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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2024

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to _____

Commission File No. 001-36913

Zevra Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware | 20-5894398
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.)
1180 Celebration Boulevard, Suite 103, Celebration, FL 34747 | (321) 939-3416
(Address of Principal Executive O ffices and Zip Code) | (Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value | ZVRA | The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes ☐ No ☒

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Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $204.8 million, based upon the closing sales price for the registrant’s common stock, as reported on the Nasdaq Global Select Market on June 28, 2024. The calculation of the aggregate market value of voting and non-voting common equity excludes shares of common stock the registrant held by executive officers, directors and stockholders that the registrant concluded were affiliates of the registrant on that date. Exclusion of such shares should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of management or policies of the registrant or that such person is controlled by or under common control with the registrant.

As of March 7, 2025, the registrant had 54,115,869 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the registrant’s definitive proxy statement relating to its 2025 annual meeting of stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

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ZEVRA THERAPEUTICS, INC.

FORM 10-K

|  | Page
| PART I |
Item 1. | Business | 7
Item 1A. | Risk Factors | 29
Item 1B. | Unresolved Staff Comments | 76
Item 1C. | Cybersecurity |
Item 2. | Properties | 77
Item 3. | Legal Proceedings | 77
Item 4. | Mine Safety Disclosures | 77
| PART II |
Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | 81
Item 6. | [Reserved] | 81
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 82
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 94
Item 8. | Financial Statements and Supplementary Data | 94
Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures | 94
Item 9A. | Controls and Procedures | 94
Item 9B. | Other Information | 95
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 95
| PART III |
Item 10. | Directors, Executive Officers and Corporate Governance | 96
Item 11. | Executive Compensation | 96
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 96
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 96
Item 14. | Principal Accounting Fees and Services | 96
| PART IV |
Item 15. | Exhibits and Financial Statement Schedules | 97
Item 16. | Form 10-K Summary | 134
| Signatures | 135

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “assume,” “intend,” “potential,” “continue” or other similar words or the negative of these terms. We have based these forward-looking statements largely on our current expectations about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this report. Accordingly, you should not place undue reliance upon these forward-looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, the timing of events and circumstances and actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements contained in this report include, but are not limited to, statements about:

| ● | our ability to commercialize and the timing of commercializing our products and product candidates, if approved;
| ● | the potential therapeutic benefits and effectiveness of our products and product candidates;
| ● | the progress of, timing of and expected amount of expenses associated with our research, development and commercialization activities;
| ● | the size and characteristics of the markets that may be addressed by our products and product candidates;
| ● | the consummation of the transaction contemplated by the PRV Transfer Agreement (as defined herein) and our anticipated net proceeds therefrom;
| ● | the expected timing of our clinical trials for our product candidates and the availability of data and results of those trials;
| ● | the progress of, outcome or and timing of any regulatory approval for any of our product candidates and the expected amount or timing of any payment related thereto under any of our collaboration agreements;
| ● | our expectations regarding federal, state and foreign legal and regulatory requirements;
| ● | our intention to seek to establish, and the potential benefits to us from, any strategic collaborations or partnerships for the development or sale of our products and product candidates, if approved;
| ● | our expectations as to future financial performance, expense levels and liquidity sources;
| ● | the sufficiency of our cash resources to fund our operating expenses and capital investment requirements for any period;
| ● | our ability to raise additional funds on commercially reasonable terms, or at all, in order to support our continued operations;
| ● | our ability to continue as a going concern;
| ● | senior leadership and board member transitions and refreshments; and
| ● | other factors discussed elsewhere in this report.

The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We have included important factors in the cautionary statements included in this report, particularly in the section entitled “Risk Factors” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. Except as required by law, we do not assume any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or circumstances or otherwise.

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RISK FACTORS SUMMARY

The risk factors summarized below could materially harm our business, operating results, and/or financial condition, impair our future prospects, and/or cause the price of our common stock to decline. These risks are discussed more fully in the section titled "Risk Factors". Material risks that may affect our business, financial condition, results of operations, and trading price of our common stock include the following:

| ● | If commercialization of our approved products, or any of our product candidates, if approved, are not successful, or we experience significant delays in commercialization, our business will be harmed.
| ● | If we are not able to obtain required regulatory approvals for any of our product candidates, or the approved labels are not sufficiently differentiated from other competing products, we will not be able to commercialize them and our ability to generate revenue or profits or to raise future capital could be limited.
| ● | Arimoclomol is currently available to Niemann-Pick disease type C patients in France, Germany, and other EU member states through our various expanded access programs ("EAPs"). EAPs are expected to remain in place until arimoclomol becomes commercially available in each of the current EAP markets. If an EAP is terminated prior to commercialization of arimoclomol in varying jurisdictions, it will have a material adverse effect on our business, results of operations, cash flows, financial condition and/or prospects.
| ● | If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
| ● | Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
| ● | We may need additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce or altogether cease our prodrug development programs or commercialization efforts or cease operations altogether.
| ● | We have incurred significant recurring negative net operating cash flows. We cannot predict if we will incur positive or negative net operating cash flows over the next several years which may impact our ability to continue as a going concern, and we may never achieve or maintain profitability.
| ● | If we are unable to obtain and maintain trade secret protection or patent protection for our technology, our approved products or our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology, our approved products, or our product candidates, if approved, may be impaired.
| ● | If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) NDA pathway, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and the FDA may not ultimately approve our product candidates.
| ● | We have entered into collaborations with Commave Therapeutics, S.A., or Commave, to develop, manufacture and commercialize AZSTARYS worldwide. In addition, we may seek collaborations with third parties for the development, or commercialization of our other product candidates, or in other territories. If those collaborations are not successful, we may not be able to capitalize on the market potential of AZSTARYS or any of our other product candidates, if approved.
| ● | The trading price of the shares of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses.
| ● | Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
| ● | We could be negatively affected as a result of the actions of activist stockholders, which could be disruptive and costly and may conflict with or disrupt the strategic direction of our business.
| ● | Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.

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NOTE REGARDING COMPANY REFERENCE

Unless the context otherwise requires, we use the terms “Zevra,” “Company,” “we,” “us” and “our” in this Annual Report on Form 10-K to refer to Zevra Therapeutics, Inc. We have proprietary rights to a number of trademarks used in this Annual Report on Form 10-K that are important to our business, including LAT®, OLPRUVA® and its related logo, MIPLYFFA™ and its related logo, and the Zevra logo. All other trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

On August 30, 2023, the Company and Aspen Z Merger Sub, Inc., a wholly-owned subsidiary of Zevra ("Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Acer Therapeutics, Inc. ("Acer"). On November 17, 2023 (the "Closing Date"), we completed the acquisition of Acer. Pursuant to the Merger Agreement, on the Closing Date, Merger Sub was merged with and into Acer (the "Merger"), with Acer continuing as the surviving entity and as a wholly-owned subsidiary of Zevra.

NOTE REGARDING MARKET AND INDUSTRY DATA

This Annual Report on Form 10-K contains statistical data, estimates and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. While we believe the industry and market data included in this Annual Report on Form 10-K is reliable and is based on reasonable assumptions, this data involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included in this Annual Report on Form 10-K.

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PART I

ITEM 1. | BUSINESS.

Overview

We are a commercial-stage company focused on addressing unmet needs for the treatment of rare diseases. Our mission is to bring life-changing therapeutics to people living with rare diseases. With data-driven development and commercialization strategies, we are overcoming complex drug development challenges to make new therapies available to the rare disease community. We have a diverse portfolio of products and product candidates, which includes pre-clinical, clinical, and commercial stage assets. Our team has specialized expertise and a track record of success in advancing promising therapies that face complex clinical, regulatory, and commercial challenges with an approach that balances science with patient need.

Following the U.S. approval of AZSTARYS® (further described below) in March 2021, we undertook a strategic process to evaluate how to leverage and potentially augment the Company’s existing capabilities while also considering where to invest in our pipeline to generate long-term shareholder value. With a track record of drug development success leading to approvals for products which had either difficult pathways to approval or where approvals were won following a complete response letter (“CRL”) from the U.S. Food and Drug Administration (“FDA”), we determined to focus our expertise on rare disease indications, as well as seeking value-creating opportunities by building and directly commercializing product candidates in lieu of an out-licensing model. We are executing on this balanced approach by building a high-performing culture that is patient-focused and driven by our commitment to developing and commercializing therapies to address the myriad unmet needs within the rare disease community.

As part of our commitment to serving the rare disease community, in February 2023, we changed our name to Zevra Therapeutics, Inc. Our name, Zevra, is the Greek word for zebra, which is the internationally recognized symbol for rare disease. This name reflects our intense focus and dedication to developing transformational, patient-focused therapies for rare diseases with limited or no treatment options available, or treatment areas with significant unmet needs.

In May 2022, we purchased all of the assets and operations of Orphazyme A/S (“Orphazyme”) related to arimoclomol, settled all of Orphazyme’s actual outstanding liabilities to its creditors with a cash payment of $12.8 million, and agreed to assume an estimated reserve clawback liability of $5.2 million related to revenue generated from Orphazyme’s EAP in France.

On November 17, 2023, we completed the acquisition of Acer. Pursuant to the Merger Agreement, Acer continues as a wholly-owned subsidiary of Zevra. The Merger included the acquisition of OLPRUVA® (sodium phenylbutyrate) for oral suspension, which was approved by the FDA on December 27, 2022, for the treatment of certain urea cycle disorders ("UCDs"). In addition, we acquired Acer's pipeline of investigational product candidates, including celiprolol for the treatment of Vascular Ehlers-Danlos syndrome ("VEDS") in, patients with a confirmed type III collagen (COL3A1) mutation.

On September 20, 2024, the FDA approved the New Drug Application (“NDA") for MIPLYFFA™ (arimoclomol), an orally-delivered treatment for Niemann-Pick disease type C (“NPC"), which is an ultra-rare and progressive neurodegenerative disease. In addition, we received a transferable rare pediatric disease priority review voucher (“PRV”) in conjunction with the approval. MIPLYFFA has also been granted orphan medical product designation for the treatment of NPC by the European Commission. In November 2024, MIPLYFFA became commercially available for dispense.

Our five-year strategic plan is focused on the continued transformation of Zevra into a leading rare-disease company. In addition to the commercialization of OLPRUVA and the approval and subsequent launch of MIPLYFFA, we discontinued our in-house drug discovery activities and closed our laboratory facilities in Iowa and Virginia to prioritize near-term resources for our late-stage clinical development and commercial opportunities in the third quarter of 2024. In the future we plan to outsource our discovery and early development activities, as well as seek to further expand our pipeline through both internal development and through our business development activities to collaborate, partner, and potentially acquire additional assets. We intend to target assets that will allow us to leverage the expertise and infrastructure that we have built to help mitigate risk and enhance our probability of success. If we are successful, expanding our pipeline could be accretive to our value proposition and has the potential to create incremental long-term value for stockholders.

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Our Product Candidates and Approved Products

We have built a diverse portfolio of products and product candidates through a combination of internal development and strategic investments through acquisition. For example, we have employed our proprietary Ligand Activated Technology ("LAT") platform to develop approved products (e.g., AZSTARYS), and clinical development candidates (KP1077IH and KP1077N). Through our business development efforts, we have added commercial products (OLPRUVA and MIPLYFFA), and a clinical development candidate (celiprolol). We furthermore have a variety of product candidates and compounds that are clinical-stage and designed to address a variety of rare diseases and other indications.

Currently active commercial products and development assets are summarized in the table below:

Active Zevra Commercial and Development Assets

Parent Drug | Indication | Product / Candidate | Development Status | Next Milestone(s)
Arimoclomol | Niemann Pick disease type C (NPC) | MIPLYFFA | FDA Approved European EAP | Tracking Commercial Progress Target MAA Submission in H2 2025
Sodium phenylbutyrate | Urea Cycle Disorders (UCD) | OLPRUVA | FDA Approved | Tracking Commercial Progress
Celiprolol | Vascular Ehlers Danlos Syndrome (VEDS) | Celiprolol | Clinical - Phase 3 | Phase 3 ongoing
Serdexmethylphenidate | Idiopathic Hypersomnia (IH) | KP1077IH | Clinical - Phase 2 | Seeking Strategic Alternatives
Serdexmethylphenidate | Narcolepsy | KP1077N | Clinical - Phase 1/2 | Seeking Strategic Alternatives
Serdexmethylphenidate and dexmethylphenidate | Attention Deficit and Hyperactivity Disorder (ADHD) | AZSTARYS | FDA Approved and Partnered | Collecting royalties and milestones

These anticipated milestones are based on information currently available to us. Our current plans and expectations are subject to a number of uncertainties, risks and other important factors that could materially impact our plans, including risks which are not solely within our control. See Part I, Item 1A. “Risk Factors” in this Annual Report on Form 10-K.

MIPLYFFA

On September 20, 2024, the FDA approved the NDA for MIPLYFFA, an orally-delivered treatment for NPC, which is an ultra-rare and progressive neurodegenerative disease. MIPLYFFA, the first FDA-approved treatment for NPC, is indicated for use in combination with miglustat for the treatment of neurological manifestations of NPC in adult and pediatric patients two years of age and older. In addition, we received a transferable rare pediatric disease PRV in conjunction with the approval. On February 27, 2025, we announced entry into an asset purchase agreement with an undisclosed party for the sale of the PRV for gross proceeds of $150 million, subject to customary closing conditions. MIPLYFFA has also been granted orphan medical product designation for the treatment of NPC by the European Commission. As of December 31, 2025, there was a total of 109 enrollments to receive MIPLYFFA, which included conversion of all active participants in our U.S. EAP, which we expect to close by the end of the second quarter of 2025. Our commercial plans will focus on continuing to raise awareness among people who are living with NPC that are diagnosed and untreated, or undiagnosed.

Soon after approval of MIPLYFFA, the FDA approved a second therapy for NPC, AQNEURSA, which is approved for symptomatic treatment of ataxia in NPC patients, and is marketed by IntraBio, Inc. ("IntraBio").

To commercialize both of our commercial products, MIPLYFFA and OLPRUVA, in the U.S., we have built, or are making arrangements with third parties to perform, marketing, sales, medical affairs, distribution, managerial and other non-technical capabilities. We initiated the commercial launch of MIPLYFFA in the U.S. immediately following receipt of FDA approval. Product became available for dispensing at our specialty pharmacy on November 21, 2024.

NPC is characterized by an inability of the body to transport cholesterol and lipids inside of cells. Symptoms of NPC include a progressive impairment of mobility, cognition, speech, and swallowing, often culminating in premature death. The incidence of NPC is estimated to be one in 100,000 to 130,000 live births. We estimate that there are approximately 1,800 individuals with NPC in the U.S. and Europe combined, of which approximately 900 are in the U.S. and 1,100 are in the EU where there is a mature market with an approved treatment available for NPC. Of these, approximately 300 to 350 people have been diagnosed in the U.S. However, diagnostic challenges may affect the number of potential patients, and we believe that the availability of treatment options in the U.S. could increase awareness of the disease and assist in more accurately identifying patients. Effective therapies to treat NPC are desperately needed, and for this reason, MIPLYFFA is currently being made available to NPC patients in France, Germany, and other EU member states under various EAPs.

Zevra holds global rights to develop and commercialize MIPLYFFA. We intend to seek regulatory approval for MIPLYFFA in the European Union ("EU"), and we are currently evaluating the potential to commercialize outside of the U.S., and/or to seek additional regulatory approvals to support future global commercialization opportunities. Our focus is currently on preparing for submission of a Marketing Authorisation Application, or MAA, in Europe in the second half of 2025.

MIPLYFFA summary:

| ● | Demonstrated halting of disease progression. MIPLYFFA in combination with miglustat is the only currently approved NPC therapy to demonstrate halting of disease progression through 12 months of treatment.
| ● | Ease of flexible administration as an oral treatment. MIPLYFFA is administered as an oral capsule that can be swallowed whole, opened and contents mixed with foods or liquids, or delivered through a feeding tube.
| ● | Extensive clinical experience with favorable safety data. No significant safety findings have been reported with more than 600 patients treated in various clinical trials conducted for multiple indications and through our EAPs.
| ● | Regulatory designations. MIPLYFFA has been granted orphan drug designation for the treatment of NPC by the European Commission. We received a transferable PRV upon approval of MIPLYFFA. On February 26, 2025, we entered into the PRV Transfer Agreement, pursuant to which we agreed to sell the PRV to the buyer, subject to customary closing conditions

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OLPRUVA

OLPRUVA (sodium phenylbutyrate) for oral suspension is approved in the U.S. as adjunctive therapy to standard of care, which includes dietary management, for the chronic management of UCDs involving deficiencies of carbamylphosphate synthetase (CPS), ornithine transcarbamylase (OTC), or argininosuccinic acid synthetase (AS). OLPRUVA for oral suspension is a proprietary and novel formulation of sodium phenylbutyrate powder, packaged in pre-measured single-dose envelopes, that has shown bioequivalence to existing sodium phenylbutyrate powder but with a pH-sensitive polymer coating that is designed to minimize dissolution of the coating for up to five (5) minutes after preparation.

UCDs are a group of rare genetic disorders that can cause harmful ammonia to build up in the blood, potentially resulting in brain damage and neurocognitive impairments, if ammonia levels are not controlled. Any increase in ammonia over time is serious. Therefore, it is important to adhere to any dietary protein restrictions and have alternative medication options to help control ammonia levels. Approximately 1 in 100,000 people have UCD, and there are an estimated 800 patients who are actively treated with nitrogen scavenging therapy in the U.S. While there are therapies currently approved for the treatment of UCDs - specifically RAVICTI, marketed by Amgen, Inc. (formerly Horizon Therapeutics) and PHEBURANE, marketed by Medunik USA - there remain unmet needs for this community of patients. OLPRUVA offers benefits over other UCD treatments by eliminating issues with palatability, offering improved portability with its single-dose envelopes, and it comes in a dosage personalized to the patient based on weight.

During the quarter ended December 31, 2023, we began generating revenue from the sale of OLPRUVA in the U.S. For additional information regarding the Merger, see Note T of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Zevra has a partnership with Relief Therapeutics who has rights to commercialize OLPRUVA in various EU countries, if approved. In addition, Zevra is obligated to pay royalties of 10% of U.S. net sales up to a maximum of $45 million, plus specified regulatory milestones to Relief Therapeutics.

During the first half of 2024, we initiated the commercial launch of OLPRUVA in the U.S. We have focused our initial efforts on the approximately 40 metabolic treatment centers of excellence across the United States which treat the majority of UCD patients to build awareness with physicians regarding the benefits of OLPRUVA. In the months since launch, our team has been able to engage with more than 90% of our prescribers. We have seen meaningful growth in reimbursement coverage, which was approximately 55% of U.S. covered lives at the time of acquisition, to now approximately 76%. In the third quarter of 2024, Zevra made a data-driven shift in our OLPRUVA commercial strategy to target specific patient segments that will receive the greatest benefit from OLPRUVA and face fewer reimbursement hurdles. To support this refinement in strategy, we focused our resources and promotional efforts in the third quarter to drive patient identification and to improve pull-through with payors. Specifically, we are targeting patients seeking greater lifestyle independence who could benefit from the “ammonia control on the go” that OLPRUVA offers.

OLPRUVA summary:

| ● | OLPRUVA is available in the U.S for the treatment of UCD. OLPRUVA is an adjunctive therapy for long-term management of adults and children weighing 20kg or greater with UCD from deficiencies of CPS, OTC, or AS.
| ● | OLPRUVA is differentiated from currently available forms of phenylbutyrate. OLPRUVA is formulated to improve palatability while providing patients with a portable and discrete pre-measured dose.
| ● | Zevra has assembled a team to support OLPRUVA and additional future commercial products. We have established an efficient commercial team which is designed to fully service the patients and prescribers within the rare disease indications we are pursuing.

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Celiprolol

The Merger with Acer included the acquisition of celiprolol. We are advancing celiprolol as an investigational product candidate for the treatment of VEDS in patients with a confirmed type III collagen (COL3A1) mutation. Celiprolol is a selective adrenergic modulator (“SAM“) and, if we receive the first approval in the U.S. for celiprolol, we believe it would be deemed a new chemical entity (“NCE”) in the U.S. Celiprolol is currently approved in certain EU states for the treatment of hypertension and angina.

Ehlers-Danlos Syndrome is an inherited disorder caused by mutations in the genes responsible for the structure, production, or processing of collagen, an important component of the connective tissues in the human body, or proteins that interact with collagen. VEDS causes abnormal fragility in blood vessels, which can give rise to aneurysms, abnormal connections between blood vessels known as arteriovenous fistulas, arterial dissections, and spontaneous vascular ruptures, all of which can be potentially life-threatening. The incidence of VEDS is estimated to be one in 50,000 to 200,000 people. There are approximately 7,500 patients in the U.S.

Currently, there are no approved therapies anywhere in the world for VEDS. However, celiprolol, prescribed off label, has become the standard of care therapy for VEDS in some European countries. Medical intervention for VEDS focuses on surgery, symptomatic treatment, genetic counseling, and prophylactic measures, such as avoiding intense physical activity, scuba diving, and violent sports. Therefore, patients must adopt a “watch and wait” approach following any confirmed diagnosis. Unfortunately, many of these arterial events have high mortality associated with them, and thus, a pharmacologic intervention that reduces the rate of events would be clinically meaningful.

Celiprolol received orphan drug designation from the FDA for the treatment of VEDS in 2015. In October 2018, a new celiprolol NDA was submitted to the FDA by Acer based on data obtained from the BBEST trial and was subsequently accepted by the FDA in October 2018 with priority review status. Following FDA review, Acer received a CRL from the FDA stating that it will be necessary to conduct an adequate and well-controlled trial to determine whether celiprolol reduces the risk of clinical events in patients with VEDS. Subsequently, Acer appealed the FDA decision, and while the FDA denied the appeal, it described possible paths forward toward approval. In a May 2021 Type B meeting with the FDA, Acer discussed the conduct of an U.S.-based prospective, randomized, double-blind, placebo-controlled, decentralized clinical trial in patients with COL3A1 positive VEDS, and sought the FDA’s opinion on various proposed design features of the study.

Based on FDA's feedback during the Type B meeting, we adopted a decentralized (virtual) event-based clinical trial design and use of an independent centralized adjudication committee with a primary endpoint based on clinical events associated with disease outcome. In April 2022, the FDA granted celiprolol Breakthrough Therapy designation (“BTD”) in the U.S. for the treatment of patients with COL3A1-positive VEDS.

In July 2022, Acer initiated enrollment in a Phase 3 long-term event-driven clinical trial designed based on the discussions from the May 2021 Type B meeting with the FDA, also known as the DiSCOVER trial. The DiSCOVER trial intends to enroll 150 VEDS patients, with 100 patients receiving celiprolol and 50 patients receiving placebo. Recruitment in the Phase-3 trial was restarted mid-2024 after a brief hiatus and the trial is actively enrolling patients. We believe that celiprolol could address significant unmet needs as there are currently no approved treatments for VEDS in the U.S.

Celiprolol summary:

| ● | Currently, no approved treatments for VEDS in the U.S. There are currently no approved treatments of VEDS in the U.S. and we believe that celiprolol, if approved, could be a significant innovation in the treatment of VEDS in the U.S. where current treatment options are focused primarily on surgical intervention.
| ● | Unique pharmacological profile. Mechanism of action in VEDS patients is thought to be through vascular dilatation and smooth muscle relaxation, the effect of which is to reduce the mechanical stress on collagen fibers in the arterial wall, and thereby potentially less incidence of vascular ruptures.
| ● | Evidence of efficacy in the EU and extensive clinical experience from multiple trials. Celiprolol has become the primary treatment for VEDS patients in several European countries. BBEST Clinical Trial data showed 76% reduction in risk of arterial events observed in COLA3A1+ subpopulation, with additional data from a long-term observational study in France.
| ● | Regulatory designations. Celiprolol for VEDS would be considered an NCE in the U.S. and has been granted Orphan Drug designation and Breakthrough Therapy designation.
| ● | Solid patent protection through 2038. Celiprolol is generally protected by U.S. patents that will expire, after utilizing all appropriate patent term adjustments but excluding possible term extensions, in 2038.

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KP1077

KP1077 is being developed and evaluated for the treatment of IH and narcolepsy. IH is a rare neurological sleep disorder affecting approximately 37,000 patients in the United States. The cardinal feature of IH is excessive daytime sleepiness ("EDS"), characterized by daytime lapses into sleep, or an irrepressible need to sleep that persists even with adequate or prolonged nighttime sleep. Additionally, those with IH have extreme difficulty waking, otherwise known as “sleep inertia,” suffer from severe and debilitating brain fog, and may fall asleep unintentionally or at inappropriate times, also known as narcolepsy. These symptoms often further lead to reported memory problems, difficulty maintaining focus, and depression.

There is currently only one approved product for the treatment of IH, XYWAV, developed by Jazz Pharmaceuticals. A second product, WAKIX, developed by Harmony Biosciences ("Harmony") and originally approved for the treatment of EDS or cataplexy in adult patients with narcolepsy, but in October 2023, Harmony announced that the difference in outcome for EDS when comparing WAKIX and placebo in its Phase 3 trial with IH patients did not reach statistical significance. Prescribers also utilize narcolepsy medications and various stimulant products “off-label” to treat IH symptoms, with methylphenidate, a stimulant which has been classified by the DEA as a Schedule II controlled substance, being one of the most commonly used stimulants for treating IH. While each of these medications can help to address certain IH symptoms, there are also potential shortcomings, including dosing inconvenience, serious adverse events, such as elevated blood pressure and heart rate, and significant drug-to-drug interactions ("DDIs"), including with medications used to manage contraception and depression. In addition, patients have indicated that the effectiveness of their current medication was poor.

Narcolepsy is a rare, chronic, debilitating neurologic disorder of sleep-wake state instability that impacts up to 200,000 Americans and is primarily characterized by EDS and cataplexy (sudden loss of muscle tone while a person is awake) along with other manifestations of rapid eye movement ("REM"), sleep dysregulation, which intrude into wakefulness. In most patients, narcolepsy is caused by the loss of hypocretin, a neuropeptide in the brain that supports sleep-wake state stability. Typical symptom onset occurs in adolescence or young adulthood, but it can take up to a decade to be properly diagnosed. Although there are several approved medications for narcolepsy, we believe a treatment option based on serdexmethylphenidate (“SDX”), our proprietary prodrug of d-methylphenidate (“d-MPH”) which has previously been classified as a Schedule IV controlled substance, with superior exposure/duration characteristics and low abuse potential may be beneficial.

We reported final data for the Phase 1 proof-of-concept study of SDX in the first quarter of 2022. Increased wakefulness, alertness, hypervigilance, and insomnia effects were reported by study participants, which we believe suggests that SDX produced targeted pharmacodynamic effects that have the potential to benefit patients with IH and other sleep disorders. In November 2022, we announced that the FDA has granted the orphan drug designation to SDX for the treatment of IH.

KP1077 utilizes SDX, our prodrug of d-MPH, as its API. During the first quarter of 2022, we initiated a Phase 1 clinical trial comparing the cardiovascular safety of SDX to immediate-release and long-acting formulations of RITALIN, a commonly prescribed central nervous system ("CNS") stimulant. In September 2022, we announced topline data from our exploratory Phase 1 clinical trial, which showed the potential for higher dose formulations of SDX to be safe and well tolerated while avoiding the potential for greater cardiovascular safety risk compared to immediate-release and long-acting formulations of RITALIN.

Based on the data, in December 2022, we announced the initiation of a double-blind, placebo-controlled, randomized-withdrawal, dose-optimizing, multicenter Phase 2 clinical trial evaluating the efficacy and safety of KP1077 for the treatment of IH. The trial concluded in March 2024 and provided meaningful information of the optimal dose and dosing regimen to inform Phase 3 trial design.

Clinically meaningful improvements were observed across all studied endpoints. The exploratory endpoints of sleep inertia and brain fog performed in-line with expectations and were stable when compared across a variety of other endpoints. Symptom improvements in patients receiving KP1077 were similar after both once-per-day, and twice-per-day dosing.

In the Phase 2 trial, KP1077 was observed to be well-tolerated at all dose levels and both dosing regimens, with adverse events that are typical for stimulants and mostly mild in severity. These results are consistent with data from the Phase 1 trial with SDX that indicated no greater cardiovascular safety risk despite higher overall exposure levels when compared to both immediate and long-acting methylphenidate products currently used off-label for the treatment of IH. On June 3, 2024, we announced final results from the Phase 2 Clinical Trial of KP1077 for IH. The proof-of-concept study was designed to evaluate safety and tolerability and was not powered to demonstrate statistical significance. However, the trial included several important secondary and exploratory endpoints, such as the change in Epworth Sleepiness Scale ("ESS") total score, the IH Severity Scale ("IHSS"), the Sleep Inertia Visual Analog Scale ("SIVAS"), and a new scale to assess the symptoms and severity of brain fog. These data gathered from the secondary endpoints will help inform the study design for a potential Phase 3 clinical trial of KP1077. We held the end-of-Phase 2 meeting with the FDA in September 2024, to discuss the design of a Phase 3 trial to study KP1077 in IH. The FDA indicated that a single pivotal study with appropriate confirmatory evidence will be sufficient to submit a new NDA. We are evaluating strategic alternatives to advance clinical development toward NDA submission and later, commercialization. KP1077 is subject to the terms and conditions of the AZSTARYS License Agreement (as defined below) but is not currently licensed to Commave thereunder.

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Key Takeaways from Phase 2 Clinical Trial of KP 1077 for IH include:

| ● | KP1077 was well tolerated at all dose levels evaluated in the trial, including the highest dose of 320 mg daily, regardless of the dosing regimen: once daily (QD) or twice daily (BID).

| ○ | Adverse events (AEs) were similar to other methylphenidate products

| ○ | Most common AEs included insomnia, headache, anxiety, decreased appetite, and nausea

| ○ | Most AEs occurred during the titration period, were mild, and did not lead to early discontinuation

| ● | Although the study was not designed to be powered for statistical significance, KP1077 was associated with clinically meaningful improvements in EDS as assessed by change from baseline in the ESS during both the 5-week open-label (OL) titration period which was maintained during the 2-week double-blind withdrawal period for both dosing regimens.

| ○ | Mean total ESS scores decreased by approximately 9 points after 5 weeks of OL treatment.

| ● | Although the study was not designed to be powered for statistical significance, at the end of 7 weeks of treatment, patients administered KP1077 showed clinically meaningful benefits in change from baseline for the ESS, IHSS, SIVAS, and Brain Fog Scale (BFS):

| ○ | Mean total ESS score decreased by 9.4 (QD) and 8.8 (BID)

| ○ | Mean total IHSS score decreased by 16.1 (QD) and 12.3 (BID)

| ○ | Mean SIVAS score decreased by 25.9 (QD) and 17.2 (BID)

| ○ | Mean total BFS symptom score decreased by 23.8 (QD) and 22.3 (BID)

| ● | The study fulfilled the objectives of providing key information for the design of a potentially pivotal efficacy trial, and the results of the secondary efficacy endpoints were supportive of initiating a Phase 3 trial of KP1077.

KP1077 Summary:

| ● | No drug-to-drug interactions observed to date. We have not observed drug-to-drug interactions in clinical drug-drug interaction studies.
| ● | Potential for reduced abuse potential as a Schedule IV controlled substance. All other methylphenidate-based products have been designated as Schedule II controlled substances, which indicates stricter control over the prescribing and use of such products. KP1077 is based on SDX, which has been designated a Schedule IV controlled substance.
| ● | No currently approved generic equivalent product. KP1077 contains SDX, our proprietary prodrug of d-methylphenidate, also known as the new chemical name, serdexmethylphenidate, by the U.S. Adopted Names Council of the American Medical Association (“USAN”), which means that there may be no generic equivalent product for KP1077 in most states, making drug-equivalent substitution potentially difficult at the pharmacy.
| ● | Orphan drug designation. Because the size of the IH patient population is small, the FDA has granted KP1077 orphan drug designation for the treatment of IH. We believe KP1077 may potentially be eligible for fast-track and breakthrough therapy designation, which may provide various regulatory benefits for the development program.

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AZSTARYS (Partnered product)

AZSTARYS contains d-MPH and our prodrug of d-MPH, SDX. On March 2, 2021, the FDA approved AZSTARYS as a once-daily treatment for attention deficit hyperactivity disorder (ADHD), in patients age six years and older. AZSTARYS is currently being marketed in the U.S. under our September 2019 collaboration and license agreement, or the AZSTARYS License Agreement, with Commave. Under the AZSTARYS License Agreement, we granted Commave an exclusive, worldwide license, to develop, manufacture, and commercialize AZSTARYS and any of our product candidates containing SDX and used to treat ADHD or any other CNS disease. In July 2020, we entered into the consulting agreement with Corium, Inc. ("Corium") (the “Corium Consulting Agreement”), under which Corium and Commave, respectively, engaged us to guide the product development and regulatory activities for certain current and potential future products in their portfolio, as well as continue supporting preparation for the potential commercial launch of AZSTARYS.

Commave has tasked Corium, another affiliate of Gurnet Point Capital, L.P., to lead all commercialization activities for AZSTARYS in the U.S. Corium commercially launched AZSTARYS in the U.S. during the third quarter of 2021. In December 2021, Commave entered into a sublicense of commercialization rights for AZSTARYS in greater China to Shanghai Ark Biopharmaceutical Ltd.

Pursuant to the AZSTARYS License Agreement, Commave agreed to pay up to $63.0 million in milestone payments upon the occurrence of specified regulatory milestones related to AZSTARYS, including FDA approval and specified conditions with respect to the final approval label. In addition, Corium agreed to make additional payments upon the achievement of specified U.S. sales milestones of up to $420 million in the aggregate. Further, Commave will pay us quarterly, tiered royalty payments based on a percentage of net sales on a product-by-product basis. Corium also agreed to be responsible for and reimburse us for all of development, commercialization and regulatory expenses for any products or product candidates containing SDX, subject to certain limitations as set forth in the AZSTARYS License Agreement, including consultation fees to be paid to us for services provided to Corium in performing such activities.

In April 2021, we entered into the AZSTARYS Amendment ("AZSTARYS Amendment"). Pursuant to the AZSTARYS Amendment, we and Commave agreed to modify the compensation terms of the AZSTARYS License Agreement. Commave paid us $10.0 million in connection with the execution of the AZSTARYS Amendment following the FDA approval of AZSTARYS in the United States. Corium also paid us $10.0 million following the SDX scheduling determination by the DEA, which occurred on May 7, 2021. In addition, the AZSTARYS Amendment increased the total remaining future regulatory and sales milestone payments related to AZSTARYS up to an aggregate of $590.0 million. The AZSTARYS License Agreement will continue on a product-by-product basis (i) until expiration of the royalty term for the applicable product candidate in the United States and (ii) perpetually for all other countries.

In May 2021, we announced that SDX, our proprietary prodrug of d-MPH and the primary active pharmaceutical ingredient ("API") in AZSTARYS, was classified as a Schedule IV controlled substance by the DEA. AZSTARYS is classified as a Schedule II controlled substance as its formulation includes a 70:30 mixture of SDX (Schedule IV) and d-MPH (Schedule II), respectively.

During the first half of 2023, annual net sales of AZSTARYS surpassed $25 million, triggering the first annual net sales milestone payment of $5.0 million under the AZSTARYS License Agreement, which was earned and recognized as revenue in the second quarter of 2023, and received after quarter-end. During the second half of 2023, annual net sales of AZSTARYS surpassed $50 million, triggering the second net sales milestone payment of $10.0 million under the AZSTARYS License Agreement, which was earned and recognized in the fourth quarter of 2023.

Other Third-Party Agreements

Aquestive Termination Agreement

Under our March 2012 termination agreement with Aquestive Therapeutics ("Aquestive"), Aquestive has the right to receive a royalty amount equal to 10% of any value generated by AZSTARYS and any product candidates containing SDX. In connection with the AZSTARYS License Agreement, we paid Aquestive a royalty equal to 10% of the quarterly royalty payments and of the regulatory and net sales milestones earned in 2020, 2021, and 2023.

Distributor Agreement

Our current single distributor for sales of our approved products, OLPRUVA and MIPLYFFA, is a specialty pharmacy provider. The Company, however, may establish additional specialty distributors or other retail pharmacies and certain medical centers or hospitals. In addition to distribution agreements, we may enter into arrangements with health care providers and payors that provide for government mandated and/or privately negotiated rebates with respect to the purchase of our products.

Relief Exclusive License Agreement

As a condition to entering into the Merger Agreement, Acer and Relief Therapeutics SA ("Relief") entered into an exclusive license agreement on August 30, 2023 (the "Relief License Agreement"). Pursuant to the Relief License Agreement, Relief will hold exclusive development and commercialization rights for OLPRUVA in the EU, Liechtenstein, San Marino, Vatican City, Norway, Iceland, Principality of Monaco, Andorra, Gibraltar, Switzerland, United Kingdom, Albania, Bosnia, Kosovo, Montenegro, Serbia and North Macedonia ("Geographical Europe"). We have the right to receive a royalty of up to 10% of the net sales of OLPRUVA in Geographical Europe.

License Agreements Related to MIPLYFFA (arimoclomol)

Prior to our acquisition of the assets of Orphazyme in May 2022, Orphazyme had entered into an asset purchase agreement with LadRx Corporation, which was assigned to XOMA (US) LLC, a wholly-owned subsidiary of XOMA Corporation ("XOMA"), in June 2023 ("XOMA License Agreement"), as well as a license agreement with Kansas University (“KU”) and UCLB Business, PLC (“UCLB”) (the “KU/UCLB License Agreement”). Under the XOMA License Agreement, XOMA is entitled to certain net sales and regulatory milestone payments in addition to a mid-single digit royalty with respect to worldwide net sales of MIPLYFFA. Under the KU/UCLB License Agreement, KU and UCLB, respectively, are entitled to a low-single digit royalty with respect to worldwide net sales of MIPLYFFA.

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Our Intellectual Property

Our intellectual property (“IP”) strategy includes seeking composition-of-matter patents, among other patents, for our prodrugs, product candidates and conjugates of our prodrugs while also protecting, where appropriate as trade secrets, our proprietary LAT platform technology, the process by which we identify, screen, evaluate and select ligands to be conjugated with parent drugs to create our prodrugs. Our current prodrugs all consist of an approved parent drug and one or more ligands that we have selected using our proprietary LAT platform technology. The parent drug and ligand or ligands together may potentially constitute a new molecule and thus may be eligible for composition-of-matter patent protection, among other patent protections, in the U.S. and abroad. Beyond our internally generated IP, we have also acquired extensive IP portfolios through our business development efforts which support the products and product candidates that we are seeking to commercialize and/or develop.

In addition to the execution of our IP strategy, we also depend upon the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors. To help protect our LAT platform technology, as well as any proprietary know-how and show-how beyond that which is patentable, we rely on trade secret protection and confidentiality agreements to protect our interests. To this end, we generally require our employees, consultants and advisors to enter into confidentiality agreements prohibiting the disclosure of confidential information and, in some cases, requiring disclosure and assignment to us of the ideas, developments, discoveries, inventions and improvements important to our business.

As of December 31, 2024, we have been granted and maintain 89 active patents within the United States, and an additional 375 active foreign patents covering our selected prodrugs and product candidates. The terms of the 89 issued U.S. patents extend to various dates ranging, for example, between 2029 and 2042. The term of our overall domestic and foreign patent portfolio related to our selected prodrugs and product candidates, including patent term adjustments but excluding possible patent term extensions, extend to various dates ranging, for example, between 2029 and 2042, if pending patent applications in each of our patent families are issued as patents. As of December 31, 2024, we had 25 pending patent applications under active prosecution in the United States, and an additional 109 pending foreign patent applications potentially covering our selected prodrugs and product candidates. Our issued and granted patents provide protection in jurisdictions that include the United States, Australia, Canada, Chile, China, European Countries, Hong Kong, India, Indonesia, Israel, Japan, Kazakhstan, Malaysia, Mexico, New Zealand, Philippines, Romania, Russia, Singapore, South Africa, South Korea, and Vietnam.

MIPLYFFA (arimoclomol)

Pursuant to our acquisition of the assets of Orphazyme, we have received method of use and method of treatment patents, and have filed related patent applications, related to the arimoclomol families in various jurisdictions, including the U.S., European countries, Israel, Japan, South Korea, Canada, China, Brazil, Russia and Turkey, with anticipated patent expiration dates of 2029, excluding any potential patent term adjustments or extensions. We anticipate filing additional patent applications related to the arimoclomol families.

OLPRUVA (sodium phenylbutyrate)

We acquired the IP portfolio supporting OLPRUVA as part of the Merger with Acer. We have both U.S. and foreign patents with claims related to OLPRUVA. Our U.S. patents are directed to pharmaceutical compositions, including OLPRUVA's polymer coated, multi-particulate dosage formulation for oral administration and covers certain methods of use claims related to OLPRUVA. Additionally, we have patents in Europe, Israel, and Mexico related to pharmaceutical compositions, including OLPRUVA's polymer coated, multi-particulate dosage formulation for oral administration. These patents expire in 2036.

In October 2022, the U.S. Patent and Trademark Office ("USPTO") issued a Notice of Allowance for U.S. patent application No. 16/624,834 for claims related to a kit comprising a combination therapeutic product composed of sodium phenylbutyrate or glycerol phenylbutyrate and sodium benzoate. That application has now issued as U.S. Patent No. 11,517,547 and was exclusively licensed to Acer, which we acquired in November 2023, from Baylor College of Medicine ("BCM"), with an expiration date in June 2038.

In July 2022, the China National Intellectual Property Administration (“CNIPA”) issued Electronic Patent Certificate ZL202122004991.9 in May 2022, for Utility Model directed to OLPRUVA (sodium phenylbutyrate). Specifically, the patent covers dosage form claims related to OLPRUVA’s polymer coated formulation for oral administration as a potential treatment for UCDs and Maple Syrup Urine Disease ("MSUD"). The patent has an expiration date in August 2031.

We have exclusive rights to certain patents and other intellectual property from BCM for the use of sodium phenylbutyrate (NaPB) for the treatment of inborn errors of BCAA metabolism, including MSUD. The licensed patents cover methods and compositions for treating humans (and animals) with various formulations and prodrugs of NaPB for inborn errors of BCAA metabolism, including MSUD, with the latest expiring in 2032. We made filings in the geographic regions that represent the largest incidence and prevalence of MSUD, including the U.S., selected countries in Europe (including Turkey), and Brazil. BCM has received three patents in the U.S. and one in the EU with respect to OLPRUVA, each of which is exclusively licensed to us pursuant to our agreement with BCM.

We also expect to benefit from potential commercial exclusivity afforded to the first drug approved after obtaining orphan drug designation for the treatment of MSUD. Orphan drug designation for OLPRUVA for the treatment of MSUD was granted by the FDA in August 2014.

Furthermore, we may qualify to receive an additional six months of pediatric exclusivity in the U.S., which runs consecutively to an existing exclusivity, if we conduct a successful pediatric study of OLPRUVA for the treatment of MSUD, approved by the FDA for this purpose.

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AZSTARYS and Serdexmethylphenidate (SDX)

We have received composition-of-matter patents and also additionally filed composition-of-matter and method of treatment patent applications related to the AZSTARYS and SDX families in the United States and in Argentina, Australia, Brazil, Canada, Chile, China, Egypt, Hong Kong, European Countries, India, Israel, Indonesia, Japan, South Korea, Kazakhstan, Mexico, Malaysia, New Zealand, Philippines, Russia, Singapore, South Africa, Thailand, Ukraine, and Vietnam. We anticipate filing additional patent applications for our prodrugs and product candidates covering SDX and KP1077.

Celiprolol

The Merger with Acer included the acquisition of celiprolol, for which we intend to protect our commercial rights in the U.S. via multiple pathways. We believe celiprolol will be eligible for NCE exclusivity which provides upon approval as an NCE five years of marketing exclusivity, during which time the FDA will not approve another drug with the same active ingredient, regardless of the indication for use, in the U.S. In January 2015, the FDA granted celiprolol Orphan Drug designation, which provides seven years of marketing exclusivity for a drug intended to treat a rare condition, if approved. During the Orphan Drug exclusivity period, the FDA cannot approve the same drug for the same indication, unless it demonstrates clinical superiority. Orphan Drug exclusivity does not prevent the FDA from approving the same drug for a different indication, or a different drug for the same indication. NCE exclusivity and Orphan Drug exclusivity periods run concurrently. Furthermore, celiprolol may qualify for an additional six months of pediatric exclusivity in the U.S., which requires the submission of one or more studies in pediatric subjects that meet requirements to be specified by the FDA in a written request for pediatric studies. Pediatric exclusivity can be obtained either before or after NDA approval. Pediatric exclusivity is attached to the end of an existing exclusivity and runs consecutively. We may also consider making modifications to the formulation in order to improve the product profile and to seek additional intellectual property. While unapproved drugs may be imported into the U.S. underspecified circumstances, such as for use in clinical studies under a valid and effective investigational new drug ("IND") or for further manufacture into an IND drug or an approved drug, we intend to aggressively assert our rights, via regulatory and legal means, to limit the importation of non-FDA approved versions of celiprolol.

In 2022, the USPTO issued a Notice of Allowance for a patent application exclusively licensed from Assistance Publique—Hôpitaux de Paris (AP-HP), for claims related to certain methods of VEDS with celiprolol. This application, titled “Method of Providing Celiprolol Therapy to a Patient,” has now issued as a U.S. patent (US 11,523,997) with an expiration date in November 2038. There is one granted patent in Mexico, and further pending applications in various jurisdictions, including the U.S. as well as Mexico, Canada, and Brazil.

Commercialization

In March 2021, we announced that the FDA approved the NDA for AZSTARYS, a once-daily product for the treatment of ADHD in patients ranging from six years and older. Corium is leading the commercialization of AZSTARYS in the U.S. under the AZSTARYS License Agreement. Corium commercially launched AZSTARYS in the U.S. in July 2021. In December 2021, Commave Therapeutics, S.A. sublicensed to Shanghai Ark Biopharmaceutical Co., Ltd. the commercialization rights Greater China, including mainland China, Hong Kong, Macau and Taiwan.

In December 2022, the FDA approved OLPRUVA (sodium phenylbutyrate) for oral suspension in the U.S.

In September 2024, the FDA approved the NDA for MIPLYFFA™ (arimoclomol), an orally-delivered treatment for NPC. MIPLYFFA has also been granted orphan designation for the treatment of NPC by the European Commission.

To support the launch of OLPRUVA and MIPLYFFA, we have built in-house capabilities including rare disease sales specialists who are working with prescribing clinicians and healthcare providers, which include metabolic specialists and clinical geneticists, as well as marketing, patient reimbursement services, market access and contracting, patient advocacy, and medical affairs teams. We have successfully recruited, on-boarded and trained our full commercial team and full launch for OLPRUVA began on January 29, 2024. We also have arrangements with third parties to provide additional services such as distribution and specialty pharmacy offerings. To support the efforts of our team members which are in the field engaging with HCPs, we are actively engaged in negotiations with the major commercial payers and state Medicaid organizations to seek access for OLPRUVA and MIPLYFFA. We have established promotional programs to drive awareness and patient experience with OLPRUVA and MIPLYFFA including Quick Start, a thirty-day free trial program designed to provide patient experience, and other patient co-pay programs, reflecting our commitment to ensure access to innovative treatments to those in need.

We have established a targeted commercial team which is designed to fully service the patients and prescribers within the rare disease indications for which we are successful in gaining approval for our product candidates. However, if our product candidates have large potential market opportunities that would require significant marketing resources, we may conclude that the most appropriate approach to their commercialization, if they receive regulatory approval, will involve forming a commercial collaboration or strategic relationship similar to those we have entered into with Commave, or consummating some type of strategic transaction, with a larger pharmaceutical or other marketing organization. As we get closer to potential approval of our product candidates, we will work to identify and implement the most appropriate commercialization strategies that we conclude are the most desirable with regard to each specific product candidate.

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Competition

Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We will face competition and potential competition from any number of pharmaceutical and biotechnology companies, specialty pharmaceutical companies, generic drug companies, drug delivery companies and academic and research institutions. Our competitors may develop or market drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products or product candidates and these competitors may also have significantly more resources than us and be more successful than us in manufacturing and marketing their products. We anticipate facing intense and increasing competition as new products enter the market and advanced technologies become available.

