technologies, unless the third-party licenses its product rights to us, which it is not required to do; • if a license is available from a third-party, we may have to pay substantial royalties, upfront fees and other amounts, and/or grant cross-licenses to intellectual property rights for our products and any license that is available may be non-exclusive, which could result in our competitors gaining access to the same intellectual property; and • redesigning our product candidates or processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.
Our product candidates could fail to receive marketing approval for many reasons, including the following: 51 • the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication; • the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain marketing approval in the U.S. or elsewhere; • the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies due to quality manufacturing concerns; • the FDA or comparable foreign regulatory authorities may fail to approve any companion diagnostics that may be required in connection with approval of our therapeutic product candidates; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Our product candidates could fail to receive marketing approval for many reasons, including the following: • the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication; • the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain marketing approval in the U.S. or elsewhere; • the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies due to quality manufacturing concerns; • the FDA or comparable foreign regulatory authorities may fail to approve any companion diagnostics that may be required in connection with approval of our therapeutic product candidates; and • the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Among other things, these provisions: • establish a classified board of directors such that not all members of the board are elected at one time; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from the board; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; 92 • limit who may call stockholder meetings; • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and • require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
Among other things, these provisions: • establish a classified board of directors such that not all members of the board are elected at one time; • allow the authorized number of our directors to be changed only by resolution of our board of directors; • limit the manner in which stockholders can remove directors from the board; • establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors; • require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent; • limit who may call stockholder meetings; • authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors; and • require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal certain provisions of our charter or bylaws.
Our existing collaborations and any future collaborations we enter into may pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs or license arrangements based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create competing priorities; 71 • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products and product candidates if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • collaborators may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product; • collaborators with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; • collaborators may not provide us with timely and accurate information regarding development progress and activity under any future license agreement, which could adversely impact our ability to report progress to our investors and otherwise plan development of our product candidates; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us; and • collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
Our existing collaborations and any future collaborations we enter into may pose a number of risks, including the following: • collaborators have significant discretion in determining the efforts and resources that they will apply; • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs or license arrangements based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as a strategic transaction that may divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products and product candidates if the collaborators believe that the competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • collaborators may fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product candidate or product; • collaborators with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products; 78 • collaborators may not provide us with timely and accurate information regarding development progress and activity under any future license agreement, which could adversely impact our ability to report progress to our investors and otherwise plan development of our product candidates; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or terminations of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would be time-consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; • if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us; and • collaborations may be terminated by the collaborator, and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.
We also may experience numerous unforeseen events during, or as a result of, any future clinical trials that could delay or prevent our ability to receive marketing approval or commercialize LTI-03, LTI-01 or any other product candidates, including, but not limited to: • regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • the FDA or other comparable regulatory authorities may disagree with our clinical trial design, including with respect to dosing levels administered in our planned clinical trials, which may delay or prevent us from initiating our clinical trials with our originally intended trial design; 41 • we may experience delays in reaching, or we may fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • the number of subjects required for clinical trials of any product candidates may be larger than we anticipate or patient recruitment and enrollment may be slow or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; • our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators; • additional delays and interruptions to our clinical trials could extend the duration of the trials and increase the overall costs to finish the trials as our fixed costs are not substantially reduced during delays; • we may elect to, or regulators, IRBs, Data Safety Monitoring Boards, or DSMBs, or ethics committees may require that we or our investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • we may not have the financial resources available to begin and complete the planned trials, or the cost of clinical trials of any product candidates may be greater than we anticipate; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate to initiate or complete a given clinical trial; and • the FDA or other comparable foreign regulatory authorities may require us to submit additional data such as long-term toxicology studies or impose other requirements before permitting us to initiate a clinical trial.
We also may experience numerous unforeseen events during, or as a result of, any future clinical trials that could delay or prevent our ability to receive marketing approval or commercialize LTI-03, LTI-01 or any other product candidates, including, but not limited to: • regulators or institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site; • the FDA or other comparable regulatory authorities may disagree with our clinical trial design, including with respect to dosing levels administered in our planned clinical trials, which may delay or prevent us from initiating our clinical trials with our originally intended trial design; • we may experience delays in reaching, or we may fail to reach, agreement on acceptable terms with prospective trial sites and prospective contract research organizations, or CROs, which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; 44 • the number of subjects required for clinical trials of any product candidates may be larger than we anticipate or patient recruitment and enrollment may be slow or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; • our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites or investigators; • additional delays and interruptions to our clinical trials could extend the duration of the trials and increase the overall costs to finish the trials as our fixed costs are not substantially reduced during delays; • we may elect to, or regulators, IRBs, Data Safety Monitoring Boards, or DSMBs, or ethics committees may require that we or our investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; • we may not have the financial resources available to begin and complete the planned trials, or the cost of clinical trials of any product candidates may be greater than we anticipate; • the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate to initiate or complete a given clinical trial; and • the FDA or other comparable foreign regulatory authorities may require us to submit additional data such as long-term toxicology studies or impose other requirements before permitting us to initiate a clinical trial.
Our or a third-party’s failure to execute on our manufacturing requirements and comply with cGMP or other requirements could adversely affect our business in a number of ways, including, but not limited to: • an inability to initiate or continue clinical trials of product candidates under development; • imposition of a clinical hold; • initiation of an Import Alert or Automatic Detection; • delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates; • loss of the cooperation of an existing or future collaborator; • subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities; • requirements to cease distribution or to recall batches of our product candidates; • increase manufacturing costs for delays and/or finding replacement manufacturers; and • in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.
Our or a third-party’s failure to execute on our manufacturing requirements and comply with cGMP or other requirements could adversely affect our business in a number of ways, including, but not limited to: • an inability to initiate or continue clinical trials of product candidates under development; • imposition of a clinical hold; • initiation of an Import Alert or Automatic Detection; • delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates; • loss of the cooperation of an existing or future collaborator; • subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities; • requirements to cease distribution or to recall batches of our product candidates; • increase manufacturing costs for delays and/or finding replacement manufacturers; and 76 • in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.
The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including, but not limited to: • efficacy and potential advantages compared to alternative treatments; 50 • the ability to offer our products, if approved, for sale at competitive prices; • convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the recommendations with respect to our product candidates in guidelines published by various scientific organizations applicable to us and our product candidates; • the strength of marketing and distribution support; • the ability to obtain sufficient third-party coverage, and adequate reimbursement; and • the prevalence and severity of any side effects.
The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors, including, but not limited to: • efficacy and potential advantages compared to alternative treatments; • the ability to offer our products, if approved, for sale at competitive prices; • convenience and ease of administration compared to alternative treatments; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the recommendations with respect to our product candidates in guidelines published by various scientific organizations applicable to us and our product candidates; • the strength of marketing and distribution support; • the ability to obtain sufficient third-party coverage, and adequate reimbursement; and • the prevalence and severity of any side effects.
For example: • others may be able to make or use compounds that are similar to the compositions of our product candidates but that are not covered by the claims of our patents or those of our licensors; • we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regard to any in-licensed patents and patent applications funded by U.S. government grants, leading to the loss of patent rights; • we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies; 75 • it is possible that our pending patent applications will not result in issued patents; • it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of our or their patents; • it is possible that others may circumvent our owned or in-licensed patents; • it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours; • the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the U.S.; • the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product candidates; • our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be held invalid or unenforceable as a result of legal challenges by third parties; • the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes which design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; • it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; • we have engaged in scientific collaborations in the past and will continue to do so in the future.
For example: • others may be able to make or use compounds that are similar to the compositions of our product candidates but that are not covered by the claims of our patents or those of our licensors; • we or our licensors, as the case may be, may fail to meet our obligations to the U.S. government in regard to any in-licensed patents and patent applications funded by U.S. government grants, leading to the loss of patent rights; 81 • we or our licensors, as the case may be, might not have been the first to file patent applications for these inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies; • it is possible that our pending patent applications will not result in issued patents; • it is possible that there are prior public disclosures that could invalidate our or our licensors’ patents, as the case may be, or parts of our or their patents; • it is possible that others may circumvent our owned or in-licensed patents; • it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our products or technology similar to ours; • the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the U.S.; • the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not cover our product candidates; • our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be held invalid or unenforceable as a result of legal challenges by third parties; • the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes which design around our patents, or become hostile to us or the patents or patent applications on which they are named as inventors; • it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable; • we have engaged in scientific collaborations in the past and will continue to do so in the future.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or employees to our company or our stockholders, any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the 100 federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or employees to our company or our stockholders, any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
In addition, because some patent applications in the U.S. may be maintained in secrecy until the patents are issued, patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months after filing, and publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our owned and in-licensed issued patents or our pending 77 applications, or that we or, if applicable, a licensor were the first to invent the technology.
