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Citius Oncology (CTOR)
NASDAQ:CTOR
Risk Overview Q4, 2024
Risk Distribution
55% Finance & Corporate
20% Tech & Innovation
10% Legal & Regulatory
8% Ability to Sell
6% Production
2% Macro & Political
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.
Risk Change Over Time
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
Citius Oncology Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.
Risk Highlights Q4, 2024
Main Risk Category
Finance & Corporate
With 28 Risks
Finance & Corporate
With 28 Risks
Number of Disclosed Risks
51
S&P 500 Average: 32
51
S&P 500 Average: 32
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Dec 2024
0Risks added
0Risks removed
0Risks changed
Since Dec 2024
Number of Risk Changed
0
S&P 500 Average: 4
0
S&P 500 Average: 4
See the risk highlights of Citius Oncology in the last period.
Risk Word Cloud
Currently, no data available
The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.
Risk Factors Full Breakdown - Total Risks 51
Finance & Corporate
Total Risks: 28/51 (55%)Below Sector Average
Share Price & Shareholder Rights16 | 31.4%
Share Price & Shareholder Rights - Risk 1
We are controlled by Citius Pharma, whose interests may differ from those of public stockholders.Share Price & Shareholder Rights - Risk 2
Certain of our directors and officers may have actual or potential conflicts of interest because of their positions with Citius Pharma.Suren Dutia, Myron Holubiak, Dr. Eugene Holuka, Leonard Mazur, Dennis McGrath, Robert Smith, and Carol Webb serve on the Board. Mr. Mazur, Jaime Bartushak and Dr. Myron Czuczman, continue to serve as our executive officers. All of these individuals continue in their director and/or management positions with Citius Pharma.
In addition, such directors and officers own shares of Citius Pharma common stock, and warrants and/or options to purchase shares of Citius Pharma common stock. Their position at Citius Pharma and the ownership of Citius Pharma equity or equity awards creates, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for Citius Pharma than the decisions have for the Company. For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between Citius Pharma and the Company regarding the terms of the A&R Shared Services Agreement governing the services provided by Citius Pharma to the Company and the relationship between the companies. Potential conflicts of interest may also arise if the Company enters into commercial arrangements with Citius Pharma in the future. As a result of these actual or apparent conflicts, the Company might be precluded from pursuing certain growth initiatives.
Share Price & Shareholder Rights - Risk 3
Conflicts of interest may arise from our relationship with Citius Pharma.Except for one director, all of our directors, executive officers and employees will also be directors and employees of Citius Pharma; the employees are all available pursuant to the A&R Shared Services Agreement. As a result of this arrangement, our relationship with Citius Pharma could give rise to certain conflicts of interest that could have an impact on our research and development programs, business opportunities, and operations generally.
Even though we are developing different technologies in different fields than Citius Pharma, we could be in competition with Citius Pharma for research scientists, financing and other resources, licensing, manufacturing, and distribution arrangements. Citius Pharma will engage for its own business in research and product development programs, investments, and business ventures, and we will not be entitled to participate or to receive an interest in those programs, investments, or business ventures. Citius Pharma will not be obligated to present any particular research and development, investment, or business opportunity to us, even if the opportunity would be within the scope of our research and development plans or programs, business objectives, or investment policies. These opportunities may include, for example, opportunities to acquire businesses or assets, including but not limited to patents and other intellectual property that could be used by us or by Citius Pharma. Each conflict of interest will be resolved by the respective boards of directors in keeping with their fiduciary duties and such policies as they may implement from time to time.
Share Price & Shareholder Rights - Risk 4
We are an emerging growth company and a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies will make our shares less attractive to investors.We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including exemption from compliance with the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earliest of: (a) the fifth anniversary of the closing of TenX's initial public offering, which was consummated on October 18, 2022, (b) the end of the fiscal year in which our total gross revenues exceed $1.235 billion, (c) the date one we qualify as a large accelerated filer as that term is defined by Rule 12b-2 of the Exchange Act, or (d) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
We are also a smaller reporting company as defined in the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a "smaller reporting company," which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in our registration statements, periodic reports and proxy statements. We will be able to take advantage of these scaled disclosures for so long as our Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and its market price may be more volatile.
Share Price & Shareholder Rights - Risk 5
The Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between the Company and our stockholders and that the federal district courts shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the "Securities Act"), which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees or the underwriters or any offering giving rise to such claim.The Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, the Certificate of Incorporation or the Bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine; provided that this provision would not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In addition, the Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the U.S. federal district courts shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors and officers, which may discourage such lawsuits against us and our directors and officers or could result in increased costs for our stockholders to bring a claim in the chosen forum. If a court were to find the choice of forum provisions in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Share Price & Shareholder Rights - Risk 6
Provisions in our Certificate of Incorporation, Bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.Our Certificate of Incorporation and Bylaws contain provisions that could significantly reduce the value of our shares to a potential acquiror or delay or prevent changes in control or changes in our management without the consent of the Board. The provisions in our governance documents include the following:
- a classified board of directors divided into three classes, with only one class of directors being elected in each year and each class serving a three-year term, which may delay the ability of stockholders to change the membership of a majority of the Board;- no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;- in the event that Citius Pharma ceases to beneficially own more than 50% of the voting power of the then-outstanding shares of stock entitled to vote generally in the election of directors (the "Trigger Event,"), the approval of at least 66-2/3% of the shares entitled to vote will be required to remove a director for cause, and the prohibition on removal of directors without cause;- the ability of the Board to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;- the ability of the Board to alter our Bylaws without obtaining stockholder approval;- upon the occurrence of the Trigger Event, the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal the Bylaws or repeal the provisions of our Certificate of Incorporation regarding the election and removal of directors;- upon the occurrence of the Trigger Event, a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;- upon the occurrence of the Trigger Event, the requirement that a special meeting of stockholders may be called only by the Board, the chair of the Board, the chief executive officer, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;- advance notice procedures that stockholders must comply with in order to nominate candidates to the Board or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror's own slate of directors or otherwise attempting to obtain control of us; and - upon the occurrence of the Trigger Event, we also become subject to the anti-takeover provisions contained in Section 203 of the General Corporation Law of the State of Delaware ("DGCL"). Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of our capital stock unless the holder has held the stock for three years or, among other exceptions, the Board has approved the transaction.
Share Price & Shareholder Rights - Risk 7
Volatility in our share price could subject us to securities litigation.In the past, securities litigation has often been brought against a company following a decline in the market price of its securities. If we face such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.
