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SOLENO THERAPEUTICS INC

SOLENO THERAPEUTICS INCSLNO決算レポート

Nasdaq · ヘルスケア · 医薬製剤

SOLENO THERAPEUTICS INC is a clinical-stage biopharmaceutical company specializing in developing novel therapies for rare endocrine, metabolic, and neurodevelopmental disorders. Its lead product candidate targets Prader-Willi syndrome, a rare genetic condition, with key patient markets across North America and the European Union.

What changed in SOLENO THERAPEUTICS INC's 10-K — 2024 vs 2025

Top changes in SOLENO THERAPEUTICS INC's 2025 10-K

451 paragraphs added · 475 removed · 293 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

45 edited+42 added−40 removed95 unchanged
Becerra , 14 F.4th 1299 (11th Cir. 2021), in January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst , the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new 9 uses or indications within the same orphan designated disease or condition that have not yet been approved.
Becerra , 14 F.4th 1299 (11th Cir. 2021), in January 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies with the court’s order in Catalyst , the FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease or condition that have not yet been approved.
In addition, PPACA provides that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that 12 was not provided as claimed or is false or fraudulent.
In addition, PPACA provides that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, the sponsor may be required to submit and obtain FDA approval of a new or supplemental NDA, which may require the development of additional data or conduct of additional pre-clinical studies and clinical trials.
Further, if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities, the sponsor may be required to 7 submit and obtain FDA approval of a new or supplemental NDA, which may require the development of additional data or conduct of additional pre-clinical studies and clinical trials.
Drugs that treat serious or life-threatening diseases and conditions that are not adequately addressed by existing drugs, and for which the development program is designed to address the unmet medical need, may be designated as fast track and/or breakthrough candidates by the FDA and may be eligible for accelerated and priority review.
Drugs that treat serious or life-threatening diseases and conditions that are not adequately addressed by existing drugs, and for which the development program is designed to address the unmet medical need, may be designated as fast track and/or breakthrough candidates by the FDA and may be eligible for accelerated review and priority approval.
Separately, the HHS office of the Office of Inspector General, or OIG, can exclude providers found liable under the False Claims Act from 11 participating in federally funded healthcare programs, including Medicare and Medicaid.
Separately, the HHS office of the Office of Inspector General, or OIG, can exclude providers found liable under the False Claims Act from participating in federally funded healthcare programs, including Medicare and Medicaid.
Additional nonclinical 7 testing may be required during the clinical development process for products intended for long-term use, such as reproductive toxicology, juvenile toxicology studies and carcinogenicity studies in two species.
Additional nonclinical testing may be required during the clinical development process for products intended for long-term use, such as reproductive toxicology, juvenile toxicology studies and carcinogenicity studies in two species.
Sanctions for violations of the federal Anti-Kickback Statute may include imprisonment and other criminal penalties, civil monetary penalties and exclusion from participation in federal healthcare programs.
Sanctions 12 for violations of the federal Anti-Kickback Statute may include imprisonment and other criminal penalties, civil monetary penalties and exclusion from participation in federal healthcare programs.
We have selected well-established and reputable global CMOs for our active pharmaceutical ingredient (API) and drug product manufacturing, that have good regulatory standing, large manufacturing capacities, and multiple manufacturing sites 6 within their business footprint. We employ highly skilled personnel with both technical and manufacturing experience to diligently manage the activities at our CMOs.
We have selected well-established and reputable global contract manufacturing organizations (CMOs) for our active pharmaceutical ingredient (API) and drug product manufacturing, that have good regulatory standing, large manufacturing capacities, and multiple manufacturing sites within their business footprint. We employ highly skilled personnel with both technical and manufacturing experience to diligently manage the activities at our CMOs.
The steep penalties that may be imposed on laboratories and other providers under this statute may be disproportionate to the relatively small dollar amounts of the claims made by these providers for reimbursement. In addition, even the threat of being excluded from participation in federal healthcare programs can have significant financial consequences on a provider.
The steep penalties that may be imposed under this statute may be disproportionate to the relatively small dollar amounts of the claims made by these providers for reimbursement. In addition, even the threat of being excluded from participation in federal healthcare programs can have significant financial consequences on a provider.
Activating the K ATP channel in adipocytes has the potential to decrease de-novo triglyceride synthesis and increase ß-oxidation of fat, reducing fat mass. DCCR was formulated with the goals of improving the safety and bioavailability of orally-administered diazoxide and reducing the frequency of dosing required by current diazoxide formulations.
Activating the K ATP channel in adipocytes has the potential to decrease de-novo triglyceride synthesis and increase ß-oxidation of fat, reducing fat mass. VYKAT XR was formulated with the goals of improving the safety and bioavailability of orally-administered diazoxide and reducing the frequency of dosing required by current diazoxide formulations.
Our developmental drug products are subject to rigorous regulation. Federal and state statutes and regulations govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these regulations, product development and product approval processes are very expensive and time-consuming.
Our drug products and product 5 candidates are subject to rigorous regulation. Federal and state statutes and regulations govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these regulations, product development and product approval processes are very expensive and time-consuming.
Diazoxide choline has been formulated into an extended-release tablet that provides lower peak plasma concentration compared to diazoxide oral suspension and allows for the gradual release of diazoxide choline from DCCR, making it suitable for once-a-day dosing.
Diazoxide choline has been formulated into an extended-release tablet that provides lower peak plasma concentration compared to diazoxide oral suspension and allows for the gradual release of diazoxide choline from VYKAT XR, making it suitable for once-a-day dosing.
We store API at third-party facilities in the United States, and provide appropriate amounts to third-party drug product CMOs in the United States who then manufacture, package and label our specified quantities of finished commercial DCCR and clinical goods for our drug candidates.
We store API at third-party facilities in the United States, and provide appropriate amounts to third-party drug product CMOs in the United States who then manufacture, package and label our specified quantities of finished commercial VYKAT XR and clinical goods for our drug candidates.
We expect that our principal competition for DCCR will include drugs currently in various stages of clinical development specifically for the treatment of PWS and hyperphagia, but may also include drugs approved for other indications, such as appetite suppression.
We expect that our principal competition for VYKAT XR will include drugs currently in various stages of clinical development specifically for the treatment of PWS and hyperphagia, but may also include drugs approved for other indications, such as appetite suppression.
DCCR contains diazoxide choline, a potent ATP-sensitive potassium (K ATP ) channel activator. The K ATP channels play a central role in the regulation of a number of physiological processes which may otherwise be dysregulated, contributing to the pathophysiology of several diseases.
VYKAT XR contains diazoxide choline, a potent ATP-sensitive potassium (K ATP ) channel activator. The K ATP channels play a central role in the regulation of a number of physiological processes which may otherwise be dysregulated, contributing to the pathophysiology of several diseases.
The gradual release and absorption of diazoxide achieved using DCCR results in consistent intraday circulating drug levels potentially reducing the adverse events often associated with transiently high circulating drug levels and providing efficacy at lower diazoxide-equivalent doses.
The gradual release and absorption of diazoxide achieved using VYKAT XR results in consistent intraday circulating drug levels potentially reducing the adverse events often associated with transiently high circulating drug levels and providing efficacy at lower diazoxide-equivalent doses.
The quantities that we store are based on our business needs and take into account scenarios for demand, production lead times, potential supply interruptions and shelf life for our API and drug product. We believe that our current manufacturing network has the appropriate capacity to produce sufficient commercial quantities of DCCR.
The quantities that we store are based on our business needs and take into account scenarios for demand, production lead times, potential supply interruptions and shelf life for our API and drug product. We believe that our current manufacturing network has the appropriate capacity to produce sufficient commercial quantities of VYKAT XR for the foreseeable future.
Diazoxide Choline Extended-Release Tablets DCCR consists of the active ingredient diazoxide choline, a choline salt of diazoxide, which is a benzothiadiazine. Once solubilized from the formulation, diazoxide choline is rapidly converted to diazoxide prior to absorption.
VYKAT XR (Diazoxide Choline) Extended-Release Tablets VYKAT XR consists of the active ingredient diazoxide choline, a choline salt of diazoxide, which is a benzothiadiazine. Once solubilized from the formulation, diazoxide choline is rapidly converted to diazoxide prior to absorption.
Currently, the only approved products for patients with PWS in the U.S. are Genotropin® (somatropin), and Omnitrope® (somatropin) which are approved only for growth failure due to PWS. There are no approved products to address PWS-associated hyperphagia and behaviors, or for any other abnormalities associated with the disease.
Currently, the only other approved products for patients with PWS in the U.S. are forms of somatropin, which are approved only for growth failure due to PWS. There are no other approved products to address PWS-associated hyperphagia and behaviors, or for any other abnormalities associated with the disease.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements for approved drugs, may result in, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements for approved drugs, may result in, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties. 8 The FDA strictly regulates the marketing, labeling, advertising and promotion of drug and device products that are placed on the market.
Employees and Human Capital As of December 31, 2024, we had 92 full-time employees. None of our employees is represented by a labor union or covered by collective bargaining agreements.
Employees and Human Capital As of December 31, 2025, we had 182 full-time employees. None of our employees is represented by a labor union or covered by collective bargaining agreements.
However, to our knowledge, there are a number of therapeutic products at various stages of clinical development for the treatment of PWS, including for hyperphagia, by Acadia Pharmaceuticals, Aardvark Therapeutics, Consynance, Neuren Pharmaceuticals, OT4B and Rhythm Pharmaceuticals.
However, to our knowledge, there are a number of therapeutic products at various stages of clinical development for the treatment of PWS, including for hyperphagia, by Aardvark Therapeutics, Bright Minds Biosciences, Consynance, Harmony Biosciences, Neuren Pharmaceuticals, OT4B, Palobiofarma and Rhythm Pharmaceuticals.
Numerous federal and state agencies enforce the antifraud and abuse laws. In addition, private insurers may also bring private actions. In some circumstances, private whistleblowers are authorized to bring fraud suits on behalf of the government against providers and are entitled to receive a portion of any final recovery. Federal and State “Self-Referral” and “Anti-Kickback” Restrictions Self-Referral law .
Numerous federal and state agencies enforce the antifraud and abuse laws. In addition, private insurers may also bring private actions. In some circumstances, private whistleblowers are authorized to bring fraud suits on behalf of the government against providers and are entitled to receive a portion of any final recovery.
The PWS care teams with the largest volumes are often in university-associated hospitals or children’s hospitals and a portion of adults with PWS live in residential group home settings. Due to these factors, we believe we are positioned to launch DCCR following approval in the U.S. through our commercial organization in a targeted and efficient manner.
The PWS care teams with the largest volumes are often in university-associated hospitals or children’s hospitals and a portion of adults with PWS live in residential group home settings. Due to these factors, we believe we have positioned ourselves to launch VYKAT XR through our commercial organization in a targeted and efficient manner.
Competition The biotechnology and pharmaceutical industries are highly competitive and characterized by rapid technological change. We face competition in each of the aspects of our business from other pharmaceutical and biotechnology companies, as well as academic research institutions, clinical reference laboratories and governmental agencies that are pursuing research or development activities similar to ours.
We face competition in each of the aspects of our business from other pharmaceutical and biotechnology companies, as well as academic research institutions, clinical reference laboratories and governmental agencies that are pursuing research or development activities similar to ours.
While physicians may prescribe drugs and devices for off label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. Noncompliance may result in warning letters, fines or additional restrictions on subsequent advertising and promotional materials.
The Federal Trade Commission (FTC) also regulates the promotion and advertising of consumer products. While physicians may prescribe drugs and devices for off label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. Noncompliance may result in warning letters, fines or additional restrictions on subsequent advertising and promotional materials.
We believe that our ability to successfully compete with these potentially competitive drug candidates will depend on, among other things: • the efficacy and safety of DCCR; • our ability to obtain regulatory approvals for DCCR and complete any post-marketing requirements (PMRs); • the timing and scope of regulatory approvals of DCCR; • our ability to obtain product acceptance by physicians and other healthcare providers and secure coverage and adequate reimbursement for DCCR use in approved indications; • our ability, and the ability of our collaborators, to manufacture and sell commercial quantities of DCCR; • the skills of our employees and our ability to recruit and retain skilled employees; • protection of our intellectual property; and • the availability of substantial capital resources to fund commercialization activities.
We believe that our ability to successfully compete with these potentially competitive drug candidates will depend on, among other things: • the perceived efficacy and safety of VYKAT XR; • our ability to obtain product acceptance by physicians and other healthcare providers and secure coverage and adequate reimbursement for VYKAT XR; • our ability, and the ability of our collaborators, to manufacture and sell commercial quantities of VYKAT XR; • the timing and scope of regulatory approvals of VYKAT XR outside of the United States; • the skills of our employees and our ability to recruit and retain skilled employees; • protection of our intellectual property; and 4 • the availability of substantial capital resources to fund commercialization activities.
