Heron Therapeutics to sell assets to CorMedix
If completed, the sale would end Heron's current biotechnology operations while it remains publicly traded with CorMedix shares and contingent payments.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Heron Therapeutics, Inc. reported third-quarter 2026 net product sales of $35.250 million, down from $38.213 million a year earlier, and a net loss of $5.006 million versus $17.495 million. For the first nine months, sales were $107.627 million versus $114.316 million, while net loss was $18.606 million versus $17.241 million. Cash, cash equivalents and short-term investments totaled $23.4 million as of September 30, 2026.
On November 8, 2026, Heron agreed to sell substantially all assets to CorMedix, excluding its federal income tax net operating loss carryforwards and certain other tax attributes. Consideration includes $145.0 million in cash, subject to closing adjustments, and 14,583,333 CorMedix common shares, plus contingent royalties and ZYNRELEF earn-outs of $25.0 million if calendar 2028 net sales equal or exceed $65.0 million, and an additional $30.0 million if sales equal or exceed $95.0 million. The sale is expected to close in the first quarter of 2027, subject to stockholder approval and customary closing conditions. If completed, Heron says it will exit its current biotechnology operations but remain publicly traded. Management believes cash and investments will meet anticipated operating needs for at least one year, while noting possible covenant failures within 12 months absent additional funding; if debt is accelerated, management expects substantial doubt about continuing as a going concern.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter net loss narrowed to $5.006 million from $17.495 million.
Negative
- Moderate pointNine-month net product sales fell to $107.627 million from $114.316 million.
- Moderate pointNine-month net loss widened to $18.606 million from $17.241 million.
Filing Explained
Exchanges of up to ten million dollars of principal per quarter are subject to a minimum exchange price.
The 10-Q describes Heron’s November 8 asset sale agreement as agreed but not completed, with closing subject to stockholder approval and other customary conditions; at closing, cash consideration is to repay all amounts outstanding under the working-capital facility.
Separately, Rubric may request that outstanding 2031 notes be exchanged for CorMedix shares Heron receives in the sale; requests begin within 30 calendar days after
Key Figures
Key Terms
minimum cash covenant financial
paid-in-kind interest financial
volume-weighted average price financial
net operating loss carryforwards financial
earn-out payments financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What is CorMedix offering for HRTX's assets?
What are the ZYNRELEF earn-out conditions in HRTX's proposed sale?
What royalties are included in HRTX's proposed sale to CorMedix?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2026
OR
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission file number:
HERON THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of the registrant's common stock, par value $0.01 per share, outstanding as of November 4, 2026 was
HERON THERAPEUTICS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2026
TABLE OF CONTENTS
PART I. |
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FINANCIAL INFORMATION |
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ITEM 1. |
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Condensed Consolidated Financial Statements |
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Condensed Consolidated Balance Sheets as of September 30, 2026 (Unaudited) and December 31, 2025 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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10 |
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ITEM 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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26 |
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ITEM 3. |
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Quantitative and Qualitative Disclosures about Market Risk |
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35 |
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ITEM 4. |
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Controls and Procedures |
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35 |
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PART II. |
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OTHER INFORMATION |
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ITEM 1. |
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Legal Proceedings |
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36 |
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ITEM 1A. |
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Risk Factors |
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38 |
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ITEM 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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48 |
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ITEM 3. |
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Defaults upon Senior Securities |
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48 |
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ITEM 4. |
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Mine Safety Disclosures |
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48 |
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ITEM 5. |
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Other Information |
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48 |
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ITEM 6. |
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Exhibits |
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49 |
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SIGNATURES |
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50 |
In this Quarterly Report on Form 10-Q, all references to "Heron," the "Company," "we," "us," "our" and similar terms refer to Heron Therapeutics, Inc. and its wholly owned subsidiary, Heron Therapeutics B.V., Heron Therapeutics®, the Heron logo, ZYNRELEF®, APONVIE®, CINVANTI®, SUSTOL®, and Biochronomer® are our trademarks, which are protected under applicable intellectual property laws and are the property of Heron. All other trademarks appearing or incorporated by reference into this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks referred to in this Quarterly Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks. We do not intend our use or display of other parties' trademarks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
1
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In some cases, you can identify forward-looking statements by the use of the words "anticipate," "assume," "believe," "could," "estimate," "expect," "intend," "may," "might," "project," "should," "will," "would," and other expressions that predict or indicate future events and trends and which do not relate to historical matters. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business and commercialization strategy, products and product candidates, research pipeline, ongoing and planned preclinical studies and clinical trials, regulatory submissions and approvals, addressable patient population, research and development expenses, timing and likelihood of success, as well as our plans and objectives for future operations, are forward-looking statements. You should not rely on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors, including the pending Asset Sale (as defined below), pursuant to which substantially all of our assets will be acquired by CorMedix (as defined below) may cause our actual results, performance or achievements to be materially different from our anticipated future results, performance or achievements expressed or implied by the forward-looking statements.