Share Price & Shareholder Rights - Risk 8
We are a controlled company within the meaning of the Nasdaq continued listing requirements and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. Our stockholders may not have the same protection afforded to stockholders of companies that are subject to such governance requirements.Citius Pharma continues to control approximately 92.3% of the voting power of the outstanding shares of Common Stock as of December 18, 2024. As a result, the Company is a "controlled company" within the meaning of the corporate governance standards of Nasdaq. Under these corporate governance standards, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain corporate governance requirements. For example, controlled companies:
- are not required to have a board that is composed of a majority of "independent directors" as defined under the Nasdaq continued listing requirements;- not required to have a compensation committee that is composed entirely of independent directors or have a written charter addressing the committee's purpose and responsibilities; and - are not required to have director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominating and corporate governance committee that is composed entirely of independent directors, and to adopt a written charter or a board resolution addressing the nominations process.
While we do not currently rely on these exemptions, we may opt to utilize these exemptions in the future as long as we remain a controlled company. Accordingly, our stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Share Price & Shareholder Rights - Risk 9
The Certificate of Incorporation of Company allows for our Board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of the Common Stock.The Board has the authority to issue up to 10,000,000 shares of preferred stock and to fix and determine the relative rights and preferences of any such preferred stock without further stockholder approval. As a result, the Board could authorize the issuance of one or more series of preferred stock that would grant preferential rights to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of Common Stock and the right to the redemption of the preferred shares, together with a premium, prior to the redemption of the Common Stock. In addition, the Board could authorize the issuance of a series of preferred stock that has greater voting power than the Common Stock or that is convertible into Common Stock, which could decrease the relative voting power of the Common Stock or result in dilution to existing stockholders.
Share Price & Shareholder Rights - Risk 10
If our Common Stock were delisted and determined to be a "penny stock," a broker-dealer may find it more difficult to trade the Common Stock and an investor may find it more difficult to acquire or dispose of the Common Stock in the secondary market.If our Common Stock were removed from listing with The Nasdaq Capital Market, we may be subject to the so-called "penny stock" rules. The U.S. Securities and Exchange Commission (the "SEC") has adopted regulations that define a "penny stock" to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange, which is the exception on which we rely. For any transaction involving a "penny stock," unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If the Common Stock were delisted and determined to be a "penny stock," a broker-dealer may find it more difficult to trade the Common Stock and an investor may find it more difficult to acquire or dispose of the Common Stock on the secondary market.
Share Price & Shareholder Rights - Risk 11
If we fail to meet the Nasdaq continued listing requirements, it could result in a suspension or delisting of the Common Stock.The Common Stock is listed for trading on The Nasdaq Capital Market, and the continued listing of the Common Stock on The Nasdaq Capital Market is subject to compliance with a number of listing standards. These listing standards include the requirement of maintaining a minimum level of stockholders' equity and maintaining a minimum stock price of $1.00. The failure to meet any listing standard would subject Company to potential loss of listing.
If the Common Stock were no longer listed on The Nasdaq Capital Market or any other Nasdaq market, investors might only be able to trade on one of the over-the-counter markets, including the OTC Bulletin Board or in the Pink Sheets (a quotation medium operated by Pink Sheets LLC). This would impair the liquidity of the Common Stock, not only in the number of shares that could be bought and sold at a given price, which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media coverage. In addition, we could face significant material adverse consequences, including:
- a limited availability of market quotations for our securities;- a limited amount of news and analyst coverage for us; and - a decreased ability to issue additional securities or obtain additional financing in the future.
In the event of a future delisting, we intend to take actions to restore our compliance with Nasdaq's continued listing requirements, but we can provide no assurance that any such action taken by us would allow our Common Stock to become listed again, stabilize the market price or improve the liquidity of our Common Stock, prevent our Common Stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq's continued listing requirements.
Share Price & Shareholder Rights - Risk 12
Substantial sales of our Common Stock may occur in connection with the potential distribution of shares by Citius Pharma, which could cause our stock price to decline.Citius Pharma has stated its intention to effect a pro rata distribution of the Common Stock it holds in Citius Oncology to Citius Pharma stockholders. Approximately 92.3% of our outstanding shares of Common Stock are owned by Citius Pharma. The timeline and details with respect to such distribution have not been announced. Stockholders receiving shares of our Common Stock in such distribution may be able to sell those shares immediately in the public market. Although we have no actual knowledge of any plan or intention of any significant Citius Pharma stockholder to sell our Common Stock following the potential distribution, it is likely that some Citius Pharma stockholders, possibly including some of its larger stockholders, would sell their shares of our Common Stock received in the potential distribution if we do not fit their investment objectives or in order to cover the related tax liability. The sales of significant amounts of our Common Stock or the perception in the market that this will occur may decrease the market price of our Common Stock and increase the volatility of our Common Stock.
Share Price & Shareholder Rights - Risk 13
You may experience dilution of your ownership interests because of the future issuance of additional shares of Common Stock or securities convertible into Common Stock.For the foreseeable future, to finance our operations, including possible acquisitions or strategic transactions, we expect to issue equity securities, resulting in the dilution of the ownership interests of the present stockholders. The Company is currently authorized to issue an aggregate of 100,000,000 shares of Common Stock and 10,000,000 shares of preferred stock, of which 71,552,402 shares are outstanding as of December 18, 2024. We may also issue additional shares of Common Stock or other securities that are convertible into or exercisable for Common Stock in financings as well as in connection with hiring or retaining employees, or for other business purposes. The future issuance of any such additional shares of Common Stock or Common Stock equivalents may create downward pressure on the trading price of the Common Stock.
Share Price & Shareholder Rights - Risk 14
Future sales of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.Subject to certain exceptions, the amended and restated registration rights agreement entered into in connection with the Merger (the "A&R Registration Rights Agreement") provides for certain restrictions on transfer with respect to the securities of the Company, including shares held by 10XYZ Holdings, LP, the sponsor of TenX, and securities held by certain directors and officers of the Company and Citius Pharma. Such restrictions expire February 9, 2025, subject to certain exceptions. Following the expiration of the lock-up period, such equity holders will not be restricted from selling or distributing shares of Common Stock held by them, other than by applicable securities laws.
Further, because we are not expected to generate revenue in the near future, we will need to continue to raise capital through one or more equity financings in order to continue commercializing LYMPHIR and developing our other product candidates. As such, sales of a substantial number of shares of Common Stock and/or securities convertible into Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of the Common Stock.