Currently, the only approved treatment related to PWS is growth hormone which addresses the short stature associated with PWS but has no effect on hyperphagia.
Currently, the only other approved treatment in the U.S. related to PWS is growth hormone which addresses the growth failure associated with PWS but has no effect on hyperphagia.
The issued patents and pending patent applications include protection of compositions, methods of manufacturing, pharmaceutical formulations, and methods of treating aspects of PWS and Smith-Magenis syndrome (SMS). Government Regulation - Pharmaceuticals Our operations and activities are subject to extensive regulation by government authorities in the U.S. and in other countries in which we elect to develop and/or commercialize our products.
Our portfolio covers various aspects of our core technologies including compositions, methods of manufacturing, pharmaceutical formulations, and methods of treating aspects of PWS and Smith-Magenis syndrome (SMS). Government Regulation - Pharmaceuticals Our operations and activities are subject to extensive regulation by government authorities in the U.S. and in other countries in which we elect to develop and/or commercialize our products.
Some older adolescents and many adults reach a stage at which they can no longer be effectively managed in the home and therefore transition to institutional care. Unmet Medical Needs in PWS The target indication for DCCR is the treatment of patients with PWS ages 4 years and older who have hyperphagia.
Some older adolescents and many adults reach a stage at which they can no longer be effectively managed in the home and therefore transition to institutional care. Unmet Medical Needs in PWS On March 26, 2025, VYKAT XR was approved by the FDA for the treatment of patients with PWS ages 4 years and older who have hyperphagia.
The reach of the Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act of 2010 (PPACA), which, among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes, effective March 23, 2010.
The term “remuneration” has been broadly interpreted to include anything of value. The reach of the Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act of 2010 (PPACA), which, among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes.
Manufacturing and Product Supply We do not own or operate manufacturing or distribution facilities or resources for commercial production and distribution of DCCR. Instead, we have multiple contractual agreements in place with third-party contract manufacturing organizations (CMOs) who, on our behalf, have manufactured clinical supplies of our drug candidates, and will manufacture commercial supplies of DCCR for the foreseeable future.
Manufacturing and Product Supply We do not own or operate manufacturing or distribution facilities or resources for production and distribution of VYKAT XR. Instead, we have multiple contractual agreements in place with third-party organizations who, on our behalf, manufacture, store and distribute commercial supplies of VYKAT XR.
Sales and Marketing The majority of the PWS population in the U.S. is diagnosed shortly after birth through an affordable genetic test, and the patient, as well as their treating physician, are captured in a commercially available reimbursement claims database.
VYKAT XR is the first treatment for hyperphagia in patients with PWS to reach the market in the U.S. and may therefore be likely to be used in a large proportion of patients. 3 Sales and Marketing The majority of the PWS population in the U.S. is diagnosed shortly after birth through an affordable genetic test, and the patient, as well as their treating physician, are captured in a commercially available reimbursement claims database.
Based on an analysis of claims data (Medicare, Medicaid, pharmacy and medical benefit claims), we have identified approximately 10,000 people who have received a PWS-specific treatment or had a PWS-specific IDC10 claim in 2022 or 2023.
Market opportunity An estimated 300,000 to 400,000 individuals worldwide have PWS with a birth incidence ranging from 1 in 15,000 to 1 in 25,000. Based on an analysis of claims data (Medicare, Medicaid, pharmacy and medical benefit claims), we have identified approximately 10,000 people who have received a PWS-specific treatment or had a PWS-specific ICD10 claim in 2022 or 2023.
If the drug candidate is approved, the FDA may also require additional studies, or PMRs. These include studies to explore scientific questions to further characterize safety or efficacy of the drug candidate.
These include studies to explore scientific questions to further characterize safety or efficacy of the drug candidate.
For example, we could be subject to penalties of $14,308 to $28,618 per false claim, adjusted each year for inflation, and each use of our product could potentially be part of a different claim submitted to the government.
For example, civil penalties of up to $25,595 may be imposed per violation, adjusted each year for inflation, and each use of our product could 11 potentially be part of a different claim submitted to the government.
We may choose, or FDA may require us, to delay or suspend our clinical trials at any time if it appears that the patients are being exposed to an unacceptable health risk or if the drug candidate does not appear to have sufficient treatment benefit. 8 FDA Approval Process When we believe that the data from our clinical trials show an adequate level of safety and efficacy, we would intend to submit an application to market the drug for a particular use, an NDA with the FDA.
We may choose, or FDA may require us, to delay or suspend our clinical trials at any time if it appears that the patients are being exposed to an unacceptable health risk or if the drug candidate does not appear to have sufficient treatment benefit.
The FDA, other heath authority, the IRB/IEC, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the IRB/IEC’s requirements, or may impose other conditions.
The FDA, other heath authority, the IRB/IEC, or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk or for failure to comply with the IRB/IEC’s requirements, or may impose other conditions. 6 Clinical trials involve the administration of an investigational drug to human subjects under the supervision of qualified investigators in accordance with good clinical practices (GCP) requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial.
The HIPAA standards apply to three types of organizations, or “Covered Entities”: health plans, healthcare clearing houses, and healthcare providers which conduct certain healthcare transactions electronically. Covered Entities and their Business Associates must have in place administrative, physical, and technical standards to guard against the misuse of individually identifiable health information.
Covered Entities and their Business Associates must have in place administrative, physical, and technical standards to guard against the misuse of individually identifiable health information.
In addition, violations of the federal physician self-referral laws, such as the Stark laws discussed below, may also violate false claims laws. Liability under the False Claims Act can result in treble damages and imposition of penalties.
Violations under the Anti-Kickback Statute, discussed further below, can implicate violations under the False Claims Act. Liability under the False Claims Act can result in treble damages and imposition of penalties.
The E.U. also has requirements for approval of manufacturing facilities for all products that are approved for sale by the European regulatory authorities. 10 Additional Government Regulations HIPAA and Other Privacy Laws Health Insurance Portability and Accountability Act (HIPAA), established for the first-time comprehensive protection for the privacy and security of health information.
The E.U. also has requirements for approval of manufacturing facilities for all products that are approved for sale by the European regulatory authorities.
The specialty pharmacy will also serve as our point of contact for inbound health care provider and patient inquiries, prescription processing, insurance investigation and patient on-boarding. 5 We believe a comparable concentration of care exists in Europe and other major markets which may allow us to market DCCR without a partner; however, we may identify commercialization partners for DCCR for many markets.
We believe a comparable concentration of care exists in Europe, Japan and other major markets which may allow us to market VYKAT XR without a partner; however, we may identify commercialization partners for VYKAT XR for many markets. The final decisions on commercialization strategy outside the U.S. will be made at a later date.
Similar regulations and requirements are in effect in other countries. Intellectual Property DCCR Patent Portfolio Our patent portfolio consists of issued U.S. patents and pending U.S. applications. The 20-year expiration dates of our issued U.S. patents are between 2025 to 2035.
We have also entered into a non-exclusive agreement with a specialty pharmacy who purchases and dispenses VYKAT XR to patients pursuant to prescriptions provided by health care providers. Intellectual Property DCCR Patent Portfolio Our patent portfolio consists of issued U.S. patents and pending U.S. applications. The 20-year expiration dates of our issued U.S. patents are between 2026 to 2035.
ITEM 1. B USINESS Company Overview We are a biopharmaceutical company developing novel therapeutics for the treatment of rare diseases. We have submitted a new drug application (NDA) to the U.S.
ITEM 1. B USINESS Company Overview We are a biopharmaceutical company developing novel therapeutics for the treatment of rare diseases. On March 26, 2025, we announced that our lead product candidate, VYKAT TM XR (diazoxide choline) extended-release tablets, formerly known as DCCR, had been approved by the U.S. Food and Drug Administration (FDA).
We plan to utilize a third party logistics provider with multiple locations to provide shipping and warehousing services for our commercial supply of DCCR. We have also entered into a non-exclusive agreement with a specialty pharmacy who will purchase our labeled drug product and dispense DCCR to patients pursuant to prescriptions provided by health care providers.
Similar regulations and requirements are in effect in other countries. We utilize a third party logistics provider (3PL) with multiple locations to provide shipping and warehousing services for our commercial supply of VYKAT XR.
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Food and Drug Administration (FDA) for our lead product candidate, diazoxide choline extended-release tablets (DCCR) for the treatment of Prader-Willi syndrome (PWS) in individuals four years and older who have hyperphagia.
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VYKAT XR is indicated to treat hyperphagia in adults and pediatric patients four years of age and older with Prader-Willi syndrome (PWS).
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On August 27, 2024, we announced that the FDA had accepted the NDA for filing, designated the application for priority review and set a Prescription Drug User Fee Act (PDUFA) target action date of December 27, 2024.
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On April 14, 2025, we announced that prescriptions of VYKAT XR had been delivered to the first individuals living with PWS who had been prescribed the medication and began recognizing revenue from the sales of VYKAT XR during the three months ended June 30, 2025. We are incorporated in the State of Delaware and headquartered in Redwood City, California.
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On November 26, 2024, we announced that the FDA had extended the review period for our NDA and set a new PDUFA target action date of March 27, 2025. DCCR previously received Breakthrough Therapy and Fast-Track designations in the United States (U.S.) and Orphan Drug designations in the U.S. and European Union (E.U.).
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We have a field force of approximately 65 individuals, including approximately 28 rare disease specialists, 16 clinical nurse educators, 6 regional access directors and 15 remote or hybrid lead generation specialists.
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Clinical Trials of DCCR for PWS A Phase 2 clinical trial (Study PC025) was a single-center, randomized withdrawal study to evaluate the safety and preliminary efficacy of DCCR in the treatment of PWS subjects. This study enrolled 13 overweight and obese subjects with genetically-confirmed PWS who were between the ages of 11 and 21.
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Pricing VYKAT XR is sold based on weight-based pricing, with a list price of $6.0976 per milligram. It is our philosophy that those in need of VYKAT XR have access to VYKAT XR.
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This study included 10-week open-label treatment phase was followed by randomized double-blind, placebo-controlled, withdrawal phase. Key efficacy results included nominally significant reductions from baseline to the end of the open-label treatment phase in mean hyperphagia score, number of subjects reporting one or more aggressive and destructive 3 behaviors, mean body fat mass, LDL cholesterol and non-HDL cholesterol.
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We offer several programs through SOLENO ONE TM to provide patients and caregivers education and resources including financial assistance in certain situations, consequently any actual out-of-pocket costs vary significantly with insurance. Competition The biotechnology and pharmaceutical industries are highly competitive and characterized by rapid technological change.
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There were also nominally significant mean increases in lean body mass and lean body mass / fat mass ratio that were associated with a nominally significant reduction in mean waist circumference, consistent with the loss of visceral fat.
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FDA Approval Process When we believe that the data from our clinical trials show an adequate level of safety and efficacy, we would intend to submit an application to market the drug for a particular use, an NDA with the FDA.
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Responders were randomized in a 1:1 ratio either to continue on active treatment at the dose they were treated with, or to the placebo equivalent of that dose for an additional 4 weeks. Of the 13 subjects who enrolled, 11 completed the open-label phase and all were designated as responders; the remaining two subjects had discontinued prematurely.
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Further, FDA’s “real-time” release of newly issued Complete Response Letters associated with withdrawn or abandoned applications, if applicable to any of our product candidates, can materially impact our business and competitive advantage. If the drug candidate is approved, the FDA may also require additional studies, or PMRs.
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DCCR was subsequently evaluated in a Phase 3 study (C601 or DESTINY PWS), a 13-week randomized, double-blind placebo-controlled study, which completed enrollment in January 2020, with 127 randomized participants at 29 sites in the U.S. and United Kingdom (U.K.).
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The Consolidated Appropriations Act of 2026, signed into law in February 2026, codified this longstanding FDA interpretation of the Orphan Drug Act, allowing the FDA to approve multiple versions of the same orphan drug for different subindications and subpopulations.
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Participants who completed DESTINY PWS and sought continued treatment with DCCR were eligible to receive DCCR in a long-term open-label safety extension study (C602). Top line results from DESTINY PWS were announced in June 2020.
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Additional Government Regulations Pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business, which may constrain the financial arrangements and relationships through which we conduct research, as well as sell, market and distribute any products for which we obtain marketing approval.
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Although the trial did not meet its primary endpoint of change from baseline in hyperphagia, significant improvements were observed in two of three key secondary endpoints. In February 2021, we announced analysis limited to data collected before the onset of the COVID-19 pandemic.
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Such laws include, without limitation, federal and state anti-kickback, fraud and abuse, false claims, data privacy and security and physician and other health care provider transparency laws and regulations.