Forward-looking statements include, but are not limited to, statements including:
2
3
You should refer to the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the U.S. Securities and Exchange Commission ("SEC") on February 26, 2026, (the "2025 Annual Report"), Quarterly Reports on Form 10-Q and other reports for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements were based on information, plans and estimates as of the date of this Quarterly Report on Form 10-Q, and while we may elect to update these forward-looking statements in our future filings under the Exchange Act, we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
4
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HERON THERAPEUTICS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
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September 30, |
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December 31, |
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(Unaudited) |
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(See Note 2) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Inventory, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use lease asset |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued clinical and manufacturing liabilities |
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Accrued payroll and employee liabilities |
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Other accrued liabilities |
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Current lease liability |
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Total current liabilities |
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Non-current notes payable, net |
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Non-current convertible notes payable, net |
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Non-current lease liability |
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Other non-current liabilities |
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Total liabilities |
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Stockholders' equity: |
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Common stock |
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Series A convertible preferred stock |
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Additional paid-in capital |
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Accumulated other comprehensive (loss) income |
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( |
) |
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Accumulated deficit |
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( |
) |
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( |
) |
Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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||
See accompanying notes.
5
HERON THERAPEUTICS, INC.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except per share amounts)
|
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
|
||||||||||
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2026 |
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2025 |
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2026 |
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2025 |
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||||
Net product sales |
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$ |
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$ |
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$ |
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$ |
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||||
Cost of product sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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General and administrative |
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Sales and marketing |
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Total operating expenses |
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Loss from operations |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Loss on debt extinguishment |
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— |
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( |
) |
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— |
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( |
) |
Other expense, net |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net loss |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Other comprehensive loss: |
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||||
Unrealized (loss) gain on short-term investments |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Basic net loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted net loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average common shares outstanding, basic and diluted |
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||||
See accompanying notes.
6
HERON THERAPEUTICS, INC.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands)
|
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|
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Series A |
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Accumulated |
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|||||||||||
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Convertible |
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Additional |
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Other |
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Total |
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|||||||||||
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Common Stock |
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Preferred Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders' |
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||||||||||||||
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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(Loss) Income |
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Deficit |
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Equity |
|
||||||||
Balance as of December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
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|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
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— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Balance as of March 31, 2026 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Issuance of common stock under the employee stock purchase plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss and comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2026 (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Balance as of September 30, 2026 (unaudited) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
Series A |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
|
|
Convertible |
|
|
Additional |
|
|
Other |
|
|
|
|
|
Total |
|
|||||||||||
|
|
Common Stock |
|
|
Preferred Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
(Loss) Income |
|
|
Deficit |
|
|
Equity |
|
||||||||
Balance as of December 31, 2024 |
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Net unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance as of March 31, 2025 (unaudited) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of common stock under the employee stock purchase plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net unrealized loss on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Balance as of June 30, 2025 (unaudited) |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Issuance of common stock under equity incentive plan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
||
Issuance of common stock in settlement of 2026 Convertible Notes |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of common stock in a private placement equity offering |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of Series A convertible preferred stock in a private placement equity offering |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net unrealized gain on short-term investments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Balance as of September 30, 2025 (unaudited) |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||||||
See accompanying notes.
