Content analysis
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H.S. senior Avg
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Financial report summary
?Risks
- Risks Related to the Company
- We are a clinical-stage company, we have a very limited operating history, are not currently profitable, do not expect to become profitable in the near future and may never become profitable.
- We are dependent on the success of one or more of our current product candidates and we cannot be certain that any of them will receive regulatory approval or be commercialized.
- If development of our product candidates does not produce favorable results, or encounters challenges, we, and our collaborators, if any, may be unable to commercialize these products.
- We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
- We expect to continue to incur significant research and development expenses, which may make it difficult for us to attain profitability.
- Our debt agreement contains restrictive and financial covenants that may limit our operating flexibility and the failure to comply with such covenants could cause our outstanding debt to become immediately payable.
- Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other significant adverse implications on our business, financial condition, and results of operations.
- Interim and preliminary results from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to additional audit, validation and verification procedures that could result in material changes in the final data.
- Our efforts to discover product candidates beyond our current product candidates may not succeed, and any product candidates we recommend for clinical development may not actually begin clinical trials.
- Delays in the commencement or completion of clinical trials could result in increased costs to us and delay our ability to establish strategic collaborations.
- Results of earlier clinical trials may not be predictive of the results of later-stage clinical trials.
- If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
- We intend to rely on third parties to conduct our preclinical studies and clinical trials and perform other tasks. If these third parties do not successfully carry out their contractual duties, meet expected deadlines, or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business, financial condition and results of operations could be substantially harmed.
- Our product candidates are subject to extensive regulation under the FDA, the EMA or comparable foreign authorities, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates.
- We are pursuing the FDA 505(b)(2) NDA pathway for our lead product candidate, SLS-002, which presents certain additional development and commercialization risks as compared to a conventional 505(b)(1) NDA for an innovator product candidate. We may pursue this pathway for other product candidates as well.
- Even if our product candidates receive regulatory approval in the U.S., we may never receive approval or commercialize our products outside of the U.S.
- Even if any of our product candidates receive regulatory approval, our product candidates may still face future development and regulatory difficulties.
- The FDA, the EMA and comparable foreign authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses.
- If our competitors have product candidates that are approved faster, marketed more effectively, are better tolerated, have a more favorable safety profile or are demonstrated to be more effective than ours, our commercial opportunity may be reduced or eliminated.
- We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our product candidates.
- The active ingredient of our lead product candidate, SLS-002, ketamine hydrochloride, is recognized as having the potential for abuse, misuse and diversion and, as a result, is and will be subject to extensive federal and state laws and regulations governing controlled substances and the entities involved in their research, manufacturing, sale and distribution, and possession. In addition, we anticipate that if we obtain marketing approval for SLS-002 it will be the subject of an FDA Risk Evaluation and Mitigation Strategy (REMS).
- We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.
- We rely completely on third parties to manufacture our preclinical and clinical drug supplies, and our business, financial condition and results of operations could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.
- Product candidates that are considered combination products for FDA purposes, such as the SLS-002 drug-device combination product consisting of ketamine hydrocholoride and a USP aqueous spray solution in a bi-dose nasal delivery device, may face additional challenges, risks and delays in the product development and regulatory approval process.
- We and our contract manufacturers are subject to significant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which we rely may not continue to meet regulatory requirements.
- Any collaboration arrangement that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our current and potential future product candidates.
- If we are unable to develop our own commercial organization or enter into agreements with third parties to sell and market our product candidates, we may be unable to generate significant revenues.
- The commercial success of our product candidates depends upon their market acceptance among physicians, patients, healthcare payors and the medical community.
- If we fail to obtain and sustain an adequate level of reimbursement for our potential products by third-party payors, potential future sales would be materially adversely affected.
- Current and future legislation may increase the difficulty and cost of commercializing our product candidates and may affect the prices we may obtain if our product candidates are approved for commercialization.
- Changes in government funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, properly administer drug innovation, or prevent our product candidates from being developed or commercialized, which could negatively impact our business, financial condition and results of operations.
- We are subject to “fraud and abuse” and similar laws and regulations, and a failure to comply with such regulations or prevail in any litigation related to noncompliance could harm our business, financial condition and results of operations.
- If we face allegations of noncompliance with the law and encounter sanctions, our reputation, revenues and liquidity may suffer, and any of our product candidates that are ultimately approved for commercialization could be subject to restrictions or withdrawal from the market.