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The analysis of the data through March 1, 2020 showed statistical significance in the primary, all key secondary, and several other efficacy endpoints.
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If our significant operations are found to be in violation of any of such laws or any other governmental regulations that apply, they may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and imprisonment.
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In September 2021, we announced interim one-year data from the C602 open-label extension (OLE) period showing statistically significant reduction from pre-DCCR baseline in mean hyperphagia scores and all other PWS behavioral parameters and statistically significant improvements compared to natural history of PWS from the PATH for PWS Study (PATH) over a one-year treatment period.
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Coverage and Reimbursement Sales of any approved products depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.
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The PATH study was sponsored by the Foundation for Prader-Willi Research (FPWR) to advance the understanding of the natural history in individuals with PWS. The FDA recommended that additional controlled data be included in an NDA submission.
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Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a country-by-country and a plan-by-plan basis. These third-party payors are increasingly reducing reimbursements for drugs.
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In March 2022, we submitted an amended protocol that incorporated a randomized withdrawal (RW) period to Study C602 to obtain additional controlled data requested by the FDA and the FDA acknowledged that data from the study had the potential to address its concerns about the efficacy of DCCR.
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In addition, the U.S. government, state legislatures, and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product.
Removed
The RW period of Study C602 was a multi-center, randomized, double-blind, placebo-controlled study of DCCR in 77 patients with PWS at 17 sites in the U.S. and 5 sites in the U.K. The RW period consisted only of patients previously enrolled in the Study C602 OLE period and did not enroll any new patients.
Added
Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product and also have a material adverse effect on sales. Healthcare Reform The United States government and other governments have shown significant interest in pursuing health care reform.
Removed
We announced the initiation of the RW period for Study C602 in October 2022, and completed enrollment in May 2023. On September 26, 2023, we announced positive statistically significant results for the primary endpoint from the RW period of Study C602. As discussed above, we submitted our NDA for DCCR to the FDA on June 27, 2024.
Added
Any government-adopted reform measures could adversely impact the pricing of health care products and services in the United States or internationally and the amount of reimbursement available from governmental agencies or other third-party payors.
Removed
On August 27, 2024, we announced that the FDA had accepted the NDA for filing and priority review and set a PDUFA target action date of December 27, 2024. On November 26, 2024, we announced that the FDA had extended the review period for our NDA and set a new PDUFA target action date of March 27, 2025.
Added
For example, the Patient Protection and Affordable Care Act (the ACA) which was enacted in the United States in 2010, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affected the pharmaceutical industry.
Removed
Safety of DCCR in the Treatment of PWS Across the combined C601 (DESTINY-PWS), and C602 long-term OLE studies (which included DCCR treatment durations of up to ~4.5 years), 98.4% of participants reported treatment emergent adverse events (TEAEs). Most were grade 1 or 2 (75.2%), with no grade 4 or higher events.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

197 edited+75 added−116 removed252 unchanged
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following: • our ability to enroll patients in clinical trials and the timing of enrollment; • the design, timing and outcomes of clinical trials; • any delays in regulatory review or approval in the U.S. or globally, of any of our planned products; • the cost and risk of initiating sales and marketing activities; • the timing and cost of, and level of investment in, research and development activities relating to our planned products, which will change from time to time; • the cost of manufacturing our products may vary depending on FDA and other regulatory requirements, the quantity of production and the terms of our agreements with manufacturers; • expenditures that we will or may incur to acquire or develop additional planned products and technologies; • changes in the competitive landscape of our industry, including consolidation among our competitors or potential partners; • the level of demand for our products may fluctuate significantly and be difficult to predict; • the risk/benefit profile, cost and reimbursement policies with respect to our future products, if approved, and existing and potential future drugs that compete with our planned products; • competition from existing and potential future offerings that compete with our products; • our ability to commercialize our products inside and outside of the U.S., either independently or working with third parties; • our ability to establish and maintain collaborations, licensing or other arrangements; • our ability to adequately support future growth; • potential unforeseen business disruptions that increase our costs or expenses; • future accounting pronouncements or changes in our accounting policies; and • the changing and volatile global economic environment.
Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following: • the cost and risk of initiating sales and marketing activities; • the cost of manufacturing our products may vary depending on FDA and other regulatory requirements, the quantity of production and the terms of our agreements with manufacturers; • expenditures that we will or may incur to acquire or develop additional planned products and technologies; • changes in the competitive landscape of our industry, including consolidation among our competitors or potential partners; • the level of demand for our products may fluctuate significantly and be difficult to predict; • the risk/benefit profile, cost and reimbursement policies with respect to our future products, if approved, and existing and potential future drugs that compete with our planned products; • competition from existing and potential future offerings that compete with our products; • our ability to commercialize our products inside and outside of the U.S., either independently or working with third parties; • our ability to enroll patients in clinical trials and the timing of enrollment; • the design, timing and outcomes of clinical trials; • any delays in regulatory review or approval in the U.S. or globally, of any of our planned products; • the timing and cost of, and level of investment in, research and development activities relating to our planned products, which will change from time to time; • our ability to establish and maintain collaborations, licensing or other arrangements; • our ability to adequately support future growth; • potential unforeseen business disruptions that increase our costs or expenses; • future accounting pronouncements or changes in our accounting policies; and • the changing and volatile global economic environment.
The regulations that may affect our ability to operate include, without limitation: • the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; 49 • indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; • the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government, and which may apply to entities like us which provide coding and billing advice to customers; • federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the HHS information related to physician payments and other transfers of value and physician ownership and investment interests; • Health Insurance Portability and Accountability Act (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act), which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; and • state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers.
The regulations that may affect our ability to operate include, without limitation: • the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; • indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs; • the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government, and which may apply to entities like us which provide coding and billing advice to customers; • federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; • the federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the HHS information related to physician payments and other transfers of value and physician ownership and investment interests; • Health Insurance Portability and Accountability Act (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH Act), which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information; and • state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers.
Among others, these provisions include the following: • our Board is divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; • our Board has the right to elect directors to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director, which will prevent stockholders from being able to fill vacancies on our Board; • our stockholders are not able to act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock cannot take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by our Board, the chairman of our board, the chief executive officer or the president; • our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • amendments of our certificate of incorporation and bylaws require the approval of 66 2/3% of our outstanding voting securities; • our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board are able to issue, without stockholder approval, shares of undesignated preferred stock, which makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.
Among others, these provisions include the following: • our Board is divided into three classes with staggered three-year terms which may delay or prevent a change of our management or a change in control; • our Board has the right to elect directors to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director, which will prevent stockholders from being able to fill vacancies on our Board; • our stockholders are not able to act by written consent or call special stockholders’ meetings; as a result, a holder, or holders, controlling a majority of our capital stock cannot take certain actions other than at annual stockholders’ meetings or special stockholders’ meetings called by our Board, the chairman of our board, the chief executive officer or the president; • our certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • amendments of our certificate of incorporation and bylaws require the approval of 66 2/3% of our outstanding voting securities; • our stockholders are required to provide advance notice and additional disclosures in order to nominate individuals for election to our Board or to propose matters that can be acted upon at a stockholders’ 49 meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and • our Board are able to issue, without stockholder approval, shares of undesignated preferred stock, which makes it possible for our Board to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.
Collaborations involving our products are subject to numerous risks, which may include the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to any such collaborations; • collaborators may not pursue development and commercialization of our products, or may elect not to continue or renew efforts based on clinical trail results, changes in their strategic focus for a variety of reasons, potentially including the acquisition of competitive products, availability of funding, and mergers or acquisitions that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a product, repeat or conduct new clinical trials or require a new engineering iteration of a product for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable products; and • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.
Collaborations involving our products are subject to numerous risks, which may include the following: • collaborators have significant discretion in determining the efforts and resources that they will apply to any such collaborations; • collaborators may not pursue development and commercialization of our products, or may elect not to continue or renew efforts based on clinical trial results, changes in their strategic focus for a variety of reasons, potentially including the acquisition of competitive products, availability of funding, and mergers or acquisitions that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a product, repeat or conduct new clinical trials or require a new engineering iteration of a product for clinical testing; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products; • a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable products; and 26 • collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; 46 • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties.
Future growth would impose significant added responsibilities on members of management, including: • managing our clinical trials effectively, which we anticipate being conducted at numerous clinical sites; • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various strategic partners, suppliers and other third parties; • improving our managerial, development, operational and finance reporting systems and procedures; and • expanding our facilities.
Future growth would impose significant added responsibilities on members of management, including: • identifying, recruiting, maintaining, motivating and integrating additional employees with the expertise and experience we will require; • managing our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors and other third parties; • managing additional relationships with various strategic partners, distributors, licensors, suppliers and other third parties; • improving our managerial, development, operational and finance reporting systems and procedures; • managing our clinical trials effectively, which we anticipate being conducted at numerous clinical sites; and • expanding our facilities.
The PPACA, among other things: • could result in the imposition of injunctions; • requires collection of rebates for drugs paid by Medicaid managed care organizations; and • requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 50% point-of-sale discounts off negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
The PPACA, among other things: 42 • could result in the imposition of injunctions; • requires collection of rebates for drugs paid by Medicaid managed care organizations; and • requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 50% point-of-sale discounts off negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
We may face claims and proceedings by private parties, and claims, investigations and other proceedings by governmental authorities, relating to allegations that our business practices do not comply with statutes, regulations or case law involving applicable fraud and abuse, privacy or data protection, or other healthcare laws and regulations, and it is possible that courts or governmental authorities may conclude that we have not complied with 50 them, or that we may find it necessary or appropriate to settle any such claims or other proceedings.
We may face claims and proceedings by private parties, and claims, investigations and other proceedings by governmental authorities, relating to allegations that our business practices do not comply with statutes, regulations or case law involving applicable fraud and abuse, privacy or data protection, or other healthcare laws and regulations, and it is possible that courts or governmental authorities may conclude that we have not complied with them, or that we may find it necessary or appropriate to settle any such claims or other proceedings.
In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm in connection with Section 404, may reveal deficiencies in our internal controls over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement.
In addition, any testing by us conducted in connection with Section 404 or any subsequent testing by our independent registered public accounting firm in connection with Section 404, may reveal deficiencies in our internal controls over financial reporting that are deemed to be significant deficiencies or material weaknesses or that may require prospective or retroactive changes 28 to our consolidated financial statements or identify other areas for further attention or improvement.
In addition, we may be subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
In addition, we may be 31 subject to claims that we are infringing other intellectual property rights, such as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures, could not result in perceived benefits that were contemplated upon entering into the transaction, and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations, solvency and financial results.
Any such transaction may require us to incur non-recurring or other charges, may increase our near and long-term expenditures, could not result in perceived benefits that were contemplated upon entering into the transaction, and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations, solvency 17 and financial results.
Additionally, our results of operations could be adversely affected by general conditions in the global economy and financial markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our products and services our ability to raise additional capital when needed on favorable terms, if at all.
Additionally, our results of operations could be adversely affected by general conditions in the global economy and financial markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for our products and our ability to raise additional capital when needed on favorable terms, if at all.
As a result of the difficulty in locating qualified new management, the loss or incapacity of existing members of our executive management team could adversely affect our operations. If we were to lose one or more of these key employees, we could experience difficulties in finding qualified successors, competing effectively, developing our technologies and implementing our business strategy.
As a result of the difficulty in locating qualified new management, the loss or incapacity of existing members of our executive management team could adversely affect our operations. If we were to lose one or more of these key employees, we could experience 25 difficulties in finding qualified successors, competing effectively, developing our technologies and implementing our business strategy.
We cannot predict when or how this situation will change. 41 Intellectual property rights do not necessarily address all potential threats to our competitive advantage. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
We cannot predict when or how this situation will change. Intellectual property rights do not necessarily address all potential threats to our competitive advantage. The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage.
If we do not accurately predict and identify our information technology systems requirements and failures and timely enhance our information technology systems, or if our remediation efforts are not successful, it could result in a material disruption of our business operations, including the loss or unauthorized disclosure of our trade secrets, individuals’ personal information, or other proprietary or sensitive data.
If we do not accurately predict and identify our information technology systems requirements and failures and timely enhance our information technology systems, or if our remediation efforts are not successful, it could result in 50 a material disruption of our business operations, including the loss or unauthorized disclosure of our trade secrets, individuals’ personal information, or other proprietary or sensitive data.
For example, these transactions may entail numerous operational and financial risks, including: 20 • exposure to unknown and contingent liabilities; • disruption of our business and diversion of our management’s time and attention in order to develop acquired products, product candidates or technologies; • incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions; • higher than expected acquisition and integration costs; • the timing and likelihood of payment of milestones or royalties; • write-downs of assets or goodwill or impairment charges; • increased operating expenditures, including additional research, development and sales and marketing expenses; • increased amortization expenses; • difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; and • impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership.