OLPRUVA

OLPRUVA competes against several currently marketed, branded and generic forms of phenylbutyrate. In particular, RAVICTI, which is marketed by Amgen Inc. (formerly Horizon Therapeutics), and PHEBURANE,, which is marketed by Medunik USA. We are also aware that there are drug candidates in clinical development for the potential treatment of UCDs. In addition, there is the potential entrance of authorized generics for RAVICTI which could enter the market as early as July 2025.

MIPLYFFA

There is another treatment for NPC, AQNEURSA (IntraBio) that was recently approved in the U.S. While AQNEURSA has a similar indication, data included on its label has a different clinical endpoint and safety profile from MIPLYFFA. We are also aware that there are several other drug candidates in clinical development for the treatment of NPC. These include adrabetadex (Mandos), and cyclodextrin (Cyclo Therapeutics).

Celiprolol

We are not aware of any active ongoing clinical trials for the treatment of VEDS. Aytu BioPharma, Inc. development program known as AR101/enzastaurin was indefinitely suspended in October 2022.

KP1077

If approved, we intend for KP1077 to compete against XYWAV, marketed by Jazz Pharmaceuticals, and potentially with other products that are currently in development for the treatment of IH. KP1077 could face potential competition from any products for the treatment of IH that are currently in or which may enter into clinical development.

AZSTARYS

AZSTARYS competes against currently marketed, branded and generic methylphenidate products for the treatment of ADHD. Some of these currently marketed products include CONCERTA, marketed by J&J Innovative Medicines (formerly Jannsen), QUELBREE, marketed by Supernus Pharmaceuticals, Inc., QUILLIVANT XR and QUILLICHEW ER, marketed by Tris Pharma, RITALIN, FOCALIN and FOCALIN XR, marketed by Novartis AG, METADATE CD, marketed by UCB SA, DAYTRANA, marketed by Noven Therapeutics, LLC, Neos Therapeutics’ CONTEMPLA XR-ODT, marketed Aytu BioScience, Inc., JORNAY PM, Ironshore Pharmaceuticals, Inc., and ADHANSIA XR, marketed by Adlon Therapeutics, in addition to multiple other branded and generic methylphenidate products. In addition, AZSTARYS will face potential competition from any other methylphenidate products for the treatment of ADHD that are currently in, or which may enter into clinical development.

Many of our competitors either alone or with strategic partners, have or will have substantially greater financial, technical, and human resources compared with us. Accordingly, our competitors may be more successful in developing or marketing products and technologies that are more effective, safer or less costly. Additionally, our competitors may obtain regulatory approval for their products more rapidly and may achieve more widespread market acceptance. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical study sites and patient registration for clinical studies and acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. There are other non-pharmaceutical therapeutic approaches that are used or may be used for our targeted indications. For example, liver transplantation may be used in some cases to treat UCDs in pediatric patients who have developed acute liver failure.

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Manufacturing

Our manufacturing strategy is to rely on contract manufacturers to produce our approved products and product candidates for clinical trials and, if approved, drug product for commercial sale. We currently have no manufacturing facilities and limited personnel in our manufacturing department. We have contracted with third parties for the manufacture, testing, and storage of our approved products and product candidates and intend to continue to do so in the future. We expect to contract with third-party manufacturers for the manufacture of all API supply needs outside the United States if and when we receive approval from regulatory authorities outside the United States.

Our current and any future third-party manufacturers, their facilities and all lots of drug substance and drug products used in our clinical trials are required to be in compliance with current good manufacturing practices ("cGMPs") and comparable foreign regulations. The cGMP and comparable foreign regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP and comparable foreign requirements and FDA and foreign regulatory authorities' satisfaction before any product is approved and we can manufacture commercial products. Our current and any future third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations.

Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreements to resolve allegations of non-compliance with these laws, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and individual imprisonments.

Third-Party Payor Coverage and Reimbursement

Sales of pharmaceutical products depend in significant part on the availability of coverage and adequate reimbursement by third-party payors, such as state and federal governmental authorities, including those that administer the Medicare and Medicaid programs, and private managed care organizations and health insurers. Decisions regarding the extent of coverage and amount of reimbursement to be provided for each of our product and product candidates is and will be made on a plan-by-plan basis. One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement, for the product. Each third-party payor determines whether or not it will provide coverage for a drug, what amount it will pay providers for the drug, and on what tier of its formulary the drug will be placed. These decisions are influenced by the existence of multiple drug products within a therapeutic class and the net cost to the plan, including the amount of the prescription price, if any, rebated by the drug’s manufacturer. Typically, generic versions of drugs are placed in a preferred tier. The position of a drug on the formulary generally determines the co-payment that a patient will need to make to obtain the drug and can strongly influence the adoption of a drug by patients and physicians. Patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products. Additionally, a third-party payor’s decision to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved. Also, third-party payors are developing increasingly sophisticated methods of controlling healthcare costs. As a result, coverage, reimbursement and placement determinations are complex and are often the subject of extensive negotiations between the payer and the manufacturer of the drug.

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Unless we enter into a strategic collaboration under which our collaborator assumes responsibility for seeking coverage and reimbursement for a given product (such as the AZSTARYS License Agreement), we will be responsible for negotiating coverage, reimbursement and placement decisions for our product candidates, if approved. Coverage, reimbursement and placement decisions for a new product are based on many factors including the coverage, reimbursement and placement of already marketed branded drugs for the same or similar indications, the safety and efficacy of the new product, availability of generics for similar indications, the clinical need for the new product and the cost-effectiveness of the product. Increasingly, both purchasers and payors are also conducting comparative clinical and cost effectiveness analyses involving application of metrics, including data on patient outcomes, provided by manufacturers.

Within the Medicare program, as self-administered drugs, our product and product candidates would be reimbursed under the expanded prescription drug benefit known as Medicare Part D. This program is a voluntary Medicare benefit administered by private plans that operate under contracts with the federal government. These plans develop formularies that determine which products are covered and what co-pay will apply to covered drugs. The plans have considerable discretion in establishing formularies and tiered co-pay structures, negotiating rebates with manufacturers and placing prior authorization and other restrictions on the utilization of specific products, subject to review by the Centers for Medicare & Medicaid Services ("CMS"), for discriminatory practices. These Part D plans negotiate discounts with drug manufacturers, which are passed on, in whole or in part, to each of the plan’s enrollees through reduced premiums. Historically, Part D beneficiaries have been exposed to significant out-of-pocket costs after they surpass an annual coverage limit and until they reach a catastrophic coverage threshold. However, changes made by recent legislation reduced this patient coverage gap, known as the “donut hole”, by transitioning patient responsibility in that coverage range from 100% in 2010 to only 25% currently. To help achieve this reduction, pharmaceutical manufacturers were required to provide quarterly discounts of 70%, which commenced January 1, 2019, and was replaced, beginning on January 1, 2025 (described below). In 2020, drug manufacturers became responsible for a larger share of total drug costs due to an increase to the catastrophic threshold. Such increase also resulted in a higher out-of-pocket threshold paid by Part D beneficiaries.

If a drug product is available for reimbursement by Medicare or Medicaid, its manufacturer must comply with various health regulatory requirements and price reporting metrics, which may include, as applicable, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990 (the "OBRA"), and the Veterans Health Care Act of 1992 (the "VHCA"), each as amended. Among other things, the OBRA requires drug manufacturers with certain drugs covered by Medicaid to pay rebates on prescription drugs to state Medicaid programs. States may also negotiate “supplemental” Medicaid rebates on drug products dispensed under Medicaid. Manufacturers participating in Medicaid are also generally required to participate in the Public Health Service 340B Drug Discount Program, which imposes a mandatory discount on purchases by certain customers. Manufacturers of innovator drugs, including 505(b)(2) drugs, that participate in the Medicaid program are also required to offer the drugs on the Federal Supply Schedule purchasing program of the General Services Administration for purchase by the Department of Veterans Affairs, the Department of Defense and other authorized users at a mandatory discount. Additional laws and requirements apply to these contracts. Participation in such federal programs may result in prices for our future products that will likely be lower than the prices we might otherwise obtain.

Third-party payers, including the U.S. government, continue to apply downward pressure on the reimbursement of pharmaceutical products. Also, the trend towards managed health care in the United States and the concurrent growth of organizations such as health maintenance organizations may result in lower reimbursement for pharmaceutical products. We expect that these trends will continue as these payors implement various proposals or regulatory policies, including various provisions of the recent health reform legislation that affect reimbursement of these products. There are currently, and we expect that there will continue to be, a number of federal, state and foreign proposals to implement controls on reimbursement and pricing, directly and indirectly.

In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, in the EU, pricing and reimbursement schemes vary widely from country to country. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular medicinal product candidate to currently available therapies. This Health Technology Assessment (“HTA”) which is currently governed by the national laws of the individual EU member states, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU member states. The downward pressure on healthcare costs in general, particularly prescription medicines, has become very intense. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably. Historically, products launched in the EU do not follow the price structures which prevail in the U.S., and generally, prices tend to be significantly lower.

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Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, packaging, recordkeeping, tracking, approval, import, export, distribution, advertising and promotion of our products and product candidates. A new drug must be approved by the FDA through the NDA process before it may be legally marketed in the United States. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources.

The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

| ● | certain non-clinical laboratory and animal tests that must be conducted in accordance with good laboratory practices ("GLP") requirements and other applicable regulations;
| ● | submission of an IND, which must be received by the FDA and become effective before human clinical trials may begin;
| ● | approval by an independent institutional review board ("IRB") or ethics committee at each clinical site or centrally before each trial may be initiated;
| ● | performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed product candidate for its intended use, performed in accordance with good clinical practice requirements ("GCPs");
| ● | preparation and submission of an NDA to the FDA;
| ● | satisfactory completion of an FDA advisory committee review, if applicable;
| ● | pre-approval inspection of manufacturing facilities at which the drug is produced to assess their compliance with cGMPs and of selected clinical investigation sites to assess compliance with GCPs; and
| ● | FDA approval of an NDA to permit commercial marketing for particular indications for use.

Clinical Trials

The testing and regulatory approval process requires substantial time, effort and financial resources. Preclinical studies include laboratory evaluation of drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as animal studies to assess potential safety and efficacy. Prior to commencing the first human clinical trial with a product candidate, we must submit the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies.

The IND becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development, as well as amendments to previously submitted clinical trials. Further, an independent IRB for each study site proposing to conduct the clinical trial must review and approve the plan for any clinical trial, its informed consent form and other communications to study subjects before the clinical trial commences at that site. The IRB must continue to oversee the clinical trial while it is being conducted, including any changes to the study plans. Regulatory authorities, an IRB or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk, the clinical trial is not being conducted in accordance with the FDA’s or the IRB’s requirements, if the drug has been associated with unexpected serious harm to subjects, or based on evolving business objectives or competitive climate. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may advise us to halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. The FDA, or the sponsor, may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. There are also requirements governing the reporting of ongoing clinical studies and clinical study results to public registries.

In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

| ● | Phase 1 - The product candidate is initially introduced into healthy subjects or patients with the target disease or condition. These studies are conducted to test the product candidate for safety, dosage tolerance, structure-activity relationships, mechanism of action, absorption, metabolism, distribution and excretion. If possible, Phase 1 trials may also be used to gain early evidence of product effectiveness.
| ● | Phase 2 - The product candidate is administered to a limited patient population with a specified disease or condition to evaluate the preliminary efficacy, optimal dosage and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
| ● | Phase 3 - The product candidate is administered to an expanded patient population to further evaluate dosage to provide statistically significant evidence of clinical efficacy and to further test for safety in an expanded subject population at multiple clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate basis for product labeling.

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In the case of a 505(b)(2) NDA, some of the above-described studies and preclinical studies may not be required or may be abbreviated. Pharmacokinetic and other bridging studies may be needed, however, to demonstrate the relevance of the studies that were previously conducted by other sponsors to the drug that is the subject of the NDA.

The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These clinical trials, sometimes referred to as Phase 4, or post-market, studies may be used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FFDCA. In addition, while the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator’s brochure.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

NDA Submission and Review by the FDA

Assuming successful completion of the required clinical and preclinical testing, among other items, the results of product development, including chemistry, manufacture and controls, non-clinical studies and clinical trials are submitted to the FDA, along with proposed labeling, as part of an NDA requesting approval to market the product. Data can come from company-sponsored clinical studies intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by independent investigators. The submission of an NDA requires payment of a substantial application user fee to the FDA. These user fees must be filed at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in some circumstances.

In addition, under the Pediatric Research Equity Act ("PREA"), an NDA or supplement to an NDA for a new active ingredient, indication, dosage form, dosage regimen or route of administration must contain data that are adequate to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.

The FDA may refer drugs which present difficult questions of safety or efficacy to an advisory committee. An advisory committee is a panel that typically includes clinicians and other experts who review, evaluate and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive review, before it accepts the application for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. The timeline for the FDA to complete its review of an NDA may differ based on whether the application is a standard review or priority review application. The FDA may give a priority review to applications for drugs that are intended to treat serious conditions and if approved, would provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of such serious conditions. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act ("PDUFA"), the FDA has set the review goal of ten months from the 60-day filing date to complete its initial review of a standard NDA for a new molecular entity, or NME, and make a decision on the application. For non-NME standard applications, the FDA has set the review goal of ten months from the submission date to complete its initial review and to make a decision on the application. For priority review applications, the FDA has set the review goal of reviewing NME NDAs within six months of the 60-day filing date and non-NME applications within six months of the date of receipt. Such deadlines are referred to as the PDUFA date. The review process and the PDUFA date may also be extended if the FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding the submission.

The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality and purity. Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCPs.

Once the FDA’s review of the application is complete, the FDA will issue either a CRL or approval letter. A CRL indicates that the review cycle of the application is complete, and the application cannot be approved in its current form. A CRL will usually describe all of the deficiencies that the FDA has identified in the NDA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL without first conducting required inspections and/or reviewing proposed labeling. In issuing the CRL, the FDA may recommend actions that the applicant might take to place the NDA in condition for approval, including requests for additional information or clarification. Even with the submission of additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA’s satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

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The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a risk evaluation and mitigation strategy ("REMS"), as a condition of approval or following approval. A REMS is a safety strategy to manage a known or potential serious risk associated with a medicine and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools.

If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed or may include contraindications, warnings or precautions in the product labeling, including a boxed warning. If the FDA requires a boxed warning, the sponsor may also be subject to specified promotional restrictions, such as the prohibition of reminder advertisements. The FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require post-marketing studies to monitor the effect of approved products and may limit further marketing of the product based on the results of these post-marketing studies.

Advertising and Promotion

The FDA and other federal regulatory agencies closely regulate the marketing and promotion of drugs through, among other things, guidance and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the internet. A product cannot be commercially promoted before it is approved. After approval, product promotion can include only those claims relating to safety and efficacy that are consistent with the labeling approved by the FDA. Healthcare providers are permitted to prescribe drugs for “off-label” uses — that is, uses not approved by the FDA and therefore not described in the drug’s labeling because the FDA does not regulate the practice of medicine. However, FDA regulations impose stringent restrictions on manufacturers’ communications regarding off-label uses. Failure to comply with applicable FDA requirements and restrictions in this area may subject a company to adverse publicity and enforcement action by the FDA, the U.S. Department of Justice, or the Office of the Inspector General of HHS, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products.

Post-Approval Requirements

Any products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including manufacturing, periodic reporting, product sampling and distribution, advertising, promotion, drug shortage reporting, compliance with any post-approval requirements imposed as a conditional of approval such as post-marketing clinical trials, REMS and surveillance, recordkeeping and reporting requirements, including adverse experiences.

After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual human prescription drug program fee requirements for approved products. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and to list their drug products and are subject to periodic announced and unannounced inspections by the FDA and these state agencies for compliance with cGMPs and other requirements, which impose procedural and documentation requirements upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with the cGMP regulations and other FDA regulatory requirements.

Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented, or FDA notification. FDA regulations also require investigation and correction of any deviations from cGMPs and specifications and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in withdrawal of marketing approval, mandatory revisions to the approved labeling to add new safety information or other limitations, imposition of post-market studies or clinical trials to assess new safety risks, or imposition of distribution or other restrictions under a REMS program, among other consequences.

The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA. Physicians, in their independent professional medical judgment, may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labelling.

In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing Act ("PDMA"), which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. The Drug Supply Chain Security Act also imposes obligations on manufacturers of pharmaceutical products related to product tracking and tracing.

Failure to comply with any of the FDA’s requirements could result in significant adverse enforcement actions. These include a variety of administrative or judicial sanctions, such as refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and individual imprisonment. Any of these sanctions could result in adverse publicity, among other adverse consequences.

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Orphan Drug Designation and Exclusivity

Under the Orphan Drug Act, the FDA may grant orphan designation to a drug intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the U.S., or a patient population greater than 200,000 individuals in the U.S. and when there is no reasonable expectation that the cost of developing and making available the drug in the U.S. will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.

If a product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of patients with the disease or condition for which the drug was designated. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or, as noted above, if a second applicant demonstrates that its product is clinically superior to the approved product with orphan exclusivity or the manufacturer of the approved product is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Rare Pediatric Disease Priority Review Voucher Program

In 2012, the U.S. Congress authorized the FDA to award priority review vouchers to sponsors of certain rare pediatric disease product applications. This program is designed to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases. Specifically, under this program, a sponsor who receives an approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive priority review of a subsequent marketing application for a different product. The sponsor of a rare pediatric disease drug product receiving a priority review voucher may transfer (including by sale) the voucher to another sponsor. The voucher may be further transferred any number of times before the voucher is used, as long as the sponsor making the transfer has not yet submitted the application. The FDA may also revoke any priority review voucher if the rare pediatric disease drug for which the voucher was awarded is not marketed in the U.S. within one year following the date of approval.

For purposes of this program, a “rare pediatric disease” is a (a) serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents; and (b) rare diseases or conditions within the meaning of the Orphan Drug Act. Under the current statutory sunset provisions, as amended by the Continuing Appropriations and Extensions Act, 2025, FDA may only award a voucher for an approved rare pediatric disease product application if the Sponsor has rare pediatric disease designation for the drug, and that designation was granted by December 20, 2024. After September 30, 2026, FDA may not award any Rare Pediatric Disease Priority Review Voucher.

Hatch-Waxman Act

Section 505 of the FFDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy for an existing product, or published literature, in support of its application. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant. Section 505(j) establishes an abbreviated approval process for a generic version of approved drug products through the submission of an abbreviated new drug application ("ANDA"). An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. ANDAs are termed “abbreviated” because they are generally not required to include preclinical and clinical data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject’s bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA patents whose claims cover the applicant’s product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the Orange Book. These products may be cited by potential competitors in support of approval of an ANDA or 505(b)(2) NDA.

Any applicant who files an ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book or a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug or method of use that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires; or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification. Generally, the ANDA or 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the ANDA or 505(b)(2) NDA applicant challenges a listed patent through a Paragraph IV certification. If the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use, the ANDA or 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired, or, if permissible, are carved out.

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If the ANDA or 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the holder of the NDA for the reference listed drug and the patent owner once the application has been accepted for filing by the FDA. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit, a decision in the infringement case that is favorable to the applicant or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where an ANDA or 505(b)(2) NDA applicant files a Paragraph IV certification, the NDA holder or patent owner regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of an ANDA or 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor’s decision to initiate patent litigation. The applicant may also elect to submit a statement certifying that its proposed label does not contain, or carves out, any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

The FDA provides periods of regulatory exclusivity, which provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug for a period of three or five years following the FDA’s approval of the NDA. Five years of exclusivity are available to new chemical entities ("NCEs"). An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent derivatives, such as a complex, chelate, or clathrate, of the molecule, responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review or approve an ANDA or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. Applicants may also seek to carve out certain drug labeling that is protected by exclusivity.

If a product is not eligible for the NCE exclusivity, it may be eligible for three years of exclusivity. Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the condition of the new drug’s approval. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.

DEA Regulation

Our products and certain of our product candidates are, or if approved, will be regulated as “controlled substances” as defined in the Controlled Substances Act of 1970 ("CSA"), and the DEA’s implementing regulations, which establish registration, security, recordkeeping, reporting, storage, distribution, importation, exportation, inventory, quota and other requirements administered by the DEA. These requirements are directly applicable to us and also applicable to our contract manufacturers and to distributors, prescribers and dispensers of our product candidates. The DEA regulates the handling of controlled substances through a closed chain of distribution. This control extends to the equipment and raw materials used in their manufacture and packaging in order to prevent loss and diversion into illicit channels of commerce.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. Schedule II drugs are those that meet the following criteria:

| ● | the drug has a high potential for abuse;
| ● | the drug has a currently accepted medical use in treatment in the United States or a currently accepted medical use with severe restrictions; and
| ● | abuse of the drug may lead to severe psychological or physical dependence.

AZSTARYS is listed as Schedule II controlled substances under the CSA. For Schedule II controlled substances, the importation of APIs for our product candidates, as well as the manufacture, shipping, storage, sales and use of the products, are subject to a high degree of regulation. In addition to maintaining an importer and/or exporter registration, importers and exporters of controlled substances must obtain a permit for every import of a Schedule I or II substance and a narcotic substance in Schedule III, IV and V, as well as every export of a Schedule I or II substance and a narcotic substance in Schedule III and IV. For all other drugs in Schedule III, IV and V, importers and exporters must submit an import or export declaration. Schedule II drugs are subject to the strictest requirements for registration, security, recordkeeping and reporting. Also, distribution and dispensing of these drugs are highly regulated. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription. Electronic prescriptions may also be permissible depending on the state, so long as the prescription complies with the DEA’s requirements for electronic prescriptions.

SDX, which is the sole API in KP1077, has been listed as a Schedule IV controlled substance under the CSA. Controlled substances classified in Schedule III, IV, and V are also subject to registration, recordkeeping, reporting, and security requirements. For example, Schedule III drug prescriptions must be authorized by a physician and may not be refilled more than six months after the date of the original prescription or more than five times. A prescription for controlled substances classified in Schedules III, IV, and V issued by a physician, may be communicated either orally, in writing or by facsimile to the pharmacies. Controlled substances that are also classified as narcotics, such as hydrocodone, oxycodone and hydromorphone, are also subject to additional DEA requirements, such as manufacturer reporting of the import of narcotic raw material.

Annual registration is required for any facility that manufactures, distributes, dispenses, imports or exports any controlled substance. The registration is specific to the particular location, activity and controlled substance schedule. For example, separate registrations are needed for import and manufacturing, and each registration will specify which schedules of controlled substances are authorized. Similarly, separate registrations are also required for separate facilities. Acquisition and distribution transactions must also be reported for Schedule I and II controlled substances, as well as Schedule III narcotic substances.

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The DEA typically inspects a facility to review its security measures prior to issuing a registration and on a periodic basis. Security requirements vary by controlled substance schedule, with the most stringent requirements applying to Schedule I and Schedule II substances. Required security measures include background checks on employees and physical control of inventory through measures such as cages, surveillance cameras and inventory reconciliations. Records must be maintained for the handling of all controlled substances, and periodic reports made to the DEA, for example distribution reports for Schedule I and II controlled substances, Schedule III substances that are narcotics, and other designated substances. Reports must also be made for thefts or losses of any controlled substance, and to obtain authorization to destroy any controlled substance. In addition, special permits and notification requirements apply to imports and exports of narcotic drugs. To enforce these requirements, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Failure to maintain compliance with applicable requirements, particularly as manifested in loss or diversion, can result in administrative, civil or criminal enforcement action that could have a material adverse effect on our business, results of operations and financial condition. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations. In some circumstances, violations could result in criminal proceedings.

In addition, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Distributions of any Schedule I or II controlled substance or Schedule III narcotic must also be accompanied by special order forms, with copies provided to the DEA. Because AZSTARYS and our product candidates may be regulated as Schedule II controlled substances, they may be subject to the DEA’s production and procurement quota scheme. The DEA establishes annually an aggregate quota for how much of a controlled substance may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. The limited aggregate amount of stimulants that the DEA allows to be produced in the U.S. each year is allocated among individual companies, which must submit applications annually to the DEA for individual production and procurement quotas. We and our contract manufacturers must receive an annual quota from the DEA in order to produce or procure any Schedule I or Schedule II substances for use in manufacturing of our product candidates. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Our, or our contract manufacturers’, quota of an active ingredient may not be sufficient to meet commercial demand or complete clinical trials. Any delay, limitation or refusal by the DEA in establishing our, or our contract manufacturers’, quota for controlled substances could delay or stop our clinical trials or product launches, which could have a material adverse effect on our business, financial position and results of operations.

Individual states also independently regulate controlled substances. We and our contract manufacturers will be subject to state regulation on distribution of these products, including, for example, state requirements for licensures or registration.

Other Healthcare Regulatory Frameworks

Our business activities, including but not limited to, research, sales, promotion, distribution, medical education and other activities are subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the U.S. Department of Health and Human Services and its various divisions, including the CMS and the Health Resources and Services Administration, the Department of Veterans Affairs, the Department of Defense and state and local governments. Our business activities must comply with numerous healthcare laws, including those described below. Compliance with government regulations requires the expenditure of substantial time and financial resources.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for, or purchasing, leasing, ordering, or arranging for the purchase, lease or order of, any good, facility, item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, a person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute, or the specific intent to violate it to have committed a violation.

The federal civil and criminal false claims laws, including the federal False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the federal government, including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, a claim for payment of items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

The federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.

Additionally, the federal Physician Payments Sunshine Act and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with specified exceptions) to report annually information related to specified payments or other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants, and certified nurse-midwives) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such providers and teaching hospitals and to report annually specified ownership and investment interests held by physicians and their immediate family members.

Depending on the circumstances, failure to comply with these laws can result in significant penalties, including criminal, civil and/or administrative penalties, damages, fines, disgorgement, debarment from government contracts, individual imprisonment, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, exclusion from government programs, refusal to allow us to enter into supply contracts, including government contracts, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could adversely affect our business.

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Data Privacy and Security Laws

We may be subject to data privacy and security laws, regulations, and standards by foreign, federal, state and local governments that govern the collection, use, access to, confidentiality and security of health-related and other personal information. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data. Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

Healthcare Reform Measures

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, in March 2010, the ACA was passed, which has substantially changed health care financing by both governmental and private insurers, and significantly affected the U.S. pharmaceutical industry. The ACA, among other things, subjected manufacturers to new annual fees and taxes for specified branded prescription drugs, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, expanded health care fraud and abuse laws, revised the methodology by which rebates owed by manufacturers to the state and federal government for covered outpatient drugs under the Medicaid Drug Rebate Program are calculated, imposed an inflation penalty on new formulations of drugs, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, expanded the 340B program which caps the price at which manufacturers can sell covered outpatient pharmaceuticals to specified hospitals, clinics and community health centers, and provided incentives to programs that increase the federal government’s comparative effectiveness research.

Since its enactment there have been executive, judicial and congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers, which went into effect in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2032 with the exception of a temporary suspension from May 1, 2020, through March 31, 2022, unless additional Congressional action is taken. In addition, in January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. On March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. The rebate was previously capped at 100% of a drug’s average manufacturer price.

Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. On August 16, 2022, the Inflation Reduction Act (“IRA”), of 2022, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025). The IRA permits the Secretary of the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years. CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and the list of the subsequent 15 drugs that will be subject to negotiation, although the drug price negotiation program is currently subject to legal challenges. For that and other reasons, it is currently unclear how the IRA will be effectuated. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price increase reporting and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states.

We expect that additional state, federal and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal, state and foreign governments will pay for healthcare product candidates and services, which could result in reduced demand for our products or additional pricing pressures.

On December 13, 2021, Regulation No 2021/2282 on HTA, amending Directive 2011/24/EU, was adopted. The Regulation entered into force in January 2022, and has been applicable since January 2025, with a phased implementation based on the type of product, i.e. oncology and advanced therapy medicinal products as of 2025, orphan medicinal products as of 2028, and all other medicinal products by 2030. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It permits EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.

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The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States. The foreign regulatory approval process includes all of the risks associated with FDA approval set forth above, as well as additional country-specific regulation.

Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Non-clinical Studies and Clinical Trials

Similarly to the United States, the various phases of non-clinical and clinical research in the EU are subject to significant regulatory controls.

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Non-clinical (pharmaco-toxicological) studies must be conducted in compliance with the principles of good laboratory practice (“GLP”) as set forth in EU Directive 2004/10/EC (unless otherwise justified for certain particular medicinal products, e.g., radio-pharmaceutical precursors for radio-labeling purposes). In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical studies. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) guidelines on Good Clinical Practices as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation (“CTR”) which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law. The CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal and database.

While the EU Clinical Trials Directive required a separate clinical trial application (“CTA”) to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed.

The CTR transition period ended on January 31, 2025, and all clinical trials (and related applications) are now fully subject to the provisions of the CTR. Medicines used in clinical trials must be manufactured in accordance with Good Manufacturing Practice (“GMP”). Other national and EU-wide regulatory requirements may also apply.

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Marketing Authorization

In order to market our product candidates in the EU and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EU, medicinal product candidates can only be commercialized after obtaining a marketing authorization (“MA”). To obtain regulatory approval of a product candidate under EU regulatory systems, we must submit a MA application (“MAA”). The process for this depends, among other things, on the nature of the medicinal product. There are two types of MAs:

• “Centralized MAs” are issued by the European Commission through the centralized procedure based on the opinion of the Committee for Medicinal Products for Human Use (“CHMP”) of the European Medicines Agency (“EMA”) and are valid throughout the EU. The centralized procedure is compulsory for certain types of medicinal products such as (i) medicinal products derived from biotechnological processes, (ii) designated orphan medicinal products, (iii) advanced therapy medicinal products (“ATMPs”) (such as gene therapy, somatic cell therapy and tissue engineered products) and (iv) medicinal products containing a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases or autoimmune diseases and other immune dysfunctions, and viral diseases. The centralized procedure is optional for products containing a new active substance not yet authorized in the EU, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

• “National MAs” are issued by the competent authorities of the EU member states, only cover their respective territory, and are available for product candidates not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in an EU member state, this national MA can be recognized in another member state through the mutual recognition procedure. If the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent authorities of each of the member states in which the MA is sought, one of which is selected by the applicant as the reference member state.

Under the above-described procedures, in order to grant the MA, the EMA or the competent authorities of the EU member states make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. MAs have an initial duration of five years. After these five years, the authorization may be renewed based on a reevaluation of the risk-benefit balance.

Data and Marketing Exclusivity

In the EU, new products authorized for marketing (i.e., reference products) generally receive eight years of data exclusivity and an additional two years of market exclusivity upon MA. If granted, the data exclusivity period prevents generic and biosimilar applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until ten years have elapsed from the initial MA of the reference product in the EU. The overall ten-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications, which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical or biological entity, and products may not qualify for data exclusivity.

Orphan Medicinal Products

The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States. A medicinal product can be designated as an orphan if its sponsor can establish that: (1) the product is intended for the diagnosis, prevention or treatment of a life threatening or chronically debilitating condition (2) either (a) such condition affects not more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from the orphan status, would not generate sufficient return in the EU to justify the necessary investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized for marketing in the EU or, if such method exists, the product will be of significant benefit to those affected by that condition.

Orphan designation must be requested before submitting an MAA. An EU orphan designation entitles a party to incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized procedure. Upon grant of a MA, orphan medicinal products are entitled to ten years of market exclusivity for the approved indication, which means that the competent authorities cannot accept another MAA, or grant a MA, or accept an application to extend a MA for a similar medicinal product for the same indication for a period of ten years. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed pediatric investigation plan (“PIP”). No extension to any supplementary protection certificate can be granted based on pediatric studies for orphan indications. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The orphan exclusivity period may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan destination, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity or where the prevalence of the condition has increased above the threshold. Additionally, MA may be granted to a similar product for the same indication at any time if (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant consents to a second orphan medicinal product application; or (iii) the applicant cannot supply enough orphan medicinal product.

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Pediatric Development

In the EU, MAAs for new medicinal products must include the results of studies conducted in the pediatric population, in compliance with a PIP agreed with the EMA’s Pediatric Committee (“PDCO”). The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained in all the EU member states and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection certificate extension (if any is in effect at the time of approval) or, in the case of orphan pharmaceutical products, a two-year extension of the orphan market exclusivity is granted.

Controlled substances

The EU legislation does not establish different classes of narcotic or psychotropic substances. However, the United Nations (“UN”) Single Convention on Narcotic Drugs of 1961 and the UN Convention on Psychotropic Substances of 1971 (“UN Conventions”) codify internationally applicable control measures to ensure the availability of narcotic drugs and psychotropic substances for medical and scientific purposes. The individual EU member states are all signatories to these UN Conventions. All signatories have a dual obligation to ensure that these substances are available for medical purposes and to protect populations against abuse and dependence. The UN Conventions regulate narcotic drugs and psychotropic substances as Schedule I, II, III, IV substances with Schedule II substances presenting the lowest relative risk of abuse among such substances and Schedule I and IV substances considered to present the highest risk of abuse.

The UN Conventions require signatories to require all persons manufacturing, trading (including exporting and importing) or distributing controlled substances to obtain a license from the relevant authority. Each individual export or import of a controlled substance must also be subject to an authorization. The obligations provided in the UN Conventions and additional requirements are implemented at national level and requirements may vary from one member state to another.

The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”) which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.

Failure to comply with EU and member state laws that apply to the conduct of clinical trials, manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of the MA, manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

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Employees

As of December 31, 2024, we employed 59 full-time employees.

Corporate Information

We were incorporated under the laws of the State of Iowa in October 2006 and were reincorporated under the laws of the State of Delaware in May 2014. We changed our name from KemPharm, Inc. to Zevra Therapeutics, Inc. effective as of February 21, 2023. Our website address is www.zevra.com.

ITEM 1A. | RISK FACTORS.

Risk Factors Summary

We are providing the following summary of the risk factors contained in our Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage our stockholders to carefully review the full risk factors contained in this Form 10-K in their entirety for additional information regarding the risks and uncertainties that could cause our actual results to vary materially from our recent results or from our anticipated future results.

Risks Related to the Commercialization of Our Approved Products and Product Candidates

| ● | If we are unable to establish effective sales, marketing and distribution capabilities for our approved products or product candidates, if approved, we may not be successful in commercializing any approved product or product candidate in the United States or any other jurisdictions.
| ● | Our approved products, or any of our product candidates that may receive marketing approval, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.
| ● | Because the target patient populations for OLPRUVA® and MIPLYFFATM are small, we must achieve significant market share and obtain relatively high per-patient prices for our products to achieve meaningful gross margins.
| ● | We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.
| ● | We may not be able to obtain either three-year FDA regulatory exclusivity or five-year FDA regulatory exclusivity as a new chemical entity.
| ● | Even if we or our collaborators are able to commercialize our approved products, or any of our product candidates, if approved, they may be subject to unfavorable pricing regulations, third-party coverage and reimbursement policies.
| ● | We may be subject to enforcement action if we engage in improper marketing or promotion of our products.
| ● | If commercialization of our approved products, or any of our product candidates, if approved, are not successful, or we experience significant delays in commercialization, our business will be harmed.

Risks Related to the Development of Our Product Candidates

| ● | If we are not able to obtain required regulatory approvals for any of our product candidates, or the approved labels are not sufficiently differentiated from other competing products, we will not be able to commercialize them and our ability to generate revenue or profits or to raise future capital could be limited.
| ● | Disruptions at the FDA, the EMA and other government agencies, including those caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.
| ● | If the FDA does not conclude that our product candidates satisfy the requirements for selected regulatory pathways, such as the 505(b)(2) NDA pathway, the approval process for our product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and the FDA may not ultimately approve our product candidates.
| ● | Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.
| ● | If we experience delays or difficulties in the enrollment of subjects in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
| ● | Interim, topline, or preliminary data 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 audit and verification procedures that could result in materials changes in the final data.
| ● | We may not be able to obtain or maintain orphan drug designations which we pursue for any of our product candidates, and we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.
| ● | Certain of our approved products and product candidates contain controlled substances, the manufacture, use, sale, importation, exportation, prescribing and distribution of which are subject to regulation by the DEA and other regulatory agencies.
| ● | Our products and product candidates may be associated with serious adverse events, undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.
| ● | 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.
| ● | If the EAP is terminated prior to commercialization of arimoclomol in the EU, if approved, it will have a material adverse effect on our business, results of operations, cash flows, financial condition and/or prospects.

Risks Related to Our Business, Our Financial Position and Our Capital Needs

| ● | Our future results will suffer if we do not effectively manage our operations.
| ● | A variety of risks associated with international operations could materially adversely affect our business.
| ● | We may not be able to retain suppliers or distributors, or suppliers or distributors may seek to modify contractual relationships with us, which could have an adverse effect on our business and operations. Third parties may terminate or alter existing contracts or relationships with us.
| ● | If we fail to maintain effective internal controls over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
| ● | We have incurred significant recurring negative and operating cash flows. We cannot predict if we will incur positive or negative net operating cash flows over the next several years, and we may never achieve or maintain profitability.
| ● | We may need additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce or altogether cease our development programs or commercialization efforts or cease operations altogether.

Risks Related to Our Dependence on Third Parties

| ● | We rely on and expect to continue to rely on third parties to conduct our clinical trials for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.
| ● | The facilities used by our contract manufacturers to manufacture our approved products, and any of our product candidates are subject to review by the FDA or comparable foreign regulatory authorities pursuant to inspections that will be conducted after we submit our marketing application to the FDA or the EMA, and such inspections could result in findings that lead to failure to obtain FDA or comparable foreign approval of such marketing applications.
| ● | Our approved products that we are commercializing, and product candidates that we are currently developing, or may develop in the future, may compete with other product candidates and drugs for access to manufacturing facilities, and we may be unable to obtain access to these facilities on favorable terms.
| ● | We have entered into collaborations with Commave, to develop, manufacture and commercialize AZSTARYS worldwide. In addition, we may seek collaborations with third parties for the development or commercialization of our other product candidates, or in other territories. If those collaborations are not successful, we may not be able to capitalize on the market potential of AZSTARYS or any of our other product candidates, if approved.
| ● | If we are not able to establish collaborations for our product candidates, we may have to alter our development and commercialization plans.

Risks Related to Our Intellectual Property

| ● | If we are unable to obtain and maintain trade secret protection or patent prosecution for our technology, our approved products or our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology, our approved products, or our product candidates, if approved, may be impaired.
| ● | Changes in patent law in the United States and other jurisdictions could alter or diminish the value of patents in general, thereby impairing our ability to protect our products and technologies.
| ● | We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
| ● | Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could significantly harm our business.
| ● | Intellectual property litigation could cause us to spread substantial resources and distract our personnel from their normal responsibilities.
| ● | We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
| ● | If we or our third-party licensors fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.
| ● | The scope of our intellectual property may be reduced or may need to be reduced due to third-party intellectual property claims.
| ● | We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.
| ● | Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.
| ● | If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
| ● | We may not be able to protect our intellectual property rights throughout the world.
| ● | Our decision to seek approval of our product candidates under certain regulatory pathways, such as the 505(b)(2) NDA pathway for the FDA, may increase the risk that patent infringement suits are filed against us, which would delay FDA or comparable foreign regulatory authorities' approval of such product candidates.

Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

| ● | Failure to obtain marketing approval in international jurisdictions would prevent our approved products, and any of our other product candidates from being marketed abroad.
| ● | A variety of risks associated with marketing our approved products, and any of our other product candidates, if approved, internationally, could affect our business.
| ● | Our approved products are, and any of our product candidates for which we obtain marketing approval will remain subject to significant post-marketing regulatory requirements and oversights.
| ● | Our employees, independent contractors, principal investigators, CROs, consultants, commercial collaborators, contract manufacturers, service providers and other vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.
| ● | Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, and other healthcare laws and regulations, which could expose us to penalties.
| ● | Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of our product candidates and increase the cost to commercialize our approved products, and any of our product candidates that may be approved in the future and affect the prices thereof.
| ● | If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in which we participate, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
| ● | Governments outside the United States tend to impose strict price controls, which may affect our revenue, if any.
| ● | If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
| ● | If our security measures are compromised now, or in the future, or the security, confidentiality, integrity or availability of, our information technology systems, software, services, communications or data is compromised, limited or fails, this could result in a material adverse impact, including without limitation, a material interruption to our operations, harm to our reputation, significant fines, penalties and liability, breach or a triggering of data protection laws, privacy policies and data protection obligations, loss of customers or sales, or material disruption of our clinical trials, commercialization or other business activities.
| ● | Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, policies, standards and other obligations related to data privacy or security could lead to government enforcement actions (which could include civil or criminal fines or penalties), a disruption of our clinical trials or commercialization of our products, private litigation, other liabilities and/or adverse publicity. Compliance, or the failure to comply with such obligations, could increase the costs of our products, could limit their use, and could otherwise negatively affect our operating results and business.
| ● | We are subject to complex and changing laws and regulations, which exposes us to potential liabilities, increased costs and other adverse effects on our business.

Risks Related to Employee Matters and Managing Our Growth

| ● | Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

Risks Related to Ownership of Our Common Stock and Our Status as a Public Company

| ● | The trading price of the shares of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses.
| ● | Future sales and issuances of equity and debt could result in additional dilution to our stockholders.
| ● | Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well.
| ● | Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law and the terms of some of our contracts, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the price of our common stock.
| ● | If we engage in acquisitions to grow our business, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations and cause our stock price to decline.
| ● | We could be negatively affected as a result of the actions of activist stockholders, which could be disruptive and costly and may conflict with or disrupt the strategic direction of our business.
| ● | We may be subject to securities litigation, class action and derivative lawsuits, which could result in substantial costs and could divert management attention away from other business concerns.
| ● | Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
| ● | We might not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our profitability.
| ● | Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition or results of operations.

General Risk Factors

| ● | An active trading market for our common stock may not be sustained and you may not be able to resell your shares of our common stock for a profit, if at all.
| ● | If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.
| ● | Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.
| ● | We incur increased costs and demands upon management as a result of being a public company.
| ● | Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial conditions or results of operations.

You should carefully consider all the risk factors and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before investing in our common stock. If any of the following risks materialize, our business, financial condition and results of operations could be seriously harmed. This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements because of factors that are described below and elsewhere in this Annual Report on Form 10-K.

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Risks Related to the Commercialization of Our Approved Products and Product Candidates

If we are unable to establish effective sales, marketing and distribution capabilities for our approved products or product candidates, if approved, we may not be successful in commercializing any approved product candidate in the United States or any other jurisdictions.

We currently have limited marketing and sales experience. In order to commercialize OLPRUVA for oral suspension in the U.S. for the treatment of certain patients with UCDs and MIPLYFFA, an orally-delivered treatment for NPC, we have added marketing, sales, medical affairs, distribution, managerial and other non-technical capabilities, or have made arrangements with third parties to perform these services. For any of our other product candidates that receive marketing approval we may have to augment our commercial capabilities or make arrangements with third parties to perform additional services, and we may not be successful in doing any of the foregoing. Building and maintaining a targeted specialty sales force is expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact our commercialization efforts. We may choose to collaborate with third parties that have their own sales forces and established distribution systems, in lieu of or to augment any sales force and distribution systems we may create. If we are unable to enter into collaborations with third parties for the commercialization of approved product candidates, if any, on acceptable terms or at all, or if any such collaborator does not devote sufficient resources to the commercialization of our product or otherwise fails in commercialization efforts, we may not be able to successfully commercialize our product candidates that receive marketing approval. If we are not successful in commercializing our product candidates that receive marketing approval, either on our own or through collaborations with one or more third parties, our potential future revenue will be materially and adversely impacted.

Establishing our own sales, marketing and distribution capabilities, involves a number of risks. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our approved products and product candidates on our own include:

| ● | our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
| ● | our inability to access government and commercial health plan formularies or secure preferred coverage and adequate reimbursement levels;
| ● | the inability of sales personnel to obtain access to physicians or achieve adequate numbers of physicians to prescribe any future prodrug products;
| ● | the lack of complementary drugs to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;
| ● | liability for personnel, including sales personnel, failing to comply with applicable legal requirements; and
| ● | costs associated with maintaining compliance with the FDA’s marketing and promotional requirements, including ongoing training and monitoring, as well as unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we decide to enter into arrangements with third parties to perform these services for certain of our product candidates, our product revenue and our profitability, if any, are likely to be lower than if we were to sell, market and distribute any product candidates that we develop ourselves. In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates in the future, or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, including Corium, and any of them may fail to devote the necessary resources and attention to sell and market our approved products, or any of our product candidates, if approved, effectively. Further, we may be liable for conduct of third parties, including Corium, acting on our behalf, including failure to comply with legal requirements applicable to sales and marketing of our product or product candidates, if approved. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our approved products, or any of our product candidates, if approved.

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Our approved products, or any of our product candidates that may receive marketing approval, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

Our approved products, or any of our product candidates that may receive marketing approval, may fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If our approved products, or any of our product candidates, if approved for commercial sale, do not achieve an adequate level of market acceptance, they may not generate significant product revenue and we may not become profitable. The degree of market acceptance of our approved products, or any of our product candidates if approved for commercial sale, will depend on a number of factors, including:

| ● | the efficacy and potential advantages compared to alternative treatments, including less expensive generic treatments;
| ● | the ability to obtain differentiating claims in the labels for most of our product candidates;
| ● | our ability to offer our prodrug products for sale at competitive prices;
| ● | the clinical indications for which our product candidates are approved;
| ● | the convenience and ease of administration compared to alternative treatments;
| ● | the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
| ● | the cost of treatment in relation to alternative treatments;
| ● | the steps that prescribers and dispensers must take for approved products are or any of our product candidates that may be considered controlled substances in the future, as well as the perceived risks based upon their controlled substance status;
| ● | the ability to manufacture our product in sufficient quantities and yields;
| ● | the strength of marketing and distribution support;
| ● | the availability of third-party coverage and adequate reimbursement or willingness of patients to pay out of pocket in the absence of third-party coverage;
| ● | the prevalence and severity of any side effects;
| ● | any potential unfavorable publicity;
| ● | any restrictions on the use, sale or distribution of our approved products or any of our product candidates, including through REMS; and
| ● | any restrictions on the use of our prodrug products together with other medications.

Because the target patient population for certain of our products is small, we must achieve significant market share and obtain relatively high per-patient prices for our products to achieve meaningful gross margins.

Our products target diseases with a small patient population. A key component of the successful commercialization of an approved product for these indications includes identification of patients and a targeted prescriber base for such product. Due to small patient populations for certain of our products, we believe that we would need to have significant market penetration to achieve meaningful revenues and identifying patients and targeting the prescriber base are key to achieving significant market penetration. Typically, drugs for conditions with small prevalence have higher prices in order to generate a return on investment, and as a result, the per-patient prices at which we sell our products are relatively high in order for us to generate an appropriate return for the investment in these product development programs and achieve meaningful gross margins.

There can be no assurance that we will be successful in achieving a sufficient degree of market penetration and/or obtaining or maintaining high per-patient prices for OLPRUVA and MIPLYFFA for diseases with small patient populations. Further, even if we obtain significant market share for OLPRUVA and MIPLYFFA, because the potential target populations are very small, we may not be able to maintain profitability despite obtaining such significant market share. Additionally, patients who discontinue therapy or do not fill prescriptions are not easily replaced by new patients, given the limited patient population.

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We face substantial competition, which may result in others developing or commercializing products before or more successfully than we do.

Our industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. We will face competition and potential competition from a number of sources, including pharmaceutical and biotechnology companies, specialty pharmaceutical companies, generic drug companies, drug delivery companies and academic and research institutions. Our competitors may develop or market drugs that are more effective, more convenient, more widely used and less costly or have a better safety profile than our products or product candidates and these competitors may also have significantly more resources than us and be more successful than us in manufacturing and marketing their products.

See Part I. Item 1. "Business—Competitors” of this Annual Report on Form 10-K for information regarding our competitors.

Many of our potential competitors have substantially greater financial, technical and human resources than we do, as well as more experience in the development of product candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products. Consequently, our competitors may develop products for indications we are pursuing or may pursue in the future, and such competitors’ products may be more effective, better tolerated and less costly than our product candidates. Our competitors may also be more successful in manufacturing and marketing their products than we are. We will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and patient enrollment in clinical trials.

Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. If the competitor’s product were similar to our product candidates, we may be required to seek approval via alternative pathways, such as the ANDA, which is used for the development of generic drug products. We may also be blocked from product marketing by periods of patent protection or regulatory exclusivity.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic drugs or giving drugs with improved attributes sufficient weight in a comparative clinical cost effectiveness analysis. For some of the indications that we are pursuing, drugs used off-label serve as cheaper alternatives to our product candidates. Their lower prices could result in significant pricing pressure, even if our product candidates are otherwise viewed as a preferable therapy. Additional drugs may become available on a generic basis over the coming years.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Consequently, our competitors may develop products for the treatment of ADHD, pain, UCDs, or for other indications pursue or we may pursue in the future, and such competitors’ products may be more effective, better tolerated and less costly than our product candidates. Our competitors may also be more successful in manufacturing and marketing their products than we are. We will also face competition in recruiting and retaining qualified personnel and establishing clinical trial sites and subject enrollment in clinical trials.

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We may not be able to obtain either three-year FDA regulatory exclusivity or five-year FDA regulatory exclusivity as a new chemical entity.

The FDA provides periods of regulatory exclusivity following their approval of an NDA, which provide the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug. Five-year exclusivity precludes approval of 505(b)(2) applications or ANDAs by delaying the submission or approval of the application, while three-year exclusivity precludes the approval of the application. We intend to seek new chemical entity, or NCE, status for any of our prodrug product candidates as appropriate. Five years of exclusivity are available to NCEs following the approval of an NDA by the FDA. An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA. If a product is not eligible for NCE exclusivity, it may be eligible for three years of exclusivity. Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials, were essential to the approval of the application and were conducted or sponsored by the applicant.

There is a risk that the FDA may disagree with any claim that we may make that any of our prodrug product candidates are NCEs and therefore entitled to five-year exclusivity. The FDA may also take the view that the studies that we are conducting are not clinical trials, other than bioavailability and bioequivalence studies, that are essential to approval and therefore do not support three-year exclusivity. Further, to the extent that the basis for exclusivity is not clear, the FDA may determine to defer a decision until it receives an application which necessitates a decision.

If we do obtain either five or three years of exclusivity, such exclusivity will not block all potential competitors from the market. Competitors may be able to obtain approval for similar products with different forms of competitive differentiating mechanisms or may be able to obtain approval for similar products without a competitive differentiating mechanism.

Even if we or our collaborators are able to commercialize our approved products, or any of our product candidates, if approved, they may be subject to unfavorable pricing regulations, third-party coverage and reimbursement policies.

The successful commercialization of our approved products, and any of our product candidates for which marketing approval is obtained will depend, in part, on the extent to which coverage and adequate reimbursement for AZSTARYS, OLPRUVA, MIPLYFFA or any of our product candidates for which marketing approval is obtained, will be available from government payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and managed care plans and other third-party payors. Government authorities and other third-party payors decide which medical products they will pay for and establish reimbursement levels, including co-payments. A trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products. Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for drugs and products. Coverage and reimbursement may not be available for any product that we commercialize and, even if these are available, the level of reimbursement may not be satisfactory. Inadequate reimbursement levels may adversely affect the demand for, or the price of, our approved products, or any of our product candidates for which we obtain marketing approval. We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies. Moreover, the trend has been for government and commercial health plans and their pharmacy benefit managers to commoditize drug products through therapeutic equivalence determinations, making formulary decisions based on cost. If coverage and adequate reimbursement are not available or reimbursement is available only at limited levels, we may not be able to successfully commercialize our approved products or commercialize any of our product candidates for which marketing approval is obtained.

There may be significant delays in obtaining coverage and reimbursement for newly approved prodrug products, and coverage may be more limited than the indications for which the product is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for coverage and reimbursement does not imply that a product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new prodrug products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for prodrug products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Private third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Except for certain government health care programs, such as the Department of Defense’s TRICARE Uniform Formulary, no uniform policy requirement for coverage and reimbursement for drug products exists among third-party payors in the United States. Even state Medicaid programs have their own preferred drug lists that may disadvantage non-preferred brand drugs. Therefore, coverage and reimbursement can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained at all. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for any approved products or product candidates that that we develop could significantly harm our operating results, our ability to raise capital needed to commercialize our products and our overall financial condition.

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drugs vary widely from country to country. Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue able to be generated from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

There can be no assurance that our approved products, or any of our product candidates, if they are approved for sale in the United States or in other countries, will be considered medically reasonable and necessary for a specific indication, that they will be considered cost-effective by third-party payors, that coverage or an adequate level of reimbursement will be available, or that third-party payors’ reimbursement policies will not adversely affect the ability to sell our approved products, or our ability to sell any of any of our product candidates profitably if they are approved for sale.

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We may be subject to enforcement action if we engage in improper marketing or promotion of our products.

The FDA closely regulates promotional materials and other promotional activities. Even if the FDA initially approves product labeling that includes a description of our improved attribute claims, the FDA may object to our marketing claims and product advertising campaigns. Failure to comply with the FDA’s promotional, marketing and advertising laws and regulations could lead to the issuance of warning letters, cyber letters, or untitled letters, adverse publicity, the requirement for dear-health-care-provider letters or other corrective information, fines and other monetary penalties, civil or criminal prosecution, including False Claims Act liability, restrictions on our operations and other operating requirements through consent decrees or corporate integrity agreements, debarment, exclusion from participation in federal health care programs and refusal of government contracts or future orders under existing contracts, among other consequences. Any of these consequences would harm the commercial success of our products.

Further, our promotional materials, statements and training methods must comply with the FDA’s prohibition of the promotion of unapproved, or off-label, use. Any regulatory approval that the FDA grants is limited to those specific diseases and indications for which a product is deemed to be safe and effective by FDA. For example, the FDA-approved label for AZSTARYS is limited to the acute treatment of ADHD in patients 6 years of age and older and the FDA approved label for OLPRUVA is limited to oral suspension in the U.S. for the treatment of certain patients with UCDs involving deficiencies of CPS, OTC, or AS. Physicians may use our products off-label, as the FDA does not restrict or regulate a physician’s independent choice of treatment within the practice of medicine. However, if the FDA determines that our promotional materials, statements or training constitutes promotion of an off-label use, it could request that we modify our promotional materials, statements or training methods or subject us to regulatory or enforcement actions, such as the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine, disgorgement of money, operating restrictions or criminal penalties. We may also be subject to actions by other governmental entities or private parties, such as the False Claims Act, civil whistleblower or “qui tam” actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products could be impaired. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could divert our management’s attention, result in substantial damage awards against us and harm our reputation.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our approved products, or any of our product candidates that we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk as our approved products, and any of our product candidates that may be approved in the future, are commercialized. This includes the risk that our products may be misused. For example, certain of our approved products do, and we anticipate that any of our product candidates we may choose to develop in the future, if approved, may carry, a boxed warning regarding lethality. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities on behalf of ourselves. Regardless of merit or eventual outcome, liability claims may result in:

| ● | decreased demand for our approved products, and any of our product candidates that we may develop;
| ● | injury to our reputation and significant negative media attention;
| ● | termination of clinical trial sites or entire trial programs;
| ● | withdrawal of clinical trial participants;
| ● | initiation of investigations by regulators;
| ● | significant costs to defend the related litigation;
| ● | a diversion of management’s time and our resources;
| ● | substantial monetary awards paid to trial participants or patients;
| ● | product recalls, withdrawals or labeling revisions and marketing or promotional restrictions;
| ● | loss of revenue;
| ● | reduced resources of our management to pursue our business strategy; and
| ● | the inability to successfully commercialize any of our approved products, or any of our product candidates that might be approved in the future.

We currently hold $10.0 million in product liability insurance coverage in the aggregate, with a per incident limit of $10.0 million, which may not be adequate to cover all liabilities that we may incur. We may need to increase our insurance coverage as we expand our clinical trials or upon commencement of commercialization of any product approved in the future. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

If commercialization of our approved products, or any of our product candidates, if approved, are not successful, or we experience significant delays in commercialization, our business will be harmed.

We currently generate minimal commercial revenue from the sale of our approved products, OLPRUVA and MIPLYFFA, and we may never be able to successfully commercialize a product candidate. We cannot guarantee that we or any other collaborators will be able to successfully develop, manufacture or commercialize our approved products, or product candidates, if approved, or that we will ever receive any future payments under the AZSTARYS License Agreement. Despite the FDA’s approval of OLPRUVA for oral suspension in the U.S. for the treatment of certain patients with UCDs, and MIPLYFFA, an orally-delivered treatment for NPC, the products may not gain market acceptance among physicians, key opinion leaders, healthcare payors, patients and the medical community.

We have made significant investments in our internal discovery and development efforts and much of our financial resources in the identification of potential product candidates via our LAT® platform technology and the development of our product candidates. Our ability to generate revenue from our approved products and any of our product candidates, if approved, will depend heavily on their successful development and commercialization. The success of our approved products and any of our product candidates will depend on several factors, including:

| ● | successful completion of preclinical studies and requisite clinical trials;
| ● | successful completion and achievement of endpoints in our clinical trials;
| ● | demonstration that the risks involved with our approved products and any of our product candidates are outweighed by the benefits;
| ● | successful development of our manufacturing processes for our approved products and for any of our product candidates, including entering into and maintaining arrangements with third-party manufacturers;
| ● | successful completion of an FDA or European pre-approval inspection of the facilities used to manufacture any of our product candidates for which we may submit an NDA or an MAA;
| ● | receipt of timely marketing approvals from applicable regulatory authorities, including, if applicable, the determination by the DEA of the controlled substance schedule for a product candidate, taking into account the recommendation of the FDA;
| ● | obtaining differentiating claims in the labels for our product candidates;
| ● | obtaining and maintaining patent, trademark and trade secret protection and regulatory exclusivity for our approved products and any of our product candidates and otherwise protecting our rights in our intellectual property portfolio;
| ● | maintaining compliance with regulatory requirements, including cGMPs;
| ● | launching commercial sales of our approved products, and any of our product candidates, if and when approved, whether alone or in collaboration with others;
| ● | acceptance of our approved products and any of our product candidates, if approved, by patients, the medical community and third-party payors;
| ● | competing effectively with other therapies;
| ● | obtaining and maintaining healthcare coverage and adequate reimbursement; and
| ● | maintaining a continued acceptable safety and efficacy profile of any of our products following approval.

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Whether regulatory approval will be granted is unpredictable and depends upon numerous factors, including the substantial discretion of the regulatory authorities. If, following submission, our NDA or marketing authorization application for a product candidate is not accepted for substantive review or approval, the FDA or other comparable foreign regulatory authorities may require that we conduct additional studies or clinical trials, provide additional data, take additional manufacturing steps or require other conditions before they will reconsider our application. If the FDA or other comparable foreign regulatory authorities require additional studies, clinical trials or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition, the FDA or other comparable foreign regulatory authorities may not consider sufficient any additional required studies, clinical trials, data or information that we perform and complete or generate, or we may decide to abandon the program.

It is possible that none of our product candidates in clinical development or any of our future product candidates will ever obtain regulatory approval, even if we expend substantial time and resources seeking such approval.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays, we could experience an inability to successfully commercialize any of our approved products or product candidates, if approved, or we could experience an inability to successfully commercialize any of our product candidates approved for marketing in the future, if any, which would harm our business.

Risks Related to the Development of Our Product Candidates

If we are not able to obtain required regulatory approvals for any of our product candidates, or the approved labels are not sufficiently differentiated from other competing products, we will not be able to commercialize them and our ability to generate revenue or profits or to raise future capital could be limited.

The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country and change over time. We are not permitted to market any of our product candidates in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approvals in such countries. In the United States, the FDA generally requires the completion of non-clinical testing and clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality and other factors before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA to the FDA and even fewer are approved for commercialization.

Even if regulatory approval is obtained, subsequent safety, efficacy, quality or other issues can result in a product approval being suspended or withdrawn, or the approved label for any approved product may not be sufficiently differentiated from other competing products to support market adoption thereof. In March 2021, the FDA approved the NDA for AZSTARYS, in December 2022, the FDA approved OLPRUVA, and in September 2024, the FDA approved MIPLYFFA. Even with the regulatory approval of AZSTARYS, OLPRUVA, and MIPLYFFA by the FDA, we cannot guarantee that the FDA will approve any of our product candidates for commercial sale or approve any proposed label we may have for any such product candidate. If our development efforts for our product candidates, including our efforts to obtain regulatory approval, are not successful for their planned indications or are delayed, or if adequate demand for our product candidates that are approved for marketing, if any, is not generated, our business will be harmed.

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The success of our product candidates will depend on the receipt and maintenance of regulatory approval and the issuance and maintenance of such approval is uncertain and subject to a number of risks, including the following:

| ● | the FDA, the EMA, or comparable foreign regulatory authorities, institutional review boards, or IRBs, or ethics committees may disagree with the design or conduct of our clinical trials;

| ● | the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA, the EMA, or other regulatory agencies for marketing approval or for us to receive approval for claims that are necessary for commercialization;

| ● | the dosing in a particular clinical trial may not be at an optimal level;

| ● | patients in our clinical trials may suffer adverse effects for reasons that may or may not be related to our product candidates;

| ● | the data collected from clinical trials may not be sufficient to support submissions to regulatory authorities or to obtain regulatory approval in the United States or elsewhere;

| ● | the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies or may later suspend or withdraw such approval;

| ● | the approval policies or regulations of the FDA, the EMA and other EU institutions, or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval; and

| ● | even if we obtain marketing approval in one or more countries, future safety or other issues could result in the suspension or withdrawal of regulatory approval in such countries.

We have only limited experience in submitting the applications necessary to gain regulatory approvals and have relied, and expect to continue to rely, on consultants and third-party contract research organizations, or CROs, with expertise in this area to assist us in this process. Securing FDA or comparable foreign approval requires the submission of extensive non-clinical and clinical data, information about product manufacturing processes and inspection of facilities and supporting information to the FDA and comparable foreign regulatory authorities for each therapeutic indication to establish a product candidate’s safety and efficacy for each indication and manufacturing quality. Additionally, we cannot guarantee that regulators will agree with our assessment of the results of the clinical trials we have conducted or that any future trials will be successful.

Any product candidates we develop may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining regulatory approval or prevent or limit commercial use with respect to one or all intended indications.

The process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the product candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in the regulatory approval policy during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application or may result in future withdrawal of approval. Regulatory approval obtained in one jurisdiction does not necessarily mean that a product candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek approval in a different jurisdiction. Failure to obtain regulatory marketing approval of our product candidates in any indication will prevent us from commercializing those product candidates for that indication, and our ability to generate revenue will be impaired.

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Disruptions at the FDA, the EMA and other government agencies, including those caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA and foreign regulatory authorities to review and or approve new products can be affected by a variety of factors, including government priorities, budget and funding levels, statutory, regulatory, and policy changes, the FDA’s and foreign regulatory authorities' ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, in recent years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

If a prolonged government shutdown or similar constraints on funding or staffing occur, or if renewed global health concerns prevent the FDA or other regulatory authorities or notified bodies from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

If the FDA does not conclude that our product candidates satisfy the requirements for the 505(b)(2) NDA pathway as anticipated, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and the FDA may not ultimately approve our product candidates.

A key element of our strategy is to seek FDA approval for most of our product candidates under Section 505(b)(2) of the FFDCA, otherwise known as the 505(b)(2) NDA pathway with any NDA submitted thereunder a 505(b)(2) NDA, where possible. The 505(b)(2) NDA pathway permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FFDCA, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our future product candidates by potentially decreasing the amount of nonclinical and/or clinical data that we would need to generate in order to obtain FDA approval. Such reliance is typically predicated on a showing of bioequivalence or comparable bioavailability to an approved drug. AZSTARYS was approved via the 505(b)(2) NDA pathway on March 2, 2021.

If the FDA does not allow us to pursue the 505(b)(2) NDA pathway as anticipated, or if we cannot demonstrate bioequivalence or comparable bioavailability of our product candidates to approved products, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. Moreover, even if the FDA does allow us to pursue the 505(b)(2) NDA pathway, depending on the product candidate, we may still need to conduct additional clinical trials, including clinical trials to assess product safety or efficacy. If this were to occur, the time and financial resources required to obtain FDA approval for our product candidates, and complications and risks associated with our product candidates, would likely substantially increase.

Moreover, our inability to pursue the 505(b)(2) NDA pathway could result in new competitive products reaching the market more quickly than our product candidates, which could hurt our competitive position and our business prospects. Even if we are allowed to pursue the 505(b)(2) NDA pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization on a timely basis, if at all. Other companies may achieve product approval of similar products before we do, which would delay our ability to obtain product approval, expose us to greater competition, and would require that we seek approval via alternative pathways.

In addition, notwithstanding the approval of several products by the FDA under Section 505(b)(2) over the last few years, pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may change its policies and practices with respect to Section 505(b)(2) regulatory approvals, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to certain requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of a new product. Even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to streamlined product development or earlier approval.

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Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates.

The risk of failure for our product candidates is high. It is impossible to predict when or if any of our current product candidates will prove effective or safe in humans and will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Interpretation of results from early, usually smaller, studies that suggest positive trends in some subjects, requires caution. Results from later stages of clinical trials enrolling more subjects may fail to show the desired safety and efficacy results or otherwise fail to be consistent with the results of earlier trials of the same product candidates. Later clinical trial results may not replicate earlier clinical trials for a variety of reasons, including differences in trial design, different trial endpoints, or lack of trial endpoints in exploratory studies, subject population, number of subjects, subject selection criteria, trial duration, drug dosage and formulation and lack of statistical power in the earlier studies. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including:

| ● | regulators, IRBs, or other ethics committees may not authorize us or our investigators to commence a clinical trial, conduct a clinical trial at a prospective trial site or amend clinical trial protocols as needed;

| ● | we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and CROs;

| ● | clinical trials of our product candidates may produce negative or inconclusive results, including failure to demonstrate statistical significance in cases where that is required, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon prodrug development programs;

| ● | we may be unable to obtain sufficient or adequate supply or quality of product candidates or other materials necessary for use in clinical trials, or experience delays in sufficiently developing, characterizing or controlling a manufacturing process suitable for clinical trials;
| ● | we may experience delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our product candidates for use in clinical trials or the inability to do any of the foregoing;

| ● | the number of subjects required for clinical trials of our product candidates may be larger than we anticipate enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate;

| ● | our third-party contractors may fail to comply with regulatory requirements or trial protocols, or meet their contractual obligations to us in a timely manner, or at all;

| ● | regulators, IRBs, or other ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

| ● | the cost of clinical trials of our product candidates may be greater than we anticipate, including if we are not able to pursue the 505(b)(2) NDA pathway for approval of our product candidates;

| ● | we will need to pay substantial application user fees, which we may not be able to afford;

| ● | we may be required to transfer manufacturing processes to larger-scale facilities operated by a contract manufacturing organization, and we may experience delays or failures by our contract manufacturers to make any necessary changes to such manufacturing process;

| ● | we may abandon our development program or programs based on the changing regulatory or commercial environment;

| ● | regulatory authorities may not agree with our trial design or implementation; and

| ● | our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials.

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If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

| ● | be delayed in obtaining marketing approval for our product candidates;

| ● | not obtain marketing approval at all;

| ● | obtain approval for indications or patient populations that are not as broad as intended or desired;

| ● | obtain approval but without the claims necessary for us to successfully commercialize our product candidates;

| ● | obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

| ● | be subject to additional post-marketing testing, surveillance, or other requirements, such as REMS; or

| ● | have the product removed from the market after obtaining marketing approval.

Any inability to successfully initiate or complete clinical trials could result in additional costs to us or impair our ability to generate revenue from product sales. In addition, if we make manufacturing or formulation changes to our product candidates, we may be required to or we may elect to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which our products have patent protection and may allow our competitors to bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may seriously harm our business.

Clinical trials must be conducted in accordance with the FDA, the EMA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where the clinical trials are conducted. We could encounter delays if a clinical trial is suspended or terminated by us, by the data safety monitoring board for such trial or by the FDA or any other regulatory authority, or if the IRBs of the institutions in which such trials are being conducted suspend or terminate the participation of their clinical investigators and sites subject to their review. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Further, conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol because of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authority. The FDA, the EMA, or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA, the EMA, or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA, the EMA, or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

Delays in the completion of any clinical trial of our product candidates will increase our costs, slow down our product development and the regulatory approval processes and delay or potentially jeopardize our ability to commence product sales and generate product revenue. Any of these occurrences may harm our business, financial condition and prospects significantly.

In addition, the policies of the FDA and other regulatory authorities with respect to clinical trials, may change and additional government regulations may be enacted. For instance, the regulatory landscape related to clinical trials in the EU recently evolved. The CTR which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate clinical trial application (“CTA”) to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR transition period ended on January 31, 2025, and all clinical trials (and related applications) are now fully subject to the provisions of the CTR. Compliance with the CTR requirements by us and our third-party service providers, such as CROs, may impact our developments plans.

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If we experience delays or difficulties in the enrollment of subjects in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible subjects to participate in these trials as may be required by the FDA or similar regulatory authorities outside the United States. We cannot predict how successful we will be at enrolling subjects in future clinical trials. If we are not successful at enrolling subjects in one clinical trial, it may affect when we are able to initiate our next clinical trial, which could result in significant delays in our efforts to pursue regulatory approval of and commercialize our product candidates. In addition, some of our competitors have ongoing clinical trials to treat the same indications as our product candidates, and subjects who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors. Subject enrollment is affected by other factors including:

| ● | the size and nature of the subject population specified in the trial protocol;
| ● | the eligibility criteria for the study in question;
| ● | the perceived risks and benefits of the product candidate under study;
| ● | the fact that the product candidate is a controlled substance;
| ● | severe or unexpected drug-related adverse events experienced by subjects in a clinical trial;
| ● | the availability of drugs approved to treat the diseases or conditions under study;
| ● | the efforts to facilitate timely enrollment in clinical trials;
| ● | the patient referral practices of physicians;
| ● | the severity of the disease or condition under investigation;
| ● | the ability to obtain and maintain subject informed consent;
| ● | the ability to retain subjects in the clinical trial and their return for follow-up;
| ● | the clinical trial design, including required tests, procedures and follow-up;
| ● | the ability to monitor subjects adequately during and after treatment;
| ● | delays in adding new investigators and clinical sites;
| ● | withdrawal of clinical trial sites from clinical trials; and
| ● | the proximity and availability of clinical trial sites for prospective subjects.

Our inability to enroll a sufficient number of subjects for clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which could cause our value to decline and limit our ability to obtain additional financing.
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Interim, topline, or preliminary data 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 audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose topline or preliminary data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary or topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data has been received and fully evaluated. Topline data also remains subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary or topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock. Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate, and our company in general. If the interim, topline, or preliminary data that we report differs from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, any of our potential product candidates may be harmed, which could harm our business, operating results, prospects, or financial condition.

We may not be able to obtain or maintain orphan drug designations which we pursue for any of our product candidates, and we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Regulatory authorities in some jurisdictions, including the United States, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a drug as an orphan product if it is intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population of greater than 200,000 individuals in the United States, but for which there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. While the FDA has granted KP1077 orphan drug designation for the treatment of IH, and celiprolol received orphan drug designation from the FDA for the treatment of VEDS, we have not received orphan drug designation for any other product candidate. We may seek to obtain orphan drug designation for product but there can be no assurance that the FDA will grant orphan designation for any indication for which we apply, or that we will be able to maintain such designation.

In the United States, orphan designation entitles a party to financial incentives such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers. In addition, if a product candidate that has orphan designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including an NDA, to market the same product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.

In the EU, orphan designation is granted by the EC based on a scientific opinion of the EMA’s Committee for Orphan Medicinal Products. A medicinal product may be designated as orphan if its sponsor can establish that (i) the product is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (ii) either (a) such condition affects no more than 5 in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the EU to justify investment; and (iii) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU, or if such a method exists, the medicinal product will be of significant benefit to those affected by the condition. The application for orphan designation must be submitted before the application for marketing authorization. Orphan designation entitles a party to financial incentives such as reduction of fees, fee waivers, protocol assistance, and access to the centralized marketing authorization procedure. Moreover, upon grant of a marketing authorization and assuming the requirement for orphan designation are also met at the time the marketing authorization is granted, orphan medicinal products are entitled to a ten-year period of market exclusivity for the approved therapeutic indication. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed Pediatric Investigation Plan.

Even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs can be approved for the same condition. Even after an orphan drug is approved, the FDA or comparable foreign regulatory authority can subsequently approve the same drug for the same condition if such regulatory authority concludes that the later drug is clinically superior because it is shown to be safer, more effective or makes a major contribution to patient care.

Orphan drug exclusivity may also be lost if the FDA later determines that the initial request for designation was materially defective. In addition, orphan drug exclusivity does not prevent the FDA from approving competing drugs for the same or similar indication containing a different active ingredient. In addition, if a subsequent drug is approved for marketing for the same or a similar indication as any of our product candidates that receive marketing approval, we may face increased competition and lose market share regardless of orphan drug exclusivity. In the EU, during the market exclusivity period, marketing authorizations may be granted to a similar medicinal product with the same orphan indication if: (i) the applicant can establish that the second medicinal product, although similar to the orphan medicinal product already authorized is safer, more effective or otherwise clinically superior to the orphan medicinal product already authorized; (ii) the marketing authorization holder for the orphan medicinal product grants its consent; or (iii) if the marketing authorization holder of the orphan medicinal product is unable to supply sufficient quantities of product. The European exclusivity period can be reduced to six years, if, at the end of the fifth year a medicine no longer meets the criteria for orphan designation (i.e. the prevalence of the condition has increased above the orphan designation threshold, or it is judged that the product is sufficiently profitable so as not to justify maintenance of market exclusivity).

Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

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Certain of our approved products and product candidates contain controlled substances, the manufacture, use, sale, importation, exportation, prescribing and distribution of which are subject to regulation by the DEA and other regulatory agencies.

Certain of our approved products and certain of our product candidates are regulated as controlled substances, which are subject to state, federal, and foreign laws and regulations regarding their manufacture, use, sale, importation, exportation, and distribution. Among other things, controlled substances are regulated under the Controlled Substances Act of 1970 and regulations of the DEA. Before we can commercialize any of our products or product candidates, if approved, the DEA will need to determine the controlled substance schedule, taking into account the recommendation of the FDA. This may be a lengthy process that could delay our marketing of a product candidate and could potentially diminish any regulatory exclusivity periods for which we may be eligible.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. The DEA determined AZSTARYS to be a Schedule II controlled substance. In addition, the DEA scheduled SDX as a Schedule IV substance. We expect that most of our product candidates, including KP1077, if approved, will also be regulated as “controlled substances” by the DEA, which subjects AZSTARYS and this product candidate to additional restrictions regarding their manufacture, shipment, storage, sale and use, depending on the scheduling of the active ingredients, and may limit the commercial potential of our products and any of our product candidates, if approved.

Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule drugs as well. While some states automatically schedule a drug when the DEA does so, in other states there must be rulemaking or a legislative action. State scheduling may delay commercial sale of any controlled substance drug product for which we obtain federal regulatory approval and adverse scheduling could impair the commercial attractiveness of such product. We or our collaborators must also obtain separate state registrations in order to be able to obtain, handle and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal law.

For any of our products or product candidates classified as controlled substances, we and our suppliers, manufacturers, contractors, customers and distributors are required to obtain and maintain applicable registrations from state, federal and foreign law enforcement and regulatory agencies and comply with state, federal and foreign laws and regulations regarding the manufacture, use, sale, importation, exportation and distribution of controlled substances. There is a risk that DEA regulations may limit the supply of the compounds used in clinical trials for our product candidates, and, in the future, the ability to produce and distribute our products in the volume needed to meet commercial demand. For example, a DEA quota system controls and limits the availability and production of controlled substances in Schedule I or II. Because our products and most of our product candidates are or may be regulated as Schedule II controlled substances, they may be subject to the DEA’s production and procurement quota scheme. The DEA establishes annually an aggregate quota for how much of a controlled substance may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. Manufacturers of Schedule I and II controlled substances are required to apply for quotas on an annual basis. If we or our contract manufacturers or suppliers do not obtain a sufficient quota from the DEA, we may not be able to obtain sufficient quantities of these controlled substances in order to complete our clinical trials or meet commercial demand for any of our products or product candidates classified under Schedule II.

Regulations associated with controlled substances govern manufacturing, labeling, packaging, testing, dispensing, production and procurement quotas, recordkeeping, reporting, handling, shipment and disposal. These regulations increase the personnel needs and the expense associated with development and commercialization of product candidates including controlled substances. The DEA, and some states, conduct periodic inspections of registered establishments that handle controlled substances. Failure to obtain and maintain required registrations or comply with any applicable regulations could delay or preclude us from developing and commercializing our product candidates containing controlled substances and subject us to enforcement action. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations. In some circumstances, violations could lead to criminal proceedings. Because of their restrictive nature, these regulations could limit commercialization of any of our products or product candidates that are classified as controlled substances.

The EU legislation does not establish different classes of narcotic or psychotropic substances. However, the United Nations (“UN”) Single Convention on Narcotic Drugs of 1961 and the UN Convention on Psychotropic Substances of 1971 (“UN Conventions”) codify internationally applicable control measures to ensure the availability of narcotic drugs and psychotropic substances for medical and scientific purposes. The individual EU member states are all signatories to these UN Conventions. All signatories have a dual obligation to ensure that these substances are available for medical purposes and to protect populations against abuse and dependence. The UN Conventions regulate narcotic drugs and psychotropic substances as Schedule I, II, III, IV substances with Schedule II substances presenting the lowest relative risk of abuse among such substances and Schedule I and IV substances considered to present the highest risk of abuse.

The UN Conventions require signatories to require all persons manufacturing, trading (including exporting and importing) or distributing controlled substances to obtain a license from the relevant authority. Each individual export or import of a controlled substance must also be subject to an authorization. The obligations provided in the UN Conventions and additional requirements are implemented at national level and requirements may vary from one member state to another. In order to develop and commercialize our products in the EU, we would need to comply with the national requirements related to controlled substances which is costly and may affect our development plans in the EU.

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Our products and product candidates may be associated with serious adverse events, undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences.

Adverse events or other undesirable side effects caused by our products or product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approvals by the FDA or other comparable foreign regulatory authorities.

During the conduct of clinical trials, patients report changes in their health, including illnesses, injuries, and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions. It is possible that as we test our product candidates in larger, longer and more extensive clinical trials, or as use of these product candidates becomes more widespread if they receive regulatory approval, illnesses, injuries, discomforts and other adverse events that were observed in previous trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by patients. Many times, side effects are only detectable after investigational products are tested in large-scale clinical trials or, in some cases, after they are made available to patients on a commercial scale following approval.

If any serious adverse events occur, clinical trials or commercial distribution of any product candidates or products we develop could be suspended or terminated, and our business could be seriously harmed. Treatment-related side effects could also affect patient recruitment and the ability of enrolled patients to complete the trial or result in potential liability claims. Regulatory authorities could order us to cease further development of, deny approval of, and/or require us to cease selling our products or product candidates, if approved, for any or all targeted indications. If we are required to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of our products or product candidates may be harmed, and our ability to generate product revenues from them or other product candidates that we develop may be delayed or eliminated. Additionally, if one or more of our product candidates receives marketing approval and we or others later identify undesirable side effects or adverse events caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

| ● | regulatory authorities may suspend, limit or withdraw approvals of such product, or seek an injunction against its manufacture or distribution;
| ● | regulatory authorities may require additional warnings on the label, including “boxed” warnings, or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;
| ● | we may be required to change the way the product is administered or conduct additional clinical trials or post-approval studies;
| ● | we may be required to create a risk evaluation and mitigation strategy, or REMS, which could include a medication guide outlining the risks of such side effects for distribution to patients;
| ● | we may be subject to fines, injunctions or the imposition of criminal penalties;
| ● | we could be sued and held liable for harm caused to patients; and
| ● | our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of our products or any of our product candidates, if approved, and could seriously harm our business.

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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.

Because we have limited financial and management resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

If the EAP is terminated prior to commercialization of arimoclomol in the EU, if approved, it will have a material adverse effect on our business, results of operations, cash flows, financial condition and/or prospects.

Arimoclomol is currently available to NPC patients in France, Germany, and other EU member states through the EAP. The EAP is expected to remain in place until arimoclomol becomes commercially available in each of the current EAP markets. If the EAP is terminated prior to commercialization of arimoclomol, it will have a material adverse effect on our business, results of operations, cash flows, financial condition and/or prospects.

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Risks Related to Our Business, Our Financial Position and Our Capital Needs

Our future results will suffer if we do not effectively manage our expanded operations.

Due to the additional of our commercialization capabilities and through our strategic transactions, the size and scope of our operations increased. We may continue to expand our size and operations through further expansion of capabilities, additional acquisitions or other strategic transactions. Our future success depends, in part, upon our ability to manage our expanded business, which may pose substantial challenges for our management, including challenges related to the management and monitoring of new operations and locations and associated increased costs and complexity. There can be no assurances that we will be successful in managing our expanded business or that we will realize the expected economies of scale, synergies and other benefits currently anticipated from the Merger or anticipated from any additional acquisitions or strategic transactions.

A variety of risks associated with international operations could materially adversely affect our business.

We expect to engage in significant cross-border activities, and we will be subject to risks related to international operations, including:

| ● | different regulatory requirements for maintaining approval of drugs in foreign countries;
| ● | differing payor reimbursement regimes, governmental payors or patient self-pay systems and price controls;
| ● | reduced protection for contractual and intellectual property rights in some countries;
| ● | unexpected changes in tariffs, trade barriers and regulatory requirements;
| ● | economic weakness, including inflation, labor shortages, supply chain shortages, or other economic or political uncertainties or instability in particular foreign economies and markets;
| ● | compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
| ● | foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;
| ● | workforce uncertainty in countries where labor unrest is more common than in North America;
| ● | tighter restrictions on privacy and the collection and use of patient and clinical trial participant data; and
| ● | business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

We may not be able to retain suppliers or distributors, or suppliers or distributors may seek to modify contractual relationships with us, which could have an adverse effect on our business and operations. Third parties may terminate or alter existing contracts or relationships with us.

We may experience impacts on relationships with customers, suppliers and distributors that may harm our business and results of operations. Certain suppliers or distributors may seek to terminate or modify contractual obligations following the Merger whether or not contractual rights are triggered as a result of the Merger. There can be no guarantee that our or Acer's prior customers, suppliers and distributors will remain with or continue to have a relationship with us or do so on contractual terms amenable to us. If any suppliers or distributors seek to terminate or modify contractual obligations or discontinue their relationship with us, then our business and results of operations may be harmed.

If we fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Our management is required to report annually on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

Our failure to certify the effectiveness of our internal control over financial reporting or our disclosure controls and procedures, or the identification of the material weakness, could subject us to regulatory scrutiny and a loss of public confidence, which could have a material adverse effect on our business and our stock price. If we identify material weaknesses or significant deficiencies, we may not be able to remediate them in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, we may encounter problems or delays in completing the implementation of any requested improvements and, if and when such a report is required, receiving a favorable attestation report from our independent registered public accounting firm. If we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our results of operations and financial condition.

We have incurred significant recurring negative net operating cash flows. We cannot predict if we will incur positive or negative net operating cash flows o ver the next several years, which may impact our ability to continue as a going concern, and we may never achieve or maintain profitability.

We have historically had significant negative net operating cash flows since inception. For the years ended December 31, 2024, and 2023, net cash used in operations was $69.7 million and $33.5 million, respectively. We have financed our operations through December 31, 2024, with funds raised in private placements of redeemable convertible preferred stock, the issuance of convertible promissory notes and term debt, our initial public offering and other public and private offerings of our common stock, as well as through royalties and milestone payments received under the AZSTARYS License Agreement, reimbursements related to arimoclomol under the EAP, and product sales of OLPRUVA and MIPLYFFA.

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We have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical trials, and commercialization. We are still in the early stages of commercializing our approved products. We have devoted substantial financial resources and efforts to research and development, including preclinical studies and clinical trials, and our product candidates are in various stages of development. We have only completed development of, and received regulatory approval for, AZSTARYS and MIPLYFFA. We expect to continue to incur significant expenses and operating losses over the next several years and our net losses may fluctuate significantly from quarter to quarter and year to year as we:

| ● | continue our ongoing preclinical studies, clinical trials and our product development activities for our pipeline of product candidates;
| ● | seek regulatory approvals for product candidates that successfully complete clinical trials;
| ● | continue research and preclinical development and initiate clinical trials of our product candidates;
| ● | seek to discover and develop additional product candidates either internally or in partnership with other pharmaceutical companies;
| ● | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
| ● | maintain, expand and protect our intellectual property portfolio;
| ● | incur additional legal, accounting and other expenses in operating as a public company; and
| ● | add operational systems and personnel, if needed, to support any future commercialization efforts.

To become and remain profitable, we must succeed in developing and eventually commercializing prodrugs that generate significant revenue. This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials and obtaining regulatory approval of our product candidates, and manufacturing, marketing and selling, whether ourselves or through a license with a third party, any of our product candidates for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We are in various stages of these activities for our product candidates and we cannot guarantee that any strategy we adopt will be successful. We may never succeed in commercialization activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with prodrug development, we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation and completion of our clinical trials or the development of any of our product candidates, our expenses could increase.

Even if we achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, obtain product approvals, diversify our product offerings or continue our operations. A decline in our value could also cause you to lose all or part of your investment.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may not generate the necessary data or results required to obtain regulatory approval for our product candidates or claims necessary to make such candidates profitable and achieve product sales. In addition, our approved products or any of our product candidates, if approved, may not achieve commercial success. Our commercial revenue will be derived from sales of prodrug products. We cannot guarantee that we or Corium will be able to successfully commercialize OLPRUVA, MIPLYFFA, or AZSTARYS to any certain level, or any of the product candidates subject to the AZSTARYS License Agreement, even if approved, or that we will ever receive any additional payments under the AZSTARYS License Agreement from the commercial sales of AZSTARYS or any future payments under the AZSTARYS License Agreement. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or debt securities, the terms of those securities or debt may restrict our ability to operate. Any future debt financing and equity financing, if available, may involve agreements that include, covenants limiting and restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or altogether cease our research and development programs or future commercialization efforts.

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We may need additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce or altogether cease our development programs or commercialization efforts or cease operations altogether.

Based on our current operating plan, excluding the expected net proceeds from our sale of the MIPLYFFA PRV (subject to customary closing conditions), our existing resources are expected to be sufficient to fund operating expense and capital investment requirements into 2029. Our liquidity needs will be largely determined by the success of operations through the progression of our products and product candidates in the future. We also may consider other sources to fund operations including: (1) out-licensing rights to certain of our technologies and product candidates, pursuant to which we would receive cash royalties and milestones; (2) raising additional capital through equity or debt financings or from other sources; (3) obtaining product candidate regulatory approvals, which would generate revenue, milestones and cash flow; (4) reducing spending on one or more research and development programs, including by discontinuing development; and/or (5) restructuring operations to change our overhead structure. We are in the early stages of our commercialization effort for OLPRUVA and MIPLYFFA and do not yet have a substantial basis to project future earnings, and our other sources of revenue are not sufficient to sustain our present activities on their own. Accordingly, our ability to continue as a going concern may require us to obtain additional financing to fund our operations.

We expect that our only sources of revenues will be through payments arising from sales of our approved products and any other future arrangements related to one of our product candidates. We cannot guarantee that we will be able to generate sufficient proceeds from the sale of our approved products or product candidates, if approved, or be successful in completing other transactions that will fully fund our operating expenses. Further, the recent economic uncertainty, may dramatically reduce our ability to secure debt or equity financing necessary to support our operations. If we are delayed in obtaining additional funding or are unable to complete a strategic transaction, we may discontinue our development activities on our product candidates or discontinue our operations. Our future capital requirements will depend on many factors, including:

| ● | the success in commercializing our approved products;
| ● | the commercial revenue received from commercial sales of our approved products, MIPLYFFA and OLPRUVA, or any of our product candidates subject to the terms of the AZSTARYS License Agreement, or sales of our product candidates for which we receive marketing approval in the future, which may be affected by market conditions, including obtaining coverage and adequate reimbursement of our approved products, or any of our product candidates, from third-party payors, including government programs and managed care organizations, and competition within the therapeutic class to which our approved products, or any our product candidates are assigned;
| ● | the progress and results of our preclinical studies, clinical trials, chemistry, manufacturing and controls, and other product development and commercialization activities;
| ● | the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our product candidates;
| ● | the ability to obtain differentiating claims in the labels for our product candidates;
| ● | the number and development requirements of other product candidates that we may pursue;
| ● | the costs, timing and outcome of regulatory review of our product candidates;
| ● | the efforts necessary to institute post-approval regulatory compliance requirements;
| ● | the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
| ● | the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
| ● | the extent to which we acquire or in-license other product candidates and technologies.

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Risks Related to Our Dependence on Third Parties

We rely on and expect to continue to rely on third parties to conduct our clinical trials for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials.

We have engaged and expect to continue to engage CROs for our planned clinical trials of our product candidates. We rely on and expect to continue to rely on CROs, as well as other third parties, such as clinical data management organizations, medical institutions and clinical investigators, to conduct those clinical trials. Agreements with such third parties might terminate for a variety of reasons, including a failure to perform by the third parties. If we need to enter into alternative arrangements, our drug development activities would be delayed.

Our reliance on these third parties for research and development activities reduces our control over these activities but does not relieve us of our responsibilities. For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. Moreover, the FDA requires us to comply with regulatory standards, commonly referred to as good clinical practices, or GCPs, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, investigators and trial sites. We also are required to register specified ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. In addition, we must conduct our clinical trials with product produced under cGMP requirements. Similar requirements apply in foreign jurisdictions. Failure to comply with these regulations may require us to repeat preclinical studies and clinical trials, which would delay the regulatory approval process. Failure to comply with the applicable requirements related to clinical investigations by us, our CROs or clinical trial sites can also result in clinical holds and termination of clinical trials, debarment, FDA or foreign regulatory authorities refusal to approve applications based on the clinical data, warning letters, withdrawal of marketing approval if the product has already been approved, fines and other monetary penalties, delays, adverse publicity and civil and criminal sanctions, among other consequences.

Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

In addition, investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA or foreign regulatory authorities conclude that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection of any NDA or foreign marketing authorization application we submit by the FDA or foreign regulatory authorities. Any such delay or rejection could prevent us from commercializing our product candidates. Further, our arrangements with investigators are also subject to scrutiny under other health care regulatory laws, such as the Anti-Kickback Statute and comparable foreign laws.

We also rely on and expect to continue to rely on other third parties to store and distribute product supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

If the third parties with whom we contract do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, we may need to conduct additional trials, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our business may be adversely affected.

We contract with third parties for the manufacture of our approved products, partnered products and product candidates that utilize SDX, sodium phenylbutyrate, and arimoclomol, and we expect to continue to do so. This reliance on third-party manufacturers increases the risk that we will not have sufficient quantities of SDX, sodium phenylbutyrate and arimoclomol, or such quantities at an acceptable cost, which could delay, prevent or impair commercialization or development efforts.

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We do not have any manufacturing facilities. We procure the bulk drug substances for our approved products and product candidates from sole-source, third-party manufacturers and the partnered products and product candidates that utilize these moieties as the API used in our clinical trials from other third parties. We anticipate we will continue to do so for the foreseeable future. We also expect to continue to rely on third parties as we proceed with preclinical and clinical testing of our product candidates, as well as for commercial manufacture of our approved products, or any of our product candidates should such candidates receive marketing approval. This reliance on third parties increases the risk that we will not have sufficient quantities of SDX, sodium phenylbutyrate, arimoclomol, or other bulk drug substances or our approved products, partnered product or product candidates, or such quantities at an acceptable cost or quality, which could delay, prevent or impair our ability to timely conduct our clinical trials or our other development or commercialization efforts.

We may be unable to establish any future agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to maintain our existing third-party relationships or establish any such agreements with other third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

| ● | reliance on the third party for FDA, DEA, EMA and comparable foreign authorities, regulatory compliance and quality assurance;

| ● | the possible misappropriation of our proprietary information, including our trade secrets and know-how;

| ● | disruption and costs associated with changing suppliers, including additional regulatory filings;

| ● | the possible breach, termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us;

| ● | a delay or inability to procure or expand sufficient manufacturing capacity;

| ● | manufacturing and product quality issues related to scale-up of manufacturing;

| ● | costs and validation of new equipment and facilities required for scale-up;

| ● | the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

| ● | termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;

| ● | the reliance on a limited number of sources, and in some cases, single sources for product components, such that if we are unable to secure a sufficient supply of these product components, we will be unable to manufacture and sell our product candidates in a timely fashion, in sufficient quantities or under acceptable terms; and

| ● | carrier disruptions or increased costs that are beyond our control.

Additionally, trade policies and geopolitical disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect our business, particularly if these measures affect regions where manufacturing and product development activities take place or raw materials are sourced. For example, tensions between the United States and China have led to a series of tariffs being imposed by the United States on imports from China, as well as other business restrictions. Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, that could adversely impact supply chains. As these tensions continue to rise, more targeted approaches on certain products, industries or companies could significantly impact our development and commercialization efforts. The U.S. government has recently imposed tariffs on certain foreign goods, and some foreign governments have threatened or instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products, which could increase the cost of goods needed to commercialize our products and continue development of our product candidates. Further, such actions by the U.S. could result in other retaliatory actions by those countries which could impact our ability to profitably commercialize our products in those jurisdictions. As a result, our business, operations, and financial condition could be materially harmed.

Any of these events could lead to clinical trial delays, failure to obtain regulatory approval or impact our ability to successfully commercialize our products, if approved. Some of these events could be the basis for FDA or foreign regulatory authorities action, including injunction, recall, seizure or total or partial suspension of production.

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The facilities used by our contract manufacturers to manufacture our approved products, and any of our product candidates are subject to review by the FDA or comparable foreign regulatory authorities pursuant to inspections that will be conducted after we submit our marketing application to the FDA or the EMA, and such inspections could result in findings that lead to failure to obtain FDA or comparable foreign approval of such marketing applications.

We do not, other than through our contractual arrangements, control the manufacturing process of our approved products, or any of our other product candidates, and we are completely dependent on, our contract manufacturing partners for compliance with cGMP requirements and for manufacture of both active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or other regulatory authorities, we will not be able to secure and maintain regulatory approval of our marketing applications for the use of their manufacturing facilities for our products. In addition, other than through our contractual agreements, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA, or a comparable foreign regulatory authority, does not approve these facilities for the manufacturing of our approved products, or any of our other product candidates, or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain marketing approval for or market our approved products, or any of our other product candidates, if approved.

Further, for our approved products and any of our product candidates, if approved, our suppliers will be subject to regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our approved products or any of our product candidates, if approved, and subject to ongoing inspections by the regulatory agencies. Failure by any of our suppliers to comply with applicable regulations may result in long delays and interruptions to our manufacturing capacity while we seek to secure another supplier that meets all regulatory requirements, as well as market disruption related to any necessary recalls or other corrective actions.

Third-party manufacturers may not be able to comply with cGMP regulations or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including warning letters, clinical holds or termination of clinical trials, fines, injunctions, restitution, disgorgement, civil penalties, delays, suspension or withdrawal of approvals or other permits, FDA refusal to approve pending applications, product detentions, FDA or DEA consent decrees placing significant restrictions on or suspending manufacturing and distribution operations, debarment, refusal to allow import or export, product detentions, adverse publicity, dear-health-care-provider letters or other warnings, license revocation, seizures or recalls of product candidates, operating restrictions, refusal of government contracts or future orders under existing contracts and civil and criminal liability, including False Claims Act liability, exclusion from participation in federal health care programs, and corporate integrity agreements among other consequences, any of which could significantly and adversely affect supplies of our prodrugs.

Our approved products that we are commercializing, and product candidates that we are currently developing, or may develop in the future, may compete with other product candidates and drugs for access to manufacturing facilities, and we may be unable to obtain access to these facilities on favorable terms.

There are a limited number of manufacturers that operate under cGMP or comparable foreign regulations and that might be capable of manufacturing for us. Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do not currently have arrangements in place for redundant supply or a second source for our approved products or product candidates bulk drug substance. If our current contract manufacturer for our approved products or product candidates bulk drug substance cannot perform as agreed, we may be required to replace such manufacturer and we may incur added costs and delays in identifying and qualifying any such replacement. Any performance failure or significant delay could negatively affect our business, results of operations and financial condition.

We have entered into collaborations with Commave, to develop, manufacture and commercialize AZSTARYS worldwide. In addition, we may seek collaborations with third parties for the development or commercialization of our other product candidates, or in other territories. If those collaborations are not successful, we may not be able to capitalize on the market potential of AZSTARYS or any of our other product candidates, if approved.