Share Price & Shareholder Rights - Risk 15
The market price of our Common Stock is highly volatile, and you may lose some or all of your investment.Following the Merger, the market price of our Common Stock has fluctuated significantly due to a number of factors, some of which are beyond our control, including those factors discussed in this "Risk Factors and Risk Factor Summary" section and many others, such as:
- the Company's cash resources available to continue commercialization and development of LYMPHIR;- the Company's ability to meet its contractual obligations;- our ability to commercialize LYMPHIR or any future product candidates, if approved;- the level of success and the cost of our marketing efforts for LYMPHIR and any future product candidates;- unanticipated serious safety concerns related to the use of LYMPHIR or any other product candidate;- announcements regarding results of any pre-clinical or clinical trials relating to our future product candidates;- adverse regulatory decisions;- changes in laws or regulations applicable to LYMPHIR or any future product candidates, including but not limited to clinical trial requirements for approvals and post-approval requirements;- our dependence on third parties and on Citius Pharma under the A&R Shared Services Agreement;- future issuances of debt or equity securities;- actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results;- our inability to establish additional partnerships, the termination of license agreements by our existing partners or announcements by our partners regarding therapeutic candidates competitive with ours;- the introduction of new technologies or enhancements to existing technologies by us or others in the industry;- the recruitment or departure of key scientific or management personnel;- announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;- our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;- publication of research reports about us, the indications we seek to treat or our industry, or oncology research in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;- changes in the market valuations of similar companies;- overall performance of the equity markets;- announcements or actions taken by Citius Pharma as the Company's majority stockholder;- sales (or distributions) of our Common Stock by Citius Pharma, or our other stockholders in the future;- trading volume of our Common Stock;- legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain and maintain patent protection for LYMPHIR or any future product candidates, government investigations and the results of any proceedings or lawsuits, including, but not limited to, patent or stockholder litigation;- significant lawsuits, including patent or stockholder litigation;- the impact of any natural disasters or public health emergencies, such as occurred with the COVID-19 pandemic;- general economic, industry and market conditions other events or factors, many of which are beyond our control; and - changes in accounting standards, policies, guidelines, interpretations or principles.
In addition, in the past, stockholders have initiated Company action lawsuits against biotechnology and biopharmaceutical companies following periods of volatility in the market prices of these companies' stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert our management's attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.
Share Price & Shareholder Rights - Risk 16
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse opinion regarding our Common Stock, our stock price and trading volume could decline.The trading market for Common Stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. We currently have research coverage by three securities and industry analysts. If any of the analysts who cover us issue an adverse opinion regarding us, our business model, our intellectual property or our stock performance, or if our commercialization efforts for LYMPHIR, or any clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Accounting & Financial Operations6 | 11.8%
Accounting & Financial Operations - Risk 1
Our operating results may fluctuate significantly.Accounting & Financial Operations - Risk 2
We have not paid cash dividends in the past and we do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the capital appreciation, if any, of the Common Stock.We have not paid cash dividends on our Common Stock and we do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as our Board may consider relevant. In addition, our ability to pay dividends may be limited by covenants in any future outstanding indebtedness that we may incur. Since we do not intend to pay dividends, a stockholder's ability to receive a return on such stockholder's investment will depend on any future appreciation in the market value of the Common Stock. There is no guarantee that the Common Stock will appreciate or even maintain the price at which our stockholders have purchased it.
Accounting & Financial Operations - Risk 3
If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, the Company's results of operations could be adversely affected.The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We will base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances, as provided in "The Company Management's Discussion and Analysis of Financial Condition and Results of Operations?-?Critical Accounting Policies and Estimates." The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our financial statements include the treatment of research and development costs and in-process research and development. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Common Stock.
Additionally, we will regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position, and profit.
Accounting & Financial Operations - Risk 4
Our financial statements may not necessarily be indicative of the conditions that would have existed if we had been operated as an unaffiliated company of Citius Pharma.Citius Pharma provides all of our operational functions, systems and infrastructure pursuant to the A&R Shared Services Agreement. Our financial statements reflect charges for these services on an allocation basis. As a result, our historical financial statements may not be reflective of conditions that would have existed or what our results of operations would have been had we been a stand-alone public company and no longer a majority-owned subsidiary of Citius Pharma. We may incur additional internal costs to implement certain new systems, including infrastructure and an enterprise resource planning system, while our legacy systems are currently being fully supported by Citius Pharma.
We may also need to make investments or hire additional employees to operate without the same access to Citius Pharma' existing operational and administrative infrastructure. These initiatives may be costly to implement. Due to the scope and complexity of the underlying projects relative to these efforts, the amount of total costs could be materially higher than what is currently estimated, and the timing of the incurrence of these costs is subject to change.
These potential costs could have a material adverse effect on the Company's operations and revenues.
Accounting & Financial Operations - Risk 5
We have a limited operating history upon which to evaluate our ability to successfully commercialize LYMPHIR and any future product candidate.We have one approved product candidate, LYMPHIR, while future product candidates, if any, resulting from our ongoing research with LYMPHIR for other possible indications, are and would be in the pre-clinical stage. As a result, our success is dependent upon our ability to commercialize LYMPHIR, and we, as a company, have not demonstrated an ability to perform the functions necessary for the approval or successful commercialization of any current or future product candidates. While various members of our executive management and key employees have significant prior experience in pharmaceutical development, as a company we have to date successfully completed only one late-stage clinical trial (much of which had been undertaken by Eisai prior to our in-licensing of the intellectual property for LYMPHIR) and we are undertaking commercialization activities for the first time for LYMPHIR. Despite our progress with LYMPHIR, our operations have been limited primarily to business planning, research and development, and raising capital. These operations provide a limited basis for you to assess our ability to successfully commercialize our current or future product candidates and the advisability of investing in the securities.