In addition, because some patent applications in the U.S. may be maintained in secrecy until the patents are issued, patent applications in the U.S. and many foreign jurisdictions are typically not published until 18 months after filing, and publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our owned and in-licensed issued patents or our pending applications, or that we or, if applicable, a licensor were the first to invent the technology.
The draft regulation also provides for more flexible rules on the duration of market exclusivity, including: ten years of market exclusivity for orphan drugs in the case of “high unmet medical need”, five years for orphan drugs, approved by a bibliographic marketing authorization and nine years in all other cases with the possibility of extension 46 in the case of market access in all Member States (another year) or development of new therapeutic indications for an already authorized orphan medicinal product (up to two years).
The draft regulation also provides for more flexible rules on the duration of market exclusivity, including: ten years of market exclusivity for orphan drugs in the case of “high unmet medical need”, five years for orphan drugs, approved by a bibliographic marketing authorization and nine years in all other cases with the possibility of extension in the case of market access in all Member States (another year) or development of new therapeutic indications for an already authorized orphan medicinal product (up to two years).
Our future growth would impose significant added responsibilities on members of management, including, but not limited to: • identifying, recruiting, integrating, maintaining and motivating additional employees; • managing our development and commercialization efforts effectively, including the clinical and FDA review process for LTI-03, LTI-01 and any other product candidates, while complying with our contractual obligations to contractors and other third parties; and • improving our operational, financial and management controls, reporting systems and procedures.
Our future growth would impose significant added responsibilities on members of management, including, but not limited to: • identifying, recruiting, integrating, maintaining and motivating additional employees; 92 • managing our development and commercialization efforts effectively, including the clinical and FDA review process for LTI-03, LTI-01 and any other product candidates, while complying with our contractual obligations to contractors and other third parties; and • improving our operational, financial and management controls, reporting systems and procedures.
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap; imposes rebates 65 under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023); and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).
If any of our relationships with these third-party CROs or others terminate, we may not be able to enter into arrangements with alternative CROs or other third parties or to do so on commercially reasonable terms. Switching or adding additional CROs might require prior regulatory approvals or notifications and involves additional cost. Furthermore, it requires management time and focus.
If any of our relationships with these third-party CROs or others terminate, we may not be able to enter into arrangements with alternative CROs or other third parties or to do so on commercially reasonable terms. Switching or 75 adding additional CROs might require prior regulatory approvals or notifications and involves additional cost. Furthermore, it requires management time and focus.
To become and remain profitable, we must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including completing clinical trials and preclinical studies, obtaining marketing approval for product candidates, manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements.
To become and remain profitable, we must develop and eventually commercialize products with significant market potential. This will require us to be successful in a range of challenging activities, including completing clinical 40 trials and preclinical studies, obtaining marketing approval for product candidates, manufacturing, marketing and selling products for which we may obtain marketing approval and satisfying any post-marketing requirements.
The enrollment of patients depends on many factors, including, but not limited to: • the patient eligibility and exclusion criteria defined in the protocol; • the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients; • the willingness or availability of patients to participate in our trials; • the proximity of patients to trial sites; • the design of the trial; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating; • the availability of competing commercially available therapies and other competing product candidates’ clinical trials; 44 • our ability to obtain and maintain patient informed consents; and • the risk that patients enrolled in clinical trials will drop out of the trials or are discontinued from trials at the recommendation of the principal investigator before completion.
The enrollment of patients depends on many factors, including, but not limited to: • the patient eligibility and exclusion criteria defined in the protocol; • the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients; • the willingness or availability of patients to participate in our trials; • the proximity of patients to trial sites; • the design of the trial; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for the indications we are investigating; • the availability of competing commercially available therapies and other competing product candidates’ clinical trials; 47 • our ability to obtain and maintain patient informed consents; and • the risk that patients enrolled in clinical trials will drop out of the trials or are discontinued from trials at the recommendation of the principal investigator before completion.
Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.
Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate 67 approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be materially harmed.
In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent.
In such an event, we may be held liable for any resulting damages and 70 such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent.
These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States, as well in as the UK. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment. 63 We may seek to obtain certain regulatory designations for our product candidates.
These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the EU Member States, as well in as the UK. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment. We may seek to obtain certain regulatory designations for our product candidates.
In addition, we will be subject to continued compliance with good manufacturing practices, or cGMP, and good clinical practices, or GCP, requirements for any clinical trials that we conduct post-approval. 55 Manufacturers and their facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations.
In addition, we will be subject to continued compliance with good manufacturing practices, or cGMP, and good clinical practices, or GCP, requirements for any clinical trials that we conduct post-approval. Manufacturers and their facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMP regulations.
Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In certain circumstances, even inadvertent noncompliance events may permanently and irrevocably jeopardize patent rights.
Noncompliance events that could result in abandonment or lapse of a patent or patent 87 application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In certain circumstances, even inadvertent noncompliance events may permanently and irrevocably jeopardize patent rights.
Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical manufacturer to incur significant legal 60 expenses and divert management’s attention from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
Any action for violation of these laws, even if successfully defended, could cause a biopharmaceutical manufacturer to incur significant legal expenses and divert management’s attention from the operation of the business. Prohibitions or restrictions on sales or withdrawal of future marketed products could materially affect business in an adverse way.
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. 67 Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
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. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Some of our future trials may be open label studies, where both the patient and investigator know whether patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open label clinical trials test only the investigational product candidates and sometimes do so at different dose levels.
Some of our future trials may be open label studies, where both the patient and investigator know whether a patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open label clinical trials test only the investigational product candidates and sometimes do so at different dose levels.
In the E.U., similar political, economic, and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In markets outside of the U.S. and the E.U., reimbursement and healthcare payment systems vary significantly by country and many countries have instituted price ceilings on specific products and therapies.
In the EU, similar political, economic, and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved. In markets outside of the U.S. and the E.U., reimbursement and healthcare payment systems vary significantly by country and many countries have instituted price ceilings on specific products and therapies.
Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government affiliated hospitals, universities and other organizations.
Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, 73 tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government affiliated hospitals, universities and other organizations.
Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing, and commercialization. There are a number of large biopharmaceutical and biotechnology companies that are currently pursuing the commercialization or development of products for the treatment of fibrosis.
Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing, and commercialization. 51 There are a number of large biopharmaceutical and biotechnology companies that are currently pursuing the commercialization or development of products for the treatment of fibrosis.
A claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
A claim that includes items or 63 services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the FCA. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.
In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials or a more restrictive label than we expect (e.g., 54 Boxed Warning).
In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials or a more restrictive label than we expect (e.g., Boxed Warning).
There have been several recent U.S. congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.
There have been several U.S. congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.
These products may compete with our products in 82 jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
We are still in mid-stage and early clinical development and may be unable to obtain regulatory approval, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.
We are still 39 in mid-stage and early clinical development and may be unable to obtain regulatory approval, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.
The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on 57 average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class.
The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class.
We and these third parties are required to comply with GCP or other requirements, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical investigators and trial sites.
We and these third parties are required to comply with GCP or other requirements, which are regulations and guidelines enforced by FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, clinical investigators and trial sites.
These agreements provide 78 that all confidential information concerning our business or financial affairs developed or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual or entity during the course of the party’s relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances.
It should be noted that the market exclusivity right of the orphan medicinal product does not prevent the submission, validation and assessment of an application for marketing authorization of a similar medicinal product, including generics and biosimilars, if the remaining duration of the market exclusivity right is less than two years.
It should be noted that the market exclusivity right of the 49 orphan medicinal product does not prevent the submission, validation and assessment of an application for marketing authorization of a similar medicinal product, including generics and biosimilars, if the remaining duration of the market exclusivity right is less than two years.
To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner 69 consistent with contractual and regulatory requirements, including those related to quality control and assurance.
To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance.
For example, even if we were the first to file a patent application related to our technology, we cannot be certain that a third-party is or will be filing and prosecuting patent applications related to our technology or related to our field, which could have a material adverse effect on our business.
For example, even if we were the 85 first to file a patent application related to our technology, we cannot be certain that a third-party is or will be filing and prosecuting patent applications related to our technology or related to our field, which could have a material adverse effect on our business.
As we outsource more of our information systems to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-based information systems, the related 85 security risks will increase, and we will need to expend additional resources to protect our own technology and information systems and manage potential security risks associated with our vendors.
As we outsource more of our information systems to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-based information systems, the related security risks will increase, and we will need to expend additional resources to protect our own technology and information systems and manage potential security risks associated with our vendors.
LTI-03 and LTI-01 are in early stages of development and are subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for LTI-03, LTI-01 or any of our future product candidates in the U.S. or in any other jurisdiction.