We entered into the AZSTARYS License Agreement with Commave pursuant to which we granted an exclusive, worldwide license to Commave to develop, manufacture and commercialize AZSTARYS. On behalf of Commave, Corium leads all commercialization activities in the United States for AZSTARYS under the AZSTARYS License Agreement. We cannot guarantee that the AZSTARYS License Agreement will be successful or that we will receive any future payments under the AZSTARYS License Agreement. For instance, Commave has the option to terminate the AZSTARYS License Agreement, in its entirety or on a product-by-product and country-by-country basis, at their convenience either (i) prior to the first regulatory approval of a product upon sixty days prior written notice or (ii) subsequent to the first regulatory approval of a product upon one hundred twenty days prior written notice. Further, even if Commave does not terminate the AZSTARYS License Agreement, we cannot guarantee that we will receive any additional milestone or royalty payments under the AZSTARYS License Agreement. In addition, under the AZSTARYS License Agreement, we have limited control over the amount and timing of resources that Corium will dedicate to the development, manufacturing or commercialization of AZSTARYS. Our ability to generate revenue under the AZSTARYS License Agreement will depend, in part, on Corium’s ability to successfully perform the functions assigned to it under the AZSTARYS License Agreement.

We may also seek additional third-party collaborators for the development or commercialization of any of our other product candidates, which are not subject to the AZSTARYS License Agreement, or those that are subject to the AZSTARYS License Agreement, but the option is not exercised by Commave. In such cases, our likely collaborators would include large and mid-size pharmaceutical companies, regional, national and international pharmaceutical companies and biotechnology companies. If we do enter into any such collaboration arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our approved products or any of our other product candidates. Our ability to generate revenue from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

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Our collaboration with Commave, or Collaborator, poses the following risks to us:

| ● | the Collaborator has significant discretion in determining the efforts and resources that they will apply to these collaborations;

| ● | the Collaborator may not perform their obligations as expected;

| ● | the Collaborator may not pursue commercialization of AZSTARYS, any of our product candidates covered under the AZSTARYS License Agreement, if approved, or may elect not to continue or renew commercialization programs based on post-approval clinical trial results, changes in a Collaborator's strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

| ● | the Collaborator could independently develop, or develop with third parties, products that compete directly or indirectly with AZSTARYS, or any of our other products covered under the AZSTARYS License Agreement, as applicable, if the Collaborator believes that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

| ● | AZSTARYS, any of our other products covered under the AZSTARYS License Agreement, if approved, may be viewed by the Collaborator as competitive with their own product candidates or products, which may cause the Collaborator to cease to devote resources to the commercialization of AZSTARYS, or any of our other products covered under the AZSTARYS License Agreement, if approved;

| ● | the Collaborator may not commit sufficient resources to the development, marketing and distribution of AZSTARYS and any of our other products covered under the AZSTARYS License Agreement, as applicable;

| ● | disagreements with the Collaborator, including disagreements over proprietary rights, contract interpretation or the preferred course of development or commercialization, might cause delays or termination of the development or commercialization of AZSTARYS, or any of our other products covered under the AZSTARYS License Agreement, as applicable, might lead to additional responsibilities for us with respect to AZSTARYS or any of our other products covered under the AZSTARYS License Agreement, or might result in litigation or arbitration, any of which would be time-consuming and expensive;

| ● | the Collaborator may not properly maintain or defend our or their intellectual property rights or may use our or their proprietary information in such a way as to invite litigation that could jeopardize or invalidate such intellectual property or proprietary information or expose us to potential litigation;

| ● | the Collaborator may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; and

| ● | the license agreements may be terminated by the Collaborator under specified circumstances and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of AZSTARYS or any of our other products covered under the AZSTARYS License Agreement.

If we enter into any future collaborations we will face similar risks with any future collaborators as well.

The AZSTARYS License Agreement and any other licensing or collaboration agreements we may enter into may not lead to commercialization of AZSTARYS, or development of KP1077, or any of our other product candidates in the most efficient manner or at all. If Commave or a future collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our drug development or commercialization program could be delayed, diminished or terminated.

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If we are not able to establish collaborations for our product candidates, we may have to alter our development and commercialization plans.

Our prodrug development programs and the potential commercialization of our product candidates, if approved, will require substantial additional capital. For our product candidates, which are not subject to the terms of the AZSTARYS License Agreement, we may need to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.

We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of several factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally.

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of product candidates, reduce or delay one or more of our development programs, delay potential commercialization of our product candidates or reduce the scope of any sales or marketing activities of our product candidates, or increase our expenditures and undertake development or commercialization activities at our own expense of our product candidate. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring our product candidates to market and generate product revenue.

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Risks Related to Our Intellectual Property

If we are unable to obtain and maintain trade secret protection or patent protection for our technology, our approved products or our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology, our approved products, or our product candidates, if approved, may be impaired.

Our success depends in large part on our ability to obtain and maintain trade secret protection of our proprietary LAT platform technology as well as patent protection in the United States and other countries with respect to our approved products, and any of our product candidates. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our product technology and product candidates. As part of the AZSTARYS License Agreement, Commave obtained from us an exclusive, worldwide license to certain patents that cover AZSTARYS.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents, licensed to third parties by us.

Further, we may also not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents, licensed from third parties to us. Therefore, any such patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If such licensors or licensees fail to maintain such patents, or lose rights to those patents, the rights we have in- or out-licensed may be reduced or eliminated.

The patent position of biotechnology and pharmaceutical companies, generally, is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States or visa-versa. For example, European patent law restricts the patentability of methods of treatment of the human body more than United States law. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and utility, or equivalent, patent applications in the United States and other jurisdictions are typically, for example, not published until 18 months after the filing date of such patent applications, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make and/or use the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, priority, validity, enforceability and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents being issued that protect our product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and drugs. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

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Our patent position is subject to numerous additional risks, including the following:

| ● | we may fail to seek patent protection for inventions that are important to our success;
| ● | our pending patent applications may not result in issued patents;
| ● | we cannot be certain that we are the first to invent the inventions covered by pending patent applications or that we are the first to file such applications and, if we are not, we may be subject to priority disputes or lose rights;
| ● | we may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications;
| ● | we may not be able to acquire patent term extensions or supplemental certificates of certain patents, domestic or foreign, due to regulatory delays, among others, which may affect the term of enforceability of such patents over time;
| ● | we may file patent applications but have claims restricted or we may not be able to supply sufficient data to support our claims and, as a result, may not obtain the original claims desired or we may receive restricted claims; alternatively, it is possible that we may not receive any patent protection from an application;
| ● | even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, and may not be of sufficient scope or strength to provide us with any commercial advantage;
| ● | our competitors may be able to design around our owned or licensed patents by developing similar or alternative technologies or drugs without infringing on our intellectual property rights;
| ● | we could inadvertently abandon a patent or patent application, resulting in the loss of protection of intellectual property rights in a particular country, and we, our collaborators or our patent counsel may take action resulting in a patent or patent application becoming abandoned which may not be able to be reinstated or if reinstated, may suffer patent term adjustments or loss;
| ● | the claims of our issued patents or patent applications when issued may not cover our product candidates;
| ● | no assurance can be given that our patents would be declared by a court or tribunal, domestic or foreign, to be valid or enforceable or that a competitor’s technology or product would be found by a court or tribunal, domestic or foreign, to infringe our patents and our patents or patent applications may be challenged by third parties in patent litigation, domestic or foreign, or in proceedings before the United States Patent and Trademark Office, or the USPTO, or its foreign counterparts, and may ultimately be declared invalid or unenforceable or narrowed in scope;
| ● | there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim and there may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim;
| ● | third parties may develop products that have the same or similar effect as our products without infringing our patents;
| ● | third parties may intentionally circumvent our patents by means of alternate designs or processes or file applications or be granted patents that would block or hurt our efforts;
| ● | there may be dominating or intervening patents relevant to our product candidates of which we are not aware;
| ● | obtaining regulatory approval for pharmaceutical products is a lengthy and complex process, and as a result, any patents covering our product candidates may expire before or shortly after such product candidates are approved and commercialized;
| ● | the patent and patent enforcement laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as laws in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions; and
| ● | we may not develop additional proprietary technologies that are patentable.

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Any of these factors could hurt our ability to gain full patent protection for our products. Registered trademarks and trademark applications in the United States and other countries are subject to similar risks as described above for patents and patent applications, in addition to the risks described below.

Further, a third party may misappropriate or reverse engineer our proprietary LAT platform technology, which could limit our ability to stop others from using or commercializing similar or identical technology and resultant product candidates, product technology or prodrugs, or limit the duration of the trade secret protection of our proprietary LAT platform technology.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, litigation, nullity, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or drugs and compete directly with us, without payment to us or result in our inability to manufacture or commercialize drugs without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to seek patent protection or to license, develop or commercialize current or future product candidates.

In addition, the issuance of a patent is not conclusive as to its inventorship, ownership, scope, priority, validity or enforceability, and our owned and licensed patents may be challenged in the courts, patent offices and tribunals in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and drugs, or limit the duration of the patent protection of our product technology, product candidates and prodrugs.

Changes in patent law in the United States and other jurisdictions could alter or diminish the value of patents in general, thereby impairing our ability to protect our products and technologies.

The standards that the USPTO and patent offices in other countries use to grant patents are not always applied predictably or uniformly and can change. Changes in either the patent laws or interpretation of the patent laws in the United States and other countries could increase the uncertainties and costs, and may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our owned and licensed patents.

In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the United States Congress, the United States courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. For example, in the 2013 case Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the United States Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents owned or licensed by us will be found invalid based on this decision, future decisions by the courts, the United States Congress or the USPTO may impact the value of our patents.

For another example, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted in the United States, redefine prior art and may also affect patent litigation. The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first-to-file provisions, only became effective on March 16, 2013.

The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. For instance, the Leahy-Smith Act established the inter partes review and post grant review procedures that has lowered the burden of proof for invalidity challenges to issued patents and limited the ability to amend patent claims in response to such challenges. In addition, patent reform legislation may pass in the future that could lead to additional uncertainties and increased costs surrounding the prosecution, enforcement and defense of our owned and licensed patents and/or patent applications.

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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors or other third parties may infringe our patents, trademarks, copyrights or other intellectual property. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time consuming and divert the time and attention of our management and scientific personnel. Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement or insufficient written description. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention, or decide that the other party’s use of our patented technology falls under the safe harbor to patent infringement under 35 U.S.C. §271(e)(1). An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products and technologies. Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could significantly harm our business.

Our commercial success depends upon our ability, and the ability of any collaborators, to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. In particular, we are focused on developing product candidates based on widely used therapeutic agents or drugs, many of which may be protected by proprietary rights of third parties.

Although we seek to develop proprietary prodrug formulations that do not infringe the intellectual property rights of others, we may become party to, or threatened with, future adversarial proceedings or litigation, domestic or foreign, regarding intellectual property rights with respect to our prodrugs or other aspects of our technology, including, for example, interference or derivation proceedings before the USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our technology and drugs. However, we may not be able to obtain any required license on commercially reasonable terms, or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some or all of our business operations.

Competing products may also be sold in other countries in which our patent coverage might not exist or be as strong. If we lose a foreign patent lawsuit alleging our infringement of a competitor’s patent, we could be prevented from marketing our products in one or more foreign countries. As a result, our ability to grow our business and compete in the market may be harmed.

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Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities.

In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could hurt the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in the marketplace.

We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.

A third party may hold intellectual property rights, including patent rights, which are important or necessary to the development of our product candidates. It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our product candidates, in which case we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable terms, or at all, and we could be forced to accept unfavorable contractual terms. If we are unable to obtain such licenses on commercially reasonable terms, our business could be harmed.

If we or our third-party licensors fail to comply with our obligations in our intellectual property licenses and funding arrangements with third parties, we could lose rights that are important to our business.

We are currently party to license agreements for technologies that we anticipate using in our product development activities. In the future, we may become party to licenses that are important for product development and commercialization. If we or our third-party licensors fail to comply with the obligations under current or future license and funding agreements, our counterparties may have the right to terminate these agreements, we may be forced to terminate these agreement or we may no longer effectively rely on any licenses to us under these agreements, in which event we might not be able to develop, manufacture or market any product or utilize any technology that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially and adversely affect the value of a product candidate being developed under any such agreement or could restrict our drug discovery activities. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements with less favorable terms or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

The scope of our intellectual property may be reduced or may need to be reduced due to third-party intellectual property claims.

Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours that claims priority to an application filed prior to March 16, 2013, we may have to participate in an interference proceeding declared by the USPTO to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if, unbeknownst to us, the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions. In addition, changes enacted on March 16, 2013, to the U.S. patent laws under the Leahy-Smith Act resulted in the United States changing from a “first to invent” country to a “first to file” country. As a result, we may lose the ability to obtain a patent if another party files with the USPTO first and could become involved in proceedings before the USPTO to resolve disputes related to inventorship. We may also become involved in similar proceedings in other jurisdictions.

Furthermore, recent changes in U.S. patent law under the Leahy-Smith Act allow for post-issuance challenges to U.S. patents, including ex parte re-examinations, inter partes reviews and post-grant reviews. There is significant uncertainty as to how the new laws will be applied. If our U.S. patents are challenged using such procedures, we may not prevail, possibly resulting in altered or diminished claim scope or loss of patent rights altogether. Similarly, some countries, notably in Europe, also have post-grant opposition proceedings or nullity proceedings that can result in changes in scope or cancellation of patent claims.

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We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property or claiming ownership of what we regard as our own intellectual property.

The FDA and foreign regulatory authorities closely regulate promotional materials and other promotional activities. Even if the FDA or foreign regulatory authorities initially approve product labeling that includes a description of our improved attribute claims, the FDA and foreign regulatory authorities may object to our marketing claims and product advertising campaigns. Failure to comply with the FDA’s and comparable foreign regulatory authorities’ promotional, marketing and advertising laws and regulations could lead to the issuance of warning letters, cyber letters, or untitled letters, adverse publicity, the requirement for dear-health-care-provider letters or other corrective information, fines and other monetary penalties, civil or criminal prosecution, including False Claims Act liability, restrictions on our operations and other operating requirements through consent decrees or corporate integrity agreements, debarment, exclusion from participation in federal health care programs and refusal of government contracts or future orders under existing contracts, among other consequences. Any of these consequences would harm the commercial success of our products.

Further, our promotional materials, statements and training methods must comply with the FDA’s and comparable foreign regulatory authorities’ prohibition of the promotion of unapproved, or off-label, use. Any regulatory approval that the FDA grants is limited to those specific diseases and indications for which a product is deemed to be safe and effective by FDA. Similar requirements apply in foreign jurisdictions. For example, the FDA-approved label for AZSTARYS is limited to the acute treatment of ADHD in patients 6 years of age and older, and the FDA-approved label for APADAZ is limited to the short-term (no more than 14 days) management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. Physicians may use our products off-label, as the FDA does not restrict or regulate a physician’s independent choice of treatment within the practice of medicine. However, if the FDA or foreign regulatory authorities determine that our promotional materials, statements or training constitutes promotion of an off-label use, it could request that we modify our promotional materials, statements or training methods or subject us to regulatory or enforcement actions, such as the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine, disgorgement of money, operating restrictions or criminal penalties. We may also be subject to actions by other governmental entities or private parties, such as the False Claims Act, civil whistleblower or “qui tam” actions. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products could be impaired. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could divert our management’s attention, result in substantial damage awards against us and harm our reputation.

Any trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.

We expect to rely on trademarks as one means to distinguish our product candidates that are approved for marketing from the products of our competitors. We have registered trademarks, including those for LAT, Zevra, and OLPRUVA. In addition, we have solicited and applied for trademarks for the Zevra logo and several potential trade names and logos for future product candidates. Third parties may oppose or attempt to cancel our trademark applications or trademarks, or otherwise challenge our use of the trademarks. If our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to enforce our trademarks.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent and trademark protection for our product candidates, we also rely on trade secrets, including unpatented show-how, know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. Further, we may need to share our trade secrets and confidential know-how with future business partners, collaborators, contractors and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or actors in other countries, and those affiliated with or controlled by state actors.

Monitoring unauthorized uses and disclosures of our intellectual property, including our trade secrets, is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

Moreover, our competitors may independently develop or reverse engineer knowledge, methods, show-how and know-how equivalent to our trade secrets. Competitors could purchase our products and replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate such trade secrets, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

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We may not be able to protect our intellectual property rights throughout the world.

Patents are of national or regional effect, and filing, prosecuting and defending patents on all of our products and technologies throughout the world would be prohibitively expensive. As such, our intellectual property rights in some countries outside the United States can be less extensive than those in the United States and we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products or technology and may export otherwise infringing products or technology to territories where we have patent protection, but enforcement rights are not as strong as those in the United States. These products may compete with our products and technologies, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Further, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals or biologics, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any such lawsuits that we initiate and the damages and other remedies awarded, if any, may not be commercially meaningful. Similarly, if our trade secrets are disclosed in another jurisdiction, competitors worldwide could have access to our proprietary information and we may be without satisfactory recourse. Such disclosure could have a material adverse effect on our business. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in intellectual property laws of other countries. In addition, certain developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. In addition, many countries limit the enforceability of patents against government agencies or government contractors. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

In 2012, the European Patent Package, or EU Patent Package, regulations were passed with the goal of providing a single pan-European Unitary Patent and a new European Unified Patent Court, or UPC, for litigation involving European patents. The EU Patent Package went into effect June 1, 2023. Under the UPC, all European patents, including those issued prior to ratification of the European Patent Package, will by default automatically fall under the jurisdiction of the UPC. The UPC will provide our competitors with a new forum to centrally revoke our European patents, and allow for the possibility of a competitor to obtain pan-European injunctions. It will be several years before we will understand the scope of patent rights that will be recognized and the strength of patent remedies that will be provided by the UPC. Under the EU Patent Package, we will have the right to opt our patents out of the UPC over the first seven years of the court’s existence, but doing so may preclude us from realizing the benefits of the new unified court.

Our decision to seek approval of our product candidates under certain regulatory pathways, such as the 505(b)(2) NDA pathway for the FDA, may increase the risk that patent infringement suits are filed against us, which would delay FDA or comparable foreign regulatory authorities' approval of such product candidates.

Regarding any NDA that we may submit under the 505(b)(2) NDA pathway, if there are patents that claim the approved drug contained in our product candidates and referenced in our 505(b)(2) NDA, we must certify to the FDA and notify the patent holder that any patents listed for the approved drug in the FDA’s Orange Book publication are invalid, unenforceable or will not be infringed by the manufacture, use or sale of our prodrug. If a patent infringement lawsuit is filed against us within 45 days of its receipt of notice of our certification, the FDA is automatically prevented from approving our 505(b)(2) NDA until the earliest of 30 months, expiration of the patent, settlement of the lawsuit or a court decision in the infringement case that is favorable to us, or such shorter or longer period as may be ordered by a court. Such actions are routinely filed by patent owners. Accordingly, we may invest considerable time and expense in the development of our product candidates only to be subject to significant delay and patent litigation before our product candidates may be commercialized. We may not be successful in defending any patent infringement claim. Even if we are found not to infringe, or a plaintiff’s patent claims are found invalid or unenforceable, defending any such infringement claim would be expensive and time-consuming, and would delay launch of our product candidates and distract management from their normal responsibilities.

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Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters

Failure to obtain marketing approval in international jurisdictions would prevent our approved products, and any of our other product candidates from being marketed abroad.

In order to market and sell our products in the EU and any other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. However, failure to obtain approval in one jurisdiction may impact our ability to obtain approval elsewhere. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

A variety of risks associated with marketing our approved products and any of our product candidates, if approved, internationally, could affect our business.

We may seek regulatory approval for our approved products and any of our product candidates, if approved, outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

| ● | differing regulatory requirements in foreign countries;
| ● | the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market with low or lower prices rather than buying them locally;
| ● | unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
| ● | economic weakness, including inflation, labor shortages, supply chain shortages, or other economic or political uncertainties or instability in particular foreign economies and markets;
| ● | compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
| ● | foreign taxes, including withholding of payroll taxes;
| ● | foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;
| ● | difficulties staffing and managing foreign operations;
| ● | workforce uncertainty in countries where labor unrest is more common than in the United States;
| ● | potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;
| ● | challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;
| ● | production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
| ● | business interruptions resulting from geo-political actions, including war and terrorism, such as the current situation with Ukraine and Russia.

These and other risks associated with our international operations may compromise our ability to achieve or maintain profitability.

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Our approved products are, and any of our product candidates for which we obtain marketing approval will remain subject to significant post-marketing regulatory requirements and oversight.

Our approved products are, and any of our product candidates for which we obtain marketing approval could be, subject to significant post-marketing regulatory requirements and oversight, including the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product, significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and burdensome post-approval study or risk management requirements.

For example, we are required to conduct pediatric studies related to AZSTARYS to evaluate its safety and effectiveness for the claimed indication in pediatric patients. Under the AZSTARYS License Agreement, Corium will be responsible for these regulatory activities going forward, and we cannot guarantee they will be complied with.

For OLPRUVA for oral suspension in the U.S. for the treatment of certain patients with UCDs, and for MIPLYFFA for orally-delivered treatment for NPC, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMP and comparable foreign regulations and GCP for any clinical trials that we conduct post-approval.

In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for any approved drugs are subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, payment of substantial annual product and establishment fees, labeling requirements, promotional, marketing and advertising requirements, requirements related to further development, packaging, storage and distribution requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. If there are any modifications to the drug, including changes in indications, labeling, manufacturing processes or facilities, or new safety issues arise, a new or supplemental NDA, a post-implementation notification or other reporting may be required or requested depending on the change, which may require additional data or additional preclinical studies and clinical trials.

Our approved products are, and if marketing approval of any of our product candidates is granted, such product candidates may be, subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval, including the requirement to implement a REMS, which could involve requirements for, among other things, a medication guide, special training for prescribers and dispensers, and patient registries. In addition, the FDA or the EMA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product.

Products may be approved with a label that limits their approved uses, including more limited subject populations, than we request, and regulatory authorities may require that contraindications, warnings or precautions be included in the product labeling, including a boxed warning, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate, which could limit sales of the product. For instance, the label for AZSTARYS contains black box warnings regarding the risks of abuse and dependence.

Violations of the FFDCA relating to the promotion of prescription drugs may lead to a number of actions and penalties, including warning letters, cyber letters, or untitled letters, adverse publicity, the requirement for dear-health-care-provider letters or other corrective information, fines and other monetary penalties, civil or criminal prosecution, including False Claims Act liability, restrictions on our operations and other operating requirements through consent decrees or corporate integrity agreements, debarment, exclusion from participation in federal health care programs and refusal of government contracts or future orders under existing contracts, among other consequences.

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In addition, later discovery of previously unknown adverse events or other problems with our products, including those related to manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have negative consequences, including:

| ● | adverse inspectional findings;
| ● | restrictions on such products, distribution, manufacturers or manufacturing processes;
| ● | restrictions on the labeling or marketing of a drug;
| ● | additional warnings or other restrictions on the product’s indicated use, label, or marketing;
| ● | issuance of safety alerts, dear-healthcare-provider letters, press releases or other communications containing warnings regarding the product;
| ● | requirement to establish or modify a REMS or similar risk management programs;
| ● | requirement to conduct post-marketing studies or surveillance;
| ● | restrictions on drug distribution or use;
| ● | requirements to conduct post-marketing studies or clinical trials;
| ● | warning letters;
| ● | recall or withdrawal of the prodrug products from the market;
| ● | refusal to approve pending applications or supplements to approved applications that we submit and other delays;
| ● | clinical holds, or the suspension or termination of ongoing clinical trials;
| ● | fines, restitution or disgorgement of profits or revenue;
| ● | suspension or withdrawal of marketing approvals or other permits or voluntary suspension of marketing;
| ● | refusal to permit the import or export of our products;
| ● | reputational harm;
| ● | refusal of government contracts or future orders under existing contracts, exclusion from participation in federal health care programs, and corporate integrity agreements;
| ● | product seizure or detention; or
| ● | injunctions or the imposition of civil or criminal penalties, including False Claims Act liability.

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Non-compliance with EU requirements regarding safety monitoring or pharmacovigilance, and with requi rements related to the development of drugs for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with the EU’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.
The occurrence of any event or penalty described above may inhibit our ability to commercialize our products and generate revenue, and could require us to expend significant time and resources in response and could generate negative publicity. In addition, the policies of the FDA, the EMA and other regulatory authorities may change, and additional government regulations may be enacted that could impair our business. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action, and we may not achieve or sustain profitability.

Our employees, independent contractors, principal investigators, CROs, consultants, commercial collaborators, contract manufacturers, service providers and other vendors may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements.

We are exposed to the risk of misconduct by employees and independent contractors, such as principal investigators, CROs, consultants, commercial collaborators, contract manufacturers, service providers and other vendors. Such misconduct could include failures to comply with FDA, the EMA, or comparable foreign regulations, to provide accurate information to the FDA, the EMA, or comparable foreign authorities, to comply with manufacturing standards that we have established or that are established by regulation, to comply with federal and state contracting and healthcare fraud and abuse laws, to report drug pricing, financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including, but not limited to, research, manufacturing, distribution, pricing, discounting, marketing, advertising and promotion, sales commissions, customer incentive programs and other business arrangements. Employee and independent contractor misconduct could also involve the improper use of individually identifiable information, including, without limitation, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. In addition, federal procurement laws impose substantial penalties for misconduct in connection with government contracts and require certain contractors to maintain a code of business ethics and conduct and self-disclose credible evidence of False Claims Act violations.

It is not always possible to identify and deter employee and independent contractor misconduct, and any precautions we take to detect and prevent improper activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws. If any such actions are instituted against us, those actions could have a significant impact on our business, including the imposition of warning letters, untitled letters, cyber letters, seizure or recall of products, injunctions, withdrawal of product approval or other permits, clinical holds and termination of clinical trials, FDA or foreign regulatory authorities refusal to approve pending applications, product detentions, FDA, DEA, or comparable foreign regulatory authorities consent decrees, restriction or suspension of manufacturing and distribution, debarment, refusal to allow product import or export, adverse publicity, refusal of government contracts or future orders under existing contracts, dear-health-care-provider letters or other warnings or corrective information, recalls, delays, significant civil, criminal and administrative penalties including False Claims Act liability, damages, monetary fines, disgorgement, restitution, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, corporate integrity agreements, contractual damages, reputational harm, diminished profits and future earnings and curtailment or restructuring of our operations, among other consequences, any of which could adversely affect our ability to operate.

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Our current and future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, and other healthcare laws and regulations, which could expose us to penalties.

Healthcare providers and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of our products, as well as any product candidates for which we obtain marketing approval. Our and our commercial partners' current and future arrangements with healthcare professionals, principal investigators, consultants, customers and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws, including, without limitation, the Anti-Kickback Statute and the False Claims Act, that may constrain the business or financial arrangements and relationships through which we and our commercial partners sell, market and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to transparency laws with respect to drug pricing and transfers of value made to physicians and other healthcare professionals. The applicable federal, state and foreign healthcare laws that may affect our ability to operate include the following:

| ● | the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or arranging for the purchase, lease or order of, any good, facility, item or service, for which payment may be made, in whole or in part, under federal and state healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation;
| ● | federal civil and criminal false claims laws, including the False Claims Act, which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making or using a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an obligation to pay money to the federal government, including erroneous pricing information on which mandatory rebates, discounts and reimbursement amounts are based, or in the case of the False Claims Act, for violations of the federal Anti-Kickback Statute in connection with a claim for payment or for conduct constituting reckless disregard for the truth;
| ● | the civil monetary penalties statute, which imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent;
| ● | the Health Insurance Portability and Accountability Act, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation;
| ● | the federal Physician Payments Sunshine Act and its implementing regulations, impose new annual reporting requirements for manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with certain exceptions, to annually report certain payments and transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiologist assistants and certified nurse-midwives) and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such providers and teaching hospitals, and to report annually certain ownership and investment interests held by physicians and their immediate family members; and

| ● | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; certain state laws which require drug manufacturers to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; certain state laws that require manufacturers to report information on the pricing of certain drug products; and certain state and local laws require the registration or pharmaceutical sales representatives.

These laws may affect our and our commercial partners' sales, marketing, and other promotional activities by imposing administrative and compliance burdens on us and our commercial partners.

Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws, or that our compliance systems are inadequate to detect and report such conduct or to report accurate pricing information to the government. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, corporate integrity agreements or similar agreements to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, which could significantly harm our business. If any of the physicians or other healthcare providers or entities with whom we currently, or expect to, do business, including future collaborators, is found not to be in compliance with applicable laws, they and we may be subject to significant penalties and potential exclusion from participation in healthcare programs as a result of their non-compliance.

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Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of our product candidates and increase the cost to commercialize our approved products, and any of our product candidates that may be approved in the future and affect the prices thereof.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect the ability to profitably sell our approved products and our ability to profitably sell any of our product candidates for which we obtain marketing approval.

Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. For example, in March 2010, the ACA was signed into law and was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

Among the provisions of the ACA of importance to our potential product candidates are the following:

| ● | an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;
| ● | an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded drugs and generic drugs, respectively;
| ● | expansion of healthcare fraud and abuse laws, including the False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance;
| ● | establishment of a new and distinct methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
| ● | a new Medicare Part D coverage gap discount program (which was replaced in 2025), in which manufacturers were required to offer 70% point-of-sale discounts off negotiated prices (generally as negotiated between the Medicare Part D plan and the pharmacy) of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
| ● | extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations and extension of the inflation percentage applicable to existing branded drugs to new formulations for purposes of computing the inflation penalty component of Medicaid rebates;
| ● | expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
| ● | expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
| ● | the new requirements under the federal Open Payments program and its implementing regulations;
| ● | a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
| ● | a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

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Since its enactment, there have been executive, judicial and congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in its current form.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions to Medicare payments to providers, which went into effect in April 2013, and, due to subsequent legislative amendments, will stay in effect through 2032, In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, on March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminated the statutory Medicaid drug rebate cap, beginning January 1, 2024. The rebate was previously capped at 100% of a drug's average manufacturer price.

Further, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program with a new manufacturer discounting program (which began in 2025). The IRA permits the Secretary of the Department of Health and Human Services, or HHS, to implement many of these provisions through guidance, as opposed to regulation, for the initial years. CMS has published the negotiated prices for the initial ten drugs, which will first be effective in 2026, and has published the list of the subsequent 15 drugs that will be subject to negotiation, although the drug price negotiation program is currently subject to legal challenges. For that and other reasons, it is currently unclear how the IRA will be effectuated. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure, drug price increase reporting and other transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have enacted legislation creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states. These new laws may result in additional reductions in Medicare and other healthcare funding, which could negatively impact customers for our product candidates, if approved, and, accordingly, our financial operations

In the EU, on December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU, was adopted. The Regulation entered into force in January 2022 and has been applicable since January 2025, with phased implementation based on the type of product, i.e. oncology and advanced therapy medicinal products as of 2025, orphan medicinal products as of 2028, and all other medicinal products by 2030. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement. We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may, among other things, result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our prodrug product candidates.

Legislative and regulatory proposals and enacted statutes have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. For instance, the Drug Supply Chain Security Act imposes obligations on manufacturers of pharmaceutical products, among others, related to product tracking and tracing. Among the requirements of this new legislation, manufacturers are required to provide specified information regarding the drug products they produce to individuals and entities to which product ownership is transferred, label drug products with a product identifier and keep specified records regarding the drug products. The transfer of information to subsequent product owners by manufacturers will eventually be required to be done electronically. Manufacturers are also required to verify that purchasers of products are appropriately licensed. Further, under this legislation, manufacturers have drug product investigation, quarantine, disposition and FDA and trading-partner notification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.

In the EU, the EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020. The European Commission’s proposal for revision of several legislative instruments related to medicinal products (potentially reducing the duration of regulatory data protection, revising the eligibility for expedited pathways, etc.) was published on April 26, 2023. The proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026. The revisions may, however, have a significant impact on the pharmaceutical industry and our business in the long term.

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We cannot be sure whether additional legislative changes will be enacted, or whether the FDA or foreign regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate Program or other governmental pricing programs in which we participate, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Medicaid is a joint federal and state program administered by the states for low income and disabled beneficiaries. We participate in and have certain price reporting obligations under the Medicaid Drug Rebate Program, or the MDRP, as a condition of having covered outpatient drugs payable under Medicaid and, if applicable, under Medicare Part B. The MDRP requires us to pay a rebate to state Medicaid programs every quarter for each unit of our covered outpatient drugs dispensed to Medicaid beneficiaries and paid for by a state Medicaid program. The rebate is based on pricing data that we must report on a monthly and quarterly basis to the Centers for Medicare & Medicaid Services, or CMS, the federal agency that administers the MDRP and other governmental healthcare programs. These data include the average manufacturer price (AMP) for each drug and, in the case of innovator products, the best price, which in general represents the lowest price available from the manufacturer to certain entities in the U.S. in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions. The Medicaid rebate consists of two components, the basic rebate and the additional rebate, which is triggered if the AMP for a drug increases faster than inflation. If we become aware that our MDRP government price reporting submission for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data, we must resubmit the corrected data for up to three years after those data originally were due. If we fail to provide information timely or are found to have knowingly submitted false information to the government, we may be subject to civil monetary penalties and other sanctions, including termination from the MDRP. In the event that CMS terminates our rebate agreement pursuant to which we participate in the MDRP, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs. Our failure to comply with our MDRP price reporting and rebate payment obligations could negatively impact our financial results.

The recently-enacted IRA imposes rebates under Medicare Part B and Medicare Part D that are triggered by price increases that outpace inflation (first due in 2023), as described under the risk factor “Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of our product candidates and increase the cost to commercialize our approved products, and any of our product candidates that may be approved in the future and affect the prices thereof,” above. The Medicare Part D rebate will be calculated on the basis of the AMP figures we report pursuant to the MDRP.

Federal law requires that any company that participates in the MDRP also participate in the Public Health Service’s 340B drug pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and, if applicable, Medicare Part B. We participate in the 340B program, which is administered by the Health Resources and Services Administration, or HRSA, and requires us to charge statutorily defined covered entities no more than the 340B “ceiling price” for our covered outpatient drugs[BP(A4] [TS5] [RC6] . These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of low‑income patients. The ACA expanded the list of covered entities to include certain free‑standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts “orphan drugs,” such as OLPRUVA, from the ceiling price requirements for these covered entities. The 340B ceiling price is calculated using a statutory formula based on the AMP and rebate amount for the covered outpatient drug as calculated under the MDRP, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. We must report 340B ceiling prices to HRSA on a quarterly basis, and HRSA publishes those prices to 340B covered entities. In addition, HRSA has finalized regulations regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities for 340B‑eligible drugs. HRSA has also finalized a revised regulation implementing an administrative dispute resolution process through which 340B covered entities may pursue claims against participating manufacturers for overcharges, and through which manufacturers may pursue claims against 340B covered entities for engaging in unlawful diversion or duplicate discounting of 340B drugs. Our failure to comply 340B program requirements could negatively impact our financial results. Any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under legislation or regulation could affect our 340B ceiling price calculations and also negatively impact our financial results.

In order for OLPRUVA or any product candidates, if approved, to be paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also participate in the U.S. Department of Veterans Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. As part of this program, we are required to make our products available for procurement on an FSS contract under which we must comply with standard government terms and conditions and charge a price that is no higher than the statutory Federal Ceiling Price, or FCP, to four federal agencies (VA, U.S. Department of Defense, or DOD, Public Health Service, and U.S. Coast Guard). The FCP is based on the Non-Federal Average Manufacturer Price, or Non-FAMP, which we must calculate and report to the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant civil monetary penalties for each item of false information. The FSS pricing and contracting obligations also contain extensive disclosure and certification requirements.

We also participate in the Tricare Retail Pharmacy program, under which we are required to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. We are required to list our innovator products on a Tricare Agreement in order for them to be eligible for DOD formulary inclusion. If we overcharge the government in connection with our FSS contract or Tricare Agreement, whether due to a misstated FCP or otherwise, we are required to refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Individual states continue to consider and have enacted legislation to limit the growth of healthcare costs, including the cost of prescription drugs and combination products. A number of states have either implemented or are considering implementation of drug price transparency legislation. Requirements of pharmaceutical manufacturers under such laws include advance notice of planned price increases, reporting price increase amounts and factors considered in taking such increases, wholesale acquisition cost information disclosure to prescribers, purchasers, and state agencies, and new product notice and reporting. Such legislation could limit the price or payment for certain drugs, and a number of states are authorized to impose civil monetary penalties or pursue other enforcement mechanisms against manufacturers who fail to comply with drug price transparency requirements, including the untimely, inaccurate, or incomplete reporting of drug pricing information.

Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by us, governmental or regulatory agencies, and the courts. CMS, the Department of Health & Human Services Office of Inspector General, and other governmental agencies have pursued manufacturers that were alleged to have failed to report these data to the government in a timely or accurate manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that any submissions we are required to make under the MDRP, the 340B program, the VA/FSS program, the Tricare Retail Pharmacy Program, and other governmental drug pricing programs will not be found to be incomplete or incorrect

Governments outside the United States tend to impose strict price controls, which may affect our revenue, if any.

In some countries, particularly the EU member states, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some member states, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our prodrug products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or radioactive materials.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

If our security measures are compromised now, or in the future, or the security, confidentiality, integrity or availability of, our information technology systems, software, services, communications or data is compromised, limited or fails, this could result in a material adverse impact, including without limitation, a material interruption to our operations, harm to our reputation, significant fines, penalties and liability, breach or a triggering of data protection laws, privacy policies and data protection obligations, loss of customers or sales, or material disruption of our clinical trials or other business activity.

In the ordinary course of our business, we may collect, process, transmit and store proprietary, confidential and sensitive information, including personal information (including key-coded data and health information), intellectual property, trade secrets and proprietary business information (collectively, “Confidential Information”) owned or controlled by ourselves or other parties. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such Confidential Information.

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There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information. Despite the implementation of security measures, our information technology systems and data, and those of our CROs and other third parties on which we rely, are vulnerable to system failure, interruption, compromise, attack or damage from several sources, such as data corruption; breakdown; malicious human acts; malware (such as ransomware); misconfigurations, “bugs” or other vulnerabilities,; malicious code (such as computer viruses or worms); fraudulent activity; employee misconduct, theft or error; denial-of-service attacks; public health epidemics; cyber-attacks by sophisticated nation-state and nation-state supported actors; natural disasters; terrorism; war (such as the current situation with Ukraine and Russia); and telecommunication and electrical failures. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. Our recovery systems (and those of third parties upon whom we rely) are similarly vulnerable. Any of these events could lead to the unauthorized access, disclosure and use of proprietary, confidential, or otherwise non-public information (such as personal information). The techniques used by criminal actors to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. Attacks upon information technology systems are also increasing in their levels of persistence and intensity and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. If we or our third-party vendors were to experience a significant cybersecurity breach of our or their information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material. We may be required to expend significant resources, fundamentally change our business activities and practices, or modify our operations, including our clinical trial activities, or information technology in an effort to protect against security breaches and to mitigate, detect and remediate actual and potential vulnerabilities. Due to the nature of some of these threats, we may be unable to anticipate threats, and there is a risk that a threat may remain undetected for a period of time. The costs of maintaining or upgrading our cyber-security systems at the level commercially reasonable to keep up with our expanding operations and prevent against potential attacks are increasing, and despite our best efforts, our network security and data recovery measures and those of our vendors may still not be adequate to protect against such security breaches and disruptions, which could cause harm to our business, financial condition and results of operations. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.

We and certain of our service providers are from time to time subject to cyberattacks and security incidents. While we do not believe that we have experienced any significant system failure, accident or security breach to date, if we, our service providers, partners, or other relevant third parties experience any such incident that results in any data loss, deletion or destruction, unauthorized access to, loss of, acquisition or disclosure of, exposure or disclosure of sensitive information, or compromise related to the security, confidentiality, integrity or availability of our (or their) information technology, software, services, communications or data, it may result in a material adverse impact, including without limitation, fines, damages, litigation, enforcement actions, loss of trade secrets, a material disruption of our drug development programs, or other harm to our business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our business. Additionally, applicable data protection laws, privacy policies and data protection obligations (such as contractual obligations) may require us to notify relevant stakeholders of security breaches, including affected individuals, customers and regulators. Such disclosures are costly, and the disclosure or the failure to comply with such requirements, could lead to material adverse impacts, including without limitation, legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages if we fail to comply with applicable data protection laws, privacy policies or data protection obligations related to information security or security breaches.

Further, failures or significant downtime of our information technology or telecommunication systems or those used by our third-party service providers could cause significant interruptions in our operations and adversely impact the confidentiality, integrity and availability of sensitive or confidential information, including preventing us from conducting clinical trials, tests or research and development activities and preventing us from managing the administrative aspects of our business.

We cannot be sure that our insurance coverage will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or materially adverse impacts arising out of our privacy and cybersecurity practices, processing or security breaches that we may experience, or that such coverage will continue to be available on acceptable terms at all. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of a large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.

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Failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, policies, standards and other obligations related to data privacy or security could lead to government enforcement actions (which could include civil or criminal fines or penalties), a disruption of our clinical trials or commercialization of our products, private litigation, other liabilities, and/or adverse publicity. Compliance or the failure to comply with such obligations could increase the costs of our products, could limit their use or adoption, and could otherwise negatively affect our operating results and business.

Regulation of data (including personal data) is evolving, as federal, state, and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy and security, and the collection, processing, storage, transfer, and use of data. We and our collaborators may be subject to current, new, or modified federal, state, and foreign data protection laws and regulations. These new or proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions, and guidance on implementation and compliance practices are often updated or otherwise revised, which adds to the complexity of processing personal data. Moreover, we are subject to the terms of our privacy and security policies, representations, certifications, standards, publications, contracts and other obligations to third parties related to data privacy, security and processing. These and other requirements could require us or our collaborators to incur additional costs to achieve compliance, limit our competitiveness, necessitate the acceptance of more onerous obligations in our contracts, restrict our ability to use, store, transfer, and process data, impact our or our collaborators’ ability to process or use data in order to support the provision of our products, affect our or our partners’ ability to offer our products or operate in certain locations, cause regulators to reject, limit, or disrupt our clinical trial activities, result in increased expenses, reduce overall demand for our products and services and make it more difficult to meet expectations of or commitments to customers or collaborators. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our business, results of operation, and financial condition.

Furthermore, the Federal Trade Commission, or the FTC, also has authority to initiate enforcement actions against entities that mislead customers about HIPAA compliance, make deceptive statements about privacy and data sharing in privacy policies, fail to limit third-party use of personal health information, fail to implement policies to protect personal health information or engage in other unfair practices that harm customers or that may violate Section 5 of the FTC Act. Even when HIPAA does not apply, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Additionally, federal and state consumer protection laws are increasingly being applied by FTC and states’ attorneys general to regulate the collection, use, storage, and disclosure of personal or personally identifiable information, through websites or otherwise, and to regulate the presentation of website content.

Certain states have also adopted laws and regulations that govern the privacy, processing and protection of health-related and other personal information. Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act, collectively the CCPA, requires businesses that process the personal information of the California residents to, among other things, (i) provide certain disclosures to California residents regarding the business's collection, use, and disclosure of their personal information (ii) receive and respond to requests from California residents to access, delete, and correct their personal information or opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Additional compliance investment and potential business process changes may also be required. Similar laws have been passed in other states and are continuing to be proposed at the state and federal level, reflecting a trend toward more stringent privacy legislation in the United States. As we expand our operations, these and similar laws may increase our compliance costs and potential liability. The enactment of such laws could have potentially conflicting requirements that would make compliance challenging. In the event that we are subject to or affected by HIPAA, the CCPA, or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

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Foreign data protection laws, such as the GDPR and member state data protection laws, may also apply to health-related and other personal data that we process, including personal data relating to clinical trial participants. European data protection laws impose strict obligations on the ability to process health-related and other personal data of data subjects in Europe, including standards relating to the privacy and security of personal data. For example, in Europe, the European Union General Data Protection Regulation, or the GDPR, went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European Economic Area, or the EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition to fines, a breach of the GDPR may result in regulatory investigations, reputational damage, orders to cease/ change our data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/ or civil claims (including class actions). Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EEA and the United States remains uncertain.

We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. As a result, we may have to make certain operational changes and we will have to implement revised standard contractual clauses and other relevant documentation for existing data transfers within required time frames As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. Additionally, other countries have passed or are considering passing laws requiring local data residency and/or restricting the international transfer of data. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations regarding personal data protection and international personal data transfers that may affect how we conduct business.

Failure, or perceived failure, to comply with the GDPR, the UK GDPR, and other countries' data protection laws and regulations, privacy policies, contracts and other data protection obligations could result in government investigations and enforcement actions (which could include civil or criminal penalties, fines, or sanctions), private litigation, a diversion of management’s attention, adverse publicity and other negative effects on our operating results and business. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages if we fail to comply with applicable data protection laws, privacy policies or data protection obligations related to information security or security breaches. Moreover, clinical trial participants or subjects about whom we or our collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights or failed to comply with data protection laws, contracts, privacy notices or other obligations even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage our reputation, and adversely affect our business and results of operations.

Any of these matters could materially adversely affect our business, financial condition, or operational results.

We are subject to complex and changing laws and regulations, which exposes us to potential liabilities, increased costs and other adverse effects on our business.

We are subject to complex and changing laws, regulations, and executive orders, and compliance with these laws and regulations and executive orders, as well as changing interpretations and enforcement priorities related to such laws, regulations, and executive orders, which are onerous and expensive. Compliance with such laws, regulations, and executive orders can adversely affect our business by increasing our costs, limiting our ability to pursue or offer a product candidate or product, and requiring changes to our business. New and changing laws, regulations, and executive orders can also create uncertainty about how such laws and regulations will be interpreted and applied. Regulatory changes and other actions that materially adversely affect our business may be announced with little or no advance notice we may not be able to effectively mitigate all adverse impacts from such measures. Differing interpretations of such legal obligations and changes in enforcement priorities can expose us to significant fines, government investigations, litigation and reputational harm. If we are found to have violated laws, regulations, or executive orders, it could materially adversely affect our business, reputation, results of operations and financial condition.

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Risks Related to Employee Matters and Managing Our Growth

Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the management, research and development, clinical, financial and business development expertise of our senior leadership team, as well as the other members of our scientific and clinical teams. Although we have employment agreements with each of our executive officers, these agreements do not obligate them to continue working for our company and they may terminate their employment with us at any time. Our future performance will depend, in part, the successful transitions and integration of new senior level executives into their roles and the continuity of leadership among the larger workforce. If we do not successfully manage executive transitions, it could be viewed negatively by our customers, employees, investors, and other third-party partners, and could have an adverse impact on our business and results of operations.

Recruiting and retaining qualified scientific and clinical personnel and, if we progress the development of our product candidate pipeline toward scaling up for commercialization, manufacturing and sales and marketing personnel, will also be critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize our prodrug product candidates. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may have commitments under consulting or advisory contracts with other entities that may limit their availability to us. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

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Risks Related to Ownership of Our Common Stock and Our Status as a Public Company

The trading price of the shares of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses.

Our stock price has been, and is likely to continue to be, volatile. Since shares of our common stock were sold in our initial public offering in April 2015 at a price of $176.00 per share (adjusted to give effect to the 1-for-16 reverse stock split), our stock price has ranged from a low of $1.94 to a high of $418.40 through March 12, 2025. In addition, the stock market in general and the market for pharmaceutical companies, in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

| ● | actual or anticipated variations in our operating results;
| ● | changes in financial estimates by us or by any securities analysts who might cover our stock;
| ● | conditions or trends in our industry, including without limitation changes in the structure of healthcare payment systems;
| ● | stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the pharmaceutical industry;
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;
| ● | announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;
| ● | adverse regulatory announcements or determinations regarding our product candidates;
| ● | capital commitments;
| ● | investors’ general perception of us and our business;
| ● | global macroeconomic conditions, including inflation, tariffs, labor shortages, supply chain shortages, or other economic, political or legal changes, uncertainties or adverse developments;
| ● | political unrest, terrorism and wars, such as the current situation with Ukraine and Russia or Israel and Hamas, which could delay or disrupt our business, and if such political unrest escalates or spills over to or otherwise impacts additional regions it could heighten many of the other risk factors included in this Item 1A;
| ● | other events or factors, including those resulting from system failures and disruptions, earthquakes, hurricanes, other natural disasters, pandemics, or responses to these events;
| ● | recruitment, retention, or departure of key personnel; and
| ● | sales of our common stock, including sales by our directors and officers or specific stockholders.