For example, these transactions may entail numerous operational and financial risks, including: • exposure to unknown and contingent liabilities; • disruption of our business and diversion of our management’s time and attention in order to acquire and develop acquired products, product candidates or technologies; • incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions; • higher than expected acquisition and integration costs; • the timing and likelihood of payment of milestones or royalties; • write-downs of assets or goodwill or impairment charges; • increased operating expenditures, including additional research, development and sales and marketing expenses; • increased amortization expenses; • difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; and • impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership.
For example, the Sarbanes-Oxley Act (SOX) and the rules of the SEC and national securities exchanges have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives.
For example, the Sarbanes-Oxley Act (SOX) and the rules of the SEC and national securities exchanges have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls. Our management 27 and other personnel need to devote a substantial amount of time to these compliance initiatives.
The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of health care may adversely affect: • our ability to set a price that we believe is fair for our products; • our ability to generate revenue and achieve or maintain profitability; and • the availability of capital.
The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of health care may adversely affect: • our ability to set a price that we believe is fair for our products; • our ability to generate revenue and maintain profitability; and • the availability of capital.
We 35 base our estimates on historical experience and estimates and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.
We base our estimates on historical experience and estimates and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources.
Our business also could be harmed if a prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Litigation or other proceedings may fail and, even if successful, may result in substantial 40 costs and distract our management and other employees.
Our business also could be harmed if a prevailing party does not offer us a license on commercially reasonable terms, if any license is offered at all. Litigation or other proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees.
Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.
Patents that remain under the jurisdiction of the UPC 36 will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.
Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees. Risks related to government regulation The regulatory approval process is expensive, time consuming and uncertain, and we may not be successful in obtaining approvals for our planned products.
Even if we are successful, litigation could result in substantial cost and be a distraction to our management and other employees. Risks related to government regulation 37 The regulatory approval process is expensive, time consuming and uncertain, and we may not be successful in obtaining approvals for our planned products.
The stock market in general, and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their 51 common stock at or above the purchase price.
The stock market in general, and the market for biotechnology companies in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the purchase price.
An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without 32 infringing third-party patent rights.
If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
If any of the physicians or other providers or entities with whom we do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational 34 and financial systems, procedures and controls to manage our business effectively.
Our ability to successfully implement our business plan and comply with Section 404 requires us to be able to prepare timely and accurate financial statements. We expect that we will need to continue to improve existing, and implement new operational and financial systems, procedures and controls to manage our business effectively.
As a result, more companies may bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, which could undermine the FDA’s authority, lead to uncertainties in the industry, and disrupt the FDA’s normal operations, which could delay the FDA’s review of our marketing applications.
As a result, more companies may bring lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, which could undermine the FDA’s authority, lead to uncertainties in the industry, and disrupt the FDA’s normal operations, which could delay the FDA’s review of our future marketing applications.
In the future we may identify additional material weaknesses, fail to remediate our current material weakness or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
In the future we may identify material weaknesses, fail to remediate our current material weakness or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.
For example, our Redwood City facilities are located near earthquake fault zones and are vulnerable to damage from earthquakes as well as other types of disasters, including fires, wildfires, floods, power loss, communications failures and similar events.
For example, our Redwood City facilities are located near earthquake fault 51 zones and are vulnerable to damage from earthquakes as well as other types of disasters, including fires, wildfires, floods, power loss, communications failures and similar events.
The process of publication in leading medical journals is subject to a peer review process and peer reviewers may not consider the results of our trials sufficiently novel or worthy of publication. Failure to have our trials published in peer-reviewed journals may limit the adoption of our products.
The process of publication in leading medical journals is subject to a peer review process and peer reviewers may not consider the results of our studies sufficiently novel or worthy of publication. Failure to have our trials published in peer-reviewed journals may limit the adoption of our products.
More generally, laws and regulations governing privacy and data protection exist in many other countries around the world, and these laws (which are evolving and expanding) create complicated and potentially inconsistent obligations that may impact our business.
More 46 generally, laws and regulations governing privacy and data protection exist in many other countries around the world, and these laws (which are evolving and expanding) create complicated and potentially inconsistent obligations that may impact our business.
In addition, we are subject to extensive and ongoing regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products.
In addition, we are subject to extensive and ongoing regulatory requirements by the FDA, EMA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for our products.
The PPACA contains a number of provisions, including those governing enrollments in federal healthcare programs, 47 reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs.
The PPACA contains a number of provisions, including those governing enrollments in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which will impact existing government healthcare programs and will result in the development of new programs.
We may not be successful in our efforts to establish such a strategic partnership for any future products and programs on terms that are acceptable to us, or at all.
We may not be successful in our efforts to 21 establish such a strategic partnership for any future products and programs on terms that are acceptable to us, or at all.
Efforts to ensure that our future business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs and may require us to undertake or implement additional policies or measures.
Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations could involve substantial costs and may require us to undertake or implement additional policies or measures.
A variety of risks associated with international operations could materially adversely affect our business, including: • different regulatory requirements for drug approvals in foreign countries; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers, trade restrictions, export or import sanctions, and regulatory requirements; • economic weakness, including inflation or political instability in particular foreign economies and markets; 33 • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the U.S.; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, including the outbreak of hostilities in the Ukraine, the Middle East, or natural disasters including earthquakes, typhoons, floods and fires.
A variety of risks associated with international operations could materially adversely affect our business, including: • different regulatory requirements for drug approvals in foreign countries; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade wars, trade barriers, trade restrictions, export or import sanctions, and regulatory requirements; • economic weakness, including inflation or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country; • workforce uncertainty in countries where labor unrest is more common than in the U.S.; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, including the outbreak of hostilities in the Ukraine, the Middle East, outbreaks of disease, or natural disasters including earthquakes, typhoons, floods and fires.
Third-party payers often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. 29 Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payers for new products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Third-party payers often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. 23 Our inability to promptly obtain coverage and profitable payment rates from both government funded and private payers for new products that we develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Clinical trial activities in the European Economic Area (EEA), for example, are governed by the E.U. General Data Protection Regulation (GDPR). We may need to take additional steps, such as new contractual negotiations or modifications to our policies or practices relating to cross-border transfers of personal data, to comply with these restrictions and obligations.
Our activities in the European Economic Area (EEA), for example, are governed by the E.U. General Data Protection Regulation (GDPR). We may need to take additional steps, such as new contractual negotiations or modifications to our policies or practices relating to cross-border transfers of personal data, to comply with these restrictions and obligations.
If any planned products fail to demonstrate safety and effectiveness in clinical trials or do not gain regulatory approval, our business and results of operations will be materially and adversely harmed. Of the large number of drugs in development, only a small percentage successfully complete the FDA or comparable foreign regulatory approval processes and are commercialized.
If any current or planned products fail to demonstrate safety and effectiveness in clinical trials or do not gain regulatory approval, our business and results of operations will be materially and adversely harmed. Of the large number of drugs in development, only a small percentage successfully complete the FDA, EMA or comparable foreign regulatory approval processes and are commercialized.
The use of a specialty pharmacy involves risks, including, but not limited to, risks that a specialty pharmacy: • does not effectively dispense or support DCCR; • fails to properly administer copay mitigation programs; • does not provide us with accurate or timely information regarding their inventories or the number of patients who are using DCCR; • fails to provide timely and accurate information regarding product adverse events or product complaints; • does not devote the resources necessary to dispense DCCR in a manner that meets patient needs; • is unable to satisfy financial obligations to us or others; • loses the required licenses to distribute DCCR; or • ceases operations.
The use of a specialty pharmacy involves risks, including, but not limited to, risks that a specialty pharmacy: • does not effectively dispense or support VYKAT XR; • fails to properly administer copay mitigation programs; • does not provide us with accurate or timely information regarding their inventories or the number of patients who are using VYKAT XR; • fails to provide timely and accurate information regarding product adverse events or product complaints; • does not devote the resources necessary to dispense VYKAT XR in a manner that meets patient needs; • is unable to satisfy financial obligations to us or others; • loses the required licenses to distribute VYKAT XR; or • ceases operations.
In addition to the risks related to a company launching its first commercial drug described elsewhere in this "Risk Factors" section, the success of a new drug product is inherently difficult to predict and we may not recognize revenue as quickly, consistently or in the amounts that we, analysts or investors anticipate following the launch.
In addition to the risks related to a company launching its first commercial drug described elsewhere in this "Risk Factors" section, the success of a new drug product is inherently difficult to predict and we may not recognize revenue as quickly, consistently or in the amounts that we, analysts or investors anticipate.
Even if we are able to engage partners in commercializing our products, they may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business. The regulations that govern marketing approvals, pricing and reimbursement for new products vary widely from country to country.
Even if we are able to engage partners in commercializing VYKAT XR, they may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, thereby harming our business. The regulations that govern marketing approvals, pricing and reimbursement for new products vary widely from country to country.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a 38 substantial diversion of employee resources from our business.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
If there is an interruption in supply of our raw materials from these sole source suppliers, for any reason, there can be no assurance that we will be able to obtain adequate quantities of the raw materials within a reasonable time or at commercially reasonable prices.
If there 29 is an interruption in supply from these sole source suppliers, for any reason, there can be no assurance that we will be able to obtain adequate quantities of the raw materials within a reasonable time or at commercially reasonable prices.
Applications for our product candidates could fail to receive regulatory approval for many reasons, including the following: • the FDA or other comparable foreign regulatory authorities may disagree with the design, implementation or results of our clinical trials; 44 • the FDA may reject some or all of our data from clinical trials due to concerns related to bias, unblinding before statistical analysis plan is finalized, and/or reliability of data when the analysis is considered exploratory and not planned prospectively; • the FDA may not accept data pooled from different studies, especially if the studies features are not sufficiently similar; • the FDA finds that our data are not adequate to support the safety and efficacy of our product candidate for the proposed indication; • the FDA may disagree with our statistical analysis plan; • the FDA or other comparable foreign regulatory authorities may determine that our product candidates are not safe and effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; • the population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • the FDA or other comparable foreign regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical trials; • our clinical trials may not meet the statutory standard for substantial evidence of effectiveness or may fail to demonstrate statistical significance on the primary endpoint; • we may be unable to demonstrate to the FDA or other comparable foreign regulatory authorities that our product candidate’s risk-benefit ratio for its proposed indication is acceptable; • changes in priorities, reduction in staffing, large staff turnover or inadequate funding for the FDA or comparable foreign regulatory authorities could hinder those agencies from performing normal business functions and increase the time necessary for regulatory submissions, such as our NDA for DCCR, to be reviewed and approved, or decrease the likelihood of an approval; • the FDA or other comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and • the approval policies or regulations of the FDA or other comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval or resulting in delays in our regulatory approval.
Applications for our product candidates could fail to receive regulatory approval for many reasons, including the following: • regulatory authorities may disagree with the design, implementation or results of our clinical trials; • regulatory authorities may reject some or all of our data from clinical trials due to concerns related to bias, unblinding before statistical analysis plan is finalized, and/or reliability of data when the analysis is considered exploratory and not planned prospectively; • regulatory authorities may not accept data pooled from different studies, especially if the studies features are not sufficiently similar; • regulatory authorities finds that our data are not adequate to support the safety and efficacy of our product candidate for the proposed indication; • regulatory authorities may disagree with our statistical analysis plans; • regulatory authorities may determine that our product candidates are not safe and effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; • population studied in the clinical trial may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval; • regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical trials; • our clinical trials may not meet the statutory standard for substantial evidence of effectiveness or may fail to demonstrate statistical significance on the primary endpoint; • we may be unable to demonstrate to regulatory authorities that our product candidate’s risk-benefit ratio for its proposed indication is acceptable; • changes in priorities, reduction in staffing, large staff turnover or inadequate funding for the regulatory authorities could hinder those agencies from performing normal business functions and increase the time necessary for regulatory submissions to be reviewed and approved, or decrease the likelihood of an approval; • regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and • the approval policies or regulations of regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval or resulting in delays in our regulatory approval.
Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.
Even though we do not, and will not, control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payers, certain U.S. federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business.
Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture drug products, and these facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations.
Further, regulatory authorities must approve these manufacturing facilities before they can be used to manufacture drug products, and these facilities are subject to continual review and periodic inspections by the FDA, EMA and other regulatory authorities for compliance with cGMP and foreign regulations.
Such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign governments, may result in any materials that we import to the U.S. from countries subject to tariffs becoming more expensive or increase the price of DCCR in other countries, which could have a material adverse impact on our business, financial condition and results of operations.