LTI-03 and LTI-01 are in early and mid-stages of development and are subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for LTI-03, LTI-01 or any of our future product candidates in the U.S. or in any other jurisdiction.
Some countries require approval of the sale price of a drug before it can be marketed. 56 In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
If this sole supplier is unable to supply to us in the quantities we require, or at all, or otherwise 70 defaults on its supply obligations to us, we may not be able to obtain alternative supplies from other suppliers on acceptable terms, in a timely manner, or at all.
If this sole supplier is unable to supply to us in the quantities we require, or at all, or otherwise defaults on its supply obligations to us, we may not be able to obtain alternative supplies from other suppliers on acceptable terms, in a timely manner, or at all.
Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or interruption of our business operations. Natural disasters could further disrupt our operations and have a material and adverse effect on our business, financial condition, results of operations and prospects.
Loss of access to these facilities may result in increased costs, delays in the development of our product candidates or interruption of our business operations. Natural disasters could further disrupt our operations and have a material and adverse effect on our business, financial 94 condition, results of operations and prospects.
It is possible that the FDA may refuse to accept for substantive review any new drug applications, or NDAs, or biologics license applications, or BLAs, that 49 we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates.
It is possible that the FDA may refuse to accept for substantive review any new drug applications, or NDAs, or biologics license applications, or BLAs, that we submit for our product candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our product candidates.
Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates.
Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and 62 for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
We expect that additional state and federal healthcare reform 66 measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
The requirements governing drug pricing and reimbursement vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of 62 medicinal products for human use.
The requirements governing drug pricing and reimbursement vary widely from country to country. For example, the EU provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are 61 reimbursed under Medicare Part B and Part D.
Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our research and development activities involve the use of biological and hazardous materials and produce hazardous 64 waste products.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our research and development activities involve the use of biological and hazardous materials and produce hazardous waste products.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including, but not limited to: • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under our collaborative development relationships; 76 • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including, but not limited to: 82 • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and • the priority of invention of patented technology.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all, of the patent protection on our product candidates.
If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and 89 perhaps all, of the patent protection on our product candidates.
In addition, as a business with a limited operating history, we may encounter unforeseen 36 expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields.
In addition, as a business with a limited operating history, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields.
Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
Securing marketing approval 54 requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.
We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
We may have to pay any amounts awarded by a court or negotiated in a 52 settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
The GDPR also 72 confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large biopharmaceutical 72 companies that have resulted in a reduced number of potential future collaborators.
Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large biopharmaceutical companies that have resulted in a reduced number of potential future collaborators.
With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and 81 the patent examiner were unaware during prosecution.
With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution.
These factors include: • the enrollment or results of our current Phase 1b clinical trial of LTI-03; • any delay in identifying and advancing a clinical candidate for our other development programs; • any delay in our regulatory filings for LTI-03, LTI-01 or our other product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; • adverse results or delays in future clinical trials; • our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; • adverse regulatory decisions, including failure to receive regulatory approval of LTI-03, LTI-01 or any other product candidate; • changes in laws or regulations applicable to LTI-03, LTI-01 or any other product candidate, including but not limited to clinical trial requirements for approvals; • adverse developments concerning our manufacturers; • our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices; • our inability to establish collaborations, if needed; • our failure to commercialize our product candidates, if approved; • additions or departures of key scientific or management personnel; • unanticipated serious safety concerns related to the use of LTI-03, LTI-01 or any other product candidate; • introduction of new products or services offered by us or our competitors; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our ability to effectively manage our growth; • actual or anticipated variations in our quarterly operating results or those of companies that are perceived to be similar to us; • our cash position; • our failure to meet, or actual or anticipated changes in, the estimates and projections as to financial results, development timelines or recommendations of the investment community or that we may otherwise provide to the public; • publication of research reports about us or our industry, or product candidates in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the market valuations of similar companies; • changes in the structure of the healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • overall performance of the equity markets; • sales of our common stock by us or our stockholders in the future; • trading volume of our common stock; • changes in accounting practices; 88 • ineffectiveness of our internal controls; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • general political and economic conditions; • the level of expenses related to our product candidates or clinical development programs; • investors’ general perception of us and our business; and • other events or factors, many of which are beyond our control.
These factors include: • the timing and results of clinical trials of LTI-03 and LTI-01; • any delay in identifying and advancing a clinical candidate for our other development programs; • any delay in our regulatory filings for LTI-03, LTI-01 or our other product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information; • adverse results or delays in future clinical trials; • our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial; • adverse regulatory decisions, including failure to receive regulatory approval of LTI-03, LTI-01 or any other product candidate; • changes in laws or regulations applicable to LTI-03, LTI-01 or any other product candidate, including but not limited to clinical trial requirements for approvals; • adverse developments concerning our manufacturers; • our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices; • our inability to establish collaborations, if needed; • our failure to commercialize our product candidates, if approved; • additions or departures of key scientific or management personnel; • unanticipated serious safety concerns related to the use of LTI-03, LTI-01 or any other product candidate; • introduction of new products or services offered by us or our competitors; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors; • our ability to effectively manage our growth; • actual or anticipated variations in our quarterly operating results or those of companies that are perceived to be similar to us; • our cash position; • our failure to meet, or actual or anticipated changes in, the estimates and projections as to financial results, development timelines or recommendations of the investment community or that we may otherwise provide to the public; • publication of research reports about us or our industry, or product candidates in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts; • changes in the market valuations of similar companies; • changes in the structure of the healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • overall performance of the equity markets; • sales of our common stock by us or our stockholders in the future; • trading volume of our common stock; 96 • changes in accounting practices; • ineffectiveness of our internal controls; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; • significant lawsuits, including patent or stockholder litigation; • general political and economic conditions; • the level of expenses related to our product candidates or clinical development programs; • investors’ general perception of us and our business; and • other events or factors, many of which are beyond our control.
In addition, the GDPR includes restrictions on cross-border data transfers, and recent court decisions and regulatory guidance have substantially increased the compliance burden and legal uncertainty associated with transferring the personal data of EEA individuals to third countries outside of the EEA whose data protection laws are not believed to be adequate by European standards (although the recent EU-US Data Privacy Framework offers a new route for data transfers from the EU to be made lawfully to the US).
In addition, the GDPR includes restrictions on cross-border data transfers, and recent court decisions and regulatory guidance have substantially increased the compliance burden and legal uncertainty associated with transferring the personal data of EEA individuals to third countries outside of the EEA whose data protection laws are not believed to be adequate by European standards (although the recent EU-US Data Privacy Framework offers a new route for data transfers from the EU to be made lawfully to the U.S.).
Our failure to become and remain profitable would decrease the value of our company 37 and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.
Our commercial opportunity could be reduced or 47 eliminated if our competitors develop and commercialize products that are safer, more effective, more convenient, or less expensive than any products that we may develop.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, more convenient, or less expensive than any products that we may develop.
Moreover, our 68 business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.
If any third-party patent were held by a court of competent jurisdiction to cover our product candidates, intermediates used in the manufacture of our product candidates or our materials generally, aspects of our formulations 80 or methods of use, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable.
If any third-party patent were held by a court of competent jurisdiction to cover our product candidates, intermediates used in the manufacture of our product candidates or our materials generally, aspects of our formulations or methods of use, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid 88 or unenforceable.
If significant adverse events or other side effects are observed in any of our ongoing or future clinical trials, whether or not related to our product candidates, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts altogether 42 or may result in safety profile that could delay or prevent regulatory approval or market acceptance of any of our product candidates.
If significant adverse events or other side effects are observed in any of our ongoing or future clinical trials, whether or not related to our product candidates, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts altogether 45 or may result in safety profile that could delay or prevent regulatory approval or market acceptance of any of our product candidates.
Moreover, these rules and regulations increase our legal and financial compliance costs, and make some activities more time-consuming and costly. 89 These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
Moreover, these rules and regulations increase our legal and financial compliance costs, and make some activities more time-consuming and costly. 97 These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
Even if we are able to commercialize any product candidate, such product candidate may become subject to unfavorable pricing regulations, third-party coverage and reimbursement policies or healthcare reform initiatives, which would harm our business. The regulations that govern marketing approval, pricing, coverage and reimbursement for new drugs vary widely from country to country.
Even if we are able to commercialize any product candidate, such product ca ndidate may become subject to unfavorable pricing regulations, third-party coverage and reimbursement policies or healthcare reform initiatives, which would harm our business. The regulations that govern marketing approval, pricing, coverage and reimbursement for new drugs vary widely from country to country.
Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside of the 52 U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.
Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside of the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.
Companies that we are aware of that are targeting the treatment of various fibrosis indications include large companies with significant financial resources such as, but not limited to: AbbVie Inc., Boehringer Ingelheim GmbH, Bristol Myers Squibb Company, Gilead Sciences, Inc., Roche Holding AG, Novartis AG, and Pliant Therapeutics, Inc.