Accounting & Financial Operations - Risk 6
We have a history of net losses and expect to incur losses for the foreseeable future. We may never generate revenues or, if we are able to generate revenues, achieve profitability.We were formed in August 2021 and began operations in April 2022 when Citius Pharma transferred the assets related to LYMPHIR to us, including the license agreement with Eisai and the asset purchase agreement with of Dr. Reddy's. Our ability to become profitable depends upon our ability to generate revenues from sales of LYMPHIR, and any future product candidates, if any, resulting from our ongoing research with LYMPHIR for other possible indications. We have been focused on product development and have not generated any revenues to date. We have incurred losses in each period of our operations, and we expect to continue to incur losses for the foreseeable future. These losses are likely to continue to adversely affect our working capital, total assets, and stockholders' equity. The process of developing product candidates requires significant clinical development, laboratory testing and clinical trials. In addition, commercialization of LYMPHIR and any future approved product candidates requires that we establish sales, marketing, and manufacturing capabilities, through internal hiring and contractual relationships with others. We expect to incur substantial losses for the foreseeable future as a result of anticipated the commercial launch of LYMPHIR, increases in our research and development costs, including costs associated with conducting preclinical testing and clinical trials for any other potential products, and regulatory compliance activities. We incurred net losses of $ $21,148,747 for the year ended September 30, 2024. At September 30, 2024, the Company had stockholders' equity of $46,140,339 and an accumulated deficit of $39,278,587. The Company is currently funded by Citius Pharma. Citius Pharma funded the Company with net cash used for our operating activities in the amounts of $14,270,648 for the year ended September 30, 2024.
As of September 30, 2024, have outstanding commitments totaling $25.7 million to third-party suppliers and manufacturers, primarily related to the development and commercialization of LYMPHIR, and an aggregate of $28.4 million of due and outstanding amounts under our license agreements, that, if left unpaid, could result in a delay in the commercialization of LYMPHIR, breach of contract, loss of licensing rights or other events that would have a material adverse effect on our business and operations.
Our ability to generate revenues and achieve profitability will depend on numerous factors, including success in:
- successfully commercializing LYMPHIR and any future product candidates that receive regulatory approval;- obtaining medical insurance coverage for LYMPHIR and any future product candidates;- manufacturing commercial quantities of LYMPHIR and any future product candidates at acceptable cost levels;- establishing a favorable competitive position for LYMPHIR and any future product candidates;- receiving regulatory approvals for any future product candidates; and - developing and testing future product candidates.
Many of these factors will depend on circumstances beyond the Company's control.
Debt & Financing1 | 2.0%
Debt & Financing - Risk 1
We require substantial additional funding in the near future to support our operations, complete the commercialization of LYMPHIR, which may not be available on acceptable terms, or at all.Corporate Activity and Growth5 | 9.8%
Corporate Activity and Growth - Risk 1
Citius Pharma currently performs or supports many of our important corporate functions, which would be difficult to replace if Citius Pharma were to cease providing.Corporate Activity and Growth - Risk 2
We expect to need to increase the size of our organization to further develop our product candidates, and we may experience difficulties in managing growth.We will need to manage our anticipated growth and increased operational activity, including as a result of the planned commercialization of LYMPHIR and of any future product candidates. Our personnel, systems, and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute the growth strategy will require that we:
- successfully commercialize LYMPHIR and any future product candidates;- manage our research and development activities for future product candidates and our regulatory trials effectively;- attract and motivate sufficient numbers of talented employees or consultants;- manage our internal development efforts effectively while complying with our contractual obligations to licensors, licensees, contractors, collaborators and other third parties;- develop internal sales and marketing capabilities or establish collaborations with third parties with such capabilities; and - improve our operational, financial and management controls, reporting systems and procedures.
This planned future growth could place a strain on our administrative and operational infrastructure and may require our management to divert a disproportionate amount of our attention away from our day-to-day activities. We may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel, which may result in weaknesses in our infrastructure, and give rise to operational mistakes, loss of business opportunities, loss of employees and consultants and reduced productivity among remaining employees and consultants. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. If management is unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate or increase revenues could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.
Corporate Activity and Growth - Risk 3
Any termination, or breach by, or conflict with our strategic partners could harm our business.If we or any of our current or future collaborators fail to renew or terminate any of the collaboration or license agreements or if either party fails to satisfy their obligations under any of the collaboration or license agreements or complete them in a timely manner, we could have difficulty completing the commercialization of LYMPHIR and the development and commercialization of any future product candidate and potentially lose significant sources of revenue, which could result in an adverse impact on our operations and financial condition as well as volatility in any future revenue. In addition, the agreements with our collaborators may have provisions that give rise to disputes regarding the rights and obligations of the parties. These and other possible disagreements could lead to termination of the agreement or delays in collaborative research, development, supply, or commercialization of LYMPHIR and any future product candidate, or could require or result in litigation or arbitration. Any such conflicts with the collaborators could reduce our ability to obtain future collaboration agreements and could have a negative impact on our relationship with existing collaborators, adversely affecting our business and revenues. Finally, any of our collaborations may prove to be unsuccessful.
Under the license agreement for the intellectual property for LYMPHIR, either party may terminate the license agreement upon written notice if the other party is in material breach of the agreement, subject to cure within the designated time periods. By breaching any of our covenants, including failure to make timely payments, we risk the loss of the license, which would have a material adverse effect on our business.
Corporate Activity and Growth - Risk 4
In the event we do not successfully complete a strategic transaction, should this be deemed necessary, our Board of Directors may decide to pursue a dissolution and liquidation of our Company. In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.There can be no guarantee that the process to identify strategic transactions will result in successfully completed transactions when necessary. If additional transactions are not completed that enable us to continue the commercialization of LYMPHIR and sustain our business operations, our Board of Directors may decide that it is in the best interest of our stockholders to dissolve our Company and liquidate our assets. In that event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, ultimately, such liquidation since the amount of cash available for distribution continues to decrease as we fund our operations and evaluate our strategic alternatives. In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution of our Company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders. As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations. In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our Company. If a dissolution and liquidation were pursued, our Board, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a dissolution, liquidation or winding up of our Company.
Corporate Activity and Growth - Risk 5
Our ongoing exploration of alternative strategic paths may not result in entering into or completing transactions, when necessary, and the process of reviewing alternative strategic paths or their conclusion could adversely affect our stock price.We continue to evaluate strategic paths to provide the resources necessary to commercialize LYMPHIR and maximize stockholder value. Potential strategic paths may include partnerships, joint ventures, mergers, acquisitions, or licensing transactions, a combination of these, or other strategic transactions. There can be no assurance, however, that our evaluation will result in transactions or other alternatives, even when deemed necessary. There is no set timetable for our strategic process and we do not intend to provide updates unless or until the Board of Directors approves a specific action or otherwise determines that disclosure is appropriate or necessary.
Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us, obtaining stockholder approval and the availability of financing to third parties in a potential transaction with us on reasonable terms. The process of reviewing alternative strategic paths may be time consuming and may involve the dedication of significant resources and may require us to incur significant costs and expenses. It could negatively impact our ability to attract, retain and motivate employees, and expose us to potential litigation in connection with this process or any resulting transaction. If we are unable to effectively manage the process, our financial condition and results of operations could be adversely affected. In addition, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our Company could cause our stock price to fluctuate significantly. Further, any alternative strategic paths that may be pursued and completed ultimately may not deliver the anticipated benefits or enhance stockholder value. There can be no guarantee that the process of evaluating alternative strategic paths will result in our Company entering into or completing potential transactions within the anticipated timing or at all.
Tech & Innovation
Total Risks: 10/51 (20%)Above Sector Average
Innovation / R&D4 | 7.8%
Innovation / R&D - Risk 1
We have one approved product and have an unproven business strategy and may never achieve commercialization of LYMPHIR or any future product candidates or achieve or maintain profitability.Innovation / R&D - Risk 2
The results of pre-clinical studies and completed clinical trials are not necessarily predictive of future results, and our current and any future product candidates may not have favorable results in later studies or trials.Pre-clinical studies and Phase 1 and Phase 2 clinical trials are not primarily designed to test the efficacy of a product candidate in the general population, but rather to test initial safety, to study pharmacokinetics and pharmacodynamics, to study limited efficacy in a small number of study patients in a selected disease population, and to identify and attempt to understand the product candidate's side effects at various doses and dosing schedules. Success in pre-clinical studies or completed clinical trials does not ensure that later studies or trials, including continuing pre-clinical studies and large-scale clinical trials, will be successful nor does it predict future results. Favorable results in early studies or trials may not be repeated in later studies or trials, and product candidates in later stage trials may fail to show acceptable safety and efficacy despite having progressed through earlier trials. In addition, the placebo rate in larger studies may be higher than expected.
We may be required to demonstrate through large, long-term outcome trials that our future product candidates, if any, are safe and effective for use in a broad population prior to obtaining regulatory approval. This would increase the duration and cost of any such trial.
There is typically a high rate of attrition from the failure of product candidates proceeding through clinical trials. In addition, certain subjects in clinical trials may respond positively to placebo treatment - these subjects are commonly known as "placebo responders" - making it more difficult to demonstrate efficacy of the trial drug compared to placebo.
If any of our future product candidates fail to demonstrate sufficient safety and efficacy in any clinical trial, we will experience potentially significant delays and cost increases in, or may decide to abandon development of, that product candidate. If we abandon or are delayed, or experience increased costs in our development efforts related to any of our product candidates, we may not have sufficient resources to continue or complete development of that potential product candidate or any other product candidates. We may not be able to continue our operations and clinical studies, or generate any revenue or become profitable. Our reputation in the industry and in the investment community would likely be significantly damaged. Further, it might not be possible for us to raise funds in the public or private markets, and the stock price would likely decrease significantly.
Innovation / R&D - Risk 3
We face significant risks in our development efforts of LYMPHIR and any future product candidate.Our business depends on the successful development and commercialization of LYMPHIR. We are not permitted to market any product candidate in the U.S. until we receive approval from the FDA, or in any foreign jurisdiction until we receive the requisite approvals from such jurisdiction. We received approval from the FDA for LYMPHIR in August 2024. The process of developing new drugs and/or therapeutic products is inherently complex, unpredictable, time-consuming, expensive and uncertain. We must make long-term investments and commit significant resources before knowing whether our development programs will result in products that will receive regulatory approval and achieve market acceptance. For example, while LYMPHIR received FDA approval in August 2024, we had incurred significant expenses in its development and planned commercialization; as of September 30, 2024, we had outstanding obligations of approximately $54.1 million to third parties for LYMPHIR licensing, supply and other costs. Product candidates that appear to be promising at some or all stages of development may not receive approval or reach the market for a number of reasons that may not be predictable based on results and data of the clinical program. Product candidates may be found ineffective or may cause harmful side effects during clinical trials, may take longer to progress through clinical trials than had been anticipated, may not be able to achieve the pre-defined clinical endpoints due to statistical anomalies even though clinical benefit may have been achieved, may fail to receive necessary regulatory approvals, may prove impracticable to manufacture in commercial quantities at reasonable cost and with acceptable quality, or may fail to achieve market acceptance.
The FDA has substantial discretion in the drug approval process, including the ability to delay, limit or deny approval of our future product candidates, if any, for many reasons. For example, the FDA:
- may not find the data from clinical trials sufficient to support the submission of a Biologics License Application ("BLA") for our future product candidates or to obtain marketing approval in the U.S., including any findings that the clinical and other benefits of our future product candidates outweigh their safety risks. As an example, in July 2023, the FDA issued a CRL to our BLA for LYMPHIR, which required us to incorporate enhanced product testing and additional controls and which caused a delay of six months before we could resubmit the BLA;- could determine that the information provided by us is inadequate, contained clinical deficiencies or otherwise failed to demonstrate the safety and effectiveness of any of our future product candidates for any indication;- may disagree with the trial design or our interpretation of data from preclinical studies or clinical trials, or may change the requirements for approval even after the FDA has reviewed and commented on the design for the trials;- may identify deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we enter into agreements for the manufacture of our future product candidates;- may approve our future product candidates for fewer or more limited indications than we request, or may grant approval contingent on the performance of costly post-approval clinical trials;- may change the FDA approval policies or adopt new regulations that could adversely impact our future product candidate development programs; or - may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our future product candidates, or may require labeling claims that impair the potential market acceptance of our future product candidates.
These same risks are generally applicable to the regulatory process in foreign countries. Any failure to obtain regulatory approval of our future product candidates, if any, would significantly limit our ability to generate revenues, and any failure to obtain such approval for all of the indications and labeling claims we deem desirable could reduce our potential revenues.
Innovation / R&D - Risk 4
We currently have only one approved product and we are heavily dependent on the planned launch and commercial success of LYMPHIR.We have one product LYMPHIR, which was approved for commercial sale in August 2024. We are pursuing other future product candidates, based on our ongoing research with LYMPHIR for other possible indications all of which are in the pre-clinical stage. We are entirely dependent upon the successful commercial launch of LYMPHIR to generate revenue for the foreseeable future. The commercial launch in the U.S. is not expected to occur until the first half of 2025. As a result, it is difficult to evaluate our current business and predict our future prospects. We cannot assure you that LYMPHIR will gain market acceptance among physicians, health care payors, patients and the medical community, which is critical to our commercial success. As a company, we have limited experience engaging in commercial activities and limited relationships with physicians, hospitals and payors. Market acceptance of LYMPHIR will depend on a number of factors, including:
- acceptance by physicians, major operators of clinics and patients of LYMPHIR as a safe and effective treatment for CTCL;- the availability, cost and potential advantages of existing and any future alternative treatments;- the effectiveness of our sales and marketing efforts;- the availability of coverage, adequacy of reimbursement and favorability of pricing policies by third-party payors and government authorities;- the prevalence and severity of adverse side effects; and - the timing of market introduction of other competitive products, if any.