Many of the factors described above are not within our control and we cannot guarantee that future instances of these influencing factors will not have effects on the trading price of our common stock.

In addition, in the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies’ stock. For instance, in December 2016, we received notice of a class action suit filed against us in the Iowa District Court in Johnson County by a stockholder alleging that we, certain of our senior executives and directors who signed the registration statement in connection with our initial public offering, and each of the investment banks that acted as underwriters for the offering negligently issued untrue statements of material facts and omitted to state material facts required to be stated in the registration statement and incorporated offering materials that we filed with the U.S. Securities and Exchange Commission, or the SEC, in support of the offering. In June 2018, the case was dismissed without prejudice to members of the putative class. Future litigation could cause us to incur substantial costs and divert management’s attention and resources from our business. Further, biotechnology and pharmaceutical companies, in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

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Future sales and issuances of equity and debt could result in additional dilution to our stockholders.

We may need additional capital in the future to fund our planned future operations, including to complete potential clinical trials for our product candidates or for successful commercialization of our approved products. To raise capital, we may sell or issue common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. The issuance of additional shares of our common stock or equity securities convertible into shares of our common stock may cause your ownership interest to be diluted, and the market price of our common stock may fall or be materially and adversely affected. Examples of such issuances of equity securities include the following:

| ● | The holders of any of the warrants described elsewhere in this Annual Report on Form 10-K may elect to exercise such warrants and receive shares of common stock.

| ● | In connection with the Merger and its related transactions, we issued shares of our common stock pursuant to the Loan and Note Purchase Agreements and the cancellation of the Acer warrants. See “Liquidity and Capital Resources.”

| ● | In July 2021, the Company entered into the Equity Distribution Agreement with JMP Securities LLC, or JMP, and RBC Capital Markets, LLC, or RBCCM, under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $75,000,000 through JMP and RBCCM as its sales agents.

In June 2021, at the annual meeting of stockholders, the stockholders approved the Amended and Restated 2014 Equity Incentive Plan, which, among other things, added 4,900,000 shares to the equity plan pool, and the employee stock purchase plan, or the 2021 ESPP, which allows eligible employees to purchase up to an aggregate of 1,500,000 shares of stock through the plan. Pursuant to our equity incentive plan, we may grant equity awards and issue additional shares of our common stock to our employees, directors and consultants, and the number of shares of our common stock reserved for future issuance under this plan will be subject to automatic annual increases in accordance with the terms of the plans.

In February 2024, our Board approved the Amended and Restated 2023 Employment Inducement Award Plan, (the “2023 Plan”), under which we may grant equity awards to certain new employees. The maximum number of shares of common stock to be issued under the 2023 Plan is 4,500,000.

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Sales of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law and the terms of some or our contracts, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock or transactions that our stockholders might otherwise deem to be in their best interests. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors or our management. Therefore, these provisions could adversely affect the price of our stock. Our corporate governance documents include provisions:

| ● | establishing a classified board of directors with staggered three-year terms so that not all members of our board of directors are elected at one time;
| ● | providing that directors may be removed by stockholders only for cause;
| ● | preventing the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
| ● | requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
| ● | permitting the board of directors to issue up to 10,000,000 shares of preferred stock with any rights, preferences and privileges they may designate;
| ● | limiting the liability of, and providing indemnification to, our directors and officers;
| ● | providing that vacancies may be filled by remaining directors;
| ● | preventing cumulative voting; and
| ● | providing for a supermajority requirement to amend our amended and restated bylaws.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.

In addition, the provisions of our termination agreement with Aquestive Therapeutics ("Aquestive") may delay or prevent a change in control of our company. For example, if we enter into a merger, an asset sale or any other change of control transaction, then Aquestive will be entitled to a royalty equal to 10% of the price being paid to us and our stockholders in such transaction which is attributable to the value of AZSTARYS or KP1077.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law or any term of our contracts that has the effect of discouraging, delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

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If we engage in acquisitions to grow our business, we will incur a variety of costs and may potentially face numerous risks that could adversely affect our business and operations and cause our stock price to decline.

If appropriate opportunities become available, we may seek to acquire businesses or assets to enhance our business. In connection with any acquisitions, we could issue additional equity securities, which would dilute our stockholders, incur substantial debt to fund the acquisitions or assume significant liabilities.

Acquisitions involve many and diverse risks and uncertainties, including problems integrating the purchased operations or assets as well as unanticipated costs, liabilities, and economic, political, legal and regulatory challenges due to our inexperience operating in new regions or countries, and we may fail to successfully integrate acquired companies, such as Acer, or retain key personnel from the acquired company. To date, we have limited experience with acquisitions and the integration of acquired operations and personnel. Acquisitions may divert our attention from our core business. Acquisitions may require us to record goodwill and non-amortizable intangible assets that will be subject to testing on a regular basis and potential period impairment charges, incur amortization expenses related to certain intangible assets, and incur write-offs and restructuring and other related expenses, any of which could harm our operating results and financial condition.

New business strategies, especially those involving acquisitions, are inherently risky and may not be successful. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause our stock price to decline.

We could be negatively affected as a result of the actions of activist stockholders, which could be disruptive and costly and may conflict with or disrupt the strategic direction of our business.

Activist stockholders may from time to time attempt to effect changes in our strategic direction and seek changes regarding our corporate governance or structure. Our board of directors and management team strive to maintain constructive, ongoing communications with all stockholders who wish to speak with us, including activist stockholders, and welcome their views and opinions with the goal of working together constructively to enhance value for all stockholders. Any future proxy contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because: (1) responding to a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees; (2) actual or perceived uncertainties as to our future direction caused by activist activities may cause or appear to cause instability or lack of continuity, resulting in the loss of potential business opportunities, and potentially making it more difficult to attract and retain qualified personnel and business partners; and (3) if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans. Activist stockholder activities may also cause significant fluctuations in our stock price based on temporary or speculative market perceptions, or other factors that do not necessarily reflect the fundamental underlying value of our business.

We may be subject to securities litigation, class action and derivative lawsuits, which could result in substantial costs and could divert management attention away from other business concerns.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources from other business concerns, which could seriously harm our business. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. For example, in October 2023, purported stockholders of Acer filed complaints against Acer and certain of its directors and officers in connection with the Merger. On June 19, 2024, the Company entered into a confidential fee agreement (the "Fee Agreement") to settle these stockholder litigation matters related to the Merger. The parties to the Fee Agreement were entitled to an aggregate payment of approximately $0.3 million, which was paid during the second quarter of 2024. See Note K of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provisions of the Delaware General Corporation Law, or DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine.

In addition, our amended and restated bylaws, or the Bylaws, provide that: (i) unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (A) any derivative action or proceeding brought on behalf of us; (B) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees, to us or our stockholders; (C) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the DGCL our amended and restated certificate of incorporation or our Bylaws (as each may be amended from time to time); (D) any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our Bylaws (including any right, obligation, or remedy thereunder); (E) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (F) any action or proceeding asserting a claim against us or any of our directors, officers or other employees, governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants, provided that this provision shall not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction; (ii) unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; and (iii) any person or entity holding, owning or otherwise acquiring any interest in any security of us shall be deemed to have notice of and consented to the provisions of the Bylaws.

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These choice of forum provision 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, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation or our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

We might not be able to utilize a significant portion of our net operating loss carryforwards, which could adversely affect our profitability.

As of December 31, 2024, we had federal net operating loss carryforwards of approximately $381.3 million, due to prior period losses, $118.5 million of which, if not utilized, will begin to expire in 2027 and $262.8 million of which have no expiration date. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our profitability. These federal net operating loss carryforwards are fully reserved under a valuation allowance in the consolidated balance sheet as of December 31, 2024. On December 22, 2017, the U.S. government enacted H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (informally titled the Tax Cuts and Jobs Act). Under the Tax Cuts and Jobs Act, U.S. federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform or continue to conform to the Tax Cuts and Jobs Act or any subsequent or newly enacted federal tax legislation. To the extent that we continue to generate taxable losses in the United States or in the Kingdom of Denmark, unused losses will carry forward to offset future taxable income (subject to any applicable limitations), if any. In addition, under Section 382 and Section 383 of the Code, if a corporation undergoes an ‘‘ownership change,’’ which is generally defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We performed a Section 382 ownership change analysis in 2017 and determined that we experienced an ownership change in 2010, which resulted in a portion of our net operating loss carryforwards being subject to an annual limitation under Section 382 through 2012. No other ownership changes or limitations on our historical net operating loss carryforwards were noted through the year ended December 31, 2017. In addition, we may have already experienced an ownership change, or may experience ownership changes in the future, as a result of shifts in our stock ownership, including as a result of the Merger, as a result of the conversion of our outstanding convertible debt or otherwise as a result of changes in our stock ownership. If we determine that an ownership change has occurred and our ability to use our historical net operating loss carryforwards is materially limited, it would harm our future operating results by increasing our future tax obligations. As of December 31, 2024, we maintain a full valuation allowance over our deferred tax assets for financial reporting purposes.

Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our domestic earnings, if any. Any new taxes could adversely affect our business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, significantly revised the Internal Revenue Code of 1986, as amended. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Cuts and Jobs Act may affect us, and certain aspects of the Tax Cuts and Jobs Act could be repealed or modified in future legislation. In addition, the Inflation Reduction Act enacted in 2022 in the United States introduced, among other changes, a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations. Furthermore, it is uncertain if and to what extent various states will conform or continue to conform to the Tax Cuts and Jobs Act or any subsequent or newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Cuts and Jobs Act or subsequent or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

Additionally, the Trump administration has indicated the intent to propose significant changes to the U.S. tax system. Many aspects of these potential proposals are unclear or undeveloped and we are unable to predict which, if any, changes to the U.S. tax system will be enacted into law, and what effects any enacted legislation might have on our tax liabilities. In addition, the Trump administration has indicated that the United States may impose retaliatory measures with respect to jurisdictions that have, or are likely to, put in place tax rules that are extraterritorial or disproportionately affect American companies. The likelihood of these changes being enacted or implemented is unclear. We are currently unable to predict whether such changes will occur and, if so, the ultimate impact on our business.

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General Risk Factors

An active trading market for our common stock may not be sustained and you may not be able to resell your shares of our common stock for a profit, if at all.

An active trading market for our shares may not be sustained. If an active market for our common stock is not sustained, it may be difficult for you to sell our shares at an attractive price, or at all.

If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains and you may never receive a return on your investment.

You should not rely on an investment in our common stock to provide dividend income. We have not declared or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Investors seeking cash dividends should not purchase our common stock.

We incur increased costs and demands upon management as a result of being a public company.

As a public company listed in the United States, we incur significant additional legal, accounting and other costs. These additional costs could negatively affect our financial results. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us.

Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

Global economic uncertainty and other global economic or political and regulatory developments could have a material adverse effect on our business, cash flows, financial condition and/or prospects. Growth in the global pharmaceutical market has become increasingly tied to (i) global economic growth as an economic downturn may reduce the amount of funding for the pharmaceutical sector as a whole or certain diseases targeted by us and (ii) political conditions, tension and uncertainty which could, for instance, impact the regulations applicable to us. Uncertain political and geopolitical conditions currently exist in various parts of the world, such as the ongoing conflict between Russia and Ukraine. As a result, the United States and other governments have announced certain sanctions against Russia. The conflict in Ukraine and any retaliatory measures taken by the United States and other governments could threaten global security and result in further regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could adversely affect our business.

Future legal or regulatory changes in jurisdictions where we currently operate, or in such jurisdictions in which we may choose to operate in the future, could materially and adversely affect our business, results of operations, cash flows, financial condition and/or prospects, including by imposing regulatory and operational restrictions and compliance obligations on our business, reducing our revenue or increasing our expenses.

The above circumstances, individually or in the aggregate, could have a material adverse effect on our business, cash flows, financial condition and/or prospects.

The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, patients, environmental activists, the media and governmental and non-governmental organizations on a variety of environmental, social and other sustainability matters. We may experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability. If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer. In addition, even if we are effective at addressing such concerns, we may experience increased costs as a result of executing upon our sustainability goals that may not be offset by any benefit to our reputation, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements. If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted.

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Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, cash equivalents, and investments. The Company invests in money market funds, U.S. treasury securities, and U.S. government agency securities. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash and cash equivalents to the extent recorded on the consolidated balance sheets. Should events, including limited liquidity, defaults, non-performance or other adverse developments occur with respect to the banks or other financial institutions that hold our funds, or that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, our liquidity may be adversely affected. For example, on March 10, 2023, the Federal Deposit Insurance Corporation (FDIC) announced that Silicon Valley Bank had been closed by the California Department of Financial Protection and Innovation. Although we did not have any funds in Silicon Valley Bank or other institutions that have been closed, we cannot guarantee that the banks or other financial institutions that hold our funds will not experience similar issues.

ITEM 1B. | UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 1C. | CYBERSECURITY

Cybersecurity Risk Management and Strategy

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.

We design and assess our program based on the National Institute of Standards and Technology Cybersecurity Framework ("NIST CSF"). This does not imply that we meet any particular technical standards, specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Our cybersecurity risk management program is integrated into our overall risk management program, and shares common methodologies, reporting channels and governance processes that apply across the risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Key elements of our cybersecurity risk management program include but are not limited to the following:

| ● | risk assessments designed to help identify material risks from cybersecurity threats to our critical systems, and information;

| ● | a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;

| ● | the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes;

| ● | cybersecurity awareness training of our employees, including incident response personnel, and senior management;

| ● | a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

| ● | a third-party risk management process for key service providers, based on our assessment of their criticality to our operations and respective risk profile.

For more information, see “If our security measures are compromised now, or in the future, or the security, confidentiality, integrity or availability of, our information technology systems, software, services, communications or data is compromised, limited or fails, this could result in a material adverse impact, including without limitation, a material interruption to our operations, harm to our reputation, significant fines, penalties and liability, breach or a triggering of data protection laws, privacy policies and data protection obligations, loss of customers or sales, or material disruption of our clinical trials or other business activity.” in the “Risk Factors” section above.

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Cybersecurity Governance

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee ("Committee") oversight of cybersecurity risks, including oversight of management’s implementation of our cybersecurity risk management program.

The Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Committee, where it deems appropriate, regarding any cybersecurity incidents it considers to be significant or potentially significant.

The Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from our internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies. Our management team, including R. LaDuane Clifton, Chief Financial Officer and Treasurer, is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our management team includes IT staff such as a Director of IT with more than 21 years of IT-related experience in various roles including managing information security, managing privacy and data protection, evaluating cybersecurity risks, developing cybersecurity strategy, and implementing cybersecurity programs.

Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the information technology environment.

ITEM 2. | PROPERTIES

As of December 31, 2024, we have leased approximately 17,000 square feet of headquarters office space in Celebration, Florida, comprised of two contiguous office suites, under non-cancelable lease agreements that expire in August 2025 and February 2026, respectively. One such office suite, which is approximately 6,300 square feet and has an expiration date of February 2026, is subleased to a third party. We have the right to extend the term of the lease for two successive five-year terms upon expiration. In addition, we occupy leased office space in Newton, Massachusetts and Copenhagen, Denmark. We believe that our facilities are adequate for our current needs.

ITEM 3. | LEGAL PROCEEDINGS

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of our business. Other than as disclosed in Note K of our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe there is no litigation pending that would reasonably be expected to, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition.

ITEM 4. | MINE SAFETY DISCLOSURES

Not applicable.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K.

Name | Age | Position
Executive Officers |  |
Neil F. McFarlane | 52 | President, Chief Executive Officer, and Director
R. LaDuane Clifton, MBA, CPA | 52 | Chief Financial Officer and Treasurer
Joshua Schafer | 54 | Chief Commercial Officer and Executive Vice President of Business Development
Adrian Quartel, M.D., FFPM | 58 | Chief Medical Officer
Rahsaan W. Thompson | 54 | Chief Legal Officer, Secretary and Compliance Officer
Non-Employee Directors |  |
Thomas D. Anderson | 69 | Director
John B. Bode | 50 | Director
Douglas W. Calder | 58 | Director
Wendy Dixon, Ph.D. | 69 | Director
Tamara A. Favorito | 66 | Director
Alvin Shih, M.D. | 48 | Director
Corey Watton | 55 | Director

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Executive Officers

Neil F. McFarlane

Neil F. McFarlane has served as our president and Chief Executive Officer, and as a director of our Company, since October 2023. Mr. McFarlane served as the chief executive officer and a member of the board of directors of Adamas Pharmaceuticals, Inc. from September 2019 until November 2021, when Adamas was acquired by Supernus Pharmaceuticals, Inc. From August 2016 to May 2019, Mr. McFarlane served as the chief operating officer of Retrophin, Inc. (now Travere Therapeutics, Inc.), a public biopharmaceutical company. From 2011 to 2016, he held positions of increasing responsibility with UCB, Inc., Genzyme Corporation (now Sanofi) and Sangstat Medical Corporation (acquired by Genzyme). Mr. McFarlane currently serves as a member of the board of directors of HCRx Holdings, a private company that invests in biopharmaceutical product royalties, and previously he served as a member of the board of directors of Collegium Pharmaceutical Inc., a public biopharmaceutical company. Mr. McFarlane proudly served as an officer and enlisted soldier in the United States Army Reserves. He received his BS and MS in Nursing from the University of Florida. Our Board believes that Mr. McFarlane’s over 20 years of global biopharmaceutical and life sciences experience provide him with the qualifications and skills to serve as a director of our Company.

R. LaDuane Clifton, MBA, CPA

R. LaDuane Clifton, MBA, CPA, has served as our Chief Financial Officer since June 2015 and as our Treasurer since February 2016; he also served as our Secretary from February 2016 to June 2024. Mr. Clifton is responsible for the Company’s financial and operating activities. Previously, he served as our Vice President of Finance and Corporate Controller from April 2015 to June 2015. From August 2009 to February 2015, Mr. Clifton served in a variety of positions, including chief financial officer, secretary and treasurer, with The LGL Group, Inc., a public holding engaged in services, merchant investment and manufacturing business activities. From August 2008 to August 2009, Mr. Clifton served as the chief financial officer of a21, Inc., a public holding company with businesses in stock photography and the online retail and manufacturer of framed art, and as its corporate controller from March 2007 to August 2008. From August 2004 to March 2007, Mr. Clifton served as an auditor with KPMG. From August 1991 to August 2004, he served in a variety of finance, medical cost analysis and managed care provider contracting roles with Aetna, Inc., a publicly-held provider of healthcare benefits. Mr. Clifton is a certified public accountant in the state of Florida and received his BBA in Accounting and MBA from the University of North Florida, as well as a Graduate Certificate in Corporate Finance from Harvard University.

Joshua Schafer

Joshua Schafer has served as our Chief Commercial Officer and Executive Vice President, Business Development, since January 2023. Mr. Schafer has over 25 years of pharmaceutical commercial, new product development and M&A experience. From December 2020 to November 2022, he served as senior vice president and general manager of the Autoimmune and Rare Disease business at Mallinckrodt Pharmaceuticals. Prior to that, he served as Mallinckrodt’s chief strategy and business officer from September 2019 to December 2020 and senior vice president of business development and general manager from January 2018 to September 2019. Prior to Mallinckrodt, Mr. Schafer served as vice president and oncology therapeutic area head, global marketing and strategy at Astellas Pharmaceuticals, where he was responsible for building the company’s global oncology franchise, and also held senior roles at Takeda Pharmaceuticals, Accenture (formerly Anderson Consulting), G. D. Searle & Co. (later acquired by Pfizer) and Cognia Corporation. Mr. Schafer currently serves as a member of the board of Pharnext SA and Shuttle Pharmaceuticals. He received his BA in Biology and German at the University of Notre Dame, and both an MS in Biotechnology and an MBA from Northwestern University.

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Adrian Quartel, M.D., FFPM

Adrian Quartel, M.D., FFPM, has served as our Chief Medical Officer since January 2024, and previously served as the chief medical officer of Acer Therapeutics from February 2022 until it was acquired by Zevra at the end of 2023. At Acer, Dr. Quartel played a key role in guiding clinical development, clinical operations, medical affairs and regulatory compliance. Prior to that, he was the chief medical officer at Adamas Pharmaceuticals, a company focused on drug development for neurological diseases, from September 2020 until February 2022. From June 2017 until September 2020, Dr. Quartel served as the group vice president of global medical affairs at BioMarin Pharmaceuticals Inc., where he spearheaded the launch of six treatments for rare diseases or genetic disorders. Before his tenure at BioMarin, Dr. Quartel oversaw clinical development and held senior medical leadership positions at Chiltern, a specialist contract research organization, from September 2006 to July 2007, at Astellas Pharma, Inc., a global life sciences company, from January 2004 until September 2006, and at ICON Clinical Research., a healthcare intelligence and clinical research organization, from August 2001 to January 2004. In addition, Dr. Quartel worked as a clinical research fellow at UCLA Cedar Sinai and as a resident in cardio-thoracic surgery at Erasmus University Medical Center. He holds an M.D. from Erasmus University Medical School, Rotterdam, and has a postgraduate specialization in pharmaceutical medicine from the Faculty of Pharmaceutical Medicine in London. Dr. Quartel is board certified by the General Medical Council (GMC) in pharmaceutical medicine in the United Kingdom.

Rahsaan W. Thompson

Rahsaan W. Thompson has served as our Chief Legal Officer, Secretary and Compliance Officer since June 2024. Mr. Thompson has more than 25 years of experience as a business leader and attorney in the biotech industry. He previously served as the chief legal officer at Lyell Immunopharma, a publicly-traded and clinical-stage biotech corporation. Prior to his role at Lyell, he was the executive vice president, general counsel, corporate secretary and chief compliance officer at Gritstone bio, a publicly-traded, clinical-stage biotech company. Before that, he served as general counsel at Opiant Pharmaceuticals and Actelion Pharmaceuticals US. Earlier in his career, Mr. Thompson worked in general and corporate counsel roles at Quarles & Brady, Abraxis Bioscience and McKesson Corporation, as well as being Assistant District Attorney in the Philadelphia District Attorney’s Office. Mr. Thompson currently serves on the board of trustees for the Oakland Museum of California and previously served on the board of the American Kidney Fund. He received his JD from Hofstra University School of Law and his B.Sc. from Southern Methodist University. He has bar admissions in the States of Illinois and Pennsylvania.

Directors

Thomas D. Anderson

Thomas D. Anderson has served as a director of our Company since August 2023 and as chair of the compensation committee since February 2024. Mr. Anderson is a 35-year veteran of the biopharma industry, playing a leading role in high-growth organizations for much of his career. Mr. Anderson served as chief executive officer and director of SwanBio Therapeutics, a clinical-stage gene therapy company, from September 2019 until his semi-retirement in October 2023; subsequently, he resigned his board directorship in March 2024. Prior to that, he served as the chief commercial strategy officer of Sage Therapeutics, Inc., a biopharmaceutical company, from 2014 to 2018. From 2004 to 2014, Mr. Anderson was a senior executive with Shire Pharmaceuticals Group in a number of operational and strategic roles in both rare diseases and specialty pharmaceuticals. Earlier in his career, Mr. Anderson was with Johnson & Johnson companies, Janssen and McNeil Pharmaceutical, in a number of leadership, sales, marketing and business information roles. Mr. Anderson also served as a director of private companies, ExpressCells Inc., from 2019 to 2023, and CEO Trust, from 2018 to 2021. Mr. Anderson received his MBA from the University of Notre Dame’s Mendoza College of Business Administration. He received his BS in civil engineering from the P.C. Rossin College of Engineering at Lehigh University. Our Board believes that Mr. Anderson’s extensive experience in the biopharma industry, including as senior executive and director of multiple biopharmaceutical companies, qualifies him to serve on the Board as a director of our Company.

John B. Bode

John B. Bode has served as a director of our Company since April 2023 and as chair of the nominating and corporate governance committee since May 2023. Since February 2015, Mr. Bode has been the owner and managing director of Aerie Investments, LLC, a management consulting and investment company focused on assisting legacy media companies and digital media start-ups with business development and strategic initiatives. Mr. Bode currently serves as the chief financial officer and chief transformation officer of Postmedia Network Canada Corp., a publishing company whose shares are traded on the Toronto Stock Exchange. Since September 2022, Mr. Bode has served as the interim chief executive officer of FISION Corporation, a provider of cloud-based digital asset management, sales enablement and agile marketing technologies; and, he has served as a member of its board of directors since March 2018. Mr. Bode has served on the board of directors of SPAR Group, Inc., a leading global provider of merchandising, marketing and distribution services that is listed on the Nasdaq, since October 2023, and of The McClatchy Company, a leading privately-held publisher of newspapers, since September 2020. Mr. Bode’s past corporate experience includes many years serving as a key executive and/or financial officer for leading public companies. He was the chief financial officer of the Tribune Publishing Company from October 2013 to January 2015. He served as the chief financial officer of Source Interlink Companies, one of the largest enthusiast media companies in the United States and a leading distributor of periodicals, from January 2011 to September 2013, after serving in other accounting and finance roles with Source Interlink since 2002. He was previously employed as a certified public accountant for BDO Seidman. Mr. Bode received a BS in Accounting from Notre Dame University. Our Board believes that Mr. Bode’s experience as an executive and manager of public and private companies, as well as his experience leading commercial and marketing operations for such companies, offers the Board valuable perspective and insight and provides him with the qualifications and skills to serve as a director of our Company.

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Douglas W. Calder

Douglas W. Calder has served as a director of our Company since April 2023. Since August 2016, he has served as president and a director of Vycellix, Inc. (including its subsidiaries and affiliates), a private company engineering immune-privileged, T cell and natural killer (“NK”) cell-based cancer therapeutics. Mr. Calder has also served as a member of the board of directors of Renovaro, a public biotechnology company (Nasdaq: RENB), since October 2024, of NextGenNK, Sweden’s NK cell competence center, since June 2019, and of BioFlorida, a private company supporting Florida’s life sciences industry, since September 2018. He also has been a member of the Society for Natural Immunity since July 2018. Mr. Calder has more than 30 years of life science executive experience, having served in various senior executive roles for Florida-based biotechnology companies and research institutes, including Viragen, Accentia Biopharmaceuticals, Biovest International and the Vaccine & Gene Therapy Institute of Florida, as well as having formerly served as a registered financial portfolio manager with a focus on life science equities with the New York Stock Exchange member firms, Gruntal & Co. and Dean Witter Reynolds. Mr. Calder received a BA from Florida State University. Our Board believes that Mr. Calder’s experience in biotechnology and life science industries, including as an executive and as director, provide him with the qualifications and skills to serve as a director of our Company.

Wendy Dixon, Ph.D.

Wendy Dixon, Ph.D. has served as a director of our Company since April 2023. Dr. Dixon has more than 40 years of biopharmaceutical industry experience in drug development, with leadership roles in regulatory affairs and commercial capabilities. Dr. Dixon was chief marketing officer and president of global marketing at Bristol Myers Squibb from December 2001 to May 2009. From 1996 to 2001, she served as a senior vice president of marketing at Merck. Earlier in her career, she held executive management positions at West Pharmaceuticals, Osteotech and Centocor, as well as marketing, regulatory affairs, project management and biochemist roles at SmithKline and French (now GlaxoSmithKline). Since leaving Bristol Myers Squibb, Dr. Dixon has served on the boards of directors of numerous biopharmaceutical companies, including Arvinas, Inc. from June 2020 to May 2024, Black Diamond Therapeutics, Inc. from April 2022 to April 2024, and Iovance Biotherapeutics, Inc. from June 2022 to June 2023. Previously, Dr. Dixon served on the boards of directors of Alkermes plc from January 2011 to May 2022, bluebird bio, Inc. from May 2013 to June 2021, Incyte from May 2010 to May 2022, Sesen Bio, Inc. (formerly Eleven Biotherapeutics, Inc.) from October 2014 to February 2020, and Voyager Therapeutics, Inc. from January 2017 to January 2021. She also served on the boards of Ardea Biosciences from 2011 until 2012 when Ardea was acquired by AstraZeneca plc, and Furiex Pharmaceuticals from 2010 until 2014 when Furiex was acquired by Actavis plc. Dr. Dixon holds a Ph.D. in biochemistry and an M.Sc. and B.Sc. in Natural Science from the University of Cambridge. Our Board believes that Dr. Dixon’s extensive experience in corporate management, including as a director of multiple public companies, as well as her academic and professional expertise, provides her with the qualifications and skills to serve as a director of our Company.

Tamara A. Favorito

Tamara A. Favorito has served as a director and chair of the audit committee of our Company since August 2021 and as our Board chair since May 2023. Ms. Favorito has more than 30 years of life sciences industry experience, including 20 years as a chief financial officer. Her extensive experience includes leading multiple private and public financings and M&A transactions as well as leading public companies’ finance, investor relations, human resources, administration and managed care functions. She currently serves as a board member and audit committee chair of Artelo Biosciences, Inc., a publicly-traded clinical development stage company, since March 2021. Ms. Favorito served on the board of directors of Kintara Therapeutics, Inc. from 2021 until its merger with TuHURA Biosciences, Inc. in October 2024, and on the board of directors of Beacon Discovery, Inc. from 2018 until its acquisition by Eurofins Scientific in March 2021. Ms. Favorito was interim chief financial officer of Immunic, Inc., a publicly-traded clinical-stage drug development company in 2019. She served as chief financial officer of Signal Genetics, Inc. (now Viridian Therapeutics, Inc.), a publicly-traded molecular diagnostics company, from 2014 to 2017, HemaQuest Pharmaceuticals, Inc., a venture-backed clinical-stage drug development company, from 2010 to 2014, and Favrille, Inc. (now MMR Global, Inc.), a publicly-traded clinical-stage drug development company, from 2001 to 2009. Earlier in her career, she spent eight years in public accounting with Deloitte & Touche LLP and PricewaterhouseCoopers LLP. Ms. Favorito is a certified public accountant (inactive). She received an MBA, emphasis in Finance, from Georgia State University, and a BBA, emphasis in Accounting, from Valdosta State University. Our Board believes that Ms. Favorito's extensive experience in corporate management, finance and life science as chief financial officer of multiple public companies provides her with the qualifications and skills to serve as a director of our Company.

Alvin Shih, M.D.

Alvin Shih, M.D. has served as a director of our Company since January 2024. Dr. Shih has broad experience in drug development, spanning multiple therapeutic areas and with a focus on rare diseases, including as the former chief operating officer and a founding member of Pfizer Inc.’s rare disease research unit. Since February 2021, he has served as president and chief executive officer of Catamaran Bio, Inc., a private biotechnology company developing off-the-shelf natural killer (NK) cell therapies to treat cancer. From July 2019 to December 2020, he served as the chief executive officer of Disarm Therapeutics, a biotechnology company that developed therapeutics for both rare and prevalent neurodegenerative diseases, which was acquired by Eli Lilly in October 2020. From November 2016 to February 2019, Dr. Shih was chief executive officer of Enzyvant Therapeutics, where he led the company’s cell/tissue-based therapy development for treating a rare immunological disease. He was also the executive vice president and head of research at Retrophin, Inc., where he worked on therapies for multiple disease indications. Dr. Shih previously worked in management consulting at McKinsey & Company and L.E.K. Consulting, LLC. Dr. Shih also serves on the board of directors of Oaktree Acquisition Corp. III Life Sciences, a blank check company focused on the healthcare sector, and the private companies, Catamaran Bio, Inc., Imbria Pharmaceuticals, Inc. and Tenza bio. Dr. Shih received his medical degree from the University of Alabama School of Medicine and completed his residency training at Massachusetts General Hospital. Dr. Shih received his MBA from the Kellogg School of Management at Northwestern University and his BA from Vanderbilt University. Our Board believes that Dr. Shih’s significant leadership experience in the biotechnology industry and his experience in rare disease qualifies him to serve as a director of our Company.

Corey Watton

Corey Watton has served as a director of our Company since April 2023. Mr. Watton has served as president and chief executive officer of Fusion Medical Staffing, LLC, a private company among the fifteen largest medical staffing companies in the US, since September 2023. Prior to his CEO role, Mr. Watton served as chief financial officer of Fusion from August 2019 until September 2023, overseeing finance, project management, operations, facilities and legal operations. From April 2009 through July 2019, he served as the chief financial officer of Home Instead Senior Health Care, a global leader in in-home health care, where he oversaw finance, subsidiary companies and the financial arm of an international subsidiary. He previously was an equity member of Lutz & Company, a regional accounting firm, from 1996 to 2009. Mr. Watton is a certified public accountant and received a BS in Finance and Accounting from University of Nebraska-Lincoln. Our Board believes that Mr. Watton’s senior leadership roles in the medical services industry combined with his expertise in accounting make him well qualified to serve as a director of our Company.

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PART II

ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock Listing

Our common stock trades on The Nasdaq Global Select Market under the ticker symbol "ZVRA".

Holders of our Common Stock

As of December 31, 2024, there were approximately 80 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

The information regarding securities authorized for issuance under equity compensation plans is included in Part III of this report.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

None.

ITEM 6. | [Reserved]

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ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a commercial-stage company focused on addressing unmet needs for the treatment of rare diseases. Our mission is to bring life-changing therapeutics to people living with rare diseases. With unique, data-driven development and commercialization strategies, we are overcoming complex drug development challenges to make new therapies available to the rare disease community. We have a diverse portfolio of products and product candidates, which includes a clinical stage pipeline and commercial stage assets. Our team has specialized expertise and a track record of success in advancing promising therapies that face complex clinical and regulatory challenges with an approach that balances science and data with patient need.

Following the U.S. approval of AZSTARYS® (further described below) in March 2021, we undertook a strategic process to evaluate how to leverage and potentially augment the Company’s existing capabilities while also considering where to invest in our pipeline to generate long-term shareholder value. With a track record of drug development success leading to approvals for products which had either difficult pathways to approval or where approvals were won following a complete response letter (“CRL”) from the U.S. Food and Drug Administration ("FDA"), we determined to focus our expertise on rare disease indications, as well as seeking value-creating opportunities by building and directly commercializing product candidates in lieu of an out-licensing model. We are executing on this balanced approach by building a culture that is patient-focused and driven by our commitment to developing and making available therapies which address the myriad unmet needs within the rare disease community.

As part of our commitment to serving the rare disease community, in February 2023, we changed our name to Zevra Therapeutics, Inc. Our name, Zevra, is the Greek word for zebra, which is the internationally recognized symbol for rare disease. This name reflects our intense focus and dedication to developing transformational, patient-focused therapies for rare diseases with limited or no treatment options available, or treatment areas with significant unmet needs.

In May 2022, we purchased all of the assets and operations of Orphazyme A/S ("Orphazyme") related to arimoclomol, settled all of Orphazyme’s actual outstanding liabilities to its creditors with a cash payment of $12.8 million, and agreed to assume an estimated reserve clawback liability of $5.2 million related to revenue generated from Orphazyme’s Expanded Access Program in France (the "EAP").

On November 17, 2023, we completed the acquisition of Acer Therapeutics, Inc. ("Acer"). Pursuant to the Merger Agreement, Acer continues as a wholly-owned subsidiary of Zevra (the “Merger"). The Merger included the acquisition of OLPRUVA® (sodium phenylbutyrate) for oral suspension, which was approved by the FDA on December 27, 2022, for the treatment of certain urea cycle disorders ("UCDs"). Acer also had a pipeline of investigational product candidates, including celiprolol for the treatment of Vascular Ehlers-Danlos syndrome ("VEDS") in patients with a confirmed type III collagen (COL3A1) mutation. At the effective time of the Merger (the "Effective Time"), each share of common stock of Acer, par value $0.0001 per share, issued and outstanding immediately prior to the Effective Time (excluding cancelled shares and any shares held by holders who have exercised their appraisal rights) were converted into the right to receive (i) 0.1210 fully paid and non-assessable shares of common stock of Zevra, par value $0.0001 per share, and (ii) one non-transferable contingent value right (“CVR”) issued by Zevra, which represents the right to receive one or more contingent payments up to an additional $76.0 million upon the achievement, if any, of certain commercial and regulatory milestones for Acer’s OLPRUVA and celiprolol products within specified time periods. Certain additional cash payments are also possible pursuant to the CVRs with respect to milestones involving Acer’s early-stage program ACER-2820 (emetine).

On September 20, 2024, the FDA approved the New Drug Application (“NDA") for MIPLYFFA™ (arimoclomol), an orally-delivered treatment for Niemann-Pick disease type C (“NPC"), which is an ultra-rare and progressive neurodegenerative disease. MIPLYFFA, the first FDA-approved treatment for NPC, is indicated for use in combination with miglustat for the treatment of neurological manifestations of NPC in adult and pediatric patients two years of age and older. In addition, we received a transferable rare pediatric disease PRV in conjunction with the approval. On February 26, 2025, we and Zevra Denmark A/S entered into an asset purchase agreement (the “PRV Transfer Agreement”), pursuant to which we agreed to sell the PRV to the buyer. Pursuant to the PRV Transfer Agreement, the buyer agreed to pay us $150.0 million, payable in cash, upon the closing of the sale. The PRV Transfer Agreement contains customary representations, warranties, covenants, and indemnification provisions subject to certain limitations. The transaction remains subject to customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. MIPLYFFA has also been granted orphan medical product designation for the treatment of NPC by the European Commission. In November 2024, MIPLYFFA became commercially available.

Now focused on late-stage clinical development and commercial opportunities, we discontinued our in-house drug discovery activities and closed our laboratory facilities in Iowa and Virginia at the end of the third quarter of 2025. We anticipate that any future early research and development activities will be outsourced.

To accomplish our mission, we are seeking to further expand our pipeline through both internal development and through our business development activities to collaborate, partner, and potentially acquire additional assets. We intend to target assets that will allow us to leverage the expertise and infrastructure that we have built to help mitigate risk and enhance our probability of success. In addition, we may consider external opportunities within neurology and neurodegenerative diseases, psychiatric disorders, and other rare diseases, along with adjacent or related therapeutic categories. If we are successful, expanding our pipeline could be accretive to our value proposition and has the potential to create incremental long-term value for stockholders.

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We have historically had minimal positive net cash flows from operations. Our cash flows used in operations for the years ended December 31, 2024, and 2023, were $69.7 million and $33.5 million, respectively. We expect to continue to incur significant expenses and minimal positive net cash flows from operations or negative net cash flows from operations for the near future, and those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our expenses will fluctuate substantially as we:

| ● | continue building and maintaining our ongoing commercial capabilities to support the launch of our approved product OLPRUVA® and MIPLYFFA in the U.S.
| ● | continue our ongoing preclinical studies, clinical trials and our product development activities for our pipeline of product candidates;
| ● | seek regulatory approvals for any product candidates that successfully complete clinical trials;
| ● | continue research and preclinical development and initiate clinical trials of our product candidates;
| ● | seek to discover and develop additional product candidates either internally or in partnership with other pharmaceutical companies;
| ● | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
| ● | maintain, expand and protect our intellectual property portfolio;
| ● | incur additional legal, accounting and other expenses in operating as a public company; and
| ● | add operational systems and personnel, if needed, to support any future commercialization efforts.

Third-Party Agreements

AZSTARYS License Agreement

See Part I, Item 1. "Business—AZSTARYS” of this Annual Report on Form 10-K for information regarding the AZSTARYS License Agreement.

Components of our Results of Operations

Revenue

Our commercial revenue is, and will be, primarily derived from sales of our approved products or any of our product candidates for which we obtain regulatory approval, and sales of arimoclomol under the EAP. We expect that our other sources of revenues will be through payments arising from our license agreements with Corium, and through any other future arrangements related to one of our product candidates. To date, we have generated revenue from sales of our approved products, MIPLYFFA and OLPRUVA, to our specialty pharmacy, royalty, milestone and other reimbursement payments under the AZSTARYS License Agreement, sale of arimoclomol under the EAP, reimbursement of out-of-pocket third-party costs, and the performance of consulting services. We cannot guarantee that we will be able to successfully commercialize either MIPLYFFA or OLPRUVA, or that Corium will be able to successfully commercialize AZSTARYS or our product candidates covered under the AZSTARYS License Agreement, in addition, we cannot guarantee that we will continue to generate revenues from the sales of arimoclomol under the EAP. We also do not know when, if ever, any other product candidate will be commercially available.

Cost of Product Revenue

The components of our cost of product revenue are royalties and expenses directly attributable to revenue. To date, we have generated revenue from product sales of MIPLYFFA and OLPRUVA to our specialty pharmacy, sales of arimoclomol under the EAP, royalties, milestones and other reimbursements under the AZSTARYS License Agreement, reimbursement of out-of-pocket third-party costs, and the performance of consulting services. In connection with the AZSTARYS License Agreement, we paid Aquestive a royalty equal to 10% of the upfront license payment and all regulatory milestone and royalty payments. In addition, we paid a $6 million regulatory milestone payment earned by XOMA upon the approval of MIPLYFFA on September 20, 2024. Under the XOMA License Agreement, XOMA is also entitled to a mid-single digit royalty on net sales of MIPLYFFA, as well as certain net sales and regulatory milestone payments. We also owe an additional royalty in the low-single digit to KU/UCLB on net sales of MIPLYFFA and a 10% royalty on net sales of OLPRUVA under the Relief Termination Agreement. Other components of cost of product revenue include $6.2 million of non-cash intangible asset amortization related to the MIPLYFFA and OLPRUVA capitalized assets and $5.7 million in inventory obsolescence reserve expense related to OLPRUVA inventory during the year.

Operating Expenses

We classify our operating expenses into two categories: research and development expenses and selling general and administrative expenses. Salaries and personnel-related costs, including benefits, bonuses and stock-based compensation expense, comprise a significant component of each of these expense categories. We allocate expenses associated with our facilities, information technology costs and depreciation and amortization between research and development expenses and general and administrative expenses based on employee headcount and the nature of work performed by each employee.

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Research and Development Expense

Research and development expense consists of expenses incurred while performing research and development activities to discover and develop potential product candidates. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of:

| ● | salaries and personnel-related costs, including benefits and any stock-based compensation, for our scientific personnel performing research and development activities;
| ● | costs related to executing preclinical studies and clinical trials;
| ● | fees paid to consultants and other third parties who support our product candidate development;
| ● | other costs in seeking regulatory approval of our products; and
| ● | allocated facility-related costs and overhead.

We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs.

The following table summarizes our research and development costs for the years ended December 31, 2024 and 2023 (in thousands):

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Outsourced development costs directly identified to programs: |  |  |  |  |  |  |  |
MIPLYFFA |  | $ | 5,784 |  |  | $ | 5,579 |
OLPRUVA |  |  | 1,776 |  |  |  | - |
KP1077 |  |  | 10,486 |  |  |  | 14,458 |
APADAZ (1) |  |  | - |  |  |  | 2,446 |
Celiprolol |  |  | 2,133 |  |  |  | 159 |
Other costs |  |  | 496 |  |  |  | - |
Total outsourced development costs directly identified to programs |  |  | 20,675 |  |  |  | 22,642 |
Research and development costs not directly identified to programs: |  |  |  |  |  |  |  |
Personnel costs including cash compensation, benefits and stock-based compensation |  |  | 19,781 |  |  |  | 11,970 |
Facilities costs |  |  | 51 |  |  |  | 775 |
Other costs |  |  | 1,588 |  |  |  | 4,419 |
Total research and development costs not directly allocated to programs |  |  | 21,420 |  |  |  | 17,164 |
Total research and development expenses |  | $ | 42,095 |  |  | $ | 39,806 |

|  | (1) On May 31, 2023, Zevra and KVK-Tech, Inc. ("KVK") terminated the Collaboration and License Agreement that the parties entered into on October 25, 2018. In conjunction with the termination of the Collaboration and License Agreement, we agreed to pay a settlement to KVK of $0.9 million, which is included in research and development in the consolidated statement of operations for the year ended December 31, 2023, and was paid in October 2023.

We anticipate that our research and development expenses will fluctuate in accordance with our strategic plan as we continue our efforts to advance the development of our product candidates.

The successful development of our product candidates is highly uncertain. At this time, we cannot be certain regarding the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of our products and product candidates.

Selling, General and Administrative Expense

We anticipate that selling expenses will vary from quarter to quarter in accordance with our strategic plan as we continue our efforts to commercialize MIPLYFFA and OLPRUVA. The successful commercialization of AZSTARYS, MIPLYFFA, OLPRUVA, or any of our other product candidates that may be approved is highly uncertain. At this time, we cannot be certain regarding the nature, timing or costs required to commercialize MIPLYFFA, OLPRUVA, or any of our product candidates that may be approved in the future, due to the numerous risks and uncertainties associated with commercialization activities.

General and administrative expenses primarily consist of salaries and personnel-related costs, including employee benefits and any stock-based compensation, for employees performing functions other than research and development. This includes personnel in executive, finance, human resources and administrative support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for auditing, tax and legal services, expenses associated with obtaining and maintaining patents, consulting costs and costs of our information systems.

We expect that our general and administrative expenses will fluctuate as we continue to operate as a public reporting company and continue to develop our product candidates. We believe that these fluctuations will likely include costs related to the hiring of additional personnel and fees for outside consultants, lawyers and accountants. We also expect to continue to incur costs to comply with corporate governance, internal control, investor relations, disclosure and similar requirements applicable to public reporting companies.

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Other (Expense) Income

Other (expense) income consists primarily of non-cash costs associated with fair value adjustments to our derivative and warrant liability and amortization of debt issuance costs and debt discount to interest expense. Other (expense) income also includes interest expense incurred on our outstanding borrowings as well as interest and other income consisting primarily of interest earned on investments. These items are unrelated to our core business and thus are recognized as other (expense) income in our consolidated statements of operations.

Results of Operations

The results of operations and changes in stockholders' equity for Acer ﻿were included in the Company's consolidated financial statements beginning November 18, 2023. Acer had total operating revenue of $42,000 and a net loss of $6.8 million for the period from November 18, 2023, through December 31, 2023.

Comparison of the Years Ended December 31, 2024, and 2023 (in thousands):

|  | Year Ended December 31, |  | Period-to |
|  | 2024 |  |  | 2023 |  |  | Period Change |
Revenue, net |  | $ | 23,612 |  |  | $ | 27,461 |  |  | $ | (3,849 | )
Cost of product revenue (excluding $6,235 and $772 in intangible asset amortization for the years ended December 31, 2024, and 2023, respectively, shown separately below) |  |  | 7,417 |  |  |  | 2,173 |  |  |  | 5,244 |
Intangible asset amortization |  |  | 6,235 |  |  |  | 772 |  |  |  | 5,463 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Research and development |  |  | 42,095 |  |  |  | 39,806 |  |  |  | 2,289 |
Selling, general and administrative |  |  | 54,868 |  |  |  | 34,314 |  |  |  | 20,554 |
Total operating expenses |  |  | 96,963 |  |  |  | 74,120 |  |  |  | 22,843 |
Loss from operations |  |  | (87,003 | ) |  |  | (49,604 | ) |  |  | (37,399 | )
Other (expense) income: |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | (7,351 | ) |  |  | (1,501 | ) |  |  | (5,850 | )
Fair value adjustment related to warrant and CVR liability |  |  | 2,057 |  |  |  | (98 | ) |  |  | 2,155 |
Fair value adjustment related to investments |  |  | (18 | ) |  |  | 613 |  |  |  | (631 | )
Interest and other income, net |  |  | 2,175 |  |  |  | 4,541 |  |  |  | (2,366 | )
Total other (expense) income |  |  | (3,137 | ) |  |  | 3,555 |  |  |  | (6,692 | )
Loss before income taxes |  |  | (90,140 | ) |  |  | (46,049 | ) |  |  | (44,091 | )
Income tax expense |  |  | (15,371 | ) |  |  | - |  |  |  | (15,371 | )
Net loss |  | $ | (105,511 | ) |  | $ | (46,049 | ) |  | $ | (59,462 | )

Net Loss

Net loss for the year ended December 31, 2024, was $105.5 million compared to net loss of $46.0 million for the year ended December 31, 2023. The change was attributable to an increase in loss from operations of $37.4 million, a change in fair value adjustment related to investments of $0.6 million, an increase in interest expense of $5.9 million, a decrease in net interest income and other income of $2.4 million, and an increase in income tax expense of $15.4 million, partially offset by an increase in the change in fair value adjustment related to derivative and warrant liability and CVR liability of $2.2 million.