Companies that we are aware of that are targeting the treatment of various fibrosis indications include large companies with significant financial resources such as, but not limited to: AbbVie Inc., Boehringer Ingelheim GmbH, Bristol Myers Squibb Company, Gilead Sciences, Inc., Roche Holding AG, and Novartis AG.
Furthermore, because of the substantial amount of discovery required in connection with 79 intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. We may not be able to protect our intellectual property rights with patents throughout the world.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or administrative proceedings, there is a risk that some of our confidential information could be compromised by disclosure. We may not be able to protect our intellectual property rights throughout the world.
Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose, among other things, requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective “business associates,” those independent contractors or agents of covered entities that perform services for covered entities that involve the creation, use, receipt, 59 maintenance or disclosure of individually identifiable health information.
Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose, among other things, requirements relating to the privacy, security and transmission of individually identifiable health information on certain covered healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their respective “business associates”, those independent contractors or agents of covered entities that perform services for covered entities that involve the creation, use, receipt, maintenance or disclosure of individually identifiable health information.
An ineffective system of internal control could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We have identified material weaknesses in our internal control over financial reporting as of December 31, 2023.
An ineffective system of internal control could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We have identified material weaknesses in our internal control over financial reporting as of December 31, 2024 and 2023.
Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected 43 delays or increased costs due to new government regulations.
Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected 46 delays or increased costs due to new government regulations.
We have a history of cumulative losses and anticipate that we will continue to incur significant losses in the foreseeable future; thus, we do not know whether or when we will generate taxable income necessary to utilize our net operating losses or research and development tax credit carryforwards.
We have a history of cumulative losses and anticipate that we will continue to incur significant losses in the foreseeable future; thus, we do not know whether or when we will generate taxable income necessary to utilize our net operating losses or tax credit carryforwards.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur board of directors is responsible for monitoring and assessing strategic risk exposure, and 93 our executive officers are responsible for the day-to-day management of the material risks that we face. Our Audit Committee, comprised of members with substantial experience in information technology governance and risk management, oversees our cybersecurity strategy.
Biggest changeOur board of directors is responsible for monitoring and assessing strategic risk exposure, and our audit committee, comprised of members with substantial experience in information technology governance and risk management, oversees our cybersecurity strategy. Our board of directors receives periodic updates from management regarding cybersecurity matters, and is notified between such updates regarding significant new cybersecurity threats or incidents.
For additional information regarding risks from cybersecurity threats, please refer to Item 1A, “Risk Factors,” in this Annual Report on Form 10-K. Governance Our management and board of directors recognize the critical importance of maintaining the trust and confidence of our business partners and employees, including the importance of managing cybersecurity risks as part of our larger risk management program.
For additional information regarding risks from cybersecurity threats, please refer to Item 1A. “Risk Factors” in this Annual Report on Form 10-K. Governance Our management and board of directors recognize the critical importance of maintaining the trust and confidence of our business partners and employees, including the importance of managing cybersecurity risks as part of our larger risk management program.
While all of our personnel play a part in managing cybersecurity risks, one of the key functions of our board of directors is informed oversight of our risk management process, including risks from cybersecurity threats.
We seek to address cybersecurity risks through a cross-functional approach. One of the key functions of our board of directors is informed oversight of our risk management process, including risks from cybersecurity threats.
As our company grows, we plan to expand our strategy for cybersecurity in alignment with nationally accepted standards. We have not encountered cybersecurity risks that have materially affected or are reasonably likely to materially affect us or our business strategy.
As our company grows, we plan to expand our strategy for cybersecurity in alignment with nationally accepted standards.
They are advised by a virtual CISO consultant with Certified Information Security Manager (CISM) and Certified Information Systems Security Professional (CISSP certifications, as well as extensive background in IT infrastructure, risk mitigation, and incident response planning.
The third-party consultant is advised by their Security Operations Center Manager with a 101 variety of technical certifications, as well as extensive background in IT infrastructure, risk mitigation, and incident response planning.
In general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, integrity, and availability of the information that we collect and store by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
Our processes are designed to preserve the confidentiality, integrity, and availability of the information that we collect and store by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. Such processes include physical, procedural and technical safeguards, and response plans on our systems.
Removed
We assess material risks from cybersecurity threats on an ongoing basis, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
Added
We have certain processes for assessing, identifying and managing cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems, which are built into our overall risk management program.
Added
We engage an external consultant to manage cybersecurity tooling and incident response, as well as general information technology, or IT, systems, which enhance our cybersecurity oversight. We consider the internal risk of oversight programs of the third-party consultant before engaging them in order to help protect us from any related vulnerabilities.
Added
Based on an assessment using the previously described cybersecurity risk management program, we do not believe that there are currently any risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Added
Our executive officers are responsible for the day-to-day management of the material risks that we face. Our executive officers are led by a third-party consultant, who oversees company-wide cybersecurity strategy, policy , standards and processes and works across relevant departments to assess and help prepare us and our employees to address cybersecurity risks.
Added
In an effort to deter and detect cyber threats, we annually provide all employees, including part-time and temporary employees, with a data protection, cybersecurity and incident response and prevention training and compliance program, which covers a range of timely and relevant topics. Past topics have included social engineering, phishing, password protection, confidential data protection, asset use and mobile security.
Added
The training and compliance program functions to educate employees on the importance of reporting all incidents immediately. We also use technology-based tools to mitigate cybersecurity risks and to bolster our employee-based cybersecurity programs.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pro perties Lung Therapeutics LLC, our wholly owned subsidiary, leased a facility containing 6,455 square feet of office space, which is located at 3801 S. Capital of Texas Hwy, Suite 330, Austin, Texas. The lease expired on March 31, 2024. We do not plan to renew the lease following its expiration and plan to operate virtually.
Biggest changeItem 2. Pro perties On August 16, 2021, Lung entered into an operating lease agreement to rent approximately 6,455 square feet of office space for its corporate headquarters in Austin, Texas, beginning on October 1, 2021. The lease expired March 31, 2024, and we did not renew the lease.
Added
Following expiration of the lease, we are operating virtually, and expect to do so for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have a material 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. 94 PART II
Biggest changeRegardless of the outcome, litigation can have a material 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. 102 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determination to pay cash dividends will be made at the discretion of our board of directors and will depend on restrictions and other factors our board of directors may deem relevant. Investors should not purchase our common stock with the expectation of receiving cash dividends. Item 6. [ R eserved] 95
Biggest changeAny future determination to pay cash dividends will be made at the discretion of our board of directors and will depend on restrictions and other factors our board of directors may deem relevant. Investors should not purchase our common stock with the expectation of receiving cash dividends. Recent Sales of Unregistered Securities None.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities Our common stock trades under the symbol “ALRN” on the Nasdaq Capital Market and has been publicly traded since June 29, 2017. Prior to this time, there was no public market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities Our common stock trades under the symbol “RNTX” on the Nasdaq Capital Market and had been publicly traded since June 29, 2017. Prior to this time, there was no public market for our common stock.
Holders of Our Common Stock As of April 12, 2024, there were approximately 467 holders of record of shares of our common stock. This number does not include stockholders for whom shares are held in “nominee” or “street” name. Dividend Policy We have never declared nor paid cash dividends on our common stock.
Holders of Our Common Stock As of March 27, 2025, there were approximately 145 holders of record of shares of our common stock. This number does not include stockholders for whom shares are held in “nominee” or “street” name. Dividend Policy We have never declared nor paid cash dividends on our common stock.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. Reserved 103

Item 7. Management's Discussion & Analysis

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

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Biggest changeOther income, net consists of gains or losses recognized from non-routine items such as accretion on short-term investments, and gains or losses recognized from foreign currency transactions, and the disposal of fixed assets. 99 Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following tables summarize our results of operations for the years ended December 31, 2023 and 2022 in thousands: Year Ended December 31, Increase 2023 2022 (Decrease) Operating expenses: Research and development $ 3,991 $ 17,967 (13,976 ) General and administrative 11,357 9,680 1,677 Restructuring and other 928 — 928 Total operating expenses 16,276 27,647 (11,371 ) Loss from operations (16,276 ) (27,647 ) 11,371 Other income, net 544 318 226 Net loss $ (15,732 ) $ (27,329 ) $ 11,597 Research and Development Expenses Year Ended December 31, Increase 2023 2022 (Decrease) Direct research and development services $ 2,406 $ 12,145 $ (9,739 ) Employee related expenses 1,214 3,266 (2,052 ) Professional fees for services 324 2,166 (1,842 ) Facilities and other expenses 47 390 (343 ) Total research and development expenses $ 3,991 $ 17,967 $ (13,976 ) Research and development expenses for the year ended December 31, 2023 were $4.0 million, compared to $18.0 million for the year ended December 31, 2022.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following tables summarize our results of operations for the years ended December 31, 2024 and 2023 in thousands: Year Ended December 31, Increase 2024 2023 (Decrease) (in thousands) Operating expenses: Research and development 14,248 3,991 10,257 General and administrative 13,864 11,357 2,507 Impairment loss on intangible assets 37,000 — 37,000 Restructuring and Other Costs — 928 (928 ) Total operating expenses 65,112 16,276 48,836 Loss from operations (65,112 ) (16,276 ) (48,836 ) Other income, net 685 544 141 Income tax benefit 1,544 — 1,544 Net loss $ (62,883 ) $ (15,732 ) $ (47,151 ) Research and Development Expenses Year Ended December 31, Increase 2024 2023 (Decrease) Direct research and development services $ 11,967 $ 2,406 $ 9,561 Employee related expenses 2,200 1,214 986 Professional fees for services 34 324 (290 ) Facilities and other expenses 47 47 — Total research and development expenses $ 14,248 $ 3,991 $ 10,257 Research and development expenses for the year ended December 31, 2024 were $14.2 million, compared to $4.0 million for the year ended December 31, 2023.