Such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign governments, may result in any materials that we import to the U.S. from countries subject to tariffs becoming more expensive or increase the price of VYKAT XR in other countries, which could have a material adverse impact on our business, financial condition and results of operations.
We may form strategic alliances, create joint ventures or collaborations, or enter into licensing agreements with third parties that we believe will more effectively provide resources to develop and commercialize DCCR. If we attempt to seek appropriate strategic partners, we may face significant competition, and the negotiation process to secure favorable terms is time-consuming and complex.
We may form strategic alliances, create joint ventures or collaborations, or enter into licensing agreements with third parties that we believe will more effectively provide resources to develop and commercialize VYKAT XR. If we attempt to seek appropriate strategic partners, we may face significant competition, and the negotiation process to secure favorable terms is time-consuming and complex.
As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must 19 recognize may vary significantly.
As the variables that we use as a basis for valuing these awards change over 16 time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly.
In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively and implement a continuous reporting and improvement process for internal control over financial reporting.
We will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a plan to assess and document the adequacy of our internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are designed and operating effectively and implement a continuous reporting and improvement process for internal control over financial reporting.
In addition, we are required to comply with cGMP regulations regarding the manufacture of our drugs, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation.
In addition, we are required to comply with cGMP and foreign regulations regarding the manufacture of our drugs, which include requirements related to quality control and quality assurance as well as the corresponding 40 maintenance of records and documentation.
We may not be able to file for regulatory approvals and even if we file we may not receive necessary approvals to commercialize our products in any market. Healthcare reform measures could hinder or prevent our planned products’ commercial success.
We may not be able to file for regulatory approvals and even if we file we may not receive necessary approvals to commercialize our products in any market. Healthcare reform measures could hinder or prevent our commercial success.
The results of our current and future clinical trials may not meet the FDA, the European Medicines Agency (EMA), or other regulatory agencies’ requirements to approve DCCR for marketing under any specific indication, and these regulatory agencies may otherwise determine that our third parties’ manufacturing processes, validation, and/ or facilities are insufficient to support approval.
The results of our current and future clinical trials may not meet the European Medicines Agency (EMA) or other regulatory agencies’ requirements to approve our products for marketing under any specific indication, and these regulatory agencies may otherwise determine that our third parties’ manufacturing processes, validation, and/ or facilities are insufficient to support approval.
The following examples are illustrative: • others may be able to make products that are similar to our current and planned products, but that are not covered by claims in our patents; • the original filers of our patents that we developed or purchased might not have been the first to make the inventions covered by the claims contained in such patents; • we might not have been the first to file patent applications covering an invention; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • pending patent applications may not lead to issued patents; • issued patents may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop or in-license additional proprietary technologies that are patentable; and • the patents of others may have an adverse effect on our business.
The following examples are illustrative: • others may be able to make products that are similar to our current and planned products, but that are not covered by claims in our patents; 35 • the original filers of our patents that we developed or purchased might not have been the first to make the inventions covered by the claims contained in such patents; • we might not have been the first to file patent applications covering an invention; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • pending patent applications may not lead to issued patents; • issued patents may not provide us with any competitive advantages, or may be held invalid, unenforceable or not properly listable in the Orange Book in the U.S., as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop or in-license additional proprietary technologies that are patentable; and • the patents of others may have an adverse effect on our business.
If our or our third-party manufacturer’s capabilities are impaired, we may not be able to manufacture and ship our products in a timely manner, which would adversely impact our business. 56
If our or our third-party manufacturer’s capabilities are impaired, we may not be able to manufacture and ship our products in a timely manner, which would adversely impact our business. 52
Manufacturing or quality assurance difficulties at our contractors and suppliers, the failure or refusal of a supplier or contract manufacturer to supply contracted quantities, or increases in demand on a supplier with constrained capacity could result in delays and disruptions in the manufacturing, distribution, and sale of DCCR, leading to lost revenue or reduced market opportunities.
Manufacturing or quality assurance difficulties at our contractors and suppliers, the failure or refusal of a supplier or contract manufacturer to supply contracted quantities, or increases in demand on a supplier with constrained capacity could result in delays and disruptions in the manufacturing, distribution, and sale of VYKAT XR, leading to lost revenue or reduced market opportunities.
The accelerated vesting of options could result in dilution to our existing stockholders and harm the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.
The accelerated vesting of equity awards could result in dilution to our existing stockholders and harm the market price of our common stock. The payment of these severance benefits could harm our financial condition and results. In addition, these potential severance payments may discourage or prevent third parties from seeking a business combination with us.
Our ability to obtain regulatory approval of DCCR depends on, among other things, successful completion of clinical trials by demonstrating efficacy with statistical significance and clinical meaning, and safety in humans.
Our ability to obtain regulatory approval of our products depends on, among other things, successful completion of clinical trials by demonstrating efficacy with statistical significance and clinical meaning, and safety in humans.
Also, there may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of DCCR. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product may infringe.
Also, there may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of VYKAT XR. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product may infringe.
If adequate funds are not available, we may be required to curtail our operations significantly or to obtain funds on unfavorable terms, through dilutive financings or entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our product candidates that we would not otherwise relinquish.
If adequate funds are not available, we may be required to curtail our operations significantly or to obtain funds on unfavorable terms, through dilutive financings or entering into arrangements with collaborative partners or others that may require us to relinquish rights to certain of our assets that we would not otherwise relinquish.
Finding alternative suppliers may not be feasible or could take a significant amount of time and involve significant expense due to the nature of DCCR. Further the qualification process for a new vendor could take months or years, and any such delay in qualification could significantly harm our business.
Finding alternative suppliers may not be feasible or could take a significant amount of time and involve significant expense due to the nature of VYKAT XR. Further the qualification process for a new vendor could take months or years, and any such delay in qualification could significantly harm our business.
Without patent protection for DCCR, we may be open to competition from generic versions of DCCR. Given the amount of time required for the development, testing and regulatory review of new planned products, patents protecting such products might expire before or shortly after such products are commercialized.
Without patent protection for VYKAT XR, we may be open to competition from generic versions of VYKAT XR. Given the amount of time required for the development, testing and regulatory review of new planned products, patents protecting such products might expire before or shortly after such products are commercialized.
Regulatory authorities may not approve the price we intend to charge for DCCR, may grant approval contingent on the performance of costly post-marketing clinical trials or other post-marketing studies, or may approve DCCR with a label that does not include the labeling claims necessary or desirable for the successful commercialization of DCCR.
Regulatory authorities may not approve the price we intend to charge for a product candidate, may grant approval contingent on the performance of costly post-marketing clinical trials or other post-marketing studies, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of a product candidate.
Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. Patent and other intellectual property litigation is prevalent in our sectors.
Our commercial success depends in part on our avoiding infringement and other violations of the patents and proprietary rights of third parties. Patent and other intellectual property litigation is prevalent in our industry.
Our lack of experience with product launches may expose us to a higher than usual level of risk of non-compliance with these regulations, with consequences that may include fines or the removal of our approved products from the marketplace by regulatory authorities.
Our lack of experience with product launches may expose us to a higher than usual level of risk of non-compliance with these regulations, with consequences that may include fines, removal of our promotional materials from the market, or the removal of our approved products from the marketplace by regulatory authorities.
If a specialty pharmacy partner does not fulfill its contractual obligations to us or fails to adequately dispense DCCR and deliver customer support, our product sales and business could be harmed or we could be subject to legal or regulatory liabilities or sanctions.
If a specialty pharmacy partner does not fulfill its contractual obligations to us or fails to adequately dispense VYKAT XR and deliver customer support, our product sales and business could be harmed or we could be subject to legal or regulatory liabilities or sanctions.
Interruptions in supplies due to pricing, timing, availability, or other issues with our sole source suppliers could have a negative impact on our contract manufacturer's ability to manufacture DCCR, which in turn could adversely affect the commercialization of DCCR.
Interruptions in supplies due to pricing, timing, availability, or other issues with our sole source suppliers could have a negative impact on our contract manufacturer's ability to manufacture VYKAT XR, which in turn could adversely affect the commercialization of VYKAT XR.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of our products are subject to extensive regulation by the FDA in the U.S. and other regulatory authorities in other 43 countries, which regulations differ from country to country.
The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of our products are subject to extensive regulation by the FDA in the U.S. and other regulatory authorities in other countries, and these regulations differ from country to country.
Although we believe that DCCR represents a promising commercial opportunity, DCCR may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or profits for us. We will need to establish a market for DCCR globally and build these markets through physician education, awareness programs, and other marketing efforts.
Although we believe that VYKAT XR represents a promising commercial opportunity, VYKAT XR may never gain significant acceptance in the marketplace and therefore may never generate substantial revenue or sustainable profits for us. We will need to establish a market for VYKAT XR globally and build these markets through physician education, awareness programs, and other marketing efforts.
While the potential economic impact brought by the hostilities in the Ukraine and the Middle East are difficult to assess or predict, these conditions have resulted in, and may continue to result in, extreme volatility and disruptions in the capital and credit markets, reducing our ability to raise additional capital through equity, equity-linked or debt financings, which could negatively impact our short-term and long-term liquidity and our ability to operate in accordance with our operating plan, or at all.
While the potential economic impact brought by the hostilities around the world are difficult to assess or predict, these conditions have resulted in, and may continue to result in, extreme volatility and disruptions in the capital and credit markets, reducing our ability to raise additional capital through equity, equity-linked or debt financings, which could negatively impact our short-term and long-term liquidity and our ability to operate in accordance with our operating plan, or at all.
If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of DCCR, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize DCCR unless we obtained a license under the applicable patents, or until such patents expire.
If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of VYKAT XR, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to continue to commercialize VYKAT XR unless we obtained a license under the applicable patents, or until such patents expire.
If we fail to comply with healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
If we fail to comply with U.S. healthcare regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Additionally, the U.S.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize DCCR.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize VYKAT XR.
The FDA can delay, limit or deny approval of a planned product for many reasons, including, but not limited to, the following: • a planned product may not be deemed safe or effective; • FDA officials may not find the data from preclinical studies and clinical trials sufficient; • the FDA might not approve our or our third-party manufacturer’s processes or facilities; or • the FDA may change its approval policies or adopt new regulations.
The FDA, EMA and comparable regulatory authorities can delay, limit or deny approval of a planned product for many reasons, including, but not limited to, the following: • a planned product may not be deemed safe or effective; • regulatory officials may not find the data from preclinical studies and clinical trials sufficient; • regulatory authorities might not approve our or our third-party manufacturer’s processes or facilities; or 38 • regulatory authorities may change its approval policies or adopt new regulations.
The market price for our common stock may be influenced by many factors, including the following: • the results of our clinical trials and our ability to obtain regulatory approval of DCCR in Prader Willi syndrome; • our ability to successfully commercialize, and realize significant revenues from sales of our products; • the success of competitive products or technologies; • the results of other clinical trials of our products or those of our competitors; • regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; • actions taken by regulatory agencies with respect to our products, clinical trials, manufacturing process or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • changes in the structure of healthcare payment systems; • market conditions in the pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally; • trading volume of our common stock; • sales of our common stock by us or our stockholders; • general economic, industry and market conditions; including those due to inflation; and • the other risks described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including the following: • our ability to successfully commercialize and sustain profitability from sales of VYKAT XR; • the success of competitive products or technologies; • the results of other clinical trials of our products or those of our competitors; • regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; • introductions and announcements of new products by us, our commercialization partners, or our competitors, and the timing of these introductions or announcements; • actions taken by regulatory agencies with respect to our products, clinical trials, manufacturing process or sales and marketing terms; • variations in our financial results or those of companies that are perceived to be similar to us; • the success of our efforts to acquire or in-license additional products or planned products; • developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners; • developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner; • announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; • developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products; • our ability or inability to raise additional capital and the terms on which we raise it; • the recruitment or departure of key personnel; • our ability to obtain regulatory approvals in foreign jurisdictions; • changes in the structure of healthcare payment systems; 47 • market conditions in the pharmaceutical and biotechnology sectors; • actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally; • trading volume of our common stock; • sales of our common stock by us or our stockholders; • general economic, industry and market conditions; including those due to inflation; and • the other risks described in this “Risk Factors” section.
Gaining acceptance in medical communities depends on a variety of factors, including clinical data published or reported in reputable contexts, the provisions of the approved label for DCCR, and word-of-mouth between physicians.
Gaining acceptance in medical communities depends on a variety of factors, including clinical data published or reported in reputable contexts, the provisions of the approved label for VYKAT XR, and word-of-mouth between physicians.
If we are unable to establish our own sales, marketing, distribution, training and support capabilities and instead enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute DCCR ourselves.