Revenue

Revenue for the year ended December 31, 2024, was $23.6 million, a decrease of approximately $3.8 million compared to revenue of $27.5 million for the year ended December 31, 2023. The decrease was primarily attributable to a decrease in sales under the AZSTARYS License Agreement of $14.2 million and a decrease in consulting revenue of $0.2 million, partially offset by an increase of $10.1 million in MIPLYFFA product sales, an increase in sales under the EAP of approximately $0.4 million, and an increase of $0.1 million in OLPRUVA product sales.

Cost of Product revenue

Cost of product revenue for the year ended December 31, 2024, was $7.4 million, an increase of $5.2 million compared to cost of product revenue of $2.2 million for the year ended December 31, 2023, primarily due to recognition of $5.7 million of inventory obsolescence related to OLPRUVA, an increase of $0.8 million in cost of MIPLYFFA product sales and royalties, and an increase of $0.2 million related to OLPRUVA product sales and royalties, partially offset by a decrease in royalty payments related to the AZSTARYS License Agreement of approximately $1.5 million.

Intangible asset amortization

Intangible asset amortization for the year ended December 31, 2024, was $6.2 million an increase of approximately $5.5 million compared to intangible asset amortization of $0.8 million for the year ended December 31, 2023. The increase was due to an increase of $5.5 million in amortization expense related to definite-lived intangible assets.

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Research and Development

Research and development expenses increased by $2.3 million, from $39.8 million for the year ended December 31, 2023, to $42.1 million for the year ended December 31, 2024. This increase was attributable to increases in personnel-related costs and share-based compensation expenses of $6.3 million and $0.9 million, respectively, partially offset by decreases in third-party research and development costs of $3.6 million and other research and development costs of $1.3 million.

General and Administrative

General and administrative expenses increased by $20.6 million, from $34.3 million for the year-ended December 31, 2023, to $54.9 million for the year ended December 31, 2024. This increase was attributable to increases in marketing costs of $10.1 million, share-based compensation expenses of $7.2 million, personnel-related costs of $1.6 million, and other expenses of $2.2 million, primarily made up of expenses related to facilities, insurance, and travel. These increases were partially offset by a decrease in professional fees of $0.5 million. Acer transaction costs were $2.2 million and are included in general and administrative expenses for the year-ended December 31, 2023.

Other (Expense) Income

Other (expense) income changed from $3.6 million of income for the year ended December 31, 2023, to $3.1 million of expense for the year ended December 31, 2024. This period-to-period change in other (expense) income was primarily attributable to an increase in interest expense of $5.9 million, a decrease in the change in fair value related to investments of $0.6 million, and a decrease in net interest and other income of $2.4 million, partially offset by a decrease in the fair value adjustment related to derivative and warrant liability and CVR liability of $2.2 million.

Income Tax Expense

Income tax expense for the year ended December 31, 2024, was $15.4 million as a result of a periodic evaluation of our tax positions. There was no income tax expense for the year ended December 31, 2023.

Liquidity and Capital Resources

Sources of Liquidity

Through December 31, 2024, we have funded our research and development and operating activities primarily through the issuance of debt and equity and from revenue received from the EAP, AZSTARYS License Agreement, OLPRUVA product sales, MIPLYFFA product sales and consulting arrangements. As of December 31, 2024, we had cash, cash equivalents and investments of $75.5 million.

To date, we have generated revenue from product sales of OLPRUVA and MIPLYFFA, product reimbursements from the EAP, proceeds from the AZSTARYS License Agreement, reimbursement of out-of-pocket third-party costs and the performance of consulting services.

On February 26, 2025, we entered into the PRV Transfer Agreement, pursuant to which we agreed to sell the PRV to the buyer, subject to customary closing conditions. Pursuant to the PRV Transfer Agreement, the buyer agreed to pay the Company $150.0 million, payable in cash, upon the closing of the sale.

We have had recurring negative net operating cash flows throughout our operating history, and we cannot guarantee or predict when we may begin to consistently generate positive net cash flows from operations, or if at all. We expect that our sources of revenue will be from product sales of OLPRUVA and MIPLYFFA, product reimbursements from the EAP, proceeds from our license agreement with Commave, and any other future arrangements related to one of our product candidates.

Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or debt, the terms of these securities may restrict our ability to operate. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or altogether cease our research and development programs or future commercialization efforts.

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Registration Statements on Form S-3

In connection with the Merger, we and Nantahala Capital Management, LLC (“Nantahala”) concurrently entered into a registration rights agreement, pursuant to which we agreed to file a resale registration statement with respect to the resale of our common stock issuable to Nantahala. On February 5, 2024, we filed a registration statement on Form S-3 (File No. 333-276856) registering an aggregate of 2,269,721 shares of our common stock. On April 5, 2024, we filed an amendment to such registration statement, which was declared effective on April 8, 2024.

On June 4, 2024, we filed a registration statement on Form S-3 (File No. 333-279941) (the "June 2024 Registration Statement") under which we sell securities, including as may be issuable upon conversion, redemption, repurchase, exchange or exercise of securities, in one or more offerings up to a total aggregate offering price of $350.0 million, $75.0 million of which was allocated to the sale of the shares of common stock issuable under the 2024 ATM Agreement. The registration statement was declared effective on June 13, 2024.

August 2024 Offering

On August 8, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co. and William Blair & Company, L.L.C., as representatives of the several underwriters named therein (collectively, the “Underwriters”), in connection with the offering, issuance and sale by us of 9,230,770 shares of our common stock at a public offering price of $6.50 per share, pursuant to the June 2024 Registration Statement and a related prospectus supplement dated August 8, 2024 filed with the SEC (the "August 2024 Offering"). Under the terms of the Underwriting Agreement, we also granted the Underwriters an option exercisable for 30 days to purchase up to an additional 1,384,615 shares of our common stock at the public offering price, less underwriting discounts and commissions, which the Underwriters exercised in full on August 9, 2024. The August 2024 Offering closed on August 12, 2024. Total shares issued were 10,615,385. Net proceeds from the offering were approximately $64.5 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of the offering to support the commercial launch activities for MIPLYFFA, continued commercial support for OLPRUVA and the continued development of celiprolol and KP1077 through potential NDA filings and other general corporate purposes.

Entry into 2024 ATM Agreement

On July 12, 2024, we entered into an equity distribution agreement (the "2024 ATM Agreement") with Citizens JMP Securities LLC ("Citizens JMP") under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million through Citizens JMP as its sales agent. The issuance and sale, if any, of common stock by us under the 2024 ATM Agreement will be made pursuant to the June 2024 Registration Statement, the accompanying prospectus, and the related prospectus supplement dated July 12, 2024. Citizens JMP may sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act. Citizens JMP will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from us (including any price, time or size limits or other customary parameters or conditions we may impose). We will pay Citizens JMP a commission equal to 3.0% in the aggregate of the gross sales proceeds of any common stock sold through Citizens JMP under the 2024 ATM Agreement. As of December 31, 2024, no shares have been issued or sold under the 2024 ATM Agreement.

Termination of 2021 ATM Agreement

On July 2, 2021, we entered into an equity distribution agreement (the "2021 ATM Agreement") with JMP Securities LLC ("JMP") and RBC Capital Markets, LLC ("RBCCM") under which we may offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $75.0 million through JMP and RBCCM as its sales agents. The issuance and sale, if any, of common stock by us under the 2021 ATM Agreement was to be made pursuant to the registration statement on Form S-3 (File No. 333-257661) which was declared effective on July 12, 2021, the accompanying prospectus, and the related prospectus supplement dated July 12, 2021. The 2021 ATM Agreement terminated on July 11, 2024, and no shares had been issued or sold under the 2021 ATM Agreement as of the termination date.

Merger Transactions and Documents

On August 30, 2023, in connection with the Merger Agreement with Acer, the following transactions occurred prior to Closing:

| ● | Bridge Loan - Zevra and Acer entered into a bridge loan agreement (the “Bridge Loan Agreement”), providing for Zevra to make loans (collectively, the “Bridge Loan”) to Acer up to an aggregate principal amount of $16.5 million. The Bridge Loan was provided to Acer to support its termination agreement with Relief Therapeutics Holding SA (“Relief”) and to provide Acer with working capital, including for payments of accounts payable to support the commercial launch of OLPRUVA and the development of celiprolol pending the Merger’s closure. On October 31, 2023, the Company and Acer entered into an amendment to the Bridge Loan Agreement, which increased the aggregate principal amount available under the loan from $16.5 million to $17.8 million.

| ● | Purchase of Acer’s Term Loans - Zevra purchased certain indebtedness of Acer held by Nantahala. Under the loan purchase with Nantahala, certain of its affiliates and certain other parties (collectively with Nantahala, "Nantahala Holders") Zevra purchased (i) an original senior secured term loan facility made available to Acer in an aggregate amount of $6.5 million and funded on March 14, 2022, and (ii) an additional senior secured term loan made to Acer in an aggregate amount of $7.0 million in a single borrowing which funded on January 31, 2023 for (1) $12.0 million in cash; (2) 98,683 shares of Zevra Common Stock; and (3) a secured Promissory Note payable by Zevra to Nantahala in the original principal amount $5.0 million, which was repaid in full and terminated in April 2024. These were recorded as receivables from Acer and were treated as a settlement of a preexisting relationship in connection with the closing of the transaction and recorded as a component of purchase consideration.

| ● | Purchase of Acer’s Convertible Notes (“Marathon Convertible Notes”) - Under the Note Purchase Agreement with the Nantahala Holders, Zevra purchased the Marathon Convertible Notes that Nantahala had acquired on June 16, 2023. Zevra acquired the Marathon Convertible Notes in exchange for the issuance of 2,171,038 shares of Zevra Common Stock at $5.0667 per share for a total purchase price of $11.0 million.

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| ● | Amendment to IP License Agreement and IP Termination Agreement: As a condition to entering into the Merger Agreement, Acer and Relief entered into the Exclusive License Agreement and the Termination Agreement terminating the collaboration and license agreement, dated March 19, 2021, by and between Acer and Relief. Pursuant to the Exclusive License Agreement, Relief holds exclusive development and commercialization rights for OLPRUVA in the European Union, Liechtenstein, San Marino, Vatican City, Norway, Iceland, Principality of Monaco, Andorra, Gibraltar, Switzerland, United Kingdom, Albania, Bosnia, Kosovo, Montenegro, Serbia and North Macedonia (Geographical Europe). Acer has the right to receive a royalty of up to 10.0% of the net sales of OLPRUVA in Geographical Europe. In accordance with the terms of the Termination Agreement, Relief received an upfront payment from Acer of $10.0 million (which payment was funded with the Bridge Loan described above) with an additional payment of $1.5 million due on the first-year anniversary of the $10.0 million payment. Acer has also agreed to pay a 10.0% royalty on net sales of OLPRUVA worldwide, excluding Geographical Europe, and 20.0% of any value received by Acer from certain third parties relating to OLPRUVA licensing or divestment rights, all of the foregoing which are capped at $45.0 million, for total payments to Relief of up to $56.5 million.

In connection with the closing of the Merger on November 17, 2023, each share of common stock of Acer was converted into the right to receive (i) 0.1210 fully paid and non-assessable shares of common stock of Zevra, par value $0.0001 per share , and (ii) one non-transferable CVR to be issued by Zevra, which will represent the right to receive one or more contingent payments up to an additional $76.0 million upon the achievement, if any, of certain commercial and regulatory milestones for Acer’s OLPRUVA and celiprolol products within specified time periods. Certain additional cash payments are also possible pursuant to the CVRs with respect to milestones involving Acer’s early-stage program ACER-2820 (emetine).

Stockholders Agreement

In connection with the Merger, a certain stockholder of Acer entered into, and Acer agreed to use its reasonable best efforts to cause certain other stockholders to enter into joinders to, a stockholders agreement with Zevra (the “Stockholders Agreement”). Pursuant to the Stockholders Agreement, the stockholders party thereto agreed to, or would agree to, among other things, vote all of their shares in Zevra that they own in favor of each nominee included in the Zevra board of director’s slate of nominees for each election of directors and in favor of each matter approved by the Zevra board of directors and submitted to stockholders of Zevra for the approval of stockholders following the closing of the Merger and until the second anniversary of the closing date of the Merger (the “Trigger Date”). In addition, the stockholders party to the Stockholders Agreement will be subject to customary standstill provisions, subject to certain exceptions, until the Trigger Date.

Cancellation of Acer Warrant

On November 22, 2023, we sold an aggregate of 1,382,489 shares of our common stock and accompanying warrants to purchase up to 1,382,489 shares of our common stock at a price of $4.34 per share to a healthcare focused investment fund (the "Investor") for gross proceeds of approximately $6.0 million and an aggregate of 917,934 shares of our common stock to cancel a warrant held by the Investor to purchase 2,920,306 shares of common stock of Acer. The shares of common stock and warrants were offered and sold to the Investor in a registered direct offering without an underwriter or placement agent.

Margin Account

On January 26, 2023, the Company and Wells Fargo, as lender, entered into a margin account agreement. The margin account bears interest at the Prime Rate minus 225 basis points. The Company's investments are used as collateral for the loan and the amount the Company is able to borrow is limited to 80-90% of its outstanding investment balance held with Wells Fargo. As of December 31, 2023, $37.7 million was outstanding under the margin account. The margin loan was included in current liabilities as of December 31, 2023, as the Company expected the outstanding balance to be due and payable in 2024 based on the anticipated level of investment balance expected to be available over the course of fiscal year 2024 to meet the Collateral Requirement. In April 2024, the Company repaid the outstanding balance under the margin account with Wells Fargo, and upon such repayment, the margin capabilities were removed from the account.

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Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2024 and 2023 (in thousands):

|  | Year Ended December 31, |  |  | Period-to |
|  | 2024 |  |  | 2023 |  |  | Period Change |
Net cash used in operating activities |  | $ | (69,665 | ) |  | $ | (33,535 | ) |  | $ | (36,130 | )
Net cash used in investing activities |  |  | (22,161 | ) |  |  | (17,390 | ) |  |  | (4,771 | )
Net cash provided by financing activities |  |  | 82,108 |  |  |  | 28,464 |  |  |  | 53,644 |
Effect of exchange rate changes on cash and cash equivalents |  |  | 454 |  |  |  | 44 |  |  |  | 410 |
Net decrease in cash and cash equivalents |  | $ | (9,264 | ) |  | $ | (22,417 | ) |  | $ | 13,153 |

Operating Activities

For the year ended December 31, 2024, net cash used in operating activities of $69.7 million consisted of a net loss of $105.5 million and $6.6 million in changes in working capital, partially offset by $42.5 million in adjustments for non-cash items. Net loss was primarily attributable to our spending on research and development programs and operating costs, partially offset by revenue received from MIPLYFFA and OLPRUVA product sales, royalties under the AZSTARYS License Agreement, and reimbursements from the EAP. The changes in working capital consisted of $3.6 million related to a change in accounts payable and accrued expenses, $8.9 million related to a change in inventories, $2.2 million related to a change in prepaids and other assets, and $0.6 million related to operating lease liabilities, partially offset by $0.4 million related to a change in discount and rebate liabilities, $0.6 million related to a change in operating lease right of use assets, $0.8 million related to a change in other liabilities, and $6.9 million increase in accounts and other receivables. The adjustments for non-cash items primarily consisted of income tax expense of $15.4 million, stock-based compensation expense of $14.9 million, consulting fees paid in stock of$0.5 million, interest expense of $2.1 million, inventory obsolescence of $5.7 million and $5.7 million related to depreciation, amortization and other items, and a loss on disposal of $0.2 million, partially offset by a change in fair value adjustment of warrants and CVR of $2.1 million.

For the year ended December 31, 2023, net cash used in operating activities of $33.5 million consisted of a net loss of $46.0 million, partially offset by $6.0 million in changes in working capital and $6.5 million in adjustments for non-cash items. Net loss was primarily attributable to our spending on research and development programs and operating costs, partially offset by revenue received under the AZSTARYS License Agreement, EAP and the Corium Consulting Agreement. The changes in working capital consisted of $11.1 million related to a change in accounts payable and accrued expenses, $3.2 million related to a change in discount and rebate liabilities, $0.2 million related to a change in inventories, $0.3 million related to a change in operating lease right of use assets, $0.4 million related to a change in other liabilities, and $0.2 million related to a change in prepaids and other assets, partially offset by a $9.1 million increase in accounts and other receivables, and $0.3 million related to operating lease liabilities. The adjustments for non-cash items primarily consisted of stock-based compensation expense of $5.9 million, consulting fees paid in stock of $0.2 million, and $1.0 million related to depreciation, amortization and other items, partially offset by a change in the fair value adjustment related to investments of $0.6 million.

Investing Activities

For the year ended December 31, 2024, net cash used in investing activities was $22.1 million, which was attributable to purchases of investments of $41.1 million and a $6.0 million regulatory milestone payment to XOMA, partially offset by maturities of investments of $25.0 million.

For the year ended December 31, 2023, net cash used in investing activities was $17.4 million, which was attributable to $30.4 million attributable to the acquisition of Acer, purchases of investments of $45.8 million, and $0.3 million in purchases of property and equipment, partially offset by maturities of investments of $59.1 million.

Financing Activities

For the year ended December 31, 2024, net cash provided by financing activities was $82.1 million, which was primarily attributable to proceeds from the issuance of debt of $58.9 million, proceeds from insurance financing arrangements of $1.0 million and proceeds from sales of common stock under the Employee Stock Purchase Plan, or the ESPP, of$1.1 million, proceeds from issuance of common stock of $66.2 million, partially offset by repayments of debt of $42.7 million, payments of principal on insurance financing arrangements of $0.4 million, and payments of deferred offering costs of $2.0 million.

For the year ended December 31, 2023, net cash provided by financing activities was $28.5 million, which was primarily attributable to proceeds from the issuance of debt of $42.4 million, proceeds from insurance financing arrangements of $1.3 million and proceeds from sales of common stock under the Employee Stock Purchase Plan, or the ESPP, of $0.2 million, proceeds from issuance of common stock of $6.0 million, partially offset by repayments of debt of $17.5 million, payments to repurchase shares as part of the Share Repurchase Program of $3.4 million, and payments of principal on insurance financing arrangements of $0.5 million.

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Future Funding Requirements

We believe that our existing cash, cash equivalents and investments will be sufficient to fund our operations into 2029, subject to continuing compliance with our debt covenants. This estimate includes anticipated revenue from net sales of OLPRUVA and MIPLYFFA, net reimbursements from the EAP, royalties under the AZSTARYS License Agreement, and accounts for continued investments into our development pipeline programs. This estimate does not include proceeds from the PRV sale, which was announced on February 26, 2025.

We maintain the majority of our cash and cash equivalents in accounts with major U.S. and multi-national financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions. In the event of a failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.

Potential near-term sources of additional funding include:

| ● | any royalties or net sales milestone payments generated under the AZSTARYS License Agreement;
| ● | any reimbursements received for arimoclomol under the EAP;
| ● | any product sales of OLPRUVA, and
| ● | any product sales of MIPLYFFA.

We cannot guarantee that we will be able to generate sufficient proceeds from any of these potential sources to fund our operating expenses. We anticipate that our expenses will fluctuate substantially as we:

| ● | continue our ongoing clinical trials and our product development activities for our pipeline of product candidates;
| ● | seek regulatory approvals for any product candidates that successfully complete clinical trials;
| ● | continue research and development and clinical trials of our product candidates;
| ● | seek to discover and develop additional product candidates either internally or in partnership with other pharmaceutical companies;
| ● | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
| ● | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
| ● | maintain, expand and protect our intellectual property portfolio; and
| ● | incur additional legal, accounting and other expenses in operating as a public company.

To date, we have generated revenue from OLPRUVA and MIPLYFFA product sales, the AZSTARYS License Agreement, reimbursements of out-of-pocket third-party costs, the performance of consulting services, and product reimbursements under the EAP. We expect that, for the foreseeable future, our only sources of revenues will be through product sales of OLPRUVA and MIPLYFFA, payments arising from the AZSTARYS License Agreement, and any other future arrangements related to one of our product candidates and product sales under the EAP. We cannot guarantee that our current commercialization strategies, or any strategy we adopt in the future, will be successful. For instance, we received milestone payments under the AZSTARYS License Agreement, but we cannot guarantee that we will earn any additional milestone or royalty payments under this agreement in the future. We also cannot guarantee that we will continue to receive reimbursements under the EAP or successfully commercialize OLPRUVA or MIPLYFFA. We also expect to continue to incur significant additional costs associated with operating as a public company.

We have based our estimates of our cash needs and cash runway on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect and we cannot guarantee that we will be able to generate sufficient proceeds from product sales of OLPRUVA and MIPLYFFA, the AZSTARYS License Agreement, product reimbursements under the EAP, or other funding transactions to fund our operating expenses. To meet any additional cash requirements, we may seek to sell additional equity or convertible securities that may result in dilution to our stockholders, issue additional debt or seek other third-party funding, including potential strategic transactions, such as licensing or collaboration arrangements. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates and products, we are unable to estimate the amounts of increased capital outlays and operating expenditures necessary to complete the commercialization and development of our partnered product or product candidates, should they obtain regulatory approval.

Adequate additional financing may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or debt, the terms of these securities may restrict our ability to operate. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or altogether cease our research and development programs and/or commercialization efforts.

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Critical Accounting Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note B to our audited financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are critical to the process of making significant estimates in the preparation of our financial statements and understanding and evaluating our reported financial results.

Acquisition of Intangible Assets

We record all assets and liabilities acquired in business acquisitions at fair value, including goodwill and other intangible assets. The initial recognition of goodwill and other intangible assets requires management to make subjective judgments concerning estimates of how the acquired assets will perform in the future using valuation methods including discounted cash flow analysis. Inherent in the determination of fair value of the reporting units are certain estimates and judgments, including the interpretation of current economic indicators and market valuations, as well as management’s strategic plans with regard to its operations. When utilizing a quantitative assessment, we determine fair value at the reporting unit level based on a combination of an income approach and market approach. The income approach is based on estimated future cash flows, discounted at a rate that approximates the cost of capital of a market participant, while the market approach is based on sales and/or earnings multiples of similar companies. These approaches use significant estimates and assumptions, including projected future cash flows and the timing of those cash flows, discount rates reflecting risks inherent in future cash flows, perpetual growth rates, and determination of appropriate market comparables.

Goodwill and Definite-Lived Intangible Assets

Goodwill represents the excess of the purchase price of an acquired business over the fair value assigned to the assets purchased and liabilities assumed. Goodwill is not amortized but is evaluated for impairment within our single reporting unit on an annual basis, during the fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of our reporting unit below its carrying amount. Our estimates associated with the annual test of goodwill for impairment, as well as the as-needed assessment of the recoverability of definite-lived intangible assets, are considered critical due to the amount of these assets recorded on our consolidated balance sheets and the judgment required.

With respect to definite-lived intangible assets, we periodically evaluate whether events and circumstances have occurred that may affect the estimated useful life or the recoverability of the remaining balance of such assets. If such events or circumstances indicate that the carrying amount of these assets may not be recoverable, management would estimate the future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) were less than the carrying amount of the assets, we would recognize an impairment charge to reduce such assets to their fair value.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and, as a result, follows the five-step model when recognizing revenue: 1) identifying a contract; 2) identifying the performance obligations; 3) determining the transaction price; 4) allocating the price to the performance obligations; and 5) recognizing revenue when the performance obligations have been fulfilled.

Net revenues from product sales are recognized at the transaction price when the customer obtains control of the Company's product, which occurs at a point in time, typically upon receipt of the product by the customer. The Company's current single customer is a specialty pharmacy provider.

The Company's net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, data fees and wholesaler fees for services. These adjustments represent variable consideration under ASC 606 and are recorded as a reduction of revenue. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.

Accrued Expenses

We enter into contractual agreements with third-party vendors who provide research and development, manufacturing, and other services in the ordinary course of business. Some of these contracts are subject to milestone-based invoicing and services are completed over an extended period of time. We record liabilities under these contractual commitments when an obligation has been incurred. This accrual process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed and estimating the level of service performed and the associated cost when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date based on the facts and circumstances known to us. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include:

| ● | fees paid to CROs in connection with preclinical and toxicology studies and clinical trials;
| ● | fees paid to investigative sites in connection with clinical trials;
| ● | fees paid to contract manufacturers in connection with the production of our raw materials, drug substance and product candidates; and
| ● | professional fees.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we will adjust the accrual accordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of these costs, our actual expenses could differ from our estimates.

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Stock-Based Compensation

We record the fair value of stock options issued as of the grant date as compensation expense. We recognize compensation expense over the requisite service period, which is equal to the vesting period. Stock-based compensation expense has been reported in our statements of operations as follows (in thousands):

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Research and development |  | $ | 5,819 |  |  | $ | 2,664 |
General and administrative |  |  | 9,087 |  |  |  | 3,290 |
Total stock-based compensation |  | $ | 14,906 |  |  | $ | 5,954 |

Determination of the Fair Value of Stock-Based Compensation Grants

We calculate the fair value of stock-based compensation arrangements using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of subjective assumptions, including the expected volatility of our common stock, the assumed dividend yield, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options and the fair value of the underlying common stock on the date of grant. In applying these assumptions, we considered the following factors:

| ● | historically we have not had sufficient experience to estimate the volatility of our common stock. As such, we calculated the expected volatility based on reported data for selected similar publicly traded companies for which the historical information is available, or peer volatility, and blended it with our historical volatility, or leverage-adjusted peer volatility. For the purpose of identifying peer companies, we consider characteristics such as industry, length of trading history, similar vesting terms and in-the-money option status. We utilized this leverage-adjusted peer volatility for grants prior to the initial public offering, as well as grants within the two-year period immediately following the initial public offering. For grants after the second anniversary of the initial public offering we utilized our historical volatility to determine the expected volatility;
| ● | the assumed dividend yield is based on our expectation of not paying dividends for the foreseeable future;
| ● | we determine the average expected life of “plain vanilla” stock options based on the simplified method in accordance with SEC Staff Accounting Bulletin Nos. 107 and 110, as our common stock to date has been publicly traded for a limited amount of time. We expect to use the simplified method until we have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. For options that are not considered “plain vanilla,” such as those with exercise prices in excess of the fair market value of the underlying stock, we use an expected life equal to the contractual term of the option;
| ● | we determine the risk-free interest rate by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant; and
| ● | we estimate forfeitures based on our historical analysis of actual stock option forfeitures.

We account for stock-based compensation arrangements with directors and consultants that contain only service conditions for vesting using a fair value approach. The grant date fair value of these options is measured using the Black-Scholes option pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option.

The following summarizes the assumptions used for estimating the fair value of stock options granted to employees for the periods indicated:

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Risk-free interest rate |  |  | 3.82% - 4.50% |  |  |  | 3.34% - 4.79% |
Expected term (in years) |  |  | 5.50 - 6.25 |  |  |  | 5.50 - 10.00 |
Expected volatility |  |  | 89.85% - 91.32% |  |  |  | 89.48% - 93.67% |
Expected dividend yield |  |  | 0 |  |  |  | 0 |

Utilization of Net Operating Loss Carryforwards and Research and Development Credits

As of December 31, 2024, we had federal net operating loss, or NOL, carryforwards of approximately $381.3 million, $118.5 million of which, if not utilized, will begin to expire in 2027 and $262.8 million of which have no expiration date. We also have certain state net operating loss carryforwards totaling $428.6 million, which, if not utilized, will begin to expire in 2027. We also have Denmark net operating loss carryforwards totaling $7.7 million which have an indefinite carryforward period in Denmark. The Company recorded refundable research and development tax credit as other income and not income tax under ASC 740 in the consolidated statement of operations for the year ended December 31, 2024. These refundable tax credits are a result of increased qualified research and development spending in certain jurisdictions which allow for a refundable credit even when the Company has no current period income tax expense.

In accordance with Section 382 of the Code, a change in equity ownership of greater than 50% within a three-year period results in an annual limitation on a company’s ability to utilize its NOL carryforwards created during the tax periods prior to the change in ownership. We performed a Section 382 ownership change analysis in 2017 and determined that we experienced an ownership change in 2010, which resulted in a portion of our net operating loss carryforwards being subject to an annual limitation under Section 382 through 2012. No other ownership changes or limitations on our historical net operating loss carryforwards were noted through the year ended December 31, 2017. In addition, we may have already experienced an ownership change, or may experience an ownership changes in the future, as a result of shifts in our stock ownership. If we determine that an ownership change has occurred and our ability to use our historical net operating loss carryforwards is materially limited, it would harm our future operating results by increasing our future tax obligations.

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Warrants

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480) and FASB ASC Topic 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For warrants that meet all criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital, on the consolidated statement of stockholders’ deficit at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in other expense, net, on the consolidated statement of operations. The fair value of the warrants was estimated using the Black-Scholes option pricing model.

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ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required by this Item 8 are set forth beginning in Item 15 of this report and are incorporated herein by reference.

ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. | CONTROLS AND PROCEDURES

Limitations on effectiveness of controls and procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

f

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our chief executive officer and our chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(e) under the Exchange Act. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled "Internal Control – Integrated Framework (2013)" published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2024.

Our independent registered public accounting firm has not performed an evaluation of our internal control over financial reporting during any period in accordance with the provisions of the Sarbanes-Oxley Act. For as long as we remain a non-accelerated filer, we intend to take advantage of the exemption permitting us not to comply with the requirement that our independent registered public accounting firm provide an attestation on the effectiveness of our internal control over financial reporting.

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Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during our fiscal quarter ended December 31, 2024, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. | OTHER INFORMATION

| (a) | Disclosure in lieu of reporting on a Current Report on Form 8-K.

None.

| (b) | Insider Trading Arrangements and Policies.

During the three-months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

ITEM 9C. | DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item 10 will be set forth in the headings “Proposal 1 – Election of Directors,” “Executive Officers” and “Information Regarding the Board of Directors and Corporate Governance” and “Delinquent Section 16(a) Reports” in our definitive proxy statement for our 2025 annual meeting of stockholders, or the proxy statement, and, is incorporated herein by reference.

We have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Code of Conduct is available on our website at www.zevra.com. The nominating and corporate governance committee of our board of directors is responsible for overseeing the Code of Conduct and must approve any waivers of the Code of Conduct for employees, executive officers and directors. We intend to post any amendments to the Code of Conduct or any waivers of its requirements for any executive officer or director on our website.

ITEM 11. | EXECUTIVE COMPENSATION

The information required by this Item 11 will be set forth under the headings “Executive Compensation”, “Director Compensation” and “Information Regarding the Board of Directors and Corporate Governance” in our proxy statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item 12 will be set forth under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance under the Equity Compensation Plans” in the proxy statement and is incorporated herein by reference.

ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The items required by this Item 13 will be set forth under the headings “Information Regarding the Board of Directors and Corporate Governance” and “Transactions with Related Persons” in the proxy statement and is incorporated herein by reference.

ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 will be set forth under the proposal with the heading “Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm” in the proxy statement and is incorporated herein by reference.

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PART IV

ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

(1) Index list to Financial Statements:

| Page
Report of EY US LLP (PCAOB ID:42) |
Consolidated Balance Sheets as of December 31, 2024, and 2023 | 99
Consolidated Statements of Operations for the years ended December 31, 2024, and 2023 | 100
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024, and 2023 | 100
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, and 2023 | 102
Consolidated Statements of Cash Flows for the years ended December 31, 2024, and 2023 | 103
Notes to Consolidated Financial Statements | 104

(2) Financial Statement Schedules

All other schedules are omitted because they are not required or the required information is included in the financial statements or notes thereto.

(3) Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Zevra Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Zevra Therapeutics, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, changes in stockholders' equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

|  | Intangible Assets
Description of the Matter |  | At December 31, 2024, the Company had a definite-lived intangible asset related to the acquisition of OLPRUVA of $61.3 million. As discussed in Notes B and S to the consolidated financial statements, the Company periodically evaluates whether events and circumstances have occurred that may affect the recoverability of the remaining balance of such asset. During the year ended December 31, 2024, management considered events or circumstances that would indicate that the carrying amount of this asset may not be recoverable, and prepared an estimate of the future cash flows expected to result from the use of the asset and their eventual disposition. This analysis yielded a conclusion that the asset was recoverable as of December 31, 2024 and no impairment was recorded as of and for the year then ended. Auditing the Company's recoverability analysis for its definite-lived intangible asset related to the acquisition of OLPRUVA was complex due to the significant estimation uncertainty pertaining to the significant assumption of forecasted revenues used in management’s analysis. The significant estimation uncertainty was primarily due to the lack of historical revenue experience observed during the course of the year ended December 31, 2024. This significant assumption is forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit |  | To test the recoverability analysis for its definite-lived intangible asset related to the acquisition of OLPRUVA, our audit procedures included, among others, evaluating the prospective financial information (“PFI”) used in management’s analysis, testing the completeness and accuracy of the underlying data and evaluating the Company’s use of appropriate impairment evaluation methodologies. Our procedures to assess the PFI used in the analysis, included, among others, evaluating the significant assumption discussed above, by comparing it to industry and economic publications and trends, analyst reports, and other objective sources.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2022.

Orlando, Florida

March 12, 2025

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ZEVRA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

|  | December 31, |
|  | 2024 |  |  | 2023 |
Assets |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 33,785 |  |  | $ | 43,049 |
Securities at fair value, current |  |  | 35,711 |  |  |  | 24,688 |
Accounts and other receivables |  |  | 10,509 |  |  |  | 17,377 |
Prepaid expenses and other current assets |  |  | 4,052 |  |  |  | 1,824 |
Inventories, current |  |  | 1,970 |  |  |  | - |
Total current assets |  |  | 86,027 |  |  |  | 86,938 |
Securities at fair value, noncurrent |  |  | 6,010 |  |  |  | - |
Inventories, noncurrent |  |  | 10,999 |  |  |  | 9,841 |
Property and equipment, net |  |  | 356 |  |  |  | 736 |
Operating lease right-of-use assets |  |  | 657 |  |  |  | 790 |
Goodwill |  |  | 4,701 |  |  |  | 4,701 |
Intangible assets, net |  |  | 68,993 |  |  |  | 69,227 |
Other long-term assets |  |  | 384 |  |  |  | 94 |
Total assets |  | $ | 178,127 |  |  | $ | 172,327 |
Liabilities and stockholders’ equity |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 25,456 |  |  | $ | 28,403 |
Line of credit payable |  |  | - |  |  |  | 37,700 |
Current portion of operating lease liabilities |  |  | 420 |  |  |  | 543 |
Current portion of discount and rebate liabilities |  |  | 4,989 |  |  |  | 4,550 |
Other current liabilities |  |  | 3,200 |  |  |  | 2,524 |
Total current liabilities |  |  | 34,065 |  |  |  | 73,720 |
Long-term debt |  |  | 59,504 |  |  |  | 5,066 |
Derivative and warrant liability |  |  | 17,804 |  |  |  | 16,100 |
Income tax payable, noncurrent |  |  | 14,431 |  |  |  | - |
Operating lease liabilities, less current portion |  |  | 372 |  |  |  | 456 |
Discount and rebate liabilities, less current portion |  |  | 7,655 |  |  |  | 7,663 |
Other long-term liabilities |  |  | 4,630 |  |  |  | 7,458 |
Total liabilities |  |  | 138,461 |  |  |  | 110,463 |
Commitments and contingencies (Note K) |  |  |  |  |  |  |  |
Stockholders' equity: |  |  |  |  |  |  |  |
Preferred stock: |  |  |  |  |  |  |  |
Undesignated preferred stock, $0.0001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of December 31, 2024 or December 31, 2023 |  |  | - |  |  |  | - |
Common stock, $0.0001 par value, 250,000,000 shares authorized, 55,246,401 shares issued and 53,670,709 shares outstanding as of December 31, 2024; 43,110,360 shares issued and 41,534,668 shares outstanding as of December 31, 2023 |  |  | 5 |  |  |  | 4 |
Additional paid-in capital |  |  | 555,302 |  |  |  | 472,664 |
Treasury stock, at cost |  |  | (10,983 | ) |  |  | (10,983 | )
Accumulated deficit |  |  | (505,289 | ) |  |  | (399,778 | )
Accumulated other comprehensive income (loss) |  |  | 631 |  |  |  | (43 | )
Total stockholders' equity |  |  | 39,666 |  |  |  | 61,864 |
Total liabilities and stockholders' equity |  | $ | 178,127 |  |  | $ | 172,327 |

See accompanying notes to consolidated financial statements

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ZEVRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Revenue, net |  | $ | 23,612 |  |  | $ | 27,461 |
Cost of product revenue (excluding $6,235 and $772 in intangible asset amortization for the years ended December 31, 2024, and 2023, respectively, shown separately below) |  |  | 7,417 |  |  |  | 2,173 |
Intangible asset amortization |  |  | 6,235 |  |  |  | 772 |
Operating expenses: |  |  |  |  |  |  |  |
Research and development |  |  | 42,095 |  |  |  | 39,806 |
Selling, general and administrative |  |  | 54,868 |  |  |  | 34,314 |
Total operating expenses |  |  | 96,963 |  |  |  | 74,120 |
Loss from operations |  |  | (87,003 | ) |  |  | (49,604 | )
Other (expense) income: |  |  |  |  |  |  |  |
Interest expense |  |  | (7,351 | ) |  |  | (1,501 | )
Fair value adjustment related to warrant and CVR liability |  |  | 2,057 |  |  |  | (98 | )
Fair value adjustment related to investments |  |  | (18 | ) |  |  | 613 |
Interest and other income, net |  |  | 2,175 |  |  |  | 4,541 |
Total other (expense) income |  |  | (3,137 | ) |  |  | 3,555 |
Loss before income taxes |  |  | (90,140 | ) |  |  | (46,049 | )
Income tax expense |  |  | (15,371 | ) |  |  | - |
Net loss |  | $ | (105,511 | ) |  | $ | (46,049 | )
Basic and diluted net loss per share of common stock: |  |  |  |  |  |  |  |
Net loss |  | $ | (2.28 | ) |  | $ | (1.30 | )
Weighted average number of shares of common stock outstanding: |  |  |  |  |  |  |  |
Basic and diluted |  |  | 46,251,239 |  |  |  | 35,452,460 |

See accompanying notes to consolidated financial statements

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ZEVRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Net loss |  | $ | (105,511 | ) |  | $ | (46,049 | )
Other comprehensive income (loss): |  |  |  |  |  |  |  |
Foreign currency translation adjustment |  |  | 674 |  |  |  | (156 | )
Other comprehensive income (loss) |  |  | 674 |  |  |  | (156 | )
Comprehensive loss |  | $ | (104,837 | ) |  | $ | (46,205 | )

See accompanying notes to consolidated financial statements

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ZEVRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

|  |  |  |  |  | Additional |  |  |  |  |  |  |  |  |  |  | Other |  |  | Total |
|  | Common |  |  | Paid-in |  |  | Treasury |  |  | Accumulated |  |  | Comprehensive |  |  | Stockholders' |
|  | Stock |  |  | Capital |  |  | Stock |  |  | Deficit |  |  | Income (Loss) |  |  | Equity |
Balance as of January 1, 2023 |  | $ | 3 |  |  | $ | 436,269 |  |  | $ | (7,536 | ) |  | $ | (353,729 | ) |  | $ | 113 |  |  | $ | 75,120 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (46,049 | ) |  |  | - |  |  |  | (46,049 | )
Stock-based compensation expense |  |  | - |  |  |  | 5,954 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,954 |
Issuance of common stock in connection with the Merger |  |  | 1 |  |  |  | 28,390 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 28,391 |
Issuance of common stock |  |  | - |  |  |  | 6,106 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,106 |
Issuance of warrants |  |  | - |  |  |  | (4,500 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,500 | )
Shares repurchased as part of the Share Repurchase Program |  |  | - |  |  |  | - |  |  |  | (3,447 | ) |  |  | - |  |  |  | - |  |  |  | (3,447 | )
Issuance of common stock as part of the Employee Stock Purchase Plan |  |  | - |  |  |  | 218 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 218 |
Issuance of common stock in exchange for consulting services |  |  | - |  |  |  | 227 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 227 |
Other comprehensive income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (156 | ) |  |  | (156 | )
Balance as of December 31, 2023 |  | $ | 4 |  |  | $ | 472,664 |  |  | $ | (10,983 | ) |  | $ | (399,778 | ) |  | $ | (43 | ) |  | $ | 61,864 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (105,511 | ) |  |  | - |  |  |  | (105,511 | )
Stock-based compensation expense |  |  | - |  |  |  | 14,906 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 14,906 |
Issuance of common stock in public offering (Note B) |  |  | 1 |  |  |  | 64,516 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64,517 |
Issuance of common stock in exchange for consulting services |  |  | - |  |  |  | 474 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 474 |
Issuance of common stock as part of the Employee Stock Purchase Plan |  |  | - |  |  |  | 1,058 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,058 |
Issuance of common stock for options exercised |  |  | - |  |  |  | 1,684 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,684 |
Other comprehensive income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 674 |  |  |  | 674 |
Balance as of December 31, 2024 |  | $ | 5 |  |  | $ | 555,302 |  |  | $ | (10,983 | ) |  | $ | (505,289 | ) |  | $ | 631 |  |  | $ | 39,666 |

See accompanying notes to consolidated financial statements

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ZEVRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net loss |  | $ | (105,511 | ) |  | $ | (46,049 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Stock-based compensation expense |  |  | 14,906 |  |  |  | 5,954 |
Income tax expense |  |  | 15,374 |  |  |  | - |
Depreciation and amortization expense |  |  | 6,389 |  |  |  | 1,006 |
Inventory obsolescence |  |  | 5,746 |  |  |  | - |
Non-cash interest expense |  |  | 2,089 |  |  |  | - |
Fair value adjustment related to derivative and warrant liability and CVR liability |  |  | (2,057 | ) |  |  | 98 |
Amortization (accretion) on investments |  |  | (890 | ) |  |  | - |
Fair value adjustment related to investments |  |  | 18 |  |  |  | (613 | )
Loss on sublease and disposal of property and equipment |  |  | 218 |  |  |  | 157 |
Consulting fees paid in common stock |  |  | 474 |  |  |  | 227 |
Gain on foreign currency exchange rates |  |  | 219 |  |  |  | (198 | )
Change in assets and liabilities: |  |  |  |  |  |  |  |
Accounts and other receivables |  |  | 6,868 |  |  |  | (9,078 | )
Prepaid expenses and other current assets |  |  | (2,228 | ) |  |  | 152 |
Inventories |  |  | (8,874 | ) |  |  | 206 |
Operating lease right-of-use assets |  |  | 552 |  |  |  | 326 |
Other long-term assets |  |  | - |  |  |  | (5 | )
Accounts payable and accrued expenses |  |  | (3,598 | ) |  |  | 11,130 |
Discount and rebate liabilities |  |  | 431 |  |  |  | 3,231 |
Operating lease liabilities |  |  | (626 | ) |  |  | (439 | )
Other liabilities |  |  | 835 |  |  |  | 360 |
Net cash used in operating activities |  |  | (69,665 | ) |  |  | (33,535 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |
Acquisitions, net |  |  | - |  |  |  | (30,401 | )
Purchases of property and equipment |  |  | - |  |  |  | (296 | )
Payment of royalty to XOMA |  |  | (6,000 | ) |  |  | - |
Purchases of investments |  |  | (41,161 | ) |  |  | (45,814 | )
Maturities of investments |  |  | 25,000 |  |  |  | 59,121 |
Net cash used in investing activities |  |  | (22,161 | ) |  |  | (17,390 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Proceeds from issuance of debt |  |  | 58,990 |  |  |  | 42,431 |
Proceeds from insurance financing arrangements |  |  | 1,082 |  |  |  | 1,256 |
Proceeds from Employee Stock Purchase Plan |  |  | 1,058 |  |  |  | 218 |
Proceeds from stock issuance |  |  | 64,516 |  |  |  | 6,106 |
Proceeds from issuance of common stock for options exercised |  |  | 1,684 |  |  |  | - |
Payments of principal on insurance financing arrangements |  |  | (431 | ) |  |  | (564 | )
Repayment of debt |  |  | (42,700 | ) |  |  | (17,531 | )
Payment to repurchase shares as part of the Share Repurchase Program |  |  | - |  |  |  | (3,447 | )
Payment of deferred financing costs |  |  | (2,091 | ) |  |  | - |
Repayment of principal on finance lease liabilities |  |  | - |  |  |  | (5 | )
Net cash provided by financing activities |  |  | 82,108 |  |  |  | 28,464 |
Effect of exchange rate changes on cash and cash equivalents |  |  | 454 |  |  |  | 44 |
Net decrease in cash and cash equivalents |  |  | (9,264 | ) |  |  | (22,417 | )
Cash and cash equivalents, beginning of period |  |  | 43,049 |  |  |  | 65,466 |
Cash and cash equivalents, end of period |  | $ | 33,785 |  |  | $ | 43,049 |
Supplemental cash flow information: |  |  |  |  |  |  |  |
Cash paid for interest |  | $ | 5,262 |  |  | $ | 456 |
Right-of-use assets obtained in exchange for lease liabilities |  |  | - |  |  |  | - |
Supplemental disclosure of noncash investing activities: |  |  |  |  |  |  |  |
Issuance of common stock in connection with the Merger (Note T) |  |  | - |  |  |  | (28,390 | )
Supplemental disclosure of noncash financing activities: |  |  |  |  |  |  |  |
Issuance of secured promissory note for the Merger (Note T) |  |  | - |  |  |  | (5,066 | )
Issuance of contingent value rights for the Merger (Note T) |  |  | - |  |  |  | (8,562 | )

See accompanying notes to consolidated financial statements

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ZEVRA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. | Description of Business, Basis of Presentation, and Significant Transactions

Organization

Zevra Therapeutics, Inc. (the "Company") is a commercial-stage company focused on addressing unmet needs for the treatment of rare diseases. The Company has a diverse portfolio of products and product candidates, which includes clinical stage pipeline and commercial stage assets. On September 20, 2024, the U.S. Food and Drug Administration ("FDA") approved the New Drug Application (“NDA”) for MIPLYFFA™ (arimoclomol), an orally-delivered treatment for Niemann-Pick disease type C (“NPC”), which is an ultra-rare and progressive neurodegenerative disease. MIPLYFFA, the first FDA-approved treatment for NPC, is indicated for use in combination with miglustat for the treatment of neurological manifestations of NPC in adult and pediatric patients two years of age and older. In addition, the Company received a transferable rare pediatric disease priority review voucher (“PRV”) in conjunction with the approval of MIPLYFFA. On February 26, 2025, the Company and Zevra Denmark A/S entered into an asset purchase agreement (the “PRV Transfer Agreement”), pursuant to which the Company agreed to sell the PRV to the buyer. Pursuant to the PRV Transfer Agreement, the buyer agreed to pay the Company $150.0 million, payable in cash, upon the closing of the sale. The PRV Transfer Agreement contains customary representations, warranties, covenants, and indemnification provisions subject to certain limitations. The transaction remains subject to customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. MIPLYFFA has also been granted orphan medicinal product designation for the treatment of NPC by the European Commission. OLPRUVA® (sodium phenylbutyrate) for oral suspension is approved by the FDA for the treatment of urea cycle disorders ("UCDs"). The Company also has a pipeline of investigational product candidates, including celiprolol for the treatment of vascular Ehlers-Danlos syndrome in patients with a confirmed type III collagen mutation. KP1077 is the Company's clinical development product candidate which is being developed as a treatment for idiopathic hypersomnia ("IH"), a rare neurological sleep disorder, and narcolepsy. KP1077 is comprised solely of serdexmethylphenidate (“SDX”), the Company's proprietary prodrug of d-methylphenidate ("d-MPH"). The FDA has granted KP1077 orphan drug designation for the treatment of IH.

The Company changed its name from KemPharm, Inc. to Zevra Therapeutics, Inc. effective as of February 21, 2023. On March 1, 2023, following its name change, the Company's common stock began trading on the Nasdaq Global Select Market under the ticker symbol "ZVRA".

Basis of Presentation

The Company prepared the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the Company’s opinion, reflect all adjustments, including normal recurring items that are necessary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Merger

On August 30, 2023, the Company and Aspen Z Merger Sub, Inc., a wholly-owned subsidiary of Zevra (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Acer Therapeutics Inc. (“Acer”), a pharmaceutical company focused on development and commercialization of therapies for rare and life-threatening diseases. On November 17, 2023 (the "Closing Date"), the Company completed the acquisition of Acer. Pursuant to the Merger Agreement, on the Closing Date, Merger Sub was merged with and into Acer (the "Merger"), with Acer continuing as the surviving entity and as a wholly-owned subsidiary of Zevra. In connection therewith, Zevra has also purchased Acer’s secured debt from Nantahala Capital Management, LLC ("NCM”), certain of its affiliates and certain other parties (collectively with NCM, “Nantahala”) through a series of transactions and Zevra agreed to provide Acer with a bridge loan facility for up to $18.0 million ("Bridge Loan"), subject to certain terms and conditions. The Merger has expanded Zevra's rare disease portfolio, as well as increased and diversified its revenues with the addition of a U.S. commercial asset, OLPRUVA, indicated for the treatment of UCDs. See Note T for further discussion related to the Merger.