The duration, costs and timing of clinical trials and development of a product candidate will depend on a variety of factors, including: • the scope, rate of progress, expense and results of clinical trials of the product candidate that we are developing and other research and development activities that we have conducted; • uncertainties in clinical trial design and patient enrollment rates; • significant and changing government regulation and regulatory guidance; • the timing and receipt of any marketing approvals; and • the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
The duration, costs and timing of clinical trials and development of a product candidate will depend on a variety of factors, including: • the scope, rate of progress, expense and results of clinical trials of the product candidates that we are developing and other research and development activities that we have conducted; • uncertainties in clinical trial design and patient enrollment rates; • significant and changing government regulation and regulatory guidance; • the timing and receipt of any marketing approvals; and • the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Research and Development Expenses For the periods presented in this Annual Report on Form 10-K, research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include: • salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; • expenses incurred in connection with the clinical development of its product candidates, including under agreements with third parties, such as consultants and contract research organizations, or CROs; • the cost of manufacturing product candidates for use in its clinical trials and preclinical studies, including under agreements with third parties, such as consultants and contract manufacturing organizations, or CMOs; • expenses incurred in connection with the preclinical development of its product candidates, including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties; • the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; • third-party license fees; • costs related to compliance with regulatory requirements; and • facility-related expenses, which included direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
Research and Development Expenses For the periods presented in this Annual Report on Form 10-K, research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include: • salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions; • expenses incurred in connection with the clinical development of our product candidates, including under agreements with third parties, such as consultants and contract research organizations, or CROs; • the cost of manufacturing product candidates for use in our clinical trials and preclinical studies, including under agreements with third parties, such as consultants and contract manufacturing organizations, or CMOs; • expenses incurred in connection with the preclinical development of our product candidates, including outsourced professional scientific development services, consulting research fees and payments made under sponsored research arrangements with third parties; • the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; • third-party license fees; • costs related to compliance with regulatory requirements; and 106 • facility-related expenses, which included direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
The Financing closed on November 2, 2023. On February 28, 2024, we held our 2023 annual meeting of stockholders in which our stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of our outstanding Series X Preferred Stock.
The PIPE Financing closed on November 2, 2023. On February 28, 2024, we held our 2023 annual meeting of stockholders in which our stockholders approved the issuance, in accordance with Nasdaq Listing Rule 5635(a), of shares of common stock, upon conversion of our outstanding Series X Preferred Stock.
To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses. 104 Stock-Based Compensation We account for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation, or ASC 718.
To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses. Stock-Based Compensation We account for stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation , or ASC 718.
Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. In addition, we typically used our employee and infrastructure resources across our development programs.
Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. In addition, we typically use our employee and infrastructure resources across our development programs.
Components of Aileron’s Results of Operations Revenue We have not generated any revenue from product sales and we do not expect to generate any revenue from the sale of products in the foreseeable future. Operating Expenses Our expenses since inception have consisted solely of research and development costs, general and administrative, and restructuring costs.
Components of Rein’s Results of Operations Revenue We have not generated any revenue from product sales and we do not expect to generate any revenue from the sale of products in the foreseeable future. Operating Expenses Our expenses since inception have consisted solely of research and development costs, general and administrative, and restructuring costs.
Though the tax effects may be delayed indefinitely, ASC 740-10-55-63 states that “deferred tax liabilities may not be eliminated or reduced because a reporting entity may be able to delay the settlement of those liabilities by delaying the events that would cause taxable temporary differences to reverse.” As such, the Company has recorded a deferred tax liability for the portion of the liability that cannot be offset with indefinite lived deferred tax assets.
Though the tax effects may be delayed indefinitely, ASC 740-10-55-63 states that “deferred tax liabilities may not be eliminated or reduced because a reporting entity may be able to delay the settlement of those liabilities by delaying the events that would cause taxable temporary differences to reverse.” As such, we have recorded a deferred tax liability for the portion of the liability that cannot be offset with indefinite lived deferred tax assets.
Off-Balance Sheet Arrangements As of December 31, 2023 and 2022 and in the periods presented, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Off-Balance Sheet Arrangements As of December 31, 2024 and 2023 and in the periods presented, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Examples of estimated accrued research and development expenses include fees paid to: • vendors in connection with preclinical and clinical development activities; • CROs in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf; • investigative sites or other service providers in connection with clinical trials; and • CMOs or other vendors in connection with the production of preclinical and clinical trial materials.
Examples of estimated accrued research and development expenses include fees paid to: • vendors in connection with preclinical and clinical development activities; • contract research organizations, or CROs, in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf; 113 • investigative sites or other service providers in connection with clinical trials; and • contract manufacturing organization, or CMOs, or other vendors in connection with the production of preclinical and clinical trial materials.
Our pipeline includes: • LTI-03, a peptide, for which we are currently recruiting patients for a Phase 1b dose-ranging, placebo-controlled safety, tolerability, and pharmacodynamic biomarker activity trial in development for the treatment of IPF, that has demonstrated the ability to protect healthy lung epithelial cells and reduce pro-fibrotic signaling; • LTI-01, a proenzyme that completed a Phase 2a dose-ranging, placebo-controlled trial and a Phase 1b safety, tolerability and proof of mechanism trial in LPE patients, an indication that has no approved drug treatment; and • preclinical programs targeting cystic fibrosis and a peptide program focused on the Cav1 protein for systemic fibrosis indications.
Our pipeline includes: • LTI-03, a peptide, for which we conducted a Phase 1b dose-ranging, placebo-controlled safety, tolerability, and pharmacodynamic biomarker activity trial in development for the treatment of Idiopathic Pulmonary Fibrosis, or IPF, that has demonstrated the ability to protect healthy lung epithelial cells and reduce pro-fibrotic signaling; • LTI-01, a proenzyme that completed a Phase 2a dose-ranging, placebo-controlled trial and a Phase 1b safety, tolerability and proof of mechanism trial in loculated pleural effusion, or LPE, patients, an indication that has no approved drug treatment; and • preclinical programs targeting cystic fibrosis and a peptide program focused on the Cav1 protein for systemic fibrosis indications.
Immediately following the closing of the Lung Acquisition, we entered into a Stock and Warrant Purchase Agreement, or the Purchase Agreement, with a group of accredited investors, or the Investors, led by Bio Partners, the majority stockholder of Lung prior to the closing of the Lung Acquisition, and including Nantahala Capital, as well as additional undisclosed investors, pursuant to which we issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) warrants to purchase up to an aggregate of 2,353,500 shares of common stock, or the Warrant Shares, for an aggregate purchase price of approximately $18.4 million, which included the conversion of certain convertible promissory notes in the aggregate principal amount of approximately $1.6 million issued by Lung to Bios Partners prior to the closing of the Lung Acquisition at a 10% discount to the per share price of the Series X Preferred Stock,, or the Financing, and collectively with the Lung Acquisition, the Transactions.
In addition, we assumed (i) all Lung stock options and all warrants exercisable for Lung common stock immediately outstanding prior to the closing of the Lung Acquisition, each subject to adjustment pursuant to the terms of the Lung Acquisition Agreement. 105 Immediately following the closing of the Lung Acquisition, we entered into the Purchase Agreement, with the Investors, led by Bio Partners, the majority stockholder of Lung prior to the closing of the Lung Acquisition, and including Nantahala Capital, as well as additional undisclosed investors, pursuant to which we issued and sold (i) an aggregate of 4,707 shares of Series X Preferred Stock, and (ii) warrants to purchase up to an aggregate of 2,353,500 shares of common stock, or the PIPE Warrant Shares, for an aggregate purchase price of approximately $18.4 million, which included the conversion of certain convertible promissory notes in the aggregate principal amount of approximately $1.6 million issued by Lung to Bios Partners prior to the closing of the Lung Acquisition at a 10% discount to the per share price of the Series X Preferred Stock, or the PIPE Financing, and collectively with the Lung Acquisition, the Transactions.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S.