If we are unable to successfully establish our own sales, marketing, distribution, training and support capabilities and instead enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute VYKAT XR ourselves.
In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute DCCR or may be unable to do so on terms that are favorable to us.
In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute VYKAT XR or may be unable to do so on terms that are favorable to us.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management depending on the 58 circumstances, including in some cases to our executive team. Our cybersecurity incident management team, and other individuals as needed, work to help us mitigate and remediate cybersecurity incidents of which we are notified.
Our cybersecurity incident response processes are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including in some cases to our executive team. Our cybersecurity incident management team, and other individuals as needed, work to help us mitigate and remediate cybersecurity incidents of which we are notified.
Governance Our board of directors oversees our risk management program, including the management of cybersecurity threats as part of its general oversight function. Our Audit Committee is taking the lead on behalf of the board of directors on oversight of our cybersecurity risk management program and receives reports from management concerning our cybersecurity risk management program.
Governance Our board of directors oversees our risk management program, including the management of cybersecurity threats as part of its general oversight function. Our Audit Committee is taking the lead on behalf of the board of 54 directors on oversight of our cybersecurity risk management program and receives reports from management concerning our cybersecurity risk management program.
Our program includes controls and procedures to identify, classify and escalate certain cybersecurity incidents to provide management visibility and obtain direction from management as to the public disclosure and reporting of material incidents in a timely manner. • Technical Safeguards: We implement technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through cybersecurity threat intelligence, as well as outside audits and certifications. • Incident Response and Recovery Planning: We are establishing incident response, business continuity, and disaster recovery plans designed to address our response to a cybersecurity incident. • Third-Party Risk Management : We maintain a risk-based approach to identifying and overseeing material cybersecurity threats presented by third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a material cybersecurity incident affecting those third-party systems, including any outside auditors or consultants who advise on our cybersecurity systems. • Periodic Assessments: We conduct periodic assessments and testing of our policies, standards, processes, and practices in a manner intended to address cybersecurity threats and events.
Our program includes controls and procedures to identify, classify and escalate certain cybersecurity incidents to provide management visibility and obtain direction from management as to the public disclosure and reporting of material incidents in a timely manner. • Technical Safeguards: We implement technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through cybersecurity threat intelligence, as well as outside audits and certifications. • Sensitivity labeling and data loss prevention controls: These controls enable the identification and labeling of confidential and highly sensitive data, including intellectual property, clinical trial data, regulatory submissions, financial information, and protected health information.
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These controls also support our responsible AI adoption strategy by limiting exposure of highly sensitive information in generative AI tools and enforcing identity-based and policy-driven safeguards around the use of such data. • Incident Response and Recovery Planning: We are establishing incident response, business continuity, and disaster recovery plans designed to address our response to a cybersecurity incident.
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These plans include defined escalation pathways, containment and remediation procedures, and recovery testing for critical business systems and data. • Third-Party Risk Management : We maintain a risk-based approach to identifying and overseeing material cybersecurity threats presented by third parties, including vendors, service providers, and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a material cybersecurity incident affecting those t hird-party systems, including any outside auditors or consultants who advise on our cybersecurity systems.
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Our approach includes security reviews, contractual safeguards, and monitoring controls designed to manage third-party access to sensitive data and systems. • Periodic Assessments: We conduct periodic assessments and testing of our policies, standards, processes, and practices in a manner intended to address cybersecurity threats and events.
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We are also implementing governance measures related to emerging technologies, including artificial intelligence, to ensure appropriate oversight, responsible usage, and protection of sensitive information.

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PR OPERTIES Facilities Our principal facilities consist of two office spaces in Redwood City, California. We currently occupy 18,026 square feet of office space under a non-cancelable operating lease that expires in August 2029 and 6,368 square feet of office space under a non-cancelable operating lease that expires in May 2025.
ITEM 2. PR OPERTIES Facilities Our principal facilities primarily consist of one office space in Redwood City, California. We currently occupy 18,026 square feet of office space under a non-cancelable operating lease that expires in August 2029.
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On November 25, 2025, we executed an amendment to our operating lease which gives us access to another 17,779 square feet of office space, but we had not yet taken possession of such space as of December 31, 2025. We also lease a small office space in Dublin, Ireland that houses our European operations that expires in October 2026.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on The Nasdaq Capital Market under the symbol “SLNO”. Our March 2022 common warrants, May 2023 Tranche B warrants, and October 2023 pre-funded warrants are not traded on a national securities exchange.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on The Nasdaq Capital Market under the symbol “SLNO”. Our March 2022 common warrants and October 2023 pre-funded warrants are not traded on a national securities exchange.
The following graph shows the total stockholder return of an investment of $100 in cash at market close on December 31, 2019, through December 31, 2024 for (i) our common stock, (ii) the NASDAQ Composite Index (U.S.), and (iii) the NASDAQ Biotechnology Index.
The following graph shows the total stockholder return of an investment of $100 in cash at market close on December 31, 2020, through December 31, 2025 for (i) our common stock, (ii) the NASDAQ Composite Index (U.S.), and (iii) the NASDAQ Biotechnology Index.
As of February 26, 2025, there were 33 shareholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
As of February 19, 2026, there were 31 shareholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.
The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 60 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Soleno Therapeutics, Inc. 100.00 65.65 13.95 4.49 91.27 101.93 NASDAQ Composite Index 100.00 143.64 174.36 116.65 167.30 219.80 NASDAQ Biotechnology Index 100.00 125.69 124.89 111.27 115.42 113.84 Unregistered Sales of Equity Securities and Use of Proceeds N/A.
The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. 56 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Soleno Therapeutics, Inc. 100.00 21.24 6.84 139.04 155.28 159.94 NASDAQ Composite Index 100.00 121.39 81.21 116.47 149.83 180.33 NASDAQ Biotechnology Index 100.00 99.37 88.53 91.84 90.58 119.92 Unregistered Sales of Equity Securities and Use of Proceeds N/A.
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Purchases of Equity Securities by the Issuer On November 10, 2025, we entered into a confirmation and a supplemental confirmation (together, the “ASR Agreement”) of an accelerated share repurchase transaction with Jefferies LLC ("Jefferies”).
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Under the terms of the ASR Agreement, we prepaid the $100.0 million purchase price to Jefferies and received an aggregate initial share delivery of 1,511,553 shares of our common stock in November 2025, with the remaining shares of common stock, if any, to be delivered by the end of our first fiscal quarter of 2026.
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The following table summarizes the stock repurchase activity for the three months ended December 31, 2025: Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs October 1, 2025 - October 31, 2025 — $ — — $ — November 1, 2025 - November 30, 2025 1,511,553 (1) $ 46.00 (2) 1,511,553 $ — (3) December 1, 2025 - December 31, 2025 — $ - — $ — 57 (1) The specific number of shares of our common Stock that we ultimately repurchased under the ASR Agreement was determined based on the volume-weighted average price of our common stock during the term of the transaction, less an agreed discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreement.
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Upon final settlement in January 2026, Jefferies was required to deliver an aggregate of 662,497 additional shares of our common stock to us. (2) Based upon our aggregate repurchase of 2,174,050 shares of our common stock pursuant to the ASR Agreement, we paid an average of $46.00 per share.
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(3) The transactions contemplated by the ASR Agreement are now complete and the company did not make any payments beyond the initial $100 million prepayment. 58

Item 7. Management's Discussion & Analysis

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

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Contingent consideration Contingent consideration elements of a business combination are recorded in accordance with ASC 805 which provides that, when contingent consideration terms provide for future payment obligations, the obligation is measured at its fair value on the acquisition date, and the subsequent increase or decrease of the value of the estimated amounts of contingent consideration to be paid is be recognized as expense or income, respectively, in the consolidated statements of operations and comprehensive loss.
Contingent consideration Contingent consideration elements of a business combination are recorded in accordance with ASC 805 which provides that, when contingent consideration terms provide for future payment obligations, the obligation is measured at its fair value on the acquisition date, and the subsequent increase or decrease of the value of the estimated amounts of contingent consideration to be paid is be recognized as expense or income, respectively, in the consolidated statements of operations and comprehensive income (loss).
Our agreement to pay the former Essentialis stockholders for achieving certain commercial milestones resulted in the recognition of contingent consideration, which was recorded at the inception of the transaction, and subsequent changes to estimate the amount of contingent consideration to be paid is recognized as expenses or income in the consolidated statements of operations and comprehensive loss.
Our agreement to pay the former Essentialis stockholders for achieving certain commercial milestones resulted in the recognition of contingent consideration, which was recorded at the inception of the transaction, and subsequent changes to estimate the amount of contingent consideration to be paid is recognized as expenses or income in the consolidated statements of operations and comprehensive income (loss).
The fair value of the contingent 64 consideration is based on our analysis of the likelihood of the drug indication being approved by the FDA and then reaching the cumulative revenue milestones. Common Stock Purchase Warrants and Other Derivative Financial Instruments We account for warrants in accordance with the guidance in ASC 815 Derivatives and Hedging .
The fair value of the contingent consideration is based on our analysis of the likelihood of the drug indication being approved by the FDA and then reaching the cumulative revenue milestones. Common Stock Purchase Warrants and Other Derivative Financial Instruments We account for warrants in accordance with the guidance in ASC 815 Derivatives and Hedging .
For performance-based awards the requisite service period is the longest explicit, implicit or derived service period based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. The Black-Scholes option-pricing model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards.
For performance-based awards the requisite service period is the longest explicit, implicit or derived service period based on management’s estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date. 62 The Black-Scholes option-pricing model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards.
Marketable Securities We classify our marketable securities as available-for-sale and records such assets at estimated fair value in the balance sheets, with unrealized gains and non-credit related losses that are determined to be temporary, if any, reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive loss and as a separate component of stockholders’ equity.
Marketable Securities We classify our marketable securities as available-for-sale and record such assets at estimated fair value in the balance sheets, with unrealized gains and non-credit related losses that are determined to be temporary, if any, reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive income (loss) and as a separate component of stockholders’ equity.
If we had made different assumptions, our stock-based compensation expense, net loss and net loss per share of common stock could have been significantly different.
If we had made different assumptions, our stock-based compensation expense, net income (loss) and net income (loss) per share of common stock could have been significantly different.
We classified the 2018 PIPE Warrants at their fair value and re-measured them at each balance sheet date until they were exercised or expired. Any changes in the fair value were recognized as Other income (expense), net in the consolidated statements of operations and comprehensive loss. The 2018 PIPE Warrants expired in December 2023.
We classified the 2018 PIPE Warrants at their fair value and re-measured them at each balance sheet date until they were exercised or expired. Any changes in the fair value were recognized as Other income (expense), net in the consolidated statements of operations and comprehensive income (loss).
We anticipate general and administrative expenses will increase in future periods, reflecting an expanding infrastructure, an increase in pre-commercial activities, other administrative expenses, and increased professional fees associated with being a public reporting company.
We anticipate selling, general and administrative expenses will increase in future periods, reflecting an expanding infrastructure, an increase in commercial activities and other administrative expenses, and increased professional fees associated with being a public reporting company.
The cadence of our research and development expenditures will fluctuate depending upon the state of our clinical programs, the timing of manufacturing and other projects necessary to support the submission of an NDA and prepare for commercial launch.
The cadence of our research and development expenditures will fluctuate depending upon the state of our clinical programs, the timing of manufacturing and other projects necessary to support the submission of an NDA and preparation for commercial launch.
Change in fair value of contingent consideration Change in fair value of contingent consideration represents the change in the fair value of the additional consideration that we expect to pay to the former Essentialis stockholders in accordance with the terms of our 2017 merger agreement with Essentialis based on our assessment of the expected likelihood of achieving two commercial sales milestones of $100.0 million in revenue and $200.0 million in revenue related to DCCR in future years.
Change in fair value of contingent consideration Change in fair value of contingent consideration represents the change in the fair value of the additional consideration that we expect to pay to the former Essentialis stockholders in accordance with the terms of our 2017 merger agreement with Essentialis based on our assessment of the expected likelihood of achieving two commercial sales milestones of $100 million in revenue and $200 million in revenue related to VYKAT XR in future years.
During the year ended December 31, 2024, we did not recognize any credit losses related to our available-for-sale debt securities. Further, as of December 31, 2024, we did not record an allowance for credit losses related to our available-for-sale debt securities. During 2023 and 2022, we did not hold any marketable securities.
During the years ended December 31, 2025 and 2024, we did not recognize any credit losses related to our available-for-sale debt securities. Further, as of December 31, 2025 and 2024, we did not record an allowance for credit losses related to our available-for-sale debt securities. During 2023, we did not hold any marketable securities.