In order to successfully commercialize LYMPHIR, we will need to establish our marketing program, which we are in the process of doing. However, physicians may decide not to prescribe LYMPHIR for a variety of reasons, including perceived safety issues, inadequate coverage or reimbursement for LYMPHIR or the utilization of products developed by other parties, all of which are circumstances outside of our control. Demand for LYMPHIR may not develop as quickly as we expect, and we may be unable to generate revenue to the level that we currently expect. Even if we succeed in obtaining market acceptance of LYMPHIR, we may be unable to reach or sustain a level of profitability.
Our ability to effectively promote LYMPHIR will also depend on pricing and cost-effectiveness, including our ability to produce LYMPHIR at a competitive price. In addition, our efforts to educate the medical community and third-party payors on the benefits of LYMPHIR may require significant resources, may be constrained by FDA rules and policies on product promotion and may never be successful.
Trade Secrets5 | 9.8%
Trade Secrets - Risk 1
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition and our business, financial condition and results of operations may be adversely affected.Trade Secrets - Risk 2
If we infringe the rights of third parties we might have to forego developing and/or selling any approved products, pay damages, or defend against litigation.If our product candidates, methods, processes, and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and we might have to:
- obtain licenses, which might not be available on commercially reasonable terms, if at all;- abandon an infringing product candidate;- redesign the product candidates or processes to avoid infringement;- stop using the subject matter claimed in the patents held by others;- pay damages; and/or - defend litigation or administrative proceedings which might be costly whether the Company wins or loses, and which could result in a substantial diversion of our financial and management resources.
Any of these events could substantially harm the Company's earnings, financial condition, and operations.
Trade Secrets - Risk 3
We rely on trade secret protections through confidentiality agreements with our employees and other parties, and the breach of these agreements could adversely affect our business and prospects.We rely on trade secrets, which we seek to protect, in part, through confidentiality and non-disclosure agreements with our employees, collaborators, suppliers, and other parties. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any such breach or that our trade secrets will not otherwise become known to or independently developed by our competitors. We might be involved from time to time in litigation to determine the enforceability, scope and validity of our proprietary rights. Any such litigation could result in substantial cost and divert management's attention from our operations.
Trade Secrets - Risk 4
Our business depends on protecting our intellectual property.Without the intellectual property rights we have already obtained, as well as the further rights we expect to pursue, our competitors would have opportunity to take advantage of our research and development efforts to develop competing products. Our success, competitive position, and future revenues, if any, depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our product candidates, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. We anticipate filing additional patent applications both in the U.S. and in other countries, as appropriate. However, the patent process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our product candidates by obtaining and defending patents. These risks and uncertainties include the following:
- our patent rights might be challenged, invalidated, or circumvented, or otherwise might not provide any competitive advantage;- our competitors, many of which have substantially greater resources than we do and many of which might make significant investments in competing technologies, might seek, or might already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and sell our product candidates either in the U.S. or in international markets;- countries other than the U.S. might have less restrictive patent laws than those upheld by U.S. courts, allowing foreign competitors the ability to exploit these laws to create, develop, and market competing products; and - as a matter of public policy regarding worldwide health concerns, there might be significant pressure on the U.S. government and other international governmental bodies to limit the scope of patent protection both inside and outside the U.S. for product candidates that prove successful.
In addition, the U.S. Patent and Trademark Office ("USPTO") and patent offices in other jurisdictions have often required that patent applications concerning pharmaceutical and/or biotechnology-related inventions be limited or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope of protection against competitive challenges. Thus, even if we or our licensors are able to obtain patents, the patents might be substantially narrower than anticipated.
Because the time period from filing a patent application to the issuance, if ever, of the patent is often more than three years and because any regulatory approval and marketing for a pharmaceutical product often occurs several years after the related patent application is filed, the resulting market exclusivity afforded by any patent on drug candidates and technologies will likely be substantially less than 20 years. In the U.S., the European Union and some other jurisdictions, patent term extensions are available for certain delays in either patent office proceedings or marketing and regulatory approval processes. However, due to the specific requirements for obtaining these extensions, there is no assurance that our patents will be granted extensions even if we encounter significant delays in patent office proceedings or marketing and regulatory approval.
Additionally, patent law is subject to change and varies among the U.S. and foreign countries. Depending on decisions by the U.S. Congress, the U.S. federal courts, the USPTO or similar authorities in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that may weaken us and our licensors' abilities to obtain new patents or to enforce existing patents that we and our licensors or partners may obtain in the future.
Patent and other intellectual property protection is crucial to the success of our business and prospects, and there is a substantial risk that such protections will prove inadequate. Our business and prospects will be harmed if these protections prove insufficient.
Trade Secrets - Risk 5
We are and may be required to make milestone payments to the licensor and former licensee of the LYMPHIR intellectual property in connection with our development and commercialization of LYMPHIR, which could adversely affect the profitability of LYMPHIR.Under the terms of the License Agreement with Eisai, we are required to pay Eisai a $5.9 million development milestone payment upon initial approval by the FDA of LYMPHIR for the CTCL indication, which occurred in August 2024, and an aggregate of up to $22 million related to the achievement of net product sales thresholds. Under the terms of the agreement with Dr. Reddy's, we are obligated to pay up to an aggregate of $40 million related to CTCL approvals in the U.S. and other markets, up to $70 million in development milestones for additional indications, and up to $300 million for commercial sales milestones. Further, under the agreement with Dr. Reddy's, we are required to (i) use commercially reasonable efforts to make commercially available products in the CTCL indication, peripheral T-cell lymphoma indication and immuno-oncology indication, (ii) initiate two investigator initiated immuno-oncology trials, (iii) use commercially reasonable efforts to achieve each of the approval milestones, and (iv) complete each specified immuno-oncology investigator trial on or before September 1, 2025, the four-year anniversary of the effective date of the definitive agreement. Additionally, we are required to commercially launch a product in a territory within six months of receiving regulatory approval for such product in each such jurisdiction.