- If we fail to retain current members of our senior management and scientific personnel, or to attract and keep additional key personnel, we may be unable to successfully develop or commercialize our product candidates.
- We will need to increase the size of our organization and may not successfully manage our growth.
- Our management’s limited public company experience could put us at greater risk of incurring fines or regulatory actions for failure to comply with federal securities laws and could put us at a competitive disadvantage and could require our management to devote additional time and resources to ensure compliance with applicable corporate governance requirements.
- We are exposed to product liability, non-clinical and clinical liability risks which could place a substantial financial burden upon us, should lawsuits be filed against us.
- Our research and development activities involve the use of hazardous materials, which subject us to regulation, related costs and delays and potential liabilities.
- We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
- Our employees and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
- Business disruptions such as natural disasters could seriously harm our future revenues and financial condition and increase our costs and expenses.
- Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations.
- We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. If we fail to comply with these laws, we could be subject to civil or criminal liabilities, other remedial measures and legal expenses, be precluded from developing, manufacturing and selling certain products outside the United States or be required to develop and implement costly compliance programs, which could adversely affect our business, results of operations and financial condition.
- Governments outside the United States tend to impose strict price controls, which may adversely affect our revenue, if any.
- Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.
- Risks Related to Our Intellectual Property
- We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.
- If we fail to comply with our obligations in the agreements under which we in-license intellectual property and other rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.
- We are required to make certain cash payments and may be required to pay milestones and royalties pursuant to certain commercial agreements, which could adversely affect the overall profitability for us of any products that we may seek to commercialize.
- We may not be able to protect our proprietary or licensed technology in the marketplace.
- Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection for licensed patents, pending patent applications and potential future patent applications and patents could be reduced or eliminated for non-compliance with these requirements.
- We may infringe the intellectual property rights of others, which may prevent or delay our drug development efforts and prevent us from commercializing or increase the costs of commercializing our products.
- Any claims or lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may adversely affect our business, financial condition and results of operations.
- Changes in U.S. patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
- We may not be able to protect our intellectual property rights throughout the world.
- We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.
- We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
- We may be subject to claims challenging the inventorship of our licensed patents, any future patents we may own and other intellectual property.
- If we do not obtain additional protection under the Hatch-Waxman Amendments and similar foreign legislation extending the terms of our licensed patents and any future patents we may own, our business, financial condition and results of operations may be materially and adversely affected.
- Risks Related to Owning Our Common Stock
- The market price of our common stock has been and will likely continue to be volatile.
- If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
- We will incur significant costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives.
- Sales of a substantial number of shares of our common stock in the public market by our existing stockholders, future issuances of our common stock or rights to purchase our common stock, could cause our stock price to fall.
- Anti-takeover provisions in our governing documents and under Nevada law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.
- Our net operating loss carryforwards and certain other tax attributes may be subject to limitations. The net operating loss carryforwards and certain other tax attributes of us may also be subject to limitations as a result of certain prior ownership changes.
- We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
- We may never pay dividends on our common stock so any returns would be limited to the appreciation of our stock.
- An active trading market for our common stock may not be sustained, and you may not be able to resell your common stock at a desired market price.
- Our internal control over financial reporting may not meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, could have a material adverse effect on our business and share price.
- If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and trading volume could decline.
Management Discussion
- Grant revenue was $2.2 million and $0 for the years ended December 31, 2023 and 2022, respectively. Grant revenue is earned under the Mass General Grant agreement for the expanded access program for ALS, which commenced in 2023.
- Research and development (“R&D”) costs are expensed as they are incurred and include the cost of compensation and related expenses, as well as expenses for third parties who conduct R&D on our behalf. The $28.5 million decrease in R&D expense during the year ended December 31, 2023, as compared to the same period in 2022, is detailed as follows (in thousands, except percentages):
- The $28.5 million decrease in R&D expense during the year ended December 31, 2023, as compared to the same period in 2022, resulted primarily from decreases in (i) clinical trial costs of approximately $17.3 million and contract consulting expenses of approximately $0.7 million, mainly due to the winding down of our clinical trials of SLS-002 and SLS-005, (ii) license payments of approximately $6.3 million under the Repurchase Agreement (as defined below) for the year ended December 31, 2022, (iii) manufacturing costs to support decreased clinical activity of $3.5 million and (iv) a decrease in employee compensation of $0.9 million due to no required bonus accrual for all employees in 2023.