The $31.3 million of additional non-cash stock-based compensation being recognized in the period is predominantly due to performance-based RSU grants which partially vested upon the acceptance by the FDA of the NDA submission and will fully vest upon the approval of our NDA by the FDA.
The $31.3 million of additional non-cash stock-based compensation being recognized in the period is predominantly due to performance-based RSU grants which partially vested upon the acceptance by the FDA of the NDA submission in 2024 and fully vested upon the approval of our NDA by the FDA in March 2025.
We classify marketable securities with remaining maturities greater than three months but less than one year as marketable securities, and those with remaining maturities greater than one year are classified as long-term marketable securities. Realized gains and losses are calculated using the specific identification method and recorded as interest income and were immaterial for all periods presented.
We classify marketable securities with remaining maturities greater than three months but less than one year as marketable securities, and those with remaining maturities greater than one year are classified as long-term marketable securities. Realized gains and losses are calculated using the specific identification method and recorded as interest income.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Income Taxes We use the liability method of accounting for income taxes, whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.
The 2018 PIPE Warrants expired in December 2023. 63 Income Taxes We use the liability method of accounting for income taxes, whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income.
Other income (expense), net Other income (expense), net is comprised of interest income, and recently interest expense from our loan and security agreement with Oxford Financing LLC and its affiliates (collectively, Oxford), and the change in the fair value of the 2018 PIPE common stock warrant liabilities.
Other income (expense), net Other income (expense), net is comprised of interest income, interest expense from our loan and security agreement with Oxford, and the change in the fair value of the 2018 PIPE common stock warrant liabilities.
Research and development expenses 63 Research and development expenses are charged to operations as incurred. Research and development expenses consist primarily of salaries, benefits, bonus, stock-based compensation, consultant fees, certain facility costs and other costs associated with clinical trials and the manufacture of our drug product.
Research and development expenses Research and development expenses are charged to operations as incurred and consist primarily of salaries, benefits, bonus, stock-based compensation, consultant fees, certain facility costs and other costs associated with 60 clinical trials and certain manufacture costs associated with our drug product that are not included in cost of goods sold.
Additionally, there was a $0.8 million net increase usage of cash during 2022 due to changes in operating assets and liabilities. Cash used in investing activities During 2024, we used $356.5 million for purchases of marketable securities and $0.2 million for purchases of property and equipment. We received proceeds of $131.0 million from maturities of marketable securities.
Additionally, there was a $6.1 million net decrease in cash used during 2024 due to changes in operating assets and liabilities. Cash used in investing activities During 2025, we used $455.8 million for purchases of marketable securities and $0.1 million for purchases of property and equipment. We received proceeds of $254.1 million from maturities of marketable securities.
In May 2024, we closed an underwritten public offering of 3,450,000 shares of our common stock at a public offering price of $46.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares.
In July 2025, we closed an underwritten public offering of 2,705,882 shares of our common stock at a public offering price of $85.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares of our common stock.
We believe that our 68 existing cash, cash equivalents and marketable securities will be sufficient to meet the company's working capital needs for the next 12 months. Our long term-term capital requirements will depend on several factors, most notably the timing of the potential approval and commercialization of DCCR.
We believe that our existing cash, cash equivalents and marketable securities and cash flows from operations will be sufficient to meet the company's working capital needs for the next twelve months. Our long-term capital requirements will depend on several factors, most notably the timing and degree of success of our continued commercialization of VYKAT XR.
General and administrative expenses will increase in support of commercializing DCCR if we receive FDA approval. 66 Change in fair value of contingent consideration We are obligated to make cash payments of up to a maximum of $21.2 million to the former Essentialis stockholders upon the achievement of certain future commercial milestones associated with the sales of DCCR in accordance with the terms of our 2017 merger agreement with Essentialis.
Change in fair value of contingent consideration We are obligated to make cash payments of up to a maximum of $21.2 million to the former Essentialis stockholders upon the achievement of certain future commercial milestones associated with the sales of VYKAT XR in accordance with the terms of our 2017 merger agreement with Essentialis.
Additionally, there was a $6.1 million net decrease usage of cash during 2024 due to changes in operating assets and liabilities.
Additionally, there was a $24.6 million net increase in cash used during 2025 due to changes in operating assets and liabilities.
The fair value of the liability for the contingent consideration payable by us achieving two commercial sales milestones of $100 million and $200 million in revenue, respectively, in future years was estimated to be $11.5 million as of December 31, 2023, a $2.7 million increase from the estimate as of December 31, 2022.
The fair value of the liability for the contingent consideration payable by us achieving two commercial sales milestones of $100 million and $200 million in revenue, respectively, in future years was estimated to be $20.3 million as of December 31, 2025, a $5.5 million increase from the estimate as of December 31, 2024, primarily due to the approval of our NDA for VYKAT XR by the FDA in March 2025 and recording product revenue from sales of VYKAT XR following the approval.
Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below: Years Ended December 31, 2024 2023 2022 (in thousands) Net cash used in operating activities $ (69,096 ) $ (24,940 ) $ (20,781 ) Net cash used in investing activities (225,682 ) - (13 ) Net cash provided by financing activities 213,025 180,019 14,092 Net increase (decrease) in cash and cash equivalents $ (81,753 ) $ 155,079 $ (6,702 ) Cash used in operating activities During 2024, operating activities used net cash of $69.1 million, which was primarily due to the loss of $175.9 million which included $100.0 million of stock-based compensation expense, $2.0 million of depreciation and amortization, $0.4 million of non-cash lease expense, non-cash expense of $3.2 million for the change in fair value of contingent consideration, and $4.9 million added back for accretion of premium/discount on marketable securities.
We believe that we will continue to have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means, but the access to such capital resources is uncertain and is not assured. 67 Cash Flows The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands): Years Ended December 31, 2025 2024 2023 Net cash provided by (used in) operating activities $ 46,798 $ (69,096 ) $ (24,940 ) Net cash used in investing activities (201,781 ) (225,682 ) - Net cash provided by financing activities 137,161 213,025 180,019 Net increase (decrease) in cash and cash equivalents $ (17,822 ) $ (81,753 ) $ 155,079 Cash provided by (used in) operating activities During 2025, operating activities provided net cash of $46.8 million, which was primarily due to net income of $20.9 million which included $45.8 million of stock-based compensation expense, $2.0 million of depreciation and amortization, $0.6 million of non-cash lease expense, non-cash expense of $5.5 million for the change in fair value of contingent consideration, and $3.5 million added back for accretion of premium/discount on marketable securities.
For more information, see the section titled “Our ability to use our net operating loss carry forwards and certain other tax attributes will be limited.” at Part 1, Item 1A of this Annual Report on Form 10-K 65 Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 Years Ended December 31, Increase (decrease) 2024 2023 Amount Percentage (in thousands) Operating expenses: Research and development $ 78,568 $ 25,189 $ 53,379 212 % General and administrative 105,861 13,481 92,380 685 % Change in fair value of contingent consideration 3,242 2,714 528 19 % Total operating expenses 187,671 41,384 146,287 353 % Operating loss (187,671 ) (41,384 ) (146,287 ) 353 % Other income (expense), net Change in fair value of warrant liabilities - (182 ) 182 100 % Interest income, net 12,052 2,578 9,474 367 % Interest expense (231 ) - (231 ) (100 %) Total other income (expense), net 11,821 2,396 9,425 393 % Net loss $ (175,850 ) $ (38,988 ) $ (136,862 ) 351 % Revenue We have not commenced commercialization of DCCR, our current sole novel therapeutic drug candidate, and accordingly, through December 31, 2024, have generated no revenue.
The decrease was primarily due to interest expense associated with the long-term debt, partially offset by an increase in interest income driven by higher cash and cash equivalents and marketable securities during the year ended December 31, 2025, compared to the year ended December 31, 2024. 65 Comparison of the Years Ended December 31, 2024 and 2023 (in thousands) Years Ended December 31, Increase (decrease) 2024 2023 Amount Percentage Product revenue, net $ - $ - $ - 0 % Operating expenses Research and development 78,568 25,189 53,379 212 % General and administrative 105,861 13,481 92,380 685 % Change in fair value of contingent consideration 3,242 2,714 528 19 % Total operating expenses 187,671 41,384 146,287 353 % Operating loss (187,671 ) (41,384 ) (146,287 ) 353 % Other income (expense), net Change in fair value of warrant liabilities - (182 ) 182 100 % Interest income, net 12,052 2,578 9,474 367 % Interest expense (231 ) - (231 ) (100 %) Total other income (expense), net 11,821 2,396 9,425 393 % Net loss $ (175,850 ) $ (38,988 ) $ (136,862 ) 351 % Revenue We had not commenced commercialization of VYKAT XR, our current sole novel therapeutic drug candidate, and accordingly, through December 31, 2024, had generated no revenue.
We had $87.9 million in cash and cash equivalents, $230.7 million of marketable securities, and $275.1 million of working capital as of December 31, 2024 and we had lease obligations totaling $3.0 million to be paid through August 2029, consisting of two operating leases for office space in Redwood City, California, one of which terminates in May 2025.
We had $70.1 million in cash and cash equivalents, $436.0 million of marketable securities and $294.5 million of working capital on December 31, 2025. We had a lease obligation totaling $2.7 million to be paid through August 2029, consisting of one operating lease for office space in Redwood City, California.
The gross proceeds of the public offering were $158.7 million, before deducting the underwriter discount and other offering expenses of $9.7 million.
The gross proceeds of the public offering were $230.0 million, before deducting the underwriter discount and other offering expenses, totaling approximately $14.3 million.
During 2023, operating activities used net cash of $24.9 million, which was primarily due to the loss of $39.0 million which included $5.9 million of stock-based compensation expense, non-cash expense of $2.7 million for the change in fair value of contingent consideration, $2.0 million of depreciation and amortization, $0.3 million of non-cash lease expense, and $0.2 million for the change in fair value of common stock warrant liability.
During 2024, operating activities used net cash of $69.1 million, which was primarily due to the loss of $175.9 million which included $100.0 million of stock-based compensation expense, $2.0 million of depreciation and amortization, $0.4 million of non-cash lease expense, non-cash expense of $3.2 million for the change in fair value of contingent consideration, and $4.9 million added back for accretion of premium/discount on marketable securities.
Costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use are expensed to research and development costs when incurred.
Costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use are expensed to research and development costs when incurred. These expenses will vary with the cadence and success of our drug candidates progressing from clinical to commercial stage.
Accounting Guidance Update Recently Issued Accounting Guidance From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB), or other standard setting bodies and adopted by us as of the specified effective date.
Off-Balance Sheet Arrangements As of December 31, 2025 and December 31, 2024, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC. 68 Accounting Guidance Update Recently Issued Accounting Guidance From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB), or other standard setting bodies and adopted by us as of the specified effective date.
We also received $1.3 million from the exercise of stock options. During 2023, we received $43.1 million from the sale and issuance of the warrants and $129.0 million gross proceeds from the sale of common stock.
During 2024, we received $149.0 million from the sale of common stock, net of issuance costs, $49.9 million from issuance of debt, net of issuance costs, and $12.9 million from the exercise of common stock and pre-funded stock warrants. We also received $1.3 million from the exercise of stock options.
These expenses will vary with the cadence and success of DCCR progressing from clinical to commercial stage. 62 General and administrative expenses General and administrative expenses consist principally of salaries and benefits, stock-based compensation expense, professional fees for legal, consulting, audit and tax services, insurance, rent, pre-commercial activities, and other general operating expenses not otherwise included in research and development.
Selling, general and administrative expenses Selling, general and administrative expenses consist principally of salaries and benefits, stock-based compensation expense, professional fees for legal, consulting, audit and tax services, insurance, rent, commercial activities such as disease state education, analytics, other marketing costs, medical affair and patient advocacy costs, and other general operating expenses not otherwise included in research and development.
The term loans accrue interest at a floating rate equal to, subject to certain conditions, (a) 1-month term SOFR plus (b) 5.50%. Prior to entering into the Oxford loan and security agreement, we had historically financed our operations principally through issuance of equity securities.
The term loans accrue interest at a floating rate equal to, subject to certain conditions, (a) 1-month term SOFR plus (b) 5.50%.
Business Overview We are a biopharmaceutical company developing novel therapeutics for the treatment of rare diseases. We have submitted a new drug application (NDA) to the U.S. Food and Drug Administration (FDA) for our lead product candidate, diazoxide choline extended-release tablets (DCCR) for the treatment of Prader-Willi syndrome (PWS) in individuals four years and older who have hyperphagia.
Business Overview We are a biopharmaceutical company developing novel therapeutics for the treatment of rare diseases. On March 26, 2025, we announced that our lead product candidate, VYKAT XR (diazoxide choline) extended-release tablets, formerly known as DCCR, had been approved by the U.S. Food and Drug Administration (FDA).