Pending further discussions with Dr. Reddy's, Dr. Reddy's agreed to a partial deferral without penalty of a milestone payment by Citius Oncology, which was triggered upon regulatory approval of LYMPHIR by the FDA and due on September 9, 2024, pursuant to the terms of the Asset Purchase Agreement. These development and milestone obligations impose substantial additional costs on us, and could divert resources from other aspects of our business and adversely affect the overall profitability of LYMPHIR. We need to obtain additional financing to satisfy these milestone payments, and cannot be sure that any additional funding will be available on terms favorable to us, or at all.
Cyber Security1 | 2.0%
Cyber Security - Risk 1
We are subject to information technology and cyber-security threats which could have an adverse effect on our business and results of operations.Legal & Regulatory
Total Risks: 5/51 (10%)Below Sector Average
Regulation3 | 5.9%
Regulation - Risk 1
Following the regulatory approval of LYMPHIR, we remain subject to ongoing regulatory obligations and restrictions, which may result in significant expense and limit our ability to commercialize LYMPHIR and any future approved products.Regulation - Risk 2
The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.If we are found to have improperly promoted off-label uses of LYMPHIR or any other product candidates, if approved, or if we are found to have improperly engaged in pre-approval promotion prior to the approval of such product candidates, we may become subject to significant liability. Such enforcement has become more common in the pharmaceutical industry. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as LYMPHIR and any other product candidates that might be approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product's approved labeling. If we receive marketing approval for our product candidates for the proposed indications, physicians may nevertheless use the product for their patients in a manner that is inconsistent with the approved label, if the physicians believe in their professional medical judgment, it could be used in such manner. However, if we are found to have promoted a product for any off-label uses, the federal government could levy civil, criminal and/or administrative penalties, and seek fines against us. The FDA, Department of Justice or other regulatory authorities could also request that we enter into a consent decree or a corporate integrity agreement, or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed. If we cannot successfully manage the promotion of LYMPHIR or any other product candidates that receive approval, we could become subject to significant liability, which would materially adversely affect our business, financial condition and results of operations.
Regulation - Risk 3
We might not obtain the necessary U.S. or foreign regulatory approvals to commercialize any future product candidates.We cannot assure you that we will receive the approvals necessary to commercialize for sale any future product candidates that we might acquire or seek to develop in the future. We will need FDA approval to commercialize our product candidates in the U.S. In order to obtain FDA approval of any product candidate, we must submit to the FDA a NDA or a BLA demonstrating that the product candidate is safe for humans and effective for the intended use. This demonstration requires significant research, pre-clinical studies, and clinical trials. Satisfaction of the FDA's regulatory requirements typically takes many years, depends upon the type, complexity and novelty of the product candidate and requires substantial resources for research, development and testing. We cannot predict whether our research and clinical approaches will result in products that the FDA considers safe for humans and effective for their indicated uses. The FDA has substantial discretion in the product approval process and might require us to conduct additional pre-clinical and clinical testing, perform post-marketing studies or otherwise limit or impose conditions on any additional approvals we obtain. The approval process might also be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during a future product candidate's regulatory review. Delays in obtaining regulatory approvals might:
- delay commercialization of, and our ability to derive product revenues from, any future product candidates;- impose costly procedures on us; and - diminish any competitive advantages that we might otherwise enjoy.
Even if we comply with all FDA requests, the FDA might ultimately reject one or more of the NDAs or BLAs. Even if we are able to obtain regulatory approval for a particular future product candidate, the approval might limit the indicated medical uses for the product, limit our ability to promote, sell, and distribute the product, require that we conduct costly post-marketing surveillance, and/or require that we conduct ongoing post-marketing studies. Even if U.S. regulatory approval is obtained, the FDA may still impose significant restrictions on a product's indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. For example, the label ultimately approved for any of our product candidates, if any, may include restrictions on use. If so, we may be subject to ongoing regulatory obligations and restrictions, which may result in significant expense and limit our ability to commercialize that product candidate. The FDA could also require a registry to track the patients utilizing the product or implement a Risk Evaluation and Mitigation Strategy, or REMS, which could restrict access to the product, which would reduce our revenues and/or increase our costs. Potentially costly post-marketing clinical studies may be required as a condition of approval to further substantiate safety or efficacy, or to investigate specific issues of interest to the regulatory authority. We cannot be sure that we will ever obtain regulatory clearance for any additional product candidates. Foreign jurisdictions impose similar regulatory approval processes and we will face the same risks if we seek foreign approval for any of our product candidates. There is no guarantee that we will ever be able to successfully develop any additional product candidate.
Litigation & Legal Liabilities2 | 3.9%
Litigation & Legal Liabilities - Risk 1
We could be forced to pay substantial damage awards if product liability claims that may be brought against us are successful.Litigation & Legal Liabilities - Risk 2
A material breach or default under any of our license agreements, including failure to make timely payments when due, gives the licensor party to such agreement the right to terminate the license agreement, which termination would materially harm our business.Our commercial success will depend in part on the maintenance of our current and any future license agreements. Our license agreements impose, and we expect that future license agreements will impose on us, various diligence, milestone payment, royalty and other obligations. For example, under the license agreement and related purchase agreement for the intellectual property for LYMPHIR, we are required to use commercially reasonable diligence to develop and commercialize a product and to satisfy specified payment obligations for various developmental and regulatory milestones. Specifically, upon the approval of LYMPHIR, we became subject to the payment of an aggregate of $27.5 million under the license agreements covering LYMPHIR. Pending further discussions with Dr. Reddy's, Dr. Reddy's agreed to a partial deferral without penalty of a milestone payment by us, which was triggered upon regulatory approval of LYMPHIR by the FDA and due on September 9, 2024, pursuant to the terms of the Asset Purchase Agreement.
If we fail to comply with our obligations under the current license agreements or any future license agreements with any party, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license. Each of our license agreements provides the licensor with a right to terminate the license agreement for our material breach or default under the agreement, including the failure to make any required milestone or other payments. Should the licensor under any of the license agreements exercise such a termination right, we would lose our right to the intellectual property under the respective license agreement, which loss would materially harm our business.