For example, if the FDA, or another regulatory authority were to have required us to conduct clinical trials beyond those that we anticipated would be required for the completion of clinical development of a product candidate, or if we experienced significant trial delays due to patient enrollment or other reasons, we would have been required to expend significant additional financial resources and time on the completion of clinical development.
Food and Drug Administration, or the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipated would be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we could be required to expend significant additional financial resources and time on the completion of clinical development.
Investing Activities During the year ended December 31, 2023, investing activities provided $16.2 million of cash. We received $16.3 million of proceeds from the maturities of investments, offset by $0.1 million of cash and cash equivalents from the Lung Acquisition. During the year ended December 31, 2022, investing activities provided $26.5 million of cash.
Investing Activities During the year ended December 31, 2024, no cash was provided by investing activities. 111 During the year ended December 31, 2023, investing activities provided $16.2 million of cash. We received $16.3 million of proceeds from the maturities of investments, offset by $0.1 million of cash and cash equivalents from the Lung Acquisition.
We tracked outsourced development costs and milestone payments made under our licensing arrangements by product candidate or development program, but we did not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates because these costs are deployed across multiple programs and, as such, are not separately classified. 98 Research and development activities are central to our business model.
We track outsourced development costs and milestone payments made under our licensing arrangements by product candidate or development program, but we do not allocate personnel costs, license payments made under our licensing arrangements or other internal costs to specific development programs or product candidates because these costs are deployed across multiple programs and, as such, are not separately classified.
As a result of the Company’s acquisition of Lung Therapeutics, the tax attributes have been limited under Section 382. The Company has reflected the reduction of these tax attributes within the income tax footnote at December 31, 2023. On October 31, 2023, the Company acquired, in accordance with the terms of the Merger Agreement, the stock of Lung Therapeutics.
As a result of the Lung Acquisition, the tax attributes have been limited under Section 382. We have reflected the reduction of these tax attributes within the income tax footnote at December 31, 2024 and 2023, respectively. On October 31, 2023, we acquired, in accordance with the terms of the Lung Acquisition Agreement, the stock of Lung.
Since our inception, we have incurred significant losses on an aggregate basis. Our net losses were $15.7 million and $27.3 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $288.5 million.
Since our inception, we have incurred significant losses on an aggregate basis. Our net losses were $62.9 million and $15.7 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $351.4 million.
During the year ended December 31, 2022, operating activities used $24.9 million of cash, primarily resulting from our net loss of $27.3 million and cash provided by the change in operating assets and liabilities of $0.4 million offset by non-cash charges of $2.0 million. Non-cash charges resulted primarily from stock-based compensation expense.
During the year ended December 31, 2023, operating activities used $19.8 million of cash, primarily resulting from our net loss of $15.7 million and cash provided by the change in operating assets and liabilities of $5.4 million offset by non-cash charges of $1.3 million. Non-cash charges resulted primarily from stock-based compensation expense of $1.2 million.
Changes in our operating assets and liabilities during the year ended December 31, 2022 consisted primarily of a decrease of $1.6 million in accrued expenses and other current liabilities, a decrease of $1.6 million in prepaid expense and other assets, and an increase of $0.5 million in accounts payable.
Changes in our operating assets and liabilities during the year ended December 31, 2023 consisted primarily of an increase of $5.0 million in accounts payable, and $0.4 million in accrued expenses and other current liabilities.
Judgments concerning the recognition and measurement of our tax benefits, as well as limitations surrounding their realizability, might change as new information becomes available. Contractual Obligations Our wholly owned subsidiary, Lung Therapeutics LLC, leased a facility containing 6,455 square feet of office space located at 3801 S.
Judgments concerning the recognition and measurement of our tax benefits, as well as limitations surrounding their realizability, might change as new information becomes available. Contractual Obligations Our wholly owned subsidiary, Lung, leased a facility containing 6,455 square feet of office space located at 3801 S. Capital of Texas Hwy, Suite 330, Austin, Texas, which expired on March 31, 2024.
Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $15.8 million due to the proceeds of $15.8 million from the Financing in October 2023. 103 During the year ended December 31, 2022, net cash provided by financing activities was $0 million.
Financing Activities During the year ended December 31, 2024, net cash provided by financing activities was $17.8 million primarily due to the Offering in May 2024. During the year ended December 31, 2023, net cash provided by financing activities was $15.8 million due to the proceeds of $15.8 million from the PIPE Financing in October 2023.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2023 2022 Cash used in operating activities $ (19,808 ) $ (24,865 ) Cash provided by investing activities 16,196 26,459 Cash provided by financing activities 15,794 — Effect of exchange rate changes on cash and cash equivalents (63 ) — Net increase in cash, cash equivalents and restricted cash $ 12,119 $ 1,594 Operating Activities During the year ended December 31, 2023, operating activities used $19.8 million of cash, primarily resulting from our net loss of $15.7 million and cash provided by the change in operating assets and liabilities of $5.4 million offset by non-cash charges of $1.3 million.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2024 2023 (in thousands) Cash used in operating activities $ (22,291 ) $ (19,808 ) Cash provided by investing activities — 16,196 Cash provided by financing activities 17,818 15,794 Effect of exchange rate changes on cash and cash equivalents — (63 ) Net (decrease) increase in cash, cash equivalents and restricted cash $ (4,473 ) $ 12,119 Operating Activities During the year ended December 31, 2024, operating activities used $22.3 million of cash, primarily resulting from our net loss of $62.9 million partially offset by a change in operating assets and liabilities of $2.4 million and non-cash charges of $38.2 million.
We have financed our operations through sales of common stock in our initial public offering and follow-on public offerings, sales of common stock and warrants in a private placement, sales of common stock in “at-the-market” offerings, sales of common stock under our equity line with Lincoln Park Capital LLC, or LPC, sales of preferred stock prior to our initial public offering, payments received under a collaboration agreement and sales of common stock, preferred stock and warrants in connection with the Lung Acquisition and the Financing.
To date, we have funded our operations through sales of common stock in our initial public offering, sales of common stock and warrants in follow-on public offerings, sales of common stock and warrants in a private placement, sales of common stock in “at-the-market” offerings, sales of preferred stock prior to our initial public offering, payments received under a collaboration agreement, sales of common stock, preferred stock and warrants in connection with the Lung Acquisition and the PIPE Financing and sales of common stock upon option exercises.
In accordance with ASC 805-740-25-3, recognition of deferred tax assets and liabilities is required for substantially all temporary differences and acquired tax carryforwards and credits. The Company has computed estimated temporary differences and acquired tax carryforwards and credits as of the transaction date. The Company will not have tax basis in intangible assets recorded as part of the purchase.
In accordance with Accounting Standards Codification, or ASC, 805-740-25-3, recognition of deferred tax assets and liabilities is required for substantially all temporary differences and acquired tax carryforwards and credits. We have computed estimated temporary differences and acquired tax carryforwards and credits as of the transaction date.
On March 5, 2024, based upon existing beneficial ownership limitations, 12,087 shares of Series X Preferred Stock were automatically converted into 12,087,075 shares of common stock.
On March 5, 2024, subject to then existing beneficial ownership limitations, 11,957 shares of Series X Preferred Stock were automatically converted into 11,957,000 shares of common stock.
For accounting purposes, the intangible assets will not be amortized and subject to impairment review and testing.
We will not have tax basis in intangible assets recorded as part of the purchase. For accounting purposes, the intangible assets will not be amortized and subject to impairment review and testing.
Sales of common stock through JonesTrading and William Blair may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. We are not obligated to make any sales of common stock under the ATM Sales Agreement.
Sales of common stock through or to Citizens JMP may be made by any method that is deemed an “at the market” offering as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Capital Market.
General and Administrative Expenses Year Ended December 31, Increase 2023 2022 (Decrease) Employee related expenses $ 2,723 $ 3,068 $ (345 ) Professional fees for services 7,053 4,633 2,420 Facilities and other expenses 1,581 1,979 (398 ) Total general and administrative expenses $ 11,357 $ 9,680 $ 1,677 General and administrative expenses were $11.4 million for the year ended December 31, 2023, compared to $9.7 million for the year ended December 31, 2022.