7
HERON THERAPEUTICS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Nine Months Ended |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of debt discount and debt issuance costs |
|
|
|
|
|
|
||
Accretion of discount on short-term investments |
|
|
( |
) |
|
|
( |
) |
Retirement and impairment of property and equipment |
|
|
|
|
|
|
||
Loss on extinguishment of debt |
|
|
— |
|
|
|
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
( |
) |
|
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued clinical and manufacturing liabilities |
|
|
( |
) |
|
|
( |
) |
Accrued payroll and employee related liabilities |
|
|
( |
) |
|
|
( |
) |
Other accrued expenses |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing activities: |
|
|
|
|
|
|
||
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
Maturities and sales of short-term investments |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of property and equipment |
|
|
— |
|
|
|
|
|
Net cash provided by investing activities |
|
|
|
|
|
|
||
Financing activities: |
|
|
|
|
|
|
||
Principal and end of term fee payment for notes payable |
|
|
( |
) |
|
|
— |
|
Proceeds from the sale of common stock |
|
|
— |
|
|
|
|
|
Cash paid for issuance costs of stock |
|
|
— |
|
|
|
( |
) |
Proceeds from sale of Series A convertible preferred stock |
|
|
— |
|
|
|
|
|
Cash paid for 2026 Convertible Notes extinguishment |
|
|
— |
|
|
|
( |
) |
Cash paid for notes payable extinguishment |
|
|
— |
|
|
|
( |
) |
Proceeds from 2031 Convertible Notes issuance |
|
|
— |
|
|
|
|
|
Cash paid for 2031 Convertible Notes debt issuance costs |
|
|
— |
|
|
|
( |
) |
Proceeds from notes payable issuance |
|
|
— |
|
|
|
|
|
Cash paid for notes payable debt issuance cost |
|
|
— |
|
|
|
( |
) |
(Payments) receipts for stock issued under the equity incentive plan |
|
|
( |
) |
|
|
|
|
Proceeds from purchases under the employee stock purchase plan |
|
|
|
|
|
|
||
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
— |
|
|
See accompanying notes.
8
9
HERON THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Business
We are a commercial-stage biotechnology company focused on improving the lives of patients by developing and commercializing therapeutic innovations that improve medical care. Our advanced science, patented technologies, and innovative approach to drug discovery and development have allowed us to create and commercialize a portfolio of products that aim to advance the standard of care for acute care and oncology patients.
ZYNRELEF® (bupivacaine and meloxicam) extended-release solution ("ZYNRELEF") is approved in the United States ("U.S.") for the management of postoperative pain. APONVIE® (aprepitant) injectable emulsion ("APONVIE") is approved in the U.S. for the prevention of postoperative nausea and vomiting. CINVANTI® (aprepitant) injectable emulsion ("CINVANTI") is approved in the U.S. for the prevention of chemotherapy-induced nausea and vomiting. SUSTOL® (granisetron) extended-release injection ("SUSTOL") is also approved in the U.S. for the prevention of chemotherapy-induced nausea and vomiting. As of September 30, 2026, we have ceased distribution of SUSTOL.
Liquidity and Going Concern
In accordance with Accounting Standards Update ("ASU") No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern for a period of at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
From our inception through September 30, 2026, we have financed our operations, including technology and product research and development, primarily through issuances of our common stock, convertible notes and warrants, product sales and debt financings.
As of September 30, 2026, we had cash, cash equivalents and short-term investments of $
Pursuant to the Asset Purchase Agreement, a portion of the cash consideration in the Asset Sale will be used to repay all amounts outstanding under the Working Capital Facility Agreement. A portion of the stock consideration in the Asset Sale will be used to exchange all or a portion of the outstanding 2031 Convertible Notes as described in Note 8 - Long-Term Debt and Convertible Notes. The completion of the Asset Sale is subject to approval by the Company's stockholders and the satisfaction of other customary closing conditions, and there can be no assurance that the Company will be successful in obtaining stockholder approval or closing the Asset Sale on the anticipated timeline, on the terms currently contemplated, or at all.
10
2. Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the requirements of the SEC for interim reporting. Accordingly, since they are interim statements, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2026, are not necessarily indicative of the results that may be expected for other quarters or the year ending December 31, 2026. The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements as of that date. For more complete financial information, these condensed consolidated financial statements and the related notes thereto should be read in conjunction with the audited consolidated financial statements included in our 2025 Annual Report.
3. Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of Heron Therapeutics, Inc. and its wholly owned subsidiary, Heron Therapeutics B.V., which was organized in the Netherlands in March 2015. Heron Therapeutics B.V. has no operations and no material assets or liabilities, and there have been no significant transactions related to Heron Therapeutics B.V. since its inception.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosures made in the accompanying notes to the financial statements. Our significant accounting policies that involve significant judgment and estimates include revenue recognition, investments, inventory and the related reserves, accrued clinical and manufacturing liabilities, income taxes, stock-based compensation and accounting for debt and equity transactions. Actual results could differ materially from those estimates.
Cash, Cash Equivalents and Short-Term Investments
Cash and cash equivalents consist of cash and highly liquid investments with contractual maturities of three months or less from the original purchase date.
Short-term investments consist of securities with contractual maturities of greater than three months from the original purchase date. Securities with contractual maturities greater than one year are classified as short-term investments on the condensed consolidated balance sheets, as we have the ability, if necessary, to liquidate these securities to meet our liquidity needs in the next 12 months. We have classified our short-term investments as available-for-sale securities in the accompanying condensed consolidated financial statements. Available-for-sale securities are stated at fair market value, with net changes in unrealized gains and losses reported in other comprehensive loss and realized gains and losses included in other expense, net. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in interest income within other expense, net.
Our bank and investment accounts have been placed under a control agreement in accordance with our Working Capital Facility Agreement (see Note 8 - Long-Term Debt and Convertible Notes).
Concentration of Credit Risk
Cash, cash equivalents and short-term investments are financial instruments that potentially subject us to concentrations of credit risk. We deposit our cash in financial institutions. At times, such deposits may be in excess of insured limits. We have not experienced any losses in such accounts and believe we are not exposed to significant risk with respect to our cash, cash equivalents and short-term investments, however, any loss incurred or a lack of access to such funds could have a significant adverse impact on our financial condition, results of operations and cash flows.
We may also invest our excess cash in money market funds, U.S. government and agencies, corporate debt securities and commercial paper. We have established guidelines relative to the diversification of our cash investments and their maturities in an effort to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates.
11
ZYNRELEF, APONVIE and CINVANTI are, and until September 30, 2026, SUSTOL was, distributed in the U.S. through a limited number of specialty distributors and full line wholesalers (collectively, "Customers") that resell to healthcare providers and hospitals, the end users of our Products.
The following table includes the percentage of net product sales and accounts receivable balances for our three major Customers, each of which comprised 10% or more of our product sales:
|
|
Net Product Sales |
|
|
Accounts |
|
||||||
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
As of |
|
|||
Customer A |
|
|
% |
|
|
% |
|
|
% |
|||
Customer B |
|
|
% |
|
|
% |
|
|
% |
|||
Customer C |
|
|
% |
|
|
% |
|
|
% |
|||
Total |
|
|
% |
|
|
% |
|
|
% |
|||
Accounts Receivable, Net
Accounts receivable are recorded at the invoice amount, net of an allowance for credit losses. The allowance for credit losses reflects accounts receivable balances that are believed to be uncollectible. In estimating the allowance for credit losses, we consider (1) our historical experience with collections and write-offs; (2) the credit quality of our Customers and any recent or anticipated changes thereto; (3) the outstanding balances and past due amounts from our Customers; and (4) reasonable and supportable forecasts of economic conditions expected to exist throughout the contractual term of the receivable. As of September 30, 2026, and December 31, 2025, we do
Inventory, Net
Inventory is stated at the lower of cost or estimated net realizable value on a first-in, first-out, or FIFO, basis. We periodically analyze our inventory levels and write down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and inventory quantities that are in excess of expected sales requirements as cost of product sales. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required, which would be recorded as cost of product sales.
Property and Equipment, Net
Property and equipment is stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets (generally 5 years). Leasehold improvements are stated at cost and amortized on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.
Leases
We determine if an arrangement is a lease or contains lease components at inception. Operating leases with an initial term greater than 12 months are recorded as lease liabilities with corresponding right-of-use ("ROU") lease assets on the condensed consolidated balance sheets. ROU lease assets represent our right to use the underlying assets over the lease term, and lease liabilities represent the present value of our obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The ROU lease assets equal the lease liabilities, less unamortized lease incentives, unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease. The lease term includes any option to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. We have elected the practical expedient to not separate lease and non-lease components.
Revenue Recognition
Revenue is recognized in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("Topic 606"). Topic 606 is based on the principle that revenue should
12
be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Product Sales
Our Products are distributed in the U.S. through a limited number of Customers that resell to healthcare providers and hospitals, the end users of our Products.