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Registration Statements on Form S-3

In connection with the Merger, Zevra and Nantahala concurrently entered into a registration rights agreement, pursuant to which Zevra agreed to file a resale registration statement with respect to the resale of the Zevra common stock issuable to Nantahala. On February 5, 2024, Zevra filed a registration statement on Form S-3 (File No. 333-276856) registering an aggregate of 2,269,721 shares of Zevra’s common stock. On April 5, 2024, the Company filed an amendment to such registration statement, which was declared effective on April 8, 2024.

On June 4, 2024, the Company filed a registration statement on Form S-3 (File No. 333-279941) (the "June 2024 Registration Statement") under which the Company may sell securities, including as may be issuable upon conversion, redemption, repurchase, exchange or exercise of securities, in one or more offerings up to a total aggregate offering price of $350.0 million, $75.0 million of which was allocated to the sale of the shares of common stock issuable under the 2024 ATM Agreement (as described further below). The registration statement was declared effective on June 13, 2024

August 2024 Offering

On August 8, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald & Co. and William Blair & Company, L.L.C., as representatives of the several underwriters named therein (collectively, the “Underwriters”), in connection with the offering, issuance and sale by the Company of 9,230,770 shares of the Company’s common stock at a public offering price of $6.50 per share, pursuant to the June 2024 Registration Statement and a related prospectus supplement dated August 8, 2024, filed with the SEC (the "August 2024 Offering"). Under the terms of the Underwriting Agreement, the Company also granted the Underwriters an option exercisable for 30 days to purchase up to an additional 1,384,615 shares of its Common Stock at the public offering price, less underwriting discounts and commissions, which the Underwriters exercised in full on August 9, 2024. The August 2024 Offering closed on August 12, 2024. Total shares issued were 10,615,385. Net proceeds from the offering were approximately $64.5 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company intends to use the net proceeds of the offering to support the commercial launch activities for MIPLYFFA, continued commercial support for OLPRUVA and the continued development of celiprolol and KP1077 through potential NDA filings and other general corporate purposes.

Entry into 2024 ATM Agreement

On July 12, 2024, the Company entered into an equity distribution agreement (the "2024 ATM Agreement") with Citizens JMP Securities LLC ("Citizens JMP") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $75.0 million through Citizens JMP as its sales agent. The issuance and sale, if any, of common stock by the Company under the 2024 ATM Agreement will be made pursuant to the June 2024 Registration Statement, the accompanying prospectus, and the related prospectus supplement dated July 12, 2024. Citizens JMP may sell the common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act. Citizens JMP will use commercially reasonable efforts to sell the common stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay Citizens JMP a commission equal to 3.0% in the aggregate of the gross sales proceeds of any common stock sold through Citizens JMP under the 2024 ATM Agreement. As of December 31, 2024, no shares have been issued or sold under the 2024 ATM Agreement.

Termination of 2021 ATM Agreement

On July 2, 2021, the Company entered into an equity distribution agreement (the "2021 ATM Agreement") with JMP Securities LLC ("JMP") and RBC Capital Markets, LLC ("RBCCM") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $75.0 million through JMP and RBCCM as its sales agents. The issuance and sale, if any, of common stock by the Company under the 2021 ATM Agreement was made pursuant to the registration statement on Form S-3 (File No. 333-257661) which was declared effective on July 12, 2021, the accompanying prospectus, and the related prospectus supplement dated July 12, 2021. The 2021 ATM Agreement terminated on July 11, 2024, and no shares had been issued or sold under the 2021 ATM Agreement as of the termination date.

Reclassifications

Certain reclassifications were made to the 2023 consolidated financial statements to conform to the classifications used in 2024. These reclassifications had no impact on the consolidated net loss, changes in stockholder's equity, or cash flows previously reported.

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B. | Summary of Significant Accounting Policies

Use of Estimates

The preparation of these consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the useful lives of property and equipment, the recoverability of long-lived assets, the incremental borrowing rate for leases, and assumptions used for purposes of determining stock-based compensation, income taxes, the fair value of the derivative and warrant liability and discount and rebate liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash on deposit and investments with multiple financial institutions, the balances of which frequently exceed insured limits, and accounts receivable, which are concentrated amongst a limited number of customers.

Cash and Cash Equivalents

The Company considers any highly liquid investments with an original maturity of three months or less to be cash equivalents.

Investments

The Company maintains investment securities that are classified as available-for-sale securities for which the Company has elected the fair value option under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 825, Financial Instruments. As such, these securities are carried at fair value with unrealized gains and losses included in fair value adjustment related to investments on the consolidated statements of operations. The securities primarily consist of U.S. Treasury securities and U.S. government-sponsored agency securities and are included in securities at fair value in the consolidated balance sheets. As of December 31, 2024, and 2023, the Company held securities with an aggregate fair value of $41.7 million and $24.7 million, respectively, that contained aggregate unrealized gains of approximately $18,000 and $0.6 million, respectively. For securities held at December 31, 2024, $35.7 million mature within one year and $6.0 million mature in one to five years. Applying fair value accounting to these debt securities more accurately represents the Company's investment strategy due to the fact that excess cash is currently being invested for the purpose of funding future operation s. I nterest income is recognized as earned using an effective yield method giving effect to the amortization of premium and accretion of discount and is based on the economic life of the securities. Interest income is included in Interest and other income, net in the consolidated statements of operations.

Variable Interest Entities

The primary beneficiary of a variable interest entity ("VIE") is required to consolidate the assets and liabilities of the VIE. When the Company obtains a variable interest in another entity, it assesses at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE, and if so, whether the Company is the primary beneficiary of the VIE based on its power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the Company's obligation to absorb losses or the rights to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, the Company considers all the facts and circumstances, including the Company's role in establishing the VIE and the Company's ongoing rights and responsibilities. The assessment includes identifying the activities that most significantly impact the VIE's economic performance and identifying which party, if any, has the power to direct those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the Board of Directors) are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the rights to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests that are deemed to be variable interests in the VIE.

This assessment requires judgement in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. As of December 31, 2024, and 2023, the Company identified Acer to be the Company's sole interest in a VIE (Note T). As Zevra is the final decision maker for all of Acer's research, development, and commercialization of drug candidates that it is producing, the Company directs the activities of Acer that most significantly impact its performance. Therefore, the Company is the primary beneficiary of this VIE for accounting purposes.

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Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired when accounted for using the acquisition method of accounting for business combinations. Goodwill is not amortized but is evaluated for impairment within the Company’s single reporting unit on an annual basis, during the fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the Company’s reporting unit below its carrying amount. The Company establishes its reporting units based on the organizational structure and has determined it has one reporting unit. In performing its analysis, in accordance with ASC 350, the Company has the option to first assess qualitatively whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. In performing qualitative assessments, the Company considers, among other factors, macroeconomic conditions, the Company’s overall financial performance (including, but not limited to, comparisons to prior periods, current period internal expectations, and comparable peer companies), broader industry and market considerations, and the trading price performance of the Company’s common stock.

The Company's goodwill balance was $4.7 million as of December 31, 2024, and 2023. As of December 31, 2024, and 2023, the Company completed its annual qualitative assessment under ASC 350 to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of its reporting unit was less than its respective carrying value. The Company concluded that based on the relevant events and circumstances, it was more likely than not that the reporting unit’s fair value exceeded its related carrying value and therefore no quantitative assessment was required. No goodwill impairment charges were recorded for the year ended December 31, 2024, or 2023.

Acquired in-process research and development (“IPR&D”) that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility. The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each IPR&D project, the Company will make a determination as to the then-useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated and begin amortization. The Company evaluates IPR&D for impairment on an annual basis, during the fourth quarter, or more frequently if impairment indicators exist. The Company’s IPR&D balance was $2.0 million as of December 31, 2024, and 2023. No IPR&D impairment charges were recognized for the years ended December 31, 2024, or 2023.

As of December 31, 2024, and 2023, the Company had a definite-lived intangible asset, net related to the acquisition of OLPRUVA as a result of the Merger of $61.3 million and $67.2 million, respectively. This asset is amortized on a straight-line basis over the OLPRUVA patent life of thirteen years. Amortization expense is recorded as intangible asset amortization in the consolidated statements of operations and was $5.9 million and $0.8 million for the years ended December 31, 2024, and 2023, respectively. The Company reviews the estimated useful lives of its intangible assets on an ongoing basis (Note S).

In connection with the XOMA License Agreement, the Company paid XOMA a regulatory milestone payment of $6.0 million upon approval of MIPLYFFA in September 2024, which is included in intangible assets, net in the consolidated balance sheet. This definite-lived intangible asset is amortized on a straight-line basis over the MIPLYFFA patent life of approximately five years and is reviewed periodically for impairment. Amortization expense is recorded as intangible asset amortization in the consolidated statement of operations and was $0.3 million for the year ended December 31, 2024.

Property and Equipment

The Company records property and equipment at cost less accumulated depreciation and amortization. Costs of renewals and improvements that extend the useful lives of the assets are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to ten years. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the related lease. Upon retirement or disposition of assets, the costs and related accumulated depreciation and amortization are removed from the accounts with the resulting gains or losses, if any, reflected in the consolidated statements of operations.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying values, an impairment loss is recorded for the difference between the carrying values and fair values of the asset. No such impairment occurred for the years ended December 31, 2024, or 2023.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”) and, as a result, follows the five-step model when recognizing revenue: 1) identifying a contract; 2) identifying the performance obligations; 3) determining the transaction price; 4) allocating the price to the performance obligations; and 5) recognizing revenue when the performance obligations have been fulfilled.

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Product Revenues, Net

Net revenues from product sales are recognized at the transaction price when the customer obtains control of the Company's product, which occurs at a point in time, typically upon receipt of the product by the customer. The Company's current single customer is a specialty pharmacy provider.

The Company's net revenues represent total revenues adjusted for discounts and allowances, including estimated cash discounts, chargebacks, rebates, returns, copay assistance, data fees and wholesaler fees for services. These adjustments represent variable consideration under ASC 606 and are recorded as a reduction of revenue. These adjustments are established by management as its best estimate based on available information and will be adjusted to reflect known changes in the factors that impact such allowances. Adjustments for variable consideration are determined based on the contractual terms with customers, historical trends, communications with customers and the levels of inventory remining in the distribution channel, as well as expectations about the market for the product and anticipated introduction of competitive products.

Licensing Agreements

The terms of the Company’s licensing agreements typically include one or more of the following: (i) upfront fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments may result in licensing revenues.

As part of the accounting for these agreements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price may include such estimates as independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probability of regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the licensee which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.

Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the licensee’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative licensing revenues and earnings in the period of adjustment.

Arimoclomol Expanded Access Program

Net revenue includes revenue from the sale of arimoclomol for the treatment of NPC under the remunerated expanded access compassionate use program in France, Accès Compassionnel (“French AC”). An expanded access compassionate use program is a program giving specific patients access to a drug, which is not yet approved for commercial sale. Only drugs targeting serious or rare indications and for which there is currently no appropriate treatment are considered for expanded access compassionate use programs. Further, to be considered for the expanded access compassionate use program, the drug must have proven efficacy and safety and must either be undergoing price negotiations or seeking marketing approval.

In accordance with ASC 606, the Company recognizes revenue when fulfilling its performance obligation under the Arimoclomol Expanded Access Program ("Arimoclomol EAP") by transferring control of promised goods or services to its customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining when the customer obtains control of the product, the Company considers certain indicators, including whether the Company has a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether customer acceptance has been received. Revenue is recognized net of sales deductions, including discounts, rebates, applicable distributor fees, and revenue-based taxes.

The French Health Authorities and the manufacturer have agreed to a price for sales under the French AC, but the final transaction price depends on the terms and conditions in the contracts with the French Health Authorities, following market approval. Any excess in the price charged by the manufacturer compared to the price agreed with the health authorities once the drug product is approved in France must be repaid. The repayment is considered in the clawback liability (rebate). An estimate of net revenue and clawback liability are recognized using the ‘expected value’ method. Accounting for net revenue and clawback liability requires determination of the most appropriate method for the expected final transaction price. This estimate also requires assumptions with respect to inputs into the method, including current pricing of comparable marketed products within the rare disease area in France. Management has considered the expected final sales price as well as the price of similar drug products. The Company is operating within a rare disease therapeutic area where there is unmet treatment need and hence a limited number of comparable commercialized drug products. The limited available relevant market information for directly comparable commercialized drugs within rare disease increases the uncertainty in management's estimate.

Acquired IPR&D and Milestones Expenses

In an asset acquisition, payments incurred prior to regulatory approval to acquire rights to in-process R&D projects are expensed as acquired IPR&D and milestones expense in the consolidated statements of earnings unless the project has an alternative future use. These costs include upfront and development milestone payments related to R&D collaborations, licensing arrangements, or other asset acquisitions that provide rights to develop, manufacture and/or sell pharmaceutical products. Where contingent development milestone payments are due to third parties, prior to regulatory approval, the payment obligations are expensed when the milestone results are achieved. Regulatory and commercial milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized to intangible asset amortization over the remaining useful life of the related product.

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Inventories

The value of inventories is recorded at net realizable value. The Company determines the cost of its other inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. Inventories that are not expected to be sold within 12 months are classified as Inventories, noncurrent.

The Company may scale-up and make commercial quantities of its product candidates prior to the date it anticipates that such product will receive final regulatory approval. The scale-up and commercial production of pre-launch inventory involves the risk that such products may not be approved for marketing on a timely basis, or ever. This risk notwithstanding, the Company may scale-up and build pre-launch inventory of product that have not received final regulatory approval when the Company believes such action is appropriate in relation to the commercial value of the product launch opportunity. We capitalize inventory costs associated with our products prior to regulatory approval when, based on management's judgment, future commercialization is considered probable and the future economic benefit is expected to be realized; otherwise, such costs are expensed as research and development. The determination to capitalize inventory costs is based on various factors, including status and expectations of the regulatory approval process, any known safety or efficacy concerns, potential labeling restrictions, and any other impediments to obtaining regulatory approval. We had no pre-approval inventory on our consolidated balance sheet as of December 31, 2024, or 2023. Inventory used in clinical trials is also expensed as research and development expense, when selected for such use. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical manufacturing campaign. The cost of finished goods inventory that is shipped to a customer to support the Company’s patient assistance programs is expensed when those shipments take place. As of December 31, 2024, and 2023, the Company did not have pre-launch inventory that qualified for capitalization.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period and writes down any excess and obsolete inventory to its net realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded as a component of cost of product revenue in the statements of operations and comprehensive loss. The determination of whether inventory costs will be realizable requires the use of estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required. Additionally, the Company’s product is subject to strict quality control and monitoring that it performs throughout the manufacturing process. In the event that certain batches or units of product do not meet quality specifications, the Company will record a charge to cost of product revenue, to write-down any unsaleable inventory to its estimated net realizable value. For the year ended December 31, 2024, the Company recognized a charge of approximately $5.7 million related to write-downs for unsaleable inventory. No such write downs were recognized for the year ended December 31, 2023.

Cost of Product Revenue

The components of cost of product revenue are royalties and expenses directly attributable to revenue. To date, the Company has generated revenue from product sales of MIPLYFFA and OLPRUVA, the AZSTARYS License Agreement, sales of arimoclomol under the EAP, reimbursement of out-of-pocket third-party costs and the performance of consulting services. In connection with the AZSTARYS License Agreement, the Company pays Aquestive a royalty equal to 10% of all regulatory milestone and royalty payments. In addition, the Company capitalized incremental costs directly attributable to the AZSTARYS License Agreement. These costs are amortized to royalties and contract costs as revenue is recognized.

Under the XOMA License Agreement, XOMA is entitled to a mid-single digit percentage royalty with respect to net sales of MIPLYFFA. In addition, the Company also pays a low-single digit percentage royalty to Kansas University Center for Technology Commercialization, Inc. with respect to net sales of MIPLYFFA.

Accounts and Other Receivables

Accounts and other receivables consist of receivables from MIPLYFFA and OLPRUVA product sales, receivables under the AZSTARYS License Agreement and the EAP, and income tax receivables and other receivables due to the Company. Receivables under the AZSTARYS License Agreement are recorded for amounts due to the Company related to reimbursable third-party costs as well as milestones and royalties on product sales. Receivables under the EAP are recorded for product sales under the French AC. The Company provides reserves against receivables for estimated losses that may result from a customer's inability to pay. Receivables are evaluated to determine if any reserve or allowance should be recorded based on consideration of the current economic environment, expectations of future economic conditions, specific circumstances and the Company’s own historical collection experience. Amounts determined to be uncollectible are charged or written-off against the reserve.

Research and Development

Major components of research and development costs include cash compensation, stock-based compensation, depreciation and amortization expense on research and development property and equipment, costs of preclinical studies, clinical trials and related clinical manufacturing, costs of drug development, costs of materials and supplies, facilities cost, overhead costs, regulatory and compliance costs, and fees paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf. Costs incurred in research and development are expensed as incurred.

The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses. Prepaid expenses are recognized as expense in the statements of operations as the Company receives the related goods or services.

The Company enters into contractual agreements with third-party vendors who provide research and development, manufacturing, and other services in the ordinary course of business. Some of these contracts are subject to milestone-based invoicing and services are completed over an extended period of time. The Company records liabilities under these contractual commitments when an obligation has been incurred. This accrual process involves reviewing open contracts and purchase orders, communicating with the applicable personnel to identify services that have been performed and estimating the level of service performed and the associated cost when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of the service providers invoice the Company monthly in arrears for services performed. The Company makes estimates of the accrued expenses as of each balance sheet date based on the facts and circumstances known. The Company periodically confirms the accuracy of the estimates with the service providers and make adjustments, if necessary.

Patent Costs

Patent costs, including related legal costs, are expensed as incurred and recorded within general and administrative expenses on the statements of operations.

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Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. Valuation allowances are recorded to reduce deferred tax assets to the amount the Company believes is more likely than not to be realized.

Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company recognizes interest and penalties, if any, related to unrecognized income tax uncertainties in income tax expense. The Company did not have any accrued interest or penalties associated with uncertain tax positions as of December 31, 2024 and 2023.

The Company files income tax returns in the United States for federal and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state and local income tax examinations for years prior to 2015, although carryforward attributes that were generated prior to 2017 may still be adjusted upon examination by the Internal Revenue Service if used in a future period. No income tax returns are currently under examination by taxing authorities.

On December 22, 2017, the U.S. government enacted H.R. 1, “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” ("Ta x Act"). Effective January 1, 2018, the Tax Act provides for a new global intangible low-taxed income ("GILTI") provision. Under the GILTI provision, certain foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets are included in U.S. taxable income. The Company has not recorded any deferred taxes for future GILTI inclusions as any future inclusions are expected to be treated as a period expense and offset by net operating loss carryforwards in the U.S.

Stock-Based Compensation

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, officers and directors based on the estimated fair values of the awards as of the grant date. The Company records the value of the portion of the award that is ultimately expected to vest as expense over the requisite service period. The Company also accounts for equity instruments issued to non-employees using a fair value approach under Accounting Standards Codification ("ASC") subtopic 505-50. The Company values equity instruments and stock options granted using the Black-Scholes option pricing model.

Basic and Diluted Net Loss per Share of Common Stock

The Company uses the two-class method to compute net loss per common share because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Holders of each series of the Company’s convertible preferred stock and select warrants are entitled to participate in distributions, when and if declared by the board of directors, that are made to common stockholders and, as a result, are considered participating securities.

Segment and Geographic Information

Operating segments are defined as components of an enterprise (business activity from which it earns revenue and incurs expenses) for which discrete financial information is available and regularly reviewed by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company views its operations and manages its business as a single operating and reporting segment. The Company holds long-lived assets in the United States of $13.4 million and $10.9 million as of December 31, 2024 and 2023 respectively. The Company holds long-lived assets in Europe of $0.5 million as of both December 31, 2024 and 2023

Foreign currency

Assets and liabilities are translated into the reporting currency using the exchange rates in effect on the consolidated balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the year, which is the result of the income statement translation process. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other comprehensive income/loss in the accompanying consolidated statements of stockholders’ equity.

Debt Issuance Costs

Debt issuance costs incurred in connection with financing arrangements are recorded as a reduction of the related debt on the balance sheet and amortized over the life of the respective financing arrangement using the effective interest method.

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Warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480) and FASB ASC Topic 815, Derivatives and Hedging (ASC 815). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For warrants that meet all criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital, on the consolidated statement of stockholders’ deficit at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in other expense, net, on the consolidated statement of operations. The fair value of the warrants was estimated using the Black-Scholes option pricing model.

New Accounting Pronouncements Recently Adopted

Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard expands reportable segment disclosure requirements for public business entities primarily through expanded disclosures about significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit and loss. The Company adopted this standard for its fiscal year 2024 annual financial statements and have applied this standard retrospectively for all prior periods presented in the financial statements. See Note C for further information.

New Accounting Pronouncements Not Yet Adopted

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.

C. | Segment Information

Zevra manages its business activities on a consolidated basis and operates as a single operating segment dedicated to the research and development, manufacturing, commercialization and sale of innovative medicines and therapies. The Company primarily derives its revenue from reimbursements received from the EAP, AZSTARYS License Agreement, OLPRUVA product sales, MIPLYFFA product sales, and consulting arrangements. The accounting policies of the segment are the same as those described in Note B.

Zevra's CODM is the Company's Chief Executive Officer, Neil F. McFarlane. The CODM uses net loss, as reported in the Company's Consolidated Statements of Comprehensive Loss, in evaluating performance of its segment and determining how to allocate resources of the Company as a whole, including investing in its research and development, commercialization efforts, and acquisition strategy. The CODM does not review assets in evaluating the results of the segment, and therefore, such information is not presented.

The following table presents the operating results of the Company's segment:

|  | December 31, |  |  | December 31, |
|  | 2024 |  |  | 2023 |
Total revenues |  | $ | 23,612 |  |  | $ | 27,461 |
Less significant segment expenses: |  |  |  |  |  |  |  |
Research and development directly identified to programs |  |  | 22,532 |  |  |  | 30,083 |
Research and development not directly identified to programs |  |  | 19,562 |  |  |  | 9,723 |
Selling, general and administrative directly identified to programs |  |  | 18,094 |  |  |  | 7,770 |
Selling, general and administrative not directly identified to programs |  |  | 36,775 |  |  |  | 26,544 |
Other segment items: |  |  |  |  |  |  |  |
Income tax expense |  |  | 15,371 |  |  |  | - |
Interest income |  |  | (3,159 | ) |  |  | (4,527 | )
Depreciation and amortization expense |  |  | 6,389 |  |  |  | 1,006 |
Interest expense |  |  | 7,351 |  |  |  | 1,501 |
Other expense, net(a) |  |  | 6,208 |  |  |  | 1,410 |
Segment net loss |  | $ | (105,511 | ) |  | $ | (46,049 | )

(a) Other expense, net included in segment net loss includes foreign currency exchange gains and losses, cost of product revenue (excluding intangible asset amortization), fair value adjustment related to warrant and CVR liabilities, fair value adjustment related to investments, and other overhead expense.

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D. | Inventories

The components of inventory are summarized as follows (in thousands):

|  | December 31, 2024 |  |  | December 31, 2023
Raw Materials |  | $ | 7,928 |  |  | $ | 2,938
Work in progress |  |  | 3,260 |  |  |  | 1,884
Finished goods |  |  | 1,781 |  |  |  | 5,019
Total inventories |  | $ | 12,969 |  |  | $ | 9,841

E. | Accounts and Other Receivables

Accounts and other receivables consist of the following (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Accounts receivable |  | $ | 10,176 |  |  | $ | 16,119 |
Other receivables |  |  | 333 |  |  |  | 1,258 |
Total accounts and other receivables |  | $ | 10,509 |  |  | $ | 17,377 |

F. | Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Prepaid insurance |  | $ | 1,037 |  |  | $ | 1,172 |
Other prepaid expenses and current assets |  |  | 3,015 |  |  |  | 652 |
Total prepaid expenses and other current assets |  | $ | 4,052 |  |  | $ | 1,824 |

G. | Property and Equipment

Property and equipment consists of the following (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Laboratory equipment |  | $ | 463 |  |  | $ | 711 |
Furniture and office equipment |  |  | 200 |  |  |  | 157 |
Computers and hardware |  |  | 701 |  |  |  | 643 |
Leasehold improvements |  |  | 710 |  |  |  | 710 |
Finance lease right-of-use assets |  |  | 8 |  |  |  | 149 |
Total property and equipment |  |  | 2,082 |  |  |  | 2,370 |
Less: accumulated depreciation and amortization |  |  | (1,726 | ) |  |  | (1,634 | )
Property and equipment, net |  | $ | 356 |  |  | $ | 736 |

The estimated useful lives of property and equipment are as follows:

|  | Useful Life |
Asset Category |  | (in years) |
Laboratory equipment |  |  | 10 |
Furniture and office equipment |  |  | 5 - 10 |
Computers and hardware |  |  | 3 - 7 |
Leasehold improvements |  |  | 9 |

Depreciation and amortization expense, including amounts pertaining to assets held under finance leases, was approximately $208,000 and $245,000 for the years ended December 31, 2024 and 2023, respectively.

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H. | Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Accrued payroll |  |  | 6,126 |  |  |  | 10,671 |
Accrued professional fees |  |  | 863 |  |  |  | 675 |
Accounts payable |  |  | 13,075 |  |  |  | 13,987 |
Other accrued expenses |  |  | 5,392 |  |  |  | 3,070 |
Total accounts payable and accrued expenses |  | $ | 25,456 |  |  | $ | 28,403 |

I. | Debt Obligations

Secured Promissory Note

In connection with the Merger (Note T), on August 30, 2023, the Company and Nantahala, entered into a secured promissory note payable by Zevra to Nantahala in the original principal amount of $5.0 million (the "Nantahala Note"). The Nantahala Note initially bore interest at 9.0% per annum, payable quarterly in arrears in cash. The interest rate increased to 12.0% per annum effective March 1, 2024, as the Nantahala Note remained unpaid six months from its issue date. The additional 3.0% interest would have been paid in shares of Zevra's common stock based on the volume weighted average trading price ("VWAP") of Zevra's common stock during the twenty consecutive trading days ending on the date before such interest payment date. Beginning on the first interest payment date following the second anniversary of the Nantahala Note, and on each interest payment date thereafter, Zevra was required to make $0.6 million amortization payments on the Nantahala Note until it was paid in full. All principal and unpaid interest on the Nantahala Note would have been due on August 30, 2026, the third anniversary of the Nantahala Note. Zevra was entitled to prepay the Nantahala Note at any time without penalty. The Nantahala Note was secured by Zevra’s interest in (i) the loan assets under the Loan Purchase Agreement described in Not e T; (ii) the note assets under the Note Purchase Agreement described in Note T; (iii) the Bridge Loan described in Note T; and (iv) the proceeds therefrom. The Company used the proceeds from the Nantahala Note, along with $12.0 million in cash and 98,683 shares of Zevra's common stock, to acquire Acer's term loans, as more fully described in Not e T. In April 2024, the Nantahala Note was repaid in full and terminated. At the time of repayment, Nantahala elected to receive a cash payment in lieu of shares of Zevra's common stock in exchange for the additional 3.0% interest accrued for the period from March 1, 2024, through April 5, 2024.

Margin Account

On January 26, 2023, the Company and Wells Fargo, as lender, entered into a revolving margin account agreement. The Company's investments were used as collateral for the loan and the amount the Company was able to borrow was limited to 80-90% of its outstanding investment balance held with Wells Fargo. The margin account bore interest at the Prime rate minus 225 basis-points. As of December 31, 2023, $37.7 million was outstanding under the margin account. The margin loan was included in current liabilities as of December 31, 2023, as the Company expected the outstanding balance to be due and payable in 2024 based on the anticipated level of investment balance expected to be available over the course of fiscal year 2024 to meet the Collateral Requirement. In April 2024, the Company repaid the outstanding balance under the margin account with Wells Fargo, and upon such repayment, the margin capabilities were removed from the account.

Term Loans

On April 5, 2024 (the "Term Loans Closing Date"), the Company entered into a credit agreement (the “Credit Agreement”) with HCR Stafford Fund II, L.P., HCR Potomac Fund II, L.P., and Perceptive Credit Holdings IV, LP (collectively, the “Lenders”), and Alter Domus (US) LLC, as administrative agent (the “Administrative Agent”).

Under the terms of the Credit Agreement, the Lenders provided a senior secured loan facility to the Company in the aggregate principal amount of $100.0 million, which is divided into three tranches as follows: (i) $60.0 million which was funded in full on the Term Loans Closing Date; (ii) $20.0 million which is available to the Company in up to two drawings, each in an amount not to exceed $10.0 million, at the Company’s option until 18 months following the Term Loans Closing Date; and (iii) $20.0 million which is available to the Company upon approval by the FDA of the NDA for MIPLYFFA for the treatment of NPC, at the Company’s option until December 31, 2024 (collectively, the “Term Loans”).

The principal amount of the Term Loans outstanding (the “Outstanding Principal Amount”) will bear interest at a rate equal to 3-Month Term SOFR plus 7.00% per annum. If the net product sales for the calendar year ending December 31, 2025, exceed $100.0 million, the Outstanding Principal Amount will bear interest at 3-Month Term SOFR plus 6.00% per annum. If the net product sales for the calendar year ending December 31, 2025, do not exceed $100.0 million, then for any subsequent period of four consecutive fiscal quarters ending on or after March 31, 2026, in which net product sales exceed $125.0 million, the Outstanding Principal Amount will bear interest at 3-Month Term SOFR plus 6.50% per annum. In all cases, the 3-Month Term SOFR rate will be subject to a floor of 4.00% per annum. Interest will be payable quarterly in arrears on the last day of each calendar quarter. The Company has the option to pay up to 25% of the interest in-kind beginning on the Term Loans Closing Date, through and including June 30, 2026. The Company has recognized approximately $1.4 million of interest-in-kind as of December 31, 2024, which is included in long-term debt in the consolidated balance sheet. The Term Loans will mature on the fifth anniversary of the Term Loans Closing Date. In connection with the Credit Agreement, the Company incurred approximately $2.2 million of costs, which primarily consisted of underwriting, legal and other professional fees, and are included as a reduction to the carrying amount of the related debt liability and are deferred and amortized over the remaining life of the financing using the effective interest method.

The Credit Agreement contains customary affirmative and negative covenants by the Company, which among other things, will require the Company to provide certain financial reports to the Lenders within 60 days after the end of each of the first three fiscal quarters of each fiscal year and 105 days after the end of each fiscal year, meet certain minimum net product sales amounts, and limit the ability of the Company to incur or guarantee additional indebtedness, engage in certain transactions, and effect a consolidation or merger without consent. In addition, as long as the line of credit remains active, the Company must maintain a minimum cash balance of $20.0 million to ensure the Company can meet its immediate capital needs. The obligations of the Company under the Credit Agreement may be accelerated upon customary events of default, including non-payment of principal, interest, fees and other amounts, covenant defaults, insolvency, material judgments, or inaccuracy of representations and warranties. The Term Loans are secured by a first priority perfected lien on, and security interest in, substantially all current and future assets of the Company. The proceeds of the Term Loans were used to refinance certain existing indebtedness of the Company and its subsidiaries. The Company will use the remaining proceeds to pay fees and expenses related to the debt financing and fund the development and commercialization of OLPRUVA and MIPLYFFA.

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Long-term debt consisted of the following (in thousands):

|  | December 31, 2024 |  |  | December 31, 202 3 |
Notes payable | $ | 61,552 |  |  | $ | — |  |  |
Secured promissory note |  | — |  |  |  | 5,000 |  |  |
Unamortized original issue (discount) premium |  | (921) |  |  |  | 148 |  |  |
Less: debt issuance costs |  | (1,127) |  |  |  | (82) |  |  |
| $ | 59,504 |  |  | $ | 5,066 |  |  |

Future minimum principal payments under the secured promissory note as of December 31, 2024, were as follows (in thousands):

Year Ending December 31, 2024 |  |  | December 31, 2024 |
2025 |  | $ | — |
2026 |  |  | — |
2027 |  |  | — |
2028 |  |  | — |
2029 |  |  | 61,552 |
Total minimum payments |  |  | 61,552 |
Less: unamortized debt discount and debt issuance costs |  |  | (2,048) |
Long-term debt |  | $ | 59,504 |

J. | Revenue, net

Licensing Agreements

AZSTARYS License Agreement

The Company entered into a Collaboration and License Agreement (the “AZSTARYS License Agreement”) with Commave Therapeutics SA (formerly known as Boston Pharmaceutical S.A.) ("Commave"), an affiliate of Gurnet Point Capital, L.P., dated September 3, 2019. Under the AZSTARYS License Agreement, as amended, the Company granted to Commave an exclusive, worldwide license to develop, manufacture and commercialize the Company’s product candidates containing SDX and d-MPH, including AZSTARYS, or any other product candidates containing SDX and developed to treat ADHD or any other central nervous system disorder. Corium Inc. was tasked by Commave to lead all commercialization activities for AZSTARYS under the AZSTARYS License Agreement. Pursuant to the AZSTARYS License Agreement, Commave agreed to pay milestone payments up to an aggregate of $590.0 million upon the occurrence of specified regulatory milestones related to AZSTARYS, additional fixed payments upon the achievement of specified U.S. sales milestones, and quarterly, tiered royalty payments based on a range of percentages of net sales (as defined in the AZSTARYS License Agreement). Commave is obligated to make such royalty payments on a product-by-product basis until expiration of the royalty term for the applicable product.

The Company concluded that these regulatory milestones, sales milestones and royalty payments each contain a significant uncertainty associated with a future event. As such, these milestone and royalty payments are constrained at contract inception and are not included in the transaction price as the Company could not conclude that it is probable a significant reversal in the amount of cumulative revenue recognized will not occur surrounding these milestone payments. At the end of each reporting period, the Company updates its assessment of whether the milestone and royalty payments are constrained by considering both the likelihood and magnitude of the potential revenue reversal. For the year ended December 31, 2024, the Company recognized $4.3 million of revenue under the AZSTARYS License Agreement, respectively, primarily related to royalties. For the year ended December 31, 2023, the Company recognized revenue under the AZSTARYS License Agreement of $18.5 million, which includes $15.0 million in net sales milestone payments earned during the year then ended. There was no deferred revenue related to this agreement as of December 31, 2024, and 2023. All revenues recognized under this agreement derived in the United States.

In accordance with the terms of the Company’s Termination Agreement with Aquestive Therapeutics ("Aquestive") dated March 20, 2012, Aquestive has the right to receive an amount equal to 10% of any royalty or milestone payments made to the Company related to AZSTARYS or KP1077 under the AZSTARYS License Agreement.

The AZSTARYS License Agreement is within the scope of ASC 606, as the transaction represents a contract with a customer where the participants function in a customer / vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated under the AZSTARYS License Agreement.

Relief Exclusive License Agreement

As a condition to entering into the Merger Agreement, Acer and Relief Therapeutics SA ("Relief") entered into an exclusive license agreement on August 30, 2023 (the “Relief License Agreement”). Pursuant to the Relief License Agreement, Relief will hold exclusive development and commercialization rights for OLPRUVA in the European Union, Liechtenstein, San Marino, Vatican City, Norway, Iceland, Principality of Monaco, Andorra, Gibraltar, Switzerland, United Kingdom, Albania, Bosnia, Kosovo, Montenegro, Serbia and North Macedonia ("Geographical Europe"). The Company will have the right to receive a royalty of up to 10% of the net sales of OLPRUVA in Geographical Europe. For the year ended December 31, 2024, the Company did not recognize any revenue under the Relief License Agreement. There was no deferred revenue related to this agreement as of December 31, 2024, and 2023. For further discussion of the Relief License Agreement, see Note T.
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Product Revenues, Net

Expanded Access Program

Net revenue includes revenue from the sale of arimoclomol for the treatment of NPC under the remunerated expanded access compassionate use program in France, Accès Compassionnnel (“French AC”). An expanded access compassionate use program is a program giving specific patients access to a drug, which is not yet approved for commercial sale. Only drugs targeting serious or rare indications and for which there is currently no appropriate treatment are considered for expanded access compassionate use programs. Further, to be considered for the expanded access compassionate use program, the drug must have proven efficacy and safety and must either be undergoing price negotiations or seeking marketing approval.

In accordance with ASC 606, the Company recognizes revenue when fulfilling its performance obligation under the Expanded Access Program ("EAP") by transferring control of promised goods or services to its customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining when the customer obtains control of the product, the Company considers certain indicators, including whether the Company has a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether the customer acceptance has been received. Revenue is recognized net of sales deductions, including discounts, rebates, applicable distributor fees, and revenue-based taxes.

The French Health Authorities and the manufacturer have agreed to a price for sales under the French AC, but the final transaction price depends on the terms and conditions in the contracts with the French Health Authorities and is subject to price negotiations with the French Health Authorities following market approval. Any excess in the price charged the manufacturer compared to the price agreed with the health authorities once the drug product is approved in France must be repaid. The repayment is considered in the clawback liability (rebate). An estimate of net revenue and clawback liability are recognized using the ‘expected value’ method. Accounting for net revenue and clawback liability requires determination of the most appropriate method for the expected final transaction price. This estimate also requires assumptions with respect to inputs into the method, including current pricing of comparable marketed products within the rare disease area in France. Management has considered the expected final sales price as well as the price of similar drug products. The Company is operating within a rare disease therapeutic area where there is unmet treatment need and hence a limited number of comparable commercialized drugs products. The limited available relevant market information for directly comparable commercialized drugs within rare disease increases the uncertainty in management's estimate.

For the years ended December 31, 2024, and 2023, the Company recognized revenue related to the EAP in France of $9.1 million and $8.7 million, respectively, which is net of a clawback liability of $ 5.7 million and $5 .1 million, respectively, and other gross to net adjustments. The total estimated reserve liability as of December 31, 2024, and 2023 was $12 .6 million and $12.2 million, respectively. As of December 31, 2024, and 2023, this estimated reserve liability is recorded as discount and rebate liabilities in the consolidated balance sheets and is separated into current and long-term based upon the timing of the expected payment to the French regulators.

Product Sales

On December 27, 2022, the FDA approved OLPRUVA (sodium phenylbutyrate), a prescription medicine used along with certain therapy, including changes in diet, for the long-term management of adults and children with UCDs weighing 44 pounds (20 kg) or greater and with a body surface area of 1.2m2 or greater. On November 17, 2023, the Company acquired OLPRUVA in connection with the Merger (Note T). For the year ended December 31, 2024, sales of OLPRUVA were $0.1 million. For the year ended December 31, 2023, there were no sales of OLPRUVA.

On September 20, 2024, the NDA for MIPLYFFA, an orally-delivered treatment for NPC, which is an ultra-rare and progressive neurodegenerative disease, was approved. For the year ended December 31, 2024, net sales of MIPLYFFA were $10.1 million.

The Company currently utilizes a single specialty pharmacy provider as its sole distributor for both OLPRUVA and MIPLYFFA. The Company also enters into arrangements with health care providers and payors that provide for government mandated and/or privately negotiated rebates with respect to the purchase of its products. To commercialize OLPRUVA for oral suspension and MIPLYFFA in the U.S., the Company has built marketing, sales, medical affairs, distribution, managerial and other non-technical capabilities or is making arrangements with third parties to perform these services. All revenues derived from sales of OLPRUVA and MIPLYFFA are in the United States.

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K. | Commitments and Contingencies

Legal Matters

From time to time, the Company is involved in various legal proceedings arising in the normal course of business. For some matters, a liability is not probable, or the amount cannot be reasonably estimated and, therefore, an accrual has not been made. However, for such matters when it is probable that the Company has incurred a liability and can reasonably estimate the amount, the Company accrues and discloses such estimates.

Stockholder Litigation Related to the Merger

On October 12, 2023, Brodsky & Smith, purporting to act as counsel for Jerry Beavee, who was asserted to be a stockholder of Acer, filed a complaint entitled Jerry Beavee v. Acer Therapeutics Inc., et al., No. 1:23-cv-08995 in the United States District Court for the Southern District of New York (the "Action") alleging that defendants violated Section 14(a) and 20(a) of the Securities Exchange Act of 1934 by filing the Preliminary Merger Registration Statement which allegedly omitted certain information that such counsel asserts is material to Acer’s required disclosure.

On October 30, 2023, Acer filed with the SEC a Schedule DEF14A that contained additional information regarding the Merger, which mooted the disclosure claims alleged in the Action. On December 8, 2023, Jerry Beavee filed with the court a notice of dismissal of the Action without prejudice.

On October 20, 2023, Long Law, LLC and Acocelli Law, PLLC, purporting to act as counsel for Kevin Turner, who was asserted to be a stockholder of Acer, filed a complaint entitled Kevin Turner v. Acer Therapeutics Inc., et al., No. 1:23-cv-01185 in the United States District Court for the District of Delaware alleging that defendants violated Section 14(a) and 20(a) of the Securities Exchange Act of 1934 as well as SEC Rule 14a-9 by filing the Definitive Proxy Statement which allegedly omitted certain information that such counsel asserts is material to Acer’s required disclosure. The complaint prays that, if asserted omissions are not adequately corrected, then Turner will seek to enjoin Acer from holding a stockholder meeting to approve the Merger and, if the Merger closes, will seek to rescind it and seek an award of damages.

On October 20, 2023, Long Law, LLC, purporting to act as counsel for Matthew Jones, who was asserted to be a stockholder of Acer, filed a complaint entitled Matthew Jones v. Acer Therapeutics Inc., et al., No. 1:23-cv-01186 in the United States District Court for the District of Delaware alleging that defendants violated Section 14(a) and 20(a) of the Securities Exchange Act of 1934 as well as SEC Rule 14a-9 by filing the Definitive Proxy Statement which allegedly omitted certain information that such counsel asserts is material to the Acer’s required disclosure. The complaint prays that, if asserted omissions are not adequately corrected, then Jones will seek to enjoin Acer from holding a stockholder meeting to approve the Merger and, if the Merger closes, will seek to rescind it and seek an award of damages.

On June 19, 2024, the Company entered into a confidential fee agreement (the "Fee Agreement") to settle the above stockholder litigation matters related to the Merger. The parties to the Fee Agreement were entitled to an aggregate payment of approximately $0.3 million, which was paid during the second quarter of 2024.

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Litigation Related to the AZSTARYS License Agreement

In September 2024, the Company became engaged in a legal dispute regarding the AZSTARYS License Agreement. The litigation is in its early stages. The Company cannot predict with certainty the timing or ultimate outcome of this litigation or its potential impact on the Company's business, financial condition, or results of operations. At this time, the Company has not recorded any accrual for contingent liability associated with this matter. The AZSTARYS License Agreement remains in effect during this litigation, and both parties continue to perform their respective obligations thereunder. However, there can be no assurance that this dispute will not have an adverse impact on the Company's relationship with Commave or on the Company's business. The Company will continue to monitor developments in this matter and will assess the potential impact on the Company's financial statements in future periods. The Company expects to incur significant legal expenses in connection with this litigation, which may materially affect its results of operations in future periods.

As of December 31, 2024, and December 31, 2023, no accruals were made related to commitments and contingencies.

L. | Stock and Warrants

Authorized, Issued, and Outstanding Common Shares

As of December 31, 2024, and 2023, the Company had authorized shares of common stock of 250,000,000 shares. Of the authorized shares, 55,246,401 and 43,110,360 shares of common stock were issued as of December 31, 2024, and 2023, respectively, and 53,670,709 and 41,534,668 shares of common stock were outstanding as of December 31, 2024, and 2023, respectively.

As of December 31, 2024, and 2023, the Company had reserved authorized shares of common stock for future issuance as follows:

|  | December 31, |
|  | 2024 |  |  | 2023 |
Outstanding awards under equity incentive plans |  |  | 7,789,658 |  |  |  | 8,023,142 |
Outstanding common stock warrants |  |  | 5,483,537 |  |  |  | 5,603,729 |
Possible future issuances under equity incentive plans |  |  | 5,383,165 |  |  |  | 1,728,885 |
Possible future issuances under employee stock purchase plan |  |  | 1,148,012 |  |  |  | 1,340,172 |
Total common shares reserved for future issuance |  |  | 19,804,372 |  |  |  | 16,695,928 |

Common Stock Activity

The following table summarizes common stock activity for the years ended December 31, 2024 and 2023:

|  | Shares of |
|  | Common Stock |
Balance as of January 1, 2023 |  |  | 34,540,304 |
Common stock issued as compensation to third-parties |  |  | 44,791 |
Common stock issued as a result of stock warrants exercised |  |  | 110 |
Common stock issued as a result of stock options exercised |  |  | 7,500 |
Common stock repurchased as a result of the Stock Repurchase Program |  |  | (665,739 | )
Common stock issued in connection with the Merger (Note T) |  |  | 7,530,509 |
Common stock issued as a result of the Employee Stock Purchase Plan |  |  | 77,193 |
Balance as of December 31, 2023 |  |  | 41,534,668 |
Common stock issued in connection with the Public Offering (Note B) |  |  | 10,615,385 |
Common stock issued in connection with restricted stock units |  |  | 218,000 |
Common stock issued as compensation to third-parties |  |  | 92,988 |
Common stock issued in connection with vesting of performance-based awards |  |  | 547,945 |
Common stock issued as a result of stock options exercised |  |  | 469,563 |
Common stock issued as a result of the Employee Stock Purchase Plan |  |  | 192,160 |
Balance as of December 31, 2024 |  |  | 53,670,709 |

Authorized, Issued, and Outstanding Preferred Stock

As of December 31, 2024, and 2023, the Company had 10,000,000 shares of authorized, unallocated and unissued preferred stock. As of December 31, 2024, and 2023, no shares of preferred stock were designated, issued or outstanding.

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Warrants to Purchase Common Stock

The Company has issued warrants to purchase common stock to various third parties, of which 5,483,537 remain outstanding as of December 31, 2024, and are immediately exercisable. These warrants qualify as participating securities under ASC Topic 260, Earnings per Share, and are treated as such in the net loss per share calculation (Note P). The Company may be required to redeem these warrants for a cash amount equal to the Black-Scholes value of the portion of the warrants to be redeemed (the “Put Option”).

In connection with the Merger (Note T), in November 2023, the Company directly issued to certain investors an aggregate of 1,382,489 shares of its common stock, par value $0.0001 per share, and accompanying warrants to purchase up to 1,382,489 shares of its common stock (the "2023 Warrants") at a combined offering price of $4.34 per share of common stock and the Warrants and an aggregate of 917,934 shares of its common stock in exchange for the cancellation of a warrant to purchase 2,920,306 shares of common stock of Acer. The Warrants are immediately exercisable and expire on November 22, 2028. The Company used the net proceeds of approximately $6.0 million from the offering for general corporate purposes. These warrants are separately exercisable by the warrant holders. While the warrants are outstanding (but unexercised), the warrant holders will participate in any dividend or other distribution of the Company’s assets to its common stockholders by way of return of capital or otherwise. As of December 31, 2024, and December 31, 2023, none of the warrants have been exercised. The warrants have been evaluated to determine the appropriate accounting and classification pursuant to ASC 480 and ASC 815. Generally, freestanding warrants should be classified as (i) liabilities if the warrant terms allow settlement of the warrant exercise in cash and (ii) equity if the warrant terms only allow settlement in shares of common stock.

The Company determined that its outstanding warrants and the Put Option should be recorded as a liability and stated at fair value at each reporting period. Changes to the fair value of the warrant liability are recorded through the consolidated statements of operations as a fair value adjustment related to warrant and CVR liability. As of December 31, 2024, and December 31, 2023, the fair value of the liability associated with these warrants and the Put Option was approximately $17.8 million and $16.1 million, respectively. The fair value adjustment related to these warrants and the Put Option was approximately $1.7 million of loss and ($1.4) million of income for the years ended December 31, 2024, and 2023, respectively.

M. | Stock-Based Compensation

The Company maintains a stock-based compensation plan (the “Incentive Stock Plan”) that governs stock awards made to employees and directors prior to completion of the IPO.