Ability to Sell
Total Risks: 4/51 (8%)Above Sector Average
Competition1 | 2.0%
Competition - Risk 1
The markets in which we operate are highly competitive and we might be unable to compete successfully against new entrants or established companies.Sales & Marketing3 | 5.9%
Sales & Marketing - Risk 1
We will not be able to create a market for LYMPHIR or any future product candidate if we fail to establish marketing, sales, and distribution capabilities.Sales & Marketing - Risk 2
LYMPHIR may not gain market acceptance among physicians, patients, healthcare payers or the medical community and may not generate significant revenue.LYMPHIR may not gain market acceptance among physicians, patients, healthcare payers or the medical community. Coverage and reimbursement of our product candidates by third-party payers, including government payers, generally is also necessary for commercial success. We believe that the degree of market acceptance and our ability to generate revenues from any approved product candidate or acquired approved product will depend on a number of factors, including:
- prevalence and severity of any side effects;- perceptions by members of the health care community, including physicians, about the safety and effectiveness of LYMPHIR;- perceptions by members of the health care community, including physicians, about the use of LYMPHIR versus the respective standards of care or other alternatives for the disease or problem that we seek to address with LYMPHIR;- results of any post-approval studies of the product;- availability of coverage and reimbursement from government and other third-party payers;- the willingness of patients to pay out of pocket in the absence of government or third-party coverage;- the relative convenience and ease of administration and dosing schedule;- product labeling or product insert requirements of the FDA or other regulatory authorities;- effective sales, marketing and distribution efforts by us and/or any future licensees and distributors, if any;- price of any future products, if approved, both in absolute terms and relative to alternative treatments;- the effectiveness of our or any future collaborators' sales and marketing strategies;- patient access programs that require patients to provide certain information prior to receiving new and refill prescriptions; and - requirements for prescribing physicians to complete certain educational programs for prescribing drugs.
We expect sales of LYMPHIR to generate substantially all of our revenues for the foreseeable future, and as a result, the failure of LYMPHIR to find market acceptance would harm our business and would require us to seek additional financing. In addition, our efforts to educate the medical community and third-party payers on the benefits of LYMPHIR may require significant resources and may never be successful. These risks also apply to any future approved product candidate.
Sales & Marketing - Risk 3
Our ability to generate product revenues will be diminished if LYMPHIR, or any of our future product candidates that may be approved, sells for inadequate prices or patients are unable to obtain adequate levels of reimbursement.Our ability to commercialize our product candidates, namely LYMPHIR, alone or with collaborators, will depend in part on the extent to which reimbursement will be available from:
- government and health administration authorities;- private health maintenance or organizations and health insurers; and - other healthcare payers.
Significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Healthcare payers, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payers increasingly attempt to contain healthcare costs by limiting both coverage and the level of reimbursement for drugs. Even if product candidates are approved by the FDA, insurance coverage might not be available, and reimbursement levels might be inadequate, to cover the products. If government and other healthcare payers do not provide adequate coverage and reimbursement levels for LYMPHIR, or any of our future product candidates that may be approved, market acceptance of such products could be reduced. We cannot predict whether federal or state legislation will be passed that may impact reimbursement policies nor what the impact of any such legislation would be on the healthcare industry in general or on our business specifically.
We are actively engaged with the Center for Medicare and Medicaid Services ("CMS") in order to obtain the necessary coverage to facilitate reimbursement for LYMPHIR. However, we can offer no assurance as any reimbursement coverage.
Health administration authorities in countries other than the U.S. may not provide reimbursement for our products at rates sufficient for us to achieve profitability, or at all. Like the U.S., these countries have considered health care reform proposals and could materially alter their government-sponsored health care programs by reducing reimbursement rates. Any reduction in reimbursement rates under Medicare or foreign health care programs could negatively affect the pricing of our approved product candidates. If we are not able to charge a sufficient amount for an approved product candidate, then our margins and our profitability will be adversely affected.
Production
Total Risks: 3/51 (6%)Below Sector Average
Employment / Personnel2 | 3.9%
Employment / Personnel - Risk 1
If we are unable to retain or hire additional qualified personnel, our ability to grow our business might be harmed.Employment / Personnel - Risk 2
We rely on the significant experience and specialized expertise of the executive management and other key personnel and the loss of any of the executive management or key personnel or our inability to successfully hire their successors could harm our business.The Company's performance is substantially dependent on the continued services and on the performance of our executive management and other key personnel through the A&R Shared Services Agreement with Citius Pharma, all who have extensive experience and specialized expertise in our business. Our Chief Executive Officer, Leonard Mazur, our Secretary and Director, Myron Holubiak, our Chief Financial Officer and Chief Business Officer, Jaime Bartushak, and our Chief Medical Officer, Myron Czuczman, in particular have significant experience in the running of pharmaceutical companies and/or drug development itself. This depth of experience is of significant benefit to us, especially given the small size of our management team and company. The loss of the services of any of Mr. Mazur, Mr. Holubiak or, Dr. Czuczman, as well as any other member of our executive management or any key employees could harm our ability to attract capital, commercialize LYMPHIR and develop any future product candidates. We do not have key man life insurance policies.
Supply Chain1 | 2.0%
Supply Chain - Risk 1
We rely exclusively on third parties to formulate and manufacture our product candidates. Our failure to abide by our contractual obligations with these third parties, including timely payment, could result in a delay or the loss of necessary third-party support.Macro & Political
Total Risks: 1/51 (2%)Below Sector Average
Economy & Political Environment1 | 2.0%
Economy & Political Environment - Risk 1
Healthcare reform measures could hinder or prevent LYMPHIR's commercial success, or any of our future product candidates that may be approved.See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
FAQ
What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
How do companies disclose their risk factors?
Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
How can I use TipRanks risk factors in my stock research?
Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
A simplified analysis of risk factors is unique to TipRanks.
What are all the risk factor categories?
TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
1. Financial & Corporate
- Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
- Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
- Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
- Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
2. Legal & Regulatory
- Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
- Regulation – risks related to compliance, GDPR, and new legislation.
- Environmental / Social – risks related to environmental regulation and to data privacy.
- Taxation & Government Incentives – risks related to taxation and changes in government incentives.
3. Production
- Costs – risks related to costs of production including commodity prices, future contracts, inventory.
- Supply Chain – risks related to the company’s suppliers.
- Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
- Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
4. Technology & Innovation
- Innovation / R&D – risks related to innovation and new product development.
- Technology – risks related to the company’s reliance on technology.
- Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
- Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
5. Ability to Sell
- Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
- Competition – risks related to the company’s competition including substitutes.
- Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
- Brand & Reputation – risks related to the company’s brand and reputation.
6. Macro & Political
- Economy & Political Environment – risks related to changes in economic and political conditions.
- Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
- International Operations – risks related to the global nature of the company.
- Capital Markets – risks related to exchange rates and trade, cryptocurrency.