General and Administrative Expenses Year Ended December 31, Increase 2024 2023 (Decrease) Employee related expenses $ 5,465 $ 2,723 $ 2,742 Professional fees for services 6,257 7,053 (796 ) Facilities and other expenses 2,142 1,581 561 Total general and administrative expenses $ 13,864 $ 11,357 $ 2,507 General and administrative expenses were $13.9 million for the year ended December 31, 2024, compared to $11.4 million for the year ended December 31, 2023.
These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with our operations. In February 2023, we discontinued development of ALRN-6924 which substantially reduced our operating expenses. Notwithstanding these events, we expect to continue to incur operating losses for the foreseeable future.
These losses have resulted primarily from costs incurred in connection with research and development activities, licensing and patent investment and general and administrative costs associated with our operations as well as the impairment loss on intangible assets identified in the fourth quarter of 2024. We expect to continue to incur operating losses for the foreseeable future.
Restructuring-related charges were comprised of one-time termination costs in connection with the reduction-in-workforce, including severance, benefits, and related costs. Other Income, net Other income, net of $0.5 million for the year ended December 31, 2023 consisted of interest income of $0.4 million and investment accretion of $0.2 million.
Restructuring and Other Costs There were no restructuring-related expenses incurred during the year ended December 31, 2024. We incurred restructuring-related charges of $0.9 million for the year ended December 31, 2023 in connection with our February 2023 restructuring. Restructuring-related charges were comprised of one-time termination costs in connection with the reduction-in-workforce, including severance, benefits, and related costs.
Historically, our interest income had not been significant due to low investment balances and low interest earned on those balances. We anticipate that our interest income will fluctuate in the future in response to our cash and cash equivalents and the interest rate environment.
We anticipate that our interest income will fluctuate in the future in response to our cash and cash equivalents and the interest rate environment.
Following our acquisition of Lung, or the Lung Acquisition, the business conducted by Lung became the business primarily conducted by the Company and we shifted our operating disease focus to advancing a pipeline of first-in-class medicines to address significant unmet medical needs in orphan pulmonary and fibrosis indications. 96 Under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, we issued to the stockholders of Lung 344,345 shares of our common stock and 19,903 shares of our newly designated Series X Preferred Stock.
Following our acquisition of Lung, Lung became our wholly owned subsidiary, or the Lung Acquisition. Following the Lung Acquisition, the business conducted by Lung became the business primarily conducted by us and we shifted our operating disease focus to advancing a pipeline of first-in-class medicines to address significant unmet medical needs in orphan pulmonary and fibrosis indications.
We anticipate that our interest income and investment accretion will fluctuate in the future in response to our then-current cash and cash equivalents, and then-current interest rates. Income Taxes As of December 31, 2023, we had federal and state net operating loss carryforwards of $56.5 million and $8.2 million, respectively, which begin to expire in 2036 and 2043, respectively.
Other income, net of $0.5 million for the year ended December 31, 2023 consisted of interest income of $0.4 million and investment accretion of $0.2 million. We anticipate that our interest income and investment accretion will fluctuate in the future in response to our then-current cash and cash equivalents, and then-current interest rates.
Capital of Texas Hwy, Suite 330, Austin, Texas, which expired on March 31, 2024. We do not plan on renewing the lease. Following expiration of the lease, we plan to operate virtually. 105 Our remaining contractual rent commitment under this lease was less than $0.1 million as of December 31, 2023.
We did not renew the lease. Following expiration of the lease, we are operating virtually, and expect to do so for the foreseeable future. 115 Our remaining contractual rent commitment under this lease was $0 million and less than $0.1 million as of December 31, 2024 and December 31, 2023, respectively.
For a description of our lease obligations, refer to Note 15 to our consolidated financial statements appearing in this Annual Report on Form 10-K.
For a description of our lease obligations, refer to Note 14 to our consolidated financial statements appearing in this Annual Report on Form 10-K. Smaller Reporting Company Status We are a “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Our funding estimates are based on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect, see “Liquidity and Capital Resources.” We intend to fund our operations primarily through utilization of our current financial resources and additional raises of capital.
Our estimate as to how long we expect our existing cash and cash equivalents to be able to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.
After the Lung Acquisition, we believe that, based on our current operating plan, our cash and cash equivalents of $17.3 million as of December 31, 2023, will enable us to fund our operating expenses into the fourth quarter of 2024 following the date of this Annual Report on Form 10-K.
As of December 31, 2024, we had cash and cash equivalents of $12.9 million. Based on our current operating plan, we believe that our existing cash and cash equivalents as of December 31, 2024 will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into August 2025.
As of December 31, 2023, we also had federal research and development tax credit carryforwards of $1.1 million, which begin to expire in 2035. The Company also has federal orphan drug tax credit carryforwards of $6.7 million which begin to expire in 2039.
We also have federal orphan drug tax credit carryforwards of $5.8 million which begin to expire in 2039.
Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock. In addition, we assumed (i) all Lung stock options and all warrants exercisable for Lung common stock immediately outstanding prior to the closing of the Lung Acquisition, each subject to adjustment pursuant to the terms of the Lung Acquisition Agreement.
Under the terms of the Lung Acquisition Agreement, at the closing of the Lung Acquisition, we issued to the stockholders of Lung 344,345 shares of our common stock and 19,903 shares of our newly designated Series X Preferred Stock. Each share of Series X Preferred Stock is convertible into 1,000 shares of common stock.
Non-cash charges resulted primarily from stock-based compensation expense of $1.2 million. Changes in our operating assets and liabilities during the year ended December 31, 2023 consisted primarily of an increase of $5.0 million in accounts payable, and $0.4 million in accrued expenses and other current liabilities.
Changes in our operating assets and liabilities during the year ended December 31, 2024 consisted primarily of a decrease of $2.2 million in other assets, and an increase of $1.7 million in accrued expenses and other current liabilities, offset by a decrease of $1.6 million in deferred tax liabilities due to the reduction in the carrying value of our intangible assets.
To date, we have financed operations primarily through $145.5 million in net proceeds from sales of common stock and warrants, $131.2 million from sales of preferred stock prior to our IPO, $34.9 million from a collaboration agreement in 2010, and $18.4 million in gross proceeds, less issuance costs of $0.9 million, in connection with the Financing following the Lung Acquisition, which included the conversion of certain convertible promissory notes in the aggregate principal amount of approximately $1.6 million issued by Lung to Bios Partners prior to the closing of the Lung Acquisition at a 10% discount to the per share price of the Series X Preferred Stock.
To date, we have financed operations primarily through $145.5 million in net proceeds from sales of common stock and warrants, $0.7 million in net proceeds from sales of common stock under our “at-the-market” offering program, $131.2 million from sales of preferred stock prior to our initial public offering, or IPO, $34.9 million from a collaboration agreement in 2010, $17.5 million in net proceeds in connection with a private placement following the Lung Acquisition (as defined below) in 2023, and $17.7 million in net proceeds in connection with the issuance and sale of shares and accompanying warrants in our public offering in May 2024.
Liquidity and Capital Resources Sources of Liquidity Since our inception, we have incurred significant losses on an aggregate basis. We have not commercialized any product candidates, and as we do not have any product candidates under development, we do not expect to generate revenue from sales of any products.
Liquidity and Capital Resources Since inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from operations.
Restructuring Costs Restructuring-related charges are comprised of one-time termination costs in connection with the reduction-in-workforce, including severance, benefits, and related costs. Other Income, net Interest and Other Income Interest income consists of interest income earned on our cash and cash equivalents.
Impairment Loss on Intangible Assets Impairment loss on intangible assets was identified in the fourth quarter of 2024 when the carrying value of LTI-01 exceeded its fair value as of December 31, 2024. Restructuring Costs 107 Restructuring-related charges are comprised of one-time termination costs in connection with our reduction-in-workforce in 2023, including severance, benefits, and related costs.
The increase of $1.7 million in general and administrative expense was primarily the result of $2.4 million more professional fees during 2023 as compared to the year 2022 mainly due to the acquisition in October 2023, offset by $0.3 million lower headcount costs and $0.4 million lower facilities and other expenses during 2023 as compared to the year 2022. 100 Restructuring and Other On February 16, 2023, our Board of Directors determined to reduce the Company’s remaining workforce from nine to three full-time employees.
The increase of $2.5 million in general and administrative expenses was primarily due to increased employee and related expenses of $2.7 million as a result of increased headcount associated with the Lung Acquisition and severance expense recognized due to departure of former employees, and increased facilities and other expenses of $0.6 million as a result of the Lung Acquisition, offset by a decrease of $0.8 million in professional fees as a result of no acquisition related events during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
As of December 31, 2023, we had cash and cash equivalents of $17.3 million. 101 At-the-Market Program In January 2021, we entered into a Capital on Demand Sales Agreement, or the ATM Sales Agreement, with JonesTrading Institutional Services LLC, or JonesTrading, and William Blair & Company, L.L.C., or William Blair, as agents, under which we may issue and sell shares of common stock, having an aggregate offering price of up to $30.0 million.