In November 2014, the Board of Directors of the Company ("the Board"), and in April 2015, the Company’s stockholders, approved the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which became effective in April 2015. The 2014 Plan provides for the grant of stock options, other forms of equity compensation, and performance cash awards. In June 2021, the Company's stockholders approved an Amended and Restated 2014 Equity Incentive Plan (the "A&R 2014 Plan"), following its adoption by the Board in April 2021, which among other things added 4,900,000 shares to the maximum number of shares of common stock to be issued under the plan and extended the annual automatic increases (discussed further below) until January 1, 2031 and eliminated individual grant limits that applied under the 2014 Plan to awards that were intended to comply with the exemption for "performance-based compensation" under Code Section 162(m). The maximum number of shares of common stock that may be issued under the A&R 2014 Plan was 9,932,883 as of December 31, 2024. The number of shares of common stock reserved for issuance under the A&R 2014 Plan will automatically increase on January 1 of each year, beginning on January 1, 2016, and ending on and including January 1, 2031, by 4% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Board. Pursuant to the terms of the A&R 2014 Plan, on January 1, 2025, the common stock reserved for issuance under the A&R 2014 Plan automatically increased by 2,146,828 shares.

During the years ended December 31, 2024, and 2023, 1,177,545 and 7,500 stock options were exercised, respectively.

In January 2023, the Board approved the 2023 Employment Inducement Award Plan (as amended, the “2023 Plan”). The maximum number of shares of common stock that may be issued under the 2023 Plan is 4,500,000 as of December 31, 2024.

Stock-based compensation expense recorded under the Incentive Stock Plan, A&R 2014 Plan, and 2023 Plan is included in the following line items in the accompanying consolidated statements of operations (in thousands):

|  | Year ended December 31, |
|  | 2024 |  |  | 2023 |
Research and development |  | $ | 5,819 |  |  | $ | 2,664 |
General and administrative |  |  | 9,087 |  |  |  | 3,290 |
Total stock-based compensation expense |  | $ | 14,906 |  |  | $ | 5,954 |

There was $2.5 million of stock-based compensation expense related to performance-based awards recognized during the year ended December 31, 2024. There was no stock-based compensation expense related to performance-based awards recognized during the year ended December 31, 2023.

As a result of transition agreements entered into with certain former employees, the vesting for certain stock options was accelerated, resulting in a net increase in stock-based compensation expense of $2.4 million for the year ended December 31, 2024. The effects of this accelerated vesting are reflected in the table above within research and development expenses.

As a result of transition agreements entered into with certain former employees, certain stock options were modified, resulting in a net decrease in stock-based compensation expense of $1.2 million for the year ended December 31, 2023. The effects of those modifications are reflected in the table above within selling, general, and administrative expenses.

In June 2021, the Company's stockholders approved an Employee Stock Purchase Plan (the "ESPP"), following its adoption by the Board in April 2021. The maximum number of shares of common stock that may be issued under the ESPP is 1,500,000. The first offering period under the ESPP began on October 1, 2021, and the first purchase date occurred on May 31, 2022. As of December 31, 2024, 351,988 shares have been issued under the ESPP.

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Stock Option Awards

The Company estimates the fair value of stock options using the Black-Scholes option-pricing model, which requires the use of subjective assumptions, including the expected term of the option, the expected stock price volatility, expected dividend yield and the risk-free interest rate for the expected term of the option. The expected term represents the period of time the stock options are expected to be outstanding. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, the Company uses the simplified method to estimate the expected term for its “plain vanilla” stock options. Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. Some options, for example those that have exercise prices in excess of the fair value of the underlying stock, are not considered “plain vanilla” stock options. For these options, the Company uses an expected term equal to the contractual term of the option. Expected volatility is based on the Company’s historical volatility over the estimated expected term of the stock options. The Company assumes no dividend yield because dividends are not expected to be paid in the near future, which is consistent with the Company’s history of not paying dividends.

The Company recognizes compensation expense related to stock-based payment transactions upon satisfaction of the requisite service or vesting requirements. Forfeitures are estimated at the time of grant and revised based on actual forfeitures, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Using the Black-Scholes option-pricing model, the weighted-average fair value of awards granted during the years ended December 31, 2024, and 2023, fair value was $5.74 and $3.65 per share, respectively. The assumptions used to estimate fair value are as follows:

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Risk-free interest rate |  |  | 3.82% - 4.50% |  |  |  | 3.34% - 4.79% |
Expected term (in years) |  |  | 5.50 - 6.25 |  |  |  | 5.50 - 10.00 |
Expected volatility |  |  | 89.85% - 91.32% |  |  |  | 89.48% - 93.67% |
Expected dividend yield |  |  | 0 |  |  |  | 0 |

The activity under the Incentive Stock Plan, A&R 2014 Plan, and 2023 Plan for the year ended December 31, 2024, is summarized as follows:

|  |  |  |  |  | Weighted |  |  | Weighted Avg |  |  | Aggregate |
|  | Number of |  |  | Average |  |  | Remaining |  |  | Intrinsic |
|  | Options |  |  | Exercise Price |  |  | Contractual Term |  |  | Value |
Outstanding balance at January 1, 2024 |  |  | 7,275,197 |  |  | $ | 8.40 |  |  |  | 8.68 |  |  | $ | 11,089 |
Granted |  |  | 962,700 |  |  | $ | 5.74 |  |  |  | - |  |  |  | - |
Exercised or released |  |  | 1,162,705 |  |  | $ | 5.30 |  |  |  | - |  |  | $ | 1,966 |
Canceled or forfeited |  |  | 314,250 |  |  | $ | 4.90 |  |  |  | - |  |  |  | - |
Expired |  |  | 809,542 |  |  | $ | 22.52 |  |  |  | - |  |  |  | - |
Outstanding balance at December 31, 2024 |  |  | 5,951,400 |  |  | $ | 7.25 |  |  |  | 6.79 |  |  | $ | 17,448 |
Exercisable at December 31, 2024 |  |  | 2,399,305 |  |  | $ | 10.25 |  |  |  | 4.47 |  |  | $ | 6,302 |
Vested and expected to vest at December 31, 2024 |  |  | 5,764,166 |  |  |  |  |  |  |  | 6.75 |  |  | $ | 16,783 |

Information regarding currently outstanding and exercisable options as of December 31, 2024, is as follows:

|  | Options Outstanding |  |  | Options Exercisable |
|  |  |  |  |  | Weighted Avg |  |  |  |  |  |  | Weighted Avg |
|  | Number of |  |  | Remaining |  |  | Number of |  |  | Remaining |
Exercise Price |  | Shares |  |  | Contractual Term |  |  | Shares |  |  | Contractual Term |
$2.848 to $10.00 |  | 5,841,257 |  |  | 6.91 |  |  | 2,289,162 |  |  | 4.69 |
$10.01 to $30.00 |  | 1,875 |  |  | 4.31 |  |  | 1,875 |  |  | 4.37 |
$30.01 to $50.00 |  | 39,218 |  |  | 2.67 |  |  | 39,218 |  |  | 2.71 |
$50.01 to $70.00 |  | 21,958 |  |  | 1.60 |  |  | 21,958 |  |  | 1.63 |
$70.01 to $327.20 |  | 47,092 |  |  | 1.36 |  |  | 47,092 |  |  | 8.34 |
|  |  | 5,951,400 |  |  |  |  |  |  |  | 2,399,305 |  |  |  |  |

The total fair value of stock options vested during the years ended December 31, 2024 and 2023, was$8.1 million and $9.2 million, respectively.

Unvested stock options as of December 31, 2024 and 2023, were as follows:

|  | Number of Unvested Shares |
|  | December 31, |
Exercise Price |  | 2024 |  |  | 2023 |
$2.848 to $10.00 |  |  | 3,552,095 |  |  |  | 5,614,977 |
Total number of unvested stock options |  |  | 3,552,095 |  |  |  | 5,614,977 |

As of December 31, 2024 there was $9.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the A&R 2014 Plan and 2023 Plan.

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Restricted stock units

The following table summarizes the restricted stock unit activity under the A&R 2014 and 2023 Plan:

|  | Shares |  |  | Weighted-average grant date fair value |
Unvested balance at December 31, 2023 |  |  | 747,945 |  |  | $ | 4.33 |
Granted |  |  | 2,012,958 |  |  |  | 5.52 |
Vested |  |  | 765,945 |  |  |  | 4.77 |
Forfeited |  |  | 156,700 |  |  |  | 5.83 |
Unvested balance at December 31, 2024 |  |  | 1,838,258 |  |  | $ | 5.32 |

As of December 31, 2024 there was $7.1 million of total unrecognized compensation cost related to restricted stock units.

N. | Fair Value of Financial Instruments

The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:

| ● | Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
| ● | Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
| ● | Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued expenses, the Nantahala Note, and the margin account approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached regarding fair value measurements as of December 31, 2024, and 2023 (in thousands):

|  |  |  |  |  | Quoted Prices |  |  | Significant |  |  |  |  |
|  |  |  |  |  | in Active |  |  | Other |  |  | Significant |
|  | Balance at |  |  | Markets for |  |  | Observable |  |  | Unobservable |
|  | December 31, |  |  | Identical Assets |  |  | Inputs |  |  | Inputs |
|  | 2024 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
CVR liability (Note T) |  | $ | 3,500 |  |  | $ | - |  |  | $ | - |  |  | $ | 3,500 |
Warrant liabilities |  |  | 17,804 |  |  |  | - |  |  |  | - |  |  |  | 17,804 |
Total liabilities |  | $ | 21,304 |  |  | $ | - |  |  | $ | - |  |  | $ | 21,304 |
Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 35,711 |  |  | $ | 35,711 |  |  | $ | - |  |  | $ | - |
Corporate bonds |  |  | 6,010 |  |  |  | - |  |  |  | 6,010 |  |  |  | - |
Total assets |  | $ | 41,721 |  |  | $ | 35,711 |  |  | $ | 6,010 |  |  | $ | - |

|  |  |  |  |  | Quoted Prices |  |  | Significant |  |  |  |  |
|  |  |  |  |  | in Active |  |  | Other |  |  | Significant |
|  | Balance at |  |  | Markets for |  |  | Observable |  |  | Unobservable |
|  | December 31, |  |  | Identical Assets |  |  | Inputs |  |  | Inputs |
|  | 2023 |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
CVR liability (Note T) |  | $ | 7,262 |  |  | $ | - |  |  | $ | - |  |  | $ | 7,262 |
Warrant liabilities |  |  | 16,100 |  |  |  | - |  |  |  | - |  |  |  | 16,100 |
Total liabilities |  | $ | 23,362 |  |  | $ | - |  |  | $ | - |  |  | $ | 23,362 |
Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 24,688 |  |  | $ | 24,688 |  |  |  | - |  |  | $ | - |
Total assets |  | $ | 24,688 |  |  | $ | 24,688 |  |  | $ | - |  |  | $ | - |

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The common stock warrant liabilities were recorded at fair value using the Black-Scholes option pricing model. The following assumptions were used in determining the fair value of the warrant liabilities valued using the Black-Scholes option pricing model as of December 31, 2024, and 2023:

|  | December 31, 2024 |  |  | December 31, 2023 |
Risk-free interest rate |  |  | 4.08% | - | 4.23% |  |  |  | 3.76% | - | 4.12% |
Volatility |  |  | 62.14% | - | 68.68% |  |  |  | 62.01% | - | 92.42% |
Dividend yield |  |  | —% |  |  |  | —% |
Expected term (years) |  |  | 1.02 | - | 3.89 |  |  |  | 2.0 | - | 4.9 |
Weighted average fair value |  |  | $3.25 |  |  |  | $2.94 |

The following table is a reconciliation for the common stock warrant liabilities measured at fair value using Level 3 unobservable inputs (in thousands):

Balance at December 31, 2023 |  | $ | 16,100 |
Change in fair value measurement |  |  | 1,704 |
Balance at December 31, 2024 |  | $ | 17,804 |

For the year ended December 31, 2024, the changes in fair value of the warrant liabilities primarily resulted from the volatility of the Company's common stock and the change in the risk-free interest rates.

O. | Income Taxes

The Company did not recognize any state tax expense during the years ended December 31, 2024, and 2023. A reconciliation of the difference between the (expense)/benefit for income taxes at the statutory U.S. federal income tax rate is as follows (in thousands, except amounts pertaining to rate which are shown as a percentage):

|  | Year ended December 31, |
|  | 2024 |  |  | 2023 |
Federal statutory rate |  |  | 21.00 | % |  |  | 21.00 | %
Effect of: |  |  |  |  |  |  |  |
Foreign rate differential |  |  | 0.04 |  |  |  | - |
Change in valuation allowance |  |  | (13.17 | ) |  |  | (23.29 | )
Return to provision and deferred true-up |  |  | (4.40 | ) |  |  | (2.41 | )
Federal research and development credit |  |  | - |  |  |  | 4.09 |
Change in rate |  |  | - |  |  |  | (0.01 | )
State tax benefit (net of federal) |  |  | 5.05 |  |  |  | 5.19 |
Stock-based compensation |  |  | (0.55 | ) |  |  | (0.20 | )
Global intangible low-taxed income credit |  |  | (0.02 | ) |  |  | (3.41 | )
Officers compensation |  |  | (0.23 | ) |  |  | - |
Expiration of net operating loss deferred tax asset |  |  | (3.01 | ) |  |  | - |
Deferred adjustment and rate change |  |  | (4.27 | ) |  |  | - |
Foreign research and development excess benefit |  |  | - |  |  |  | (0.86 | )
Uncertain tax position |  |  | (17.88 | ) |  |  | - |
Other |  |  | 0.39 |  |  |  | (0.10 | )
Federal income tax provision effective rate |  |  | (17.05 | )% |  |  | 0.00 | %

The components of deferred tax assets and liabilities are as follows (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Deferred tax assets relating to: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 100,552 |  |  | $ | 90,743 |
Research and development tax carryforward |  |  | 19,153 |  |  |  | 20,670 |
Stock-based compensation |  |  | 5,711 |  |  |  | 5,154 |
174 expenses |  |  | 33,941 |  |  |  | 30,241 |
Right-of-use liability |  |  | 108 |  |  |  | 265 |
Property and equipment |  |  | 79 |  |  |  | 23 |
Other deferred tax assets |  |  | 3,652 |  |  |  | 1,951 |
Total gross deferred tax assets |  |  | 163,196 |  |  |  | 149,047 |
Deferred tax liabilities relating to: |  |  |  |  |  |  |  |
Right-of-use asset |  |  | 82 |  |  |  | 249 |
Intangibles |  |  | 17,859 |  |  |  | 14,473 |
Total gross deferred tax liabilities |  |  | 17,941 |  |  |  | 14,722 |
Deferred tax assets less liabilities |  |  | 145,256 |  |  |  | 134,324 |
Valuation allowance |  |  | (146,359 | ) |  |  | (134,488 | )
Net deferred tax liability |  | $ | (1,103 | ) |  | $ | (164 | )

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In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income (losses) and projections for future taxable income (losses) over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences in the future.

The Company recorded refundable research and development tax credit as other income and not income tax under ASC 740 in the consolidated statement of operations for the year ended December 31, 2023. These refundable tax credits are a result of increased qualified research and development spending in certain jurisdictions which allow for a refundable credit even when the Company has no current period income tax expense. The Company has analyzed their tax positions under the principles of ASC 740-10, Accounting for Uncertainty in Income Taxes.

In accordance with the Tax Cuts and Jobs Act of 2017, the Company evaluated its plans for reinvestment or repatriation of current and future earnings of foreign operations and determined to indefinitely reinvest current and future earnings of foreign operations in the foreign operation. The Company has not repatriated funds to the U.S. to satisfy domestic liquidity needs, nor does the Company anticipate the need to do so. If in the foreseeable future, the Company can no longer demonstrate that these earnings are indefinitely reinvested, a deferred tax liability will be recognized.

The Company has federal operating loss carryforwards totaling $381.3 million, $118.5 million of which, if not utilized, will begin to expire in 2027 and $262.8 million of which have no expiration date. The Company also has certain state net operating loss carryforwards totaling $428.6 million, which, if not utilized, will begin to expire in 2027. The Company also has Denmark net operating loss carryforwards totaling $7.7 million which has indefinite carryforward period in Denmark. Due to potential ownership changes that may have occurred or would occur in the future, Internal Revenue Code Section 382 may place additional limitations on the Company’s ability to utilize the net operating loss carryforward.

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P. | Net Loss Per Share

For all periods presented herein, the Company did not use the two-class method to compute net loss attributable to common stockholders per share of common stock, even though it had issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings, because these holders are not obligated to participate in a loss. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income attributable to common stockholders, basic net income attributable to common stockholders per share of common stock is computed by dividing the undistributed net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Undistributed net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed and subtracting the actual or deemed dividends declared. No such adjustment to earnings is made during periods with a net loss as the holders of the participating securities have no obligation to fund losses. Diluted net income attributable to common stockholders per share of common stock is computed under the two-class method by using the weighted average number of shares of common stock outstanding plus the potential dilutive effects of stock options and warrants. In addition to analyzing under the two class method, the Company analyzes the potential dilutive effect of stock options and warrants, under the treasury-stock method when calculating diluted income (loss) attributable to common stockholders per share of common stock, in which it is assumed that the stock options and warrants convert into common stock at the beginning of the period or date of issuance, if the stock option or warrant was issued during the period. The Company reports the more dilutive of the approaches (two-class or treasury-stock/if-converted) as its diluted net income (loss) attributable to common stockholders per share of common stock during the period.

As noted above, for all periods presented herein, the Company did not utilize the two-class approach as the Company was in a net loss position and the holders of the participating securities have no obligation to fund losses. The Company did analyze diluted net loss attributable to common stockholders per share of common stock under the treasury-stock/if-converted method and noted that all outstanding stock options and warrants were anti-dilutive for the periods presented. For all periods presented, basic net loss attributable to common stockholders per share of common stock was the same as diluted net loss attributable to common stockholders per share of common stock.

The following securities, presented on a common stock equivalent basis, have been excluded from the calculation of weighted average number of shares of common stock outstanding because their effect is anti-dilutive:

|  | December 31, |
|  | 2024 |  |  | 2023 |
Awards under equity incentive plans |  |  | 1,148,012 |  |  |  | 1,728,885 |
Common stock warrants |  |  | 5,483,537 |  |  |  | 5,603,729 |
Total securities excluded from the calculation of weighted average number of shares of common stock outstanding |  |  | 6,631,549 |  |  |  | 7,332,614 |

A reconciliation from net loss to basic net loss attributable to common stockholders per share of common stock and diluted net loss attributable to common stockholders per share of common stock for the years ended December 31, 2024, and 2023, is as follows (in thousands):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Basic and diluted net loss per share of common stock: |  |  |  |  |  |  |  |
Net loss, basic and diluted |  | $ | (105,511 | ) |  | $ | (46,049 | )
Weighted average number of shares of common stock outstanding, basic and diluted |  |  | 46,251 |  |  |  | 35,452 |
Basic and diluted net loss per share of common stock |  | $ | (2.28 | ) |  | $ | (1.30 | )

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Q. | Leases

The Company has operating and finance leases for office space, laboratory facilities and various laboratory equipment, furniture and office equipment and leasehold improvements. The Company determines if an arrangement is a lease at contract inception. Lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. The Company does not separate lease and non-lease components. Leases with a term of 12 months or less at commencement are not recorded on the consolidated balance sheets. Lease expense for these arrangements is recognized on a straight-line bases over the lease term. The Company’s leases have remaining lease terms of less than 1 year to approximately 4 years, some of which include options to extend the leases for up to 5 years, and some which include options to terminate the leases within 1 year.

Effective June 1, 2021, the Company agreed to sublease office space in Florida, comprised of one of the two contiguous suites, under a non-cancelable operating lease, which expires in February 2026.

The components of lease expense were as follows (in thousands):

|  | Year Ended December 31, |
Lease Cost |  | 2024 |  |  | 2023 |
Finance lease cost: |  |  |  |  |  |  |  |
Amortization of right-of-use assets |  | $ | 44 |  |  | $ | 102 |
Interest on lease liabilities |  |  | - |  |  |  | - |
Total finance lease cost |  |  | 44 |  |  |  | 102 |
Operating lease cost |  |  | 330 |  |  |  | 437 |
Short-term lease cost |  |  | 177 |  |  |  | 171 |
Variable lease cost |  |  | 39 |  |  |  | 40 |
Less: sublease income |  |  | (128 | ) |  |  | (157 | )
Total lease costs |  | $ | 462 |  |  | $ | 593 |

Supplemental cash flow information related to leases was as follows (in thousands):

|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Financing cash flows from finance leases |  |  | - |  |  |  | 5 |
Operating cash flows from operating leases |  |  | 405 |  |  |  | 552 |
Operating cash flows from short-term leases |  |  | 225 |  |  |  | 171 |
Operating cash flows from variable lease costs |  |  | 39 |  |  |  | 40 |
Right-of-use assets obtained in exchange for lease liabilities: |  |  |  |  |  |  |  |
Finance leases |  | $ | - |  |  | $ | - |
Operating leases |  |  | 419 |  |  |  | - |

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Supplemental balance sheet information related to leases was as follows (in thousands, except weighted average remaining lease term and weighted average discount rate):

|  | December 31, |
|  | 2024 |  |  | 2023 |
Finance Leases |  |  |  |  |  |  |  |
Property and equipment, at cost |  | $ | 1,031 |  |  | $ | 1,031 |
less: accumulated depreciation and amortization |  |  | (1,023 | ) |  |  | (882 | )
Property and equipment, net |  | $ | 8 |  |  | $ | 149 |
Operating Leases |  |  |  |  |  |  |  |
Operating lease right-of-use assets |  | $ | 657 |  |  | $ | 790 |
Total operating lease right-of-use assets |  | $ | 657 |  |  | $ | 790 |
Current portion of operating lease liabilities |  | $ | 420 |  |  | $ | 543 |
Operating lease liabilities, less current portion |  |  | 372 |  |  |  | 456 |
Total operating lease liabilities |  | $ | 792 |  |  | $ | 999 |
Weighted Average Remaining Lease Term |  |  |  |  |  |  |  |
Operating leases (in years) |  |  | 3 |  |  |  | 2 |
Weighted Average Discount Rate |  |  |  |  |  |  |  |
Finance leases |  |  | - |  |  |  | 14.3 | %
Operating leases |  |  | 9.9 | % |  |  | 7.6 | %

Maturities on lease liabilities were as follows (in thousands):

|  | Operating |
Year Ending December 31, |  | Leases |
2025 |  | $ | 481 |
2026 |  |  | 138 |
2027 |  |  | 127 |
2028 |  |  | 150 |
2029 |  |  | 38 |
Thereafter |  |  | 10 |
Total lease payments |  |  | 944 |
Less: future interest expense |  |  | (152 | )
Lease liabilities |  | $ | 792 |

R. | Employee Benefit Plan

The Company has a 401(k) retirement plan (the “401(k) Plan”) that covers substantially all employees. The Company may provide a discretionary match with a maximum amount of 4% of the participant’s compensation, which vests immediately. The Company made matching contributions under the 401(k) Plan of approximately $0.5 million and $0.3 million for the years ended December 31, 2024, and 2023, respectively.

The Company has a discretionary profit-sharing plan (the “Profit Sharing Plan”) that covers all employees. Employees become eligible participants in the Profit Sharing Plan once they have provided three years of service to the Company. The Company made no contributions to the Profit Sharing Plan in 2024 or 2023.

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S. | Goodwill & Intangible Assets

The Company's goodwill balance was $4.7 million as of December 31, 2024, and 2023.

As of December 31, 2024, and 2023, non-amortizable intangible assets include IPR&D of $2.0 million.

As of December 31, 2024, and 2023, the Company had a definite-lived intangible asset, net related to the acquisition of OLPRUVA as a result of the Merger of $61.3 million and $67.2 million, respectively. This is amortized on a straight-line basis over the OLPRUVA patent life of 13 years and is reviewed periodically for impairment. Amortization expense is recorded as intangible asset amortization in the consolidated statements of operations and was $6.2 million and $0.8 million for the years ended December 31, 2024, and 2023.

The Company's review of the estimated useful lives of its intangible assets indicated that based on recent facts and circumstances, including detailed analysis on sales experience and prospective product strategy, the actual life of the definite-lived intangible asset related to OLPRUVA was longer than the estimated useful life previously established at the acquisition of the asset. As a result, effective September 30, 2024, the Company changed its estimate of the useful life of this intangible asset to better reflect the estimated periods during which this asset will remain in service. The estimated useful life was previously 11 years and was increased to 13 years. The change in estimate was applied prospectively and decreased intangible asset amortization expense by $0.2 million for the year ended December 31, 2024. Consequently, there was an increase to intangible assets, net of $0.2 million at year end. The impact of this change in estimate to net income and basic and diluted earnings per share was de minimis.

In connection with the XOMA License Agreement, the Company owed XOMA a regulatory milestone payment of $6.0 million upon approval of MIPLYFFA, which was paid in October 2024.

This definite-lived intangible asset is amortized on a straight-line basis over the MIPLYFFA patent life of approximately five years and is reviewed periodically for impairment. Amortization expense is recorded as intangible asset amortization in the consolidated statements of operations and was $0.3 million for the year ended December 31, 2024.

The definite-lived Intangible assets that are subject to amortization have been reviewed for impairment whenever events or changes in circumstances have indicated that their carrying amounts may not be recoverable. The Company’s historical sales experience related to OLPRUVA resulted in management preparing an estimate of future cash flows used to assess the recoverability of such asset. Future cash flows specific to OLPRUVA, which most significantly includes an estimate of forecasted revenues, are based on reasonable and supportable assumptions regarding the cash flows expected to result from the use of the asset and its eventual disposition. As a result of the Company’s analysis, the asset was fully recoverable and no impairments were recorded by the Company as of and for the year’s ended December 31, 2024, and 2023.

For intangible assets subject to amortization, estimated amortization expense for the five fiscal years subsequent to December 31, 2024, is expected to be as follows:

2025 | $ | 6,461
2026 | $ | 6,461
2027 | $ | 6,461
2028 | $ | 6,461
2029 | $ | 5,830

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T. | ﻿Merger

On August 30, 2023, in connection with the Merger Agreement with Acer, the following transactions occurred prior to Closing:

| ● | Bridge Loan - Zevra and Acer entered into a bridge loan agreement (the “Bridge Loan Agreement”), providing for Zevra to make loans (collectively, the “Bridge Loan”) to Acer up to an aggregate principal amount of $16.5 million. The Bridge Loan was provided to Acer to support its termination agreement with Relief Therapeutics Holding SA (“Relief”) and to provide Acer with working capital, including for payments of accounts payable to support the commercial launch of OLPRUVA and the development of celiprolol pending the Merger’s closure. On October 31, 2023, the Company and Acer entered into an amendment to the Bridge Loan Agreement, which increased the aggregate principal amount available under the loan from $16.5 million to $18.0 million.

| ● | Purchase of Acer’s Term Loans - Zevra purchased certain indebtedness of Acer held by Nantahala Capital Management, LLC ("Nantahala). Under the loan purchase with Nantahala, certain of its affiliates and certain other parties (collectively with Nantahala, "Nantahala Holders") Zevra purchased (i) an original senior secured term loan facility made available to Acer in an aggregate amount of $6.5 million and funded on March 14, 2022, and (ii) an additional senior secured term loan made to Acer in an aggregate amount of $7.0 million in a single borrowing which funded on January 31, 2023 for (1) $12.0 million in cash; (2) 98,683 shares of Zevra Common Stock; and (3) a secured Promissory Note payable by Zevra to Nantahala in the original principal amount $5.0 million. These were recorded as receivables form Acer and were treated as a settlement of a preexisting relationship in connection with the closing of the transaction and recorded as a component of purchase consideration.

| ● | Purchase of Acer’s Convertible Notes (“Marathon Convertible Notes”)- Under the Note Purchase Agreement with the Nantahala Holders, Zevra purchased the Marathon Convertible Notes that Nantahala had acquired on June 16, 2023. Zevra acquired the Marathon Convertible Notes in exchange for the issuance of 2,171,038 shares of Zevra Common Stock at $5.0667 per share for a total purchase price of $11.0 million.

| ● | Amendment to IP License Agreement and IP Termination Agreement: As a condition to entering into the Merger Agreement, Acer and Relief Therapeutics Holding AG ("Relief") entered into the Exclusive License Agreement and the Termination Agreement terminating the collaboration and license agreement, dated March 19, 2021, by and between Acer and Relief. Pursuant to the Exclusive License Agreement, Relief holds exclusive development and commercialization rights for OLPRUVA in Geographical Europe. Acer has the right to receive a royalty of up to 10.0% of the net sales of OLPRUVA in Geographical Europe. In accordance with the terms of the Termination Agreement, Relief received an upfront payment from Acer of $10.0 million (which payment was funded with the Bridge Loan described above) with an additional payment of $1.5 million due on the first-year anniversary of the $10.0 million payment. Acer also agreed to pay a 10.0% royalty on net sales of OLPRUVA worldwide, excluding Geographical Europe, and 20.0% of any value received by Acer from certain third parties relating to OLPRUVA licensing or divestment rights, all of the foregoing which are capped at $45.0 million, for total payments to Relief of up to $56.5 million.

In connection with the closing of the Merger on November 17, 2023, each share of common stock of Acer was converted into the right to receive (i) 0.1210 fully paid and non-assessable shares of common stock of Zevra, par value $0.0001 per share , and (ii) one non-transferable contingent value right (“CVR”) to be issued by Zevra, which will represent the right to receive one or more contingent payments up to an additional $76 million upon the achievement, if any, of certain commercial and regulatory milestones for Acer’s OLPRUVA and celiprolol products within specified time periods. Certain additional cash payments are also possible pursuant to the CVRs with respect to milestones involving Acer’s early-stage program ACER-2820 (emetine).

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The assets acquired and liabilities assumed were recorded based on their acquisition date fair values. Consideration for the Merger was $72.6 million and consists of (i) approximately 2.96 million shares of Zevra common stock valued at $12.8 million, (ii) the Bridge Loan advances of $17.8 million, (iii) $12.0 million in cash paid to Nantahala; (iv) 2.27 million shares of Zevra Common Stock issued to Nantahala valued at $11.5 million based on the VWAP of shares of Zevra Common Stock during the 20 consecutive trading days ending on the trading date prior to August 30, 2023; (v) a secured promissory note payable by Zevra to Nantahala in the original principal amount of $5.0 million, as disclosed in Note I, (vi) $8.5 million in the estimated fair value of contingent consideration related to the CVRs, (vii) approximately 0.9 million shares of Zevra Common Stock issued to a former holder of Acer warrants valued at $4.0 million based on Zevra's common stock price on the Effective Date and (viii) $1.0 million in notes payable paid by the Company on Acer's behalf. In addition, effective as of immediately prior to the Effective Time, all of the outstanding and unexercised Acer stock options were automatically cancelled and ceased to exist without any cash or other consideration being paid or provided in respect thereof. The following purchase price allocation reflects the preliminary estimates of and assumptions related to the fair values of assets acquired and liabilities assumed:

Assets﻿ |  |  |  |
Cash |  | $ | 575 |
Prepaid expenses﻿ |  |  | 278 |
﻿Other current assets |  |  | 11 |
﻿Inventory |  |  | 9,376 |
﻿Property, plant, and equipment |  |  | 35 |
﻿Other noncurrent assets |  |  | 209 |
﻿Approved product - OLPRUVA |  |  | 68,000 |
﻿IPR&D - celiprolol |  |  | 2,000 |
﻿Goodwill acquired |  |  | 4,538 |
|  |  | 85,022 |
﻿Liabilities |  |  |  |
Accounts payable and accrued expenses |  | $ | 10,718 |
Deferred collaboration funding |  |  | 1,500 |
Operating lease liabilities |  |  | 175 |
|  |  | 12,393 |
Fair Value of Net Assets Acquired |  | $ | 72,629 |

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The fair values assigned to the tangible and intangible assets acquired and liabilities assumed were determined using an income approach based on management’s estimates and assumptions, as well as other information compiled by management, including third-party valuations that utilize customary valuation procedures and techniques. These preliminary fair values are subject to change within the one-year measurement period. The estimated fair values were developed by discounting future net cash flows to their present value at market-based rates of return. The goodwill acquired represents the excess of the purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. The useful lives of the intangible assets for amortization purposes were determined by considering the period of expected cash flows used to measure the fair values of the intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic and other factors that may limit the useful life. The marketed product asset is amortized on a straight-line basis over its estimated useful life. As of December 31, 2023, the IPR&D project had not been completed or abandoned and, therefore, the IPR&D intangible asset is not currently subject to amortization.

Cancellation of Acer Warrant

On November 22, 2023, the Company sold an aggregate of 917,934 shares of its common stock to a healthcare focused investment fund (the "Investor") to cancel a warrant held by the Investor to purchase 2,920,306 shares of common stock of Acer. The shares of common stock were offered and sold to the Investor in a registered direct offering without an underwriter or placement agent.

Contingent Consideration

Contingent consideration liabilities relate to the Company's liabilities arising in connection with the CVRs issued as a result of the Merger. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earn-out achievement objectives, utilizing projections about future performance. Significant inputs include volatility and projected financial information, including projections representative of a market participant's view of the expected cash payments associated with the agreed upon regulatory milestones based on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates.

The following table provides a reconciliation of the beginning and ending balances related to the contingent consideration liabilities for the CVRs (dollars in thousands):

Balance at December 31, 2023 |  | $ | 7,262 |
Change in fair value recognized in earnings |  |  | (3,762) |
Balance at December 31, 2024 |  | $ | 3,500 |

For the year ended December 31, 2024, the Company recorded a $3.7 million gain on the change in fair value of contingent consideration, primarily due to changes in market data and revenue projections.

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U. | Subsequent Events

The Company evaluated events and transactions occurring subsequent to December 31, 2024, through March 12, 2025, the date the accompanying financial statements were issued. During this period, other than the sale of the PRV, which is disclosed in Note A, there were no subsequent events that required recognition in the accompanying consolidated financial statements, nor were there any additional non-recognized subsequent events that required disclosure.

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EXHIBITS

Exhibit No. |  | Description
2.1*** |  | Agreement and Plan of Merger dated as of August 30, 2023, by and among Zevra Therapeutics, Inc., Aspen Z Merger Sub, Inc., and Acer Therapeutics Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on August 31, 2023).
3.1 |  | Amended and Restated Certificate of Incorporation of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on April 21, 2015)
3.1.1 |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company, effective as of December 23, 2020 (incorporated herein by reference to Registrant's Current Report on Form 8-K as filed with the SEC on December 28, 2020).
3.1.2 |  | Certificate of Elimination of Series A Convertible Preferred Stock of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 23, 2021).
3.1.3 |  | Certificate of Elimination of Series B-1 Convertible Preferred Stock of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 23, 2021).
3.1.4 |  | Certificate of Elimination of Series B-2 Convertible Preferred Stock of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 23, 2021).
3.1.5 |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the SEC on February 24, 2023).
3.2 |  | Amended and Restated Bylaws, as currently in effect, of Zevra Therapeutics, Inc. (incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the SEC on February 28, 2024).
4.1 |  | Specimen stock certificate evidencing shares of Common Stock (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 12, 2021).
4.2 |  | Form of Common Stock Purchase Warrant and schedule of holders (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on January 13, 2021).
4.3 |  | Form of Inducement Warrant (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on January 26, 2021).
4.4 |  | Form of Inducement Warrant (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 23, 2021).
4.5* |  | Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
4.6 |  | Form of Common Stock Purchase Warrant (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on November 20, 2023).
10.1+ |  | Material Supply Agreement, by and between the Registrant and Johnson Matthey, Inc., dated as of November 2, 2009 (incorporated by reference Registrant’s Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-202660) as filed with the SEC on April 3, 2015).
10.2 |  | Payoff letter, dated as of February 8, 2021, by and among the Company and the lenders named therein (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on February 9, 2021).
10.3 |  | Second Amendment to Senior Secured Convertible Note and Warrant, by and between Registrant and Deerfield Private Design Fund III, L.P., dated January 6, 2016 (incorporated by reference to the Registrant’s Current Report on Form 8-K as filed with the SEC on January 11, 2016).
10.3.1 |  | Fourth Amendment to Senior Secured Convertible Note and Warrant, effective as of October 3, 2016, by and between the Registrant and Deerfield Private Design Fund III, L.P. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on October 3, 2016).
10.3.2 |  | Amendment to Convertible Note and Warrant Agreement, dated November 20, 2018, between the Company and Deerfield Private Design Fund III, L.P. (as incorporated herein by reference to the Company's Current Report on Form 8-K filed with the SEC on November 20, 2018).
10.3.3 |  | Seventh Amendment to Senior Secured Convertible Note and Sixth Amendment to Warrant, dated February 28, 2019, between the Company and Deerfield Private Design Fund III, L.P. (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 1, 2019).
10.3.4 |  | Amendment to Senior Secured Convertible Notes and Amendment to Warrant, dated as of February 17, 2020, by and among Registrant and the noteholders party thereto (incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the SEC on February 18, 2020)
10.3.5 |  | Amendment to Senior Secured Convertible Notes and Amendment to Warrant, dated as of January 12, 2021, by and among the Company, Deerfield Private Design Fund III, L.P. and Deerfield Special Situations Fund, L.P. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on January 13, 2021)
10.4 |  | Warrant to Purchase Shares of Series D Preferred Stock issued to Deerfield Private Design Fund III, L.P., dated as of June 2, 2014 (incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.4.1 |  | Form of Stock Purchase Warrant to purchase shares of Series D Convertible Preferred Stock issued in bridge financing, along with a schedule of warrant holders (incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).

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EXHIBITS, CONTINUED

Exhibit No. |  | Description
10.5 |  | Amended and Restated Investors’ Rights Agreement, dated as of February 19, 2015, by and among the Registrant and certain of its stockholders (incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.6+ |  | Agreement to Terminate CLA, by and between MonoSol Rx, LLC and the Registrant, dated as of March 20, 2012 (incorporated herein by reference to the Registrant's Amendment No. 1 to Registration Statement on Form S-1/A (File No. 333-202660) as filed with the SEC on April 3, 2015).
10.7# |  | Incentive Stock Plan, as amended to date (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.7.1# |  | Form of Incentive Stock Option Agreement under Incentive Stock Plan (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.7.2# |  | Form of Nonqualified Stock Option Agreement under Incentive Stock Plan (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.7.3# |  | Amended and Restated 2014 Equity Incentive Plan (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on August 13, 2021).
10.7.4# |  | Form of Stock Option Grant Notice and Stock Option Agreement under 2014 Equity Incentive Plan (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 File No. 333-202660) as filed with the SEC on March 11, 2015).
10.7.5# |  | Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under 2014 Equity Incentive Plan (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 File No. 333-202660) as filed with the SEC on March 11, 2015).
10.7.6# |  | Form of Restricted Stock Award Grant Notice and Restricted Stock Award Agreement under 2014 Equity Incentive Plan (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on May 14, 2019).
10.7.7# |  | 2021 Employee Stock Purchase Plan (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on August 13, 2021).
10.7.8 |  | 2023 Employment Inducement Award Plan and forms of award agreements thereunder (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on April 1, 2024).
10.8# |  | Ninth Amended and Restated Non-Employee Director Compensation Policy effective May 3, 2023 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on August 14, 2023).
10.9# |  | Form of Indemnification Agreement with the Registrant's directors and executive officers (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.10# |  | Amended and Restated Employment Agreement by and between the Registrant and R. LaDuane Clifton, dated as of June 25, 2015 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on August 14, 2015).
10.10.1# |  | Amendment to Amended and Restated Employment Agreement by and between the Registrant and R. LaDuane Clifton, dated as of October 13, 2015 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on November 13, 2015).
10.11# |  | Employment Agreement by and between the Registrant and Christal M.M. Mickle, dated as of May 30, 2014 (incorporated herein by reference to the Registrant's Registration Statement on Form S-1 (File No. 333-202660) as filed with the SEC on March 11, 2015).
10.11.1# |  | Amendment to Employment Agreement by and between the Registrant and Christal M.M. Mickle, dated as of October 13, 2015 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on November 13, 2015).
10.11.2# |  | Agreement Regarding Employment Terms, dated as of May 13, 2023, between the Registrant and Christal M.M. Mickle (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on May 15, 2023).
10.12# |  | Amended and Restated Employment Agreement by and between the Registrant and Sven Guenther, dated as of April 13, 2016 (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on May 13, 2016).

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EXHIBITS, CONTINUED

Exhibit No. |  | Description
10.13#* |  | Employment Agreement by and between the Registrant and Adrian Quartel, dated as of January 3, 2024.
10.14#* |  | Employment Agreement by and between the Registrant and Joshua Schafer, dated as of January 6, 2023.
10.15# |  | Employment Agreement by and between the Registrant and Rahsaan Thompson, dated as of June 21, 2024 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q as filed with the SEC on August 13, 2024).
10.16# |  | Employment Agreement, effective as of October 10, 2023, between the Registrant and Neil F. McFarlane (incorporated herein by reference to the Registrant's Current Report on 8-K as filed with the SEC on October 10, 2023).
10.16.1#* |  | Amendment to the Employment Agreement by and between the Registrant and Neil F. McFarlane, dated as of May 7, 2024.
10.17 |  | Lease Agreement, by and between the Registrant and BRE/COH FL LLC, dated as of November 3, 2014 (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 10, 2017).
10.18.1 |  | First Amendment to the Lease Agreement, by and between the Registrant and BRE/COH FL LLC, dated as of April 21, 2015 (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 10, 2017).
10.18.2 |  | Second Amendment to the Lease Agreement, by and between the Registrant and BRE/COH FL LLC, dated as of December 22, 2015 (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 10, 2017).
10.18.3 |  | Third Amendment to the Lease Agreement, by and between the Registrant and BRE/COH FL LLC, dated as of July 15, 2016 (incorporated herein by reference to the Registrant's Annual Report on Form 10-K as filed with the SEC on March 10, 2017).
10.19 |  | Purchase Agreement, dated February 17, 2020, by and between the Registrant and Lincoln Park Capital Fund, LLC. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on February 18, 2020).
10.20+ |  | Collaboration and License Agreement, dated as of September 3, 2019, by and between the Registrant and Boston Pharmaceuticals Holdings SA (incorporated herein by reference to the Registrant’s Current Report on Form 8-K as filed with the SEC on September 4, 2019).
10.21+ |  | Amendment No. 1 to Collaboration and License Agreement, effective as of April 8, 2021, by and between the Company and Commave Therapeutics SA (formerly known as Boston Pharmaceuticals Holdings SA) (incorporated herein by reference to the Registrant’s Quarterly Report on Form 10-Q as filed with the SEC on August 13, 2021).
10.22 |  | Form of Inducement Letter (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on January 26, 2021).
10.23 |  | Form of Inducement Letter (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 23, 2021).
10.24 |  | Equity Distribution Agreement, dated July 2, 2021, by and among the Company, JMP Securities LLC and RBC Capital Markets, LLC (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on July 2, 2021).
10.25† |  | Asset Purchase Agreement by and among the Registrant, Zevra Denmark A/S and Orphazyme A/S, in restructuring, dated May 15, 2022 (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on May 16, 2022).
10.26 |  | Revolving Loan Agreement dated May 31, 2022, by and among the Registrant and Ameris Bank, as lender (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on June 1, 2022).
10.27 |  | Bridge Loan Agreement dated as of August 30, 2023, by and between the Registrant and Acer Therapeutics Inc. (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on August 31, 2023).
10.27.1 |  | First Amendment to the Bridge Loan Agreement by and between the Registrant and Acer Therapeutics Inc. (incorporated herein by reference to the Registrant’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024).
10.28*** |  | Loan Purchase Agreement dated as of August 30, 2023, by and among the Registrant and Nantahala Capital Management, LLC and the other sellers party thereto (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on August 31, 2023).
10.29*** |  | Note Purchase Agreement dated as of August 30, 2023, by and among the Registrant and Nantahala Capital Management, LLC and the other sellers party thereto (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on August 31, 2023).
10.30 |  | Registration Rights Agreement dated as of August 30, 2023, by and among the Registrant and each of the sellers party thereto (incorporated herein by reference to the Registrant's Current Report on Form 8-K as filed with the SEC on August 31, 2023).
10.31 |  | Ninth Amended and Restated Non-Employee Director Compensation Policy (incorporated herein by reference to the Registrant's Quarterly Report on Form 10-Q as filed with the SEC on August 14, 2023).
10.32 |  | Contingent Value Rights Agreement, dated as of November 17, 2023, by and among Zevra Therapeutics, Inc., Computershare, Inc., and Computershare Trust Company, N.A. (incorporated by reference to the Registrant's Current Report on 8-K as filed with the SEC on November 20, 2023).
10.33 †+ |  | Credit Agreement dated as of April 5, 2024, by and among Zevra Therapeutics, Inc. and HCR Stafford Fund II, L.P., HCR Potomac Fund II, L.P., and Perceptive Credit Holdings IV, LP (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q as filed with the SEC on May 9, 2024).
19* |  | Zevra Therapeutics, Inc. Amended and Restated Insider Trading and Window Period Policy.
21.1 |  | Subsidiaries of the Company (incorporated by reference to the Registrant’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024).
23.1* |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1* |  | Power of Attorney (included on signature page).
31.1* |  | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2* |  | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1** |  | Certification of the Principal Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2** |  | Certification of the Principal Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1# |  | Zevra Therapeutics, Inc. Policy for Recovery of Erroneously Awarded Compensation, Effective October 2, 2023 (incorporated by reference to the Registrant’s Annual Report on Form 10-K as filed with the SEC on April 1, 2024).
99.1 |  | Securities Purchase Agreement, dated as of November 20, 2023, by and between the Registrant and Armistice Capital Master Fund Ltd. (incorporated herein by reference to the Registrant's Current Report on 8-K as filed with the SEC on November 20, 2023).

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EXHIBITS, CONTINUED

Exhibit No. |  | Description
101.INS* |  | Inline XBRL Instance Document.
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document.
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
* |  | Filed herewith
** |  | Furnished herewith
*** |  | Pursuant to Item 601(b)(2) of Regulation S-K, schedules and similar attachments have been omitted. The registrant hereby agrees to furnish a copy of any omitted schedule or similar attachment to the SEC upon request.
# |  | Indicates management contract or compensatory plan.
+ |  | Certain portions of the exhibit, identified by the mark, “[*]”, have been omitted because such portions contained information that is both (i) not material and (ii) the type that the Registrant treats as private or confidential.
† |  | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished to the Securities and Exchange Commission upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

ITEM 16. | FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | Zevra Therapeutics, Inc.
Dated: March 12, 2025 |  | By: |  | /s/ Neil F. McFarlane
|  |  |  | Neil F. McFarlane
|  |  |  | President and Chief Executive Officer (Principal Executive Officer)
Dated: March 12, 2025 |  | By: |  | /s/ R. LaDuane Clifton
|  |  |  | R. LaDuane Clifton, MBA, CPA
|  |  |  | Chief Financial Officer and Treasurer (Principal Financial Officer)

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POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitute and appoint Neil F. McFarlane and R. LaDuane Clifton, and each of them (with full power to each of them to act alone), as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature |  | Title |  | Date
/s/ Neil F. McFarlane |  |  |  |
Neil F. McFarlane |  | President and Chief Executive Officer (Principal Executive Officer) |  | March 12, 2025
/s/ R. LaDuane Clifton |  |  |  |
R. LaDuane Clifton, MBA, CPA |  | Chief Financial Officer and Treasurer (Principal Financial Officer) |  | March 12, 2025
/s/ Timothy J. Sangiovanni |  |  |  |
Timothy J. Sangiovanni, CPA |  | Senior Vice President, Finance and Corporate Controller (Principal Accounting Officer) |  | March 12, 2025
/s/ Thomas D. Anderson |  |  |  |
Thomas D. Anderson |  | Director |  | March 12, 2025
/s/ John B. Bode |  |  |  |
John B. Bode |  | Director |  | March 12, 2025
/s/ Douglas W. Calder |  |  |  |
Douglas W. Calder |  | Director |  | March 12, 2025
/s/Wendy Dixon |  |  |  |
Wendy Dixon |  | Director |  | March 12, 2025
/s/ Tamara A. Favorito |  |  |  |
Tamara A. Favorito |  | Director |  | March 12, 2025
/s/ Alvin Shih |  |  |  |
Alvin Shih |  | Director |  | March 12, 2025
/s/ Corey Watton |  |  |  |
Corey Watton |  | Director |  | March 12, 2025

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