The increase was primarily related to higher stock-based compensation expense, higher costs as a result of an increase in headcount, and higher professional and consulting expenses in 2023. 67 Change in fair value of contingent consideration We are obligated to make cash payments of up to a maximum of $21.2 million to the former Essentialis stockholders upon the achievement of certain future commercial milestones associated with the sales of DCCR in accordance with the terms of our 2017 merger agreement with Essentialis.
The $62.7 million of additional non-cash stock-based compensation being recognized in the period is predominantly due to performance-based RSU grants which partially vested upon acceptance by the FDA of the NDA submission in 2024 and fully vested upon approval of our NDA by the FDA in March 2025. 66 Change in fair value of contingent consideration We are obligated to make cash payments of up to a maximum of $21.2 million to the former Essentialis stockholders upon the achievement of certain future commercial milestones associated with the sales of DCCR in accordance with the terms of our 2017 merger agreement with Essentialis.
Liquidity and Capital Resources We used $69.1 million of cash in operating activities and had a net loss of $175.9 million during 2024. We had an accumulated deficit of $452.3 million at December 31, 2024 as a result of having incurred losses since our inception.
Liquidity and Capital Resources We had net income of $20.9 million, generated $46.8 million of net cash provided by operating activities during 2025 and had an accumulated deficit of $431.4 million at December 31, 2025 as a result of losses incurred prior to 2025.
As of December 31, 2024, we had $50.0 million outstanding under our loan and security agreement with Oxford.
As of December 31, 2025, we had $50.0 million outstanding under our loan and security agreement with Oxford. Under the terms of the loan agreement with Oxford, following FDA approval of VYKAT XR, an additional $50 million became available through September 30, 2025, but was not drawn down.
A final $50 million may be made available upon mutual consent with Oxford. The loan carries an interest-only period of 48 months and a total term of 60 months; provided that if specific milestones are achieved prior to September 30, 2026, the interest-only period and maturity date will be extended by 12 months.
Following the amendment of our loan and security agreement in November 2025, the final three tranches of an aggregate of $100 million may be made available upon mutual consent with Oxford. As a result of a milestone achieved in 2025, the loan carries an interest-only period of 60 months and a total term of 72 months.
During 2023, there were no investing activities and minimal cash used during 2022 for the costs of acquiring property and equipment. 69 Cash provided by financing activities During 2024, we received $149.0 million from the sale of common stock, net of issuance costs, $49.9 million from issuance of debt, net of issuance costs, and $12.9 million from the exercise of common stock and pre-funded stock warrants.
Cash provided by financing activities During 2025, we received $215.7 million from the sale of common stock, net of issuance costs, $5.2 million from the exercise of common stock warrants, and $17.2 million from the exercise of stock options.
General and administrative expenses General and administrative expenses were $13.5 million for the year ended December 31, 2023, an increase of $3.6 million from $9.8 million in 2022.
Selling, general and administrative expenses Selling, general and administrative expenses were $132.1 million for the year ended December 31, 2025, which includes $34.1 million of non-cash stock-based compensation, an increase of $26.2 million from $105.9 million in 2024, which included $66.2 million of non-cash stock-based compensation.
Our significant accounting policies are more fully described in Note 3 to our audited financial statements contained herein.
Our significant accounting policies are more fully described in Note 3 to our audited financial statements contained herein. Revenue Recognition After FDA approval of VYKAT XR in March 2025, we began commercial marketing and made our first product sales during the three months ended June 30, 2025.
Removed
On August 27, 2024, we announced that the FDA had accepted the NDA for filing, designated the application for priority review and set a Prescription Drug User Fee Act (PDUFA) target action date of December 27, 2024.
Added
VYKAT XR is indicated to treat hyperphagia in adults and pediatric patients four years of age and older with Prader-Willi syndrome (PWS). Financial overview Summary Following FDA approval of VYKAT XR in March 2025, we began to generate revenue during the three months ended June 30, 2025.
Removed
On November 26, 2024, we announced that the FDA had extended the review period for our NDA and set a new PDUFA target action date of March 27, 2025. DCCR previously received Breakthrough Therapy and Fast-Track designations in the United States (U.S.) and Orphan Drug designations in the U.S. and European Union (E.U.).
Added
We became profitable during the three months ended September 30, 2025 and ended the year with a net income of $20.1 million. Our ability to sustain operating profitability is dependent upon continued successful commercialization of VYKAT XR.
Removed
Financial overview Summary We have not generated net income from operations to date, and at December 31, 2024 we had an accumulated deficit of $452.3 million, primarily as a result of research and development and general and administrative expenses. We may not receive marketing approval or be successful in commercializing DCCR.
Added
As of December 31, 2025, we had an accumulated deficit of $431.4 million and we had cash and cash equivalents of $70.1 million and marketable securities of $436.0 million. Product Revenue, Net We began commercial marketing and sales and recognizing revenue during the three months ended June 30, 2025.
Removed
Accordingly, we expect to incur significant losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits. As of December 31, 2024, we had cash and cash equivalents of $87.9 million and marketable securities of $230.7 million.
Added
The transaction price that we recognize as revenue for VYKAT XR sales includes an estimate of variable consideration, which includes rebates, discounts, returns, and copay assistance that are offered within our contract with our specialty pharmacy distribution partner. For additional information, refer to Note 3 of our audited financial statements contained herein.
Removed
Revenue recognition To date, we have earned no revenue from the commercial development and sale of DCCR.
Added
Cost of Goods Sold Cost of goods sold consists of manufacturing costs, transportation and freight, amortization of capitalized intangibles, royalty payments and indirect overhead costs associated with the manufacturing and distribution of VYKAT XR. Cost of goods sold may also include periodic costs related to certain manufacturing services and inventory adjustment charges.
Removed
Research and development expenses Research and development expenses consist primarily of expenses incurred by contract research organizations (CROs) associated with our clinical trials, contract manufacturing organizations (CMOs) associated with the manufacture of our drug product, employee related expenses, including salaries and benefits, and professional consultant costs.
Added
Finally, cost of goods sold may also include costs related to excess or obsolete inventory adjustment charges, abnormal costs, unabsorbed manufacturing and overhead costs, and manufacturing variances.
Removed
Clinical trial costs are a significant component of research and development expenses and include costs associated with CROs and other vendors. Invoicing from CROs and CMOs for services performed can often occur several months later. We accrue the costs incurred for clinical trial activities as measured by patient progression and the timing of various aspects of the trial.
Added
Significant estimates made by management include valuation of marketable securities, stock-based compensation, valuation of contingent liabilities for the purchase price of assets obtained through acquisition, provisions for sales rebates, returns and other incentives, valuation of financial instruments, and income taxes. Actual results may differ from these estimates under different assumptions and conditions.
Removed
For other services, we accrue the costs in connection with third-party contractor activities based on our estimate of fees and costs associate with the contract that were rendered during the period and they are expensed as incurred.
Added
ASC Topic 606, Revenue from Contracts with Customers , requires us to make estimates of variable consideration included in contracts with customers, to be included in the transaction price.
Removed
The $62.7 million of additional non-cash stock-based compensation being recognized in the period is predominantly due to performance-based RSU grants which partially vested upon acceptance by the FDA of the NDA submission and will fully vest upon approval of our NDA by the FDA.
Added
The transaction price that is recognized as revenue for products upon delivery and transfer of title to the customer includes an estimate of variable consideration for reserves which result from rebates, discounts, returns, and co-pay assistance that are offered within the contract between us and our customer.
Removed
Comparison of the Years Ended December 31, 2023 and 2022 Years Ended December 31, Increase (decrease) 2023 2022 Amount Percentage (in thousands) Operating expenses: Research and development $ 25,189 $ 15,265 $ 9,924 65 % General and administrative 13,481 9,844 3,637 37 % Change in fair value of contingent consideration 2,714 (712 ) 3,426 481 % Total operating expenses 41,384 24,397 16,987 70 % Operating loss (41,384 ) (24,397 ) (16,987 ) 70 % Other income (expense), net Change in fair value of warrant liability (182 ) 30 (212 ) (707 %) Interest income 2,578 300 2,278 759 % Total other income (expense), net 2,396 330 2,066 626 % Net loss $ (38,988 ) $ (24,067 ) $ (14,921 ) 62 % Revenue We have not commenced commercialization of DCCR, our current sole novel therapeutic drug candidate, and accordingly, through December 31, 2023, had generated no revenue.
Added
Government rebates: We are subject to discount obligations under several government programs, including Medicaid programs, Medicare and TRICARE in the United States. We estimate these rebates based upon a range of possible outcomes that are weighted for the estimated payer mix.
Removed
Research and development expenses Research and development expenses were $25.2 million for the year ended December 31, 2023, an increase of $9.9 million from $15.3 million in 2022. The increase is primarily due to increased spending in clinical trials and manufacturing efforts, and expenditures in support of an NDA submission.
Added
These reserves are recorded in the same period that the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a liability that is included in accrued expenses and other current liabilities on our consolidated balance sheets.
Removed
Other income (expense), net We had other income (expense), net of $2.4 million, an increase of $2.1 million from $0.3 million in 2022. Interest income during 2023 was $2.3 million higher than in 2022, partially offset by a decrease in fair value of the 2018 PIPE Warrants of $0.2 million during 2023 compared to 2022.
Added
On a quarterly basis, we update our estimates and record any adjustments in the period that we identify the adjustments. 61 Trade discounts and allowances: We provide discounts on VYKAT XR sales to our customer for prompt payment. This discount is recorded as a reduction of revenue in the period the related product revenue is recognized.
Removed
Under the terms of the loan agreement with Oxford, an additional $100 million may become available in three additional tranches, with tranches of $50 million and $25 million contingent upon FDA approval of DCCR for the treatment of PWS and one tranche of $25 million contingent upon certain commercial milestones.
Added
In addition, we receive and pay for various distribution services from our customer in the distribution channel. Product returns: Our customer has limited return rights related to unexpected instances in which the product is found to be damaged or defective.
Removed
In October 2023, we announced the closing of the underwritten public offering of 3,450,000 shares of our common stock at a public offering of $20.00 per share, which included the exercise in full by the underwriters of their option to purchase additional shares.
Added
We estimate the amount of product sales that may be returned and record the estimate as a reduction of revenue and a refund liability in the period in which the related product revenue is recognized. Based on the distribution model for VYKAT XR, we believe there will be minimal returns as such returns have not been material to date.
Removed
The gross proceeds of the public offering were $69.0 million, before deducting the underwriting discount and other estimated offering expenses.
Added
Other incentives: Other incentives include co-payment assistance we provide to patients with commercial insurance that have coverage and reside in states that allow co-payment assistance. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue.
Removed
We also announced the closing shares of our common stock and pre-funded warrants in a concurrent private offering pursuant to the securities purchase agreement with certain investors, including entities affiliated with existing stockholders, at a price per share of common stock equal to the public offering price of $20.00 and a price per pre-funded warrant of $19.99, for gross proceeds of approximately $60.0 million.
Added
The estimate is recorded as a reduction of revenue in the same period the related revenue is recognized.
Removed
In December 2022, we entered into a securities purchase agreement providing for the sale of up to $60.0 million in warrants and the common stock issuable upon the exercise thereof. Through December 31, 2024, we have received $10.0 million from the sale of these warrants and $44.8 million in proceeds from the exercise of certain of these warrants.
Added
Variable consideration is estimated and reduces the transaction price to reflect our best estimate of the amount of consideration to which we are entitled based on the terms of the contract and are recorded in the same period the related product revenue is recognized.
Removed
Warrants with an aggregate exercise price of $5.2 million are still outstanding. We expect to continue incurring losses for the foreseeable future and may require additional capital to penetrate markets for the sale of our product, and pursue product development initiatives.
Added
The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is considered probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.
Removed
We believe that we will continue to have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means, but the access to such capital resources is uncertain and is not assured.
Added
Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates in the period these variances become known.
Removed
In the future, if we are unable to secure additional capital, we may be required to curtail our commercial launch activities and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We believe we do not have material exposure to changes in fair value as a result of changes in interest rates. Declines in interest rates, however, will reduce future interest income. 70
We believe we do not have material exposure to changes in fair value as a result of changes in interest rates. Declines in interest rates, however, will reduce future interest income. 69
Treasury or corporate debt. As of December 31, 2024, we had unrestricted cash and cash equivalents totaling $87.9 million and $230.7 million of marketable securities held for working capital purposes. We do not enter into investments for trading or speculative purposes.
Treasury or corporate debt. As of December 31, 2025, we had unrestricted cash and cash equivalents totaling $70.1 million and $436.0 million of marketable securities held for working capital purposes. We do not enter into investments for trading or speculative purposes.