In January 2025, we issued and sold 317,772 shares of common stock for total net proceeds of $0.7 million. Upon entry into the Equity Distribution Agreement, we terminated our prior “at the market offering” pursuant to a Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC and William Blair & Company, L.L.C.
In addition, in February 2023, we determined to reduce our workforce from nine to three full-time employees, which we completed in the second quarter of 2023. The Lung Acquisition On October 31, 2023, we acquired Lung Therapeutics, Inc., or Lung, pursuant to an Agreement and Plan of Merger, or the Lung Acquisition Agreement.
Net proceeds from the Offering were $17.7 million, after deducting underwriting discounts and commissions and offering expenses, and excluding any proceeds that may be received from exercise of the Offering Warrants. The Lung Acquisition On October 31, 2023, we acquired Lung Therapeutics, Inc., or Lung, pursuant to an Agreement and Plan of Merger, or the Lung Acquisition Agreement.
Removed
Prior to the termination of development of our main product candidate in February 2023 and the acquisition of Lung (as described below), our focus was the development of our main product candidate, ALRN-6924, a MDM2/MDMX dual inhibitor that leveraged our proprietary peptide drug technology.
Added
In June 2024, we decided to temporarily delay clinical development of LTI-01 in an effort to focus our resources on clinical development of LTI-03 and until additional funds are raised. In the fourth quarter of 2024, we determined that the temporary delay of further clinical development of LTI-01 may not be a short-term measure.
Removed
Since our inception, we have devoted a substantial portion of our resources to developing our product candidates, including ALRN-6924, developing our proprietary stabilized cell-permeating peptide platform, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations.
Added
As of December 31, 2024, we had cash and cash equivalents of $12.9 million. Based on our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our planned operating expense and capital expenditure requirements into August 2025.
Removed
Announcement of Exploration of Strategic Alternatives In February 2023, we announced a review of initial data from our Phase 1b chemoprotection trial of ALRN-6924 in patients with p53-mutated breast cancer. Based on these findings, we decided to terminate the Phase 1b breast cancer trial and further development of ALRN-6924.
Added
These funds are not sufficient to enable us to complete our planned Phase 2 clinical trial of LTI-03 and we will need to obtain additional funding prior to initiating the trial. Our future 104 viability is dependent on our ability to raise additional capital to finance our operations.
Removed
We also announced that we were exploring a range of strategic alternatives to maximize shareholder value. We engaged Ladenburg Thalmann & Co., Inc. to act as a strategic advisor for this process. Strategic alternatives that were being evaluated included, but were not limited to, an acquisition, a merger, a business combination, a sale of assets or other transactions.
Added
In addition, our existing cash and cash equivalents will not be sufficient to fund all of the efforts that we plan to undertake or to fund the completion of development of our product candidates. Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.
Removed
The remaining approximately 12,522 shares of Series X Preferred Stock (which are convertible into 12,522,925 shares of common stock) will remain convertible at the option of the holder thereof, subject to certain beneficial ownership limitations.
Added
There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, or at all.
Removed
We have concluded that as of the date of this Annual Report on Form 10-K there is substantial doubt about our ability to continue as a going concern.
Added
Exclusive Option Agreement with Advancium On October 31, 2024, we entered into an exclusive option agreement, or the Option Agreement, with Advancium Health Network, or Advancium, for the sale of ALRN-6924, a clinical stage oncology agent that we were development prior to the Lung Acquisition (as defined below).
Removed
Our future viability is dependent on our ability to raise additional capital, enter into a financing, consummate a successful acquisition, merger, business 97 combination, or a sale of assets or other transaction.
Added
During the option period, Advancium intends to evaluate ALRN-6924 as a potential therapy for retinoblastoma. Under the terms of the option agreement Advancium paid us a non-refundable fee of $0.1 million for the exclusive option to acquire ALRN-6924 and related assets.
Removed
If we become unable to continue as a going concern, we may have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our consolidated financial statements.
Added
If Advancium exercises its option, we will receive an exercise payment with potential for additional development, regulatory and commercial milestone payments and sales royalties.
Removed
The decrease of $14.0 million was primarily a result of reduced spending of $6.0 million for our completed Phase 1b NSCLC trial, $1.6 million for our completed healthy volunteer study, $2.6 million for our terminated Phase 1b breast cancer trial, $2.0 million for ALRN-6924 manufacturing costs, and $1.0 million for other research expenses, and reduced spending of $2.7 million for employee related expenses and facilities and other expenses, offset by the research and development expense of $1.4 million and employee related expenses of $0.5 million incurred by Lung during 2023 after the acquisition.
Added
Equity Distribution Agreement On July 26, 2024, we entered into an Equity Distribution Agreement with Citizens JMP Securities, LLC, or Citizens JMP, as agent and/or principal, under which we may offer and sell up to $50.0 million of shares of our common stock from time to time through or to Citizens JMP.
Removed
The determination to affect the workforce reduction was made in connection with our decision to terminate the Phase 1b breast cancer trial of ALRN-6924 and further development of ALRN-6924. As a result of the above restructuring initiatives, we incurred restructuring-related charges of $0.9 million for the year ended December 31, 2023.
Added
There have been no sales on the "at the market" offering through December 31, 2024, however, in January 2025, we issued and sold 317,772 shares of common stock for total net proceeds of $0.7 million.
Removed
Pursuant to a prospectus relating to the ATM Sales Agreement we filed with the SEC on June 21, 2022, we may offer and sell shares of our common stock having an aggregate offering price of up to $14.0 million under the ATM Sales Agreement.
Added
Follow-on public offering In May 2024, we completed an underwritten follow-on public offering, or the Offering, pursuant to which we issued and sold 4,273,505 shares of our common stock, or the Offering Shares, and accompanying warrants, or the Offering Warrants, to purchase 4,273,505 shares of common stock, or the Offering Warrant Shares.
Removed
There were no sales under the ATM Sales Agreement during the year ended December 31, 2023, or the year ended December 31, 2022. Equity Line Financing On September 21, 2020, we entered into a purchase agreement, or the Equity Line Purchase Agreement, with LPC for an equity line financing.
Added
We sold all of the Offering Shares and Offering Warrants. Each Offering Share was offered and sold together with an accompanying Offering Warrant at a combined offering price of $4.68, and the underwriter purchased each Offering Share with an accompanying Offering Warrant at a combined price of $4.35.
Removed
The Equity Line Purchase Agreement provided that, subject to the terms and conditions set forth therein, we had the right, but not the obligation, to sell to LPC, and LPC is obligated to purchase up to $15.0 million of shares of common stock at our sole discretion, over a 36-month period that commenced in October 2020.
Added
Research and development activities are central to our business model.
Removed
We filed a registration statement on Form S-1 covering the sale of shares of common stock that are issued to LPC under the Equity Line Purchase Agreement, which was declared effective on October 15, 2020. The Equity Line Purchase Agreement was terminated in October 2023 pursuant to the terms thereof.
Added
Other Income, net Interest and Other Income Interest income consists of interest income earned on our cash and cash equivalents. Historically, our interest income had not been significant due to low investment balances and low interest earned on those balances.
Removed
There were no sales under the Equity Line Purchase Agreement during the years ended December 31, 2023 and 2022. The Lung Acquisition and Financing Transaction On October 31, 2023, we acquired Lung, a privately held biopharmaceutical company focused on developing novel therapies for the treatment of orphan pulmonary and fibrosis indications that have no approved or limited effective treatments.
Added
Other income, net consists of the income recognized under the Option Agreement with Advancium, gains or losses recognized from non-routine items such as accretion on short-term investments, and gains or losses recognized from foreign currency transactions, and the disposal of fixed assets.
Removed
Immediately following the acquisition of Lung, we entered into a definitive agreement for the sale of (i) 4,707 shares of Series X Non-Voting Convertible Preferred Stock, at par value of $0.001, or the Series X Preferred Stock, and (ii) warrants to purchase an aggregate of 2,353,500 shares of Aileron's common stock in a private placement to a group of accredited investors led by Bios Partners, all affiliated entities are collectively called Bios, and including Nantahala Capital, as well as additional undisclosed investors, or the Financing.
Added
We anticipate that our interest income and investment accretion will fluctuate in the future in response to our then-current cash and cash equivalents, and then-current interest rates.
Removed
The Financing resulted in gross proceeds to Aileron of approximately $18.4 million, which included the conversion of certain convertible promissory notes in the aggregate principal amount of approximately $1.6 million issued by Lung to Bios Partners prior to the closing of the Lung Acquisition at a 10% discount to the per share price of the Series X Preferred Stock.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitati ve Disclosures About Market Risk We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this item.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act for this reporting period and are not required to provide the information required under this item.

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