Revenue is recognized in an amount that reflects the consideration we expect to receive in exchange for our Products. To determine revenue recognition for contracts with Customers within the scope of Topic 606, we perform the following five steps: (i) identify the contract(s) with a Customer; (ii) identify the performance obligations of the contract(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract(s); and (v) recognize revenue when (or as) we satisfy the performance obligations. We recognize revenue from Product sales when there is a transfer of control of the Product to our Customers. We typically determine transfer of control based on when the Product is delivered, and title passes to our Customers.
Product Sales Allowances
We recognize product sales allowances as a reduction of product sales in the same period the related revenue is recognized. Product sales allowances are based on amounts owed or to be claimed on the related sales. Such variable consideration includes estimates that take into consideration the terms of our agreements with Customers, historical product returns, rebates or discounts taken, the shelf life of the product and specific known market events, such as competitive pricing and new product introductions. If actual future results vary from our estimates, we may need to adjust these estimates, which could have an effect on product sales and earnings in the period of adjustment. Our product sales allowances include:
We believe our estimated allowance for product returns and GPO discounts requires a high degree of judgment and is subject to change based on our experience and certain quantitative and qualitative factors. We believe our estimated allowances for distributor fees, GPO rebates and administrative fees, Medicaid rebates and prompt pay discounts do not require a high degree of judgment because the amounts are settled within a relatively short period of time.
Our product sales allowances and related accruals are evaluated each reporting period and adjusted when trends or significant events indicate that a change in estimate is appropriate. Changes in product sales allowance estimates could materially affect our results of operations and financial position.
13
The following table provides disaggregated net product sales (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
CINVANTI net product sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
SUSTOL net product sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
ZYNRELEF net product sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
APONVIE net product sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net product sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table provides a summary of activity with respect to our product returns, distributor fees and discounts, rebates and administrative fees, which are included in other accrued liabilities on the condensed consolidated balance sheets (in thousands):
|
|
Product |
|
|
Distributor |
|
|
Discounts, |
|
|
Total |
|
||||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payments/credits |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at September 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Comprehensive Loss
Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, including pre-funded warrants to purchase shares of common stock. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, stock options, restricted stock units, warrants and shares of common stock underlying convertible notes are considered to be common stock equivalents and are included in the calculation of diluted net loss per share only when their effect is dilutive.
Because we have incurred a net loss for the three and nine months ended September 30, 2026 and 2025, the following common stock equivalents were not included in the computation of net loss per share because their effect would be anti-dilutive (in thousands):
|
|
As of September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Stock options outstanding |
|
|
|
|
|
|
||
Restricted stock units outstanding |
|
|
|
|
|
|
||
Warrants outstanding |
|
|
|
|
|
|
||
Series A Preferred Stock convertible to common shares |
|
|
|
|
|
|
||
Shares of common stock underlying convertible notes outstanding |
|
|
|
|
|
|
||
Segment Reporting
Management, upon consideration of the organizational structure of the business and information reviewed by our Chief Executive Officer, who is also our chief operating decision maker ("CODM"), has concluded that we have
14
Recently Issued Accounting Standards Not Yet Adopted
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that we adopt as of the specified effective date. We have evaluated recently issued accounting pronouncements and do not believe any will have a material impact on our condensed consolidated financial statements or related financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires disaggregated disclosures of certain categories of expenses that are included in the face of the financial statements. This standard is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact on our disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which provides clarity regarding the existing required interim GAAP disclosures. This standard is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact on our disclosures.
4. Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The FASB ASC Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
We measure cash, cash equivalents and short-term investments at fair value on a recurring basis. The fair values of such assets were as follows (in thousands):
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
||||||||||
|
|
Balance at |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Cash and money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. treasury bills and government agency obligations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
U.S. corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
15
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
||||||||||
|
|
Balance at |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Cash and money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
U.S. treasury bills and government agency obligations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
U.S. corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign corporate debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
We have
As of September 30, 2026, cash equivalents included $
A company may elect to use fair value to measure accounts receivable, available-for-sale securities, accounts payable, guarantees and issued debt, among others. If the use of fair value is elected, any upfront costs and fees related to the item such as debt issuance costs must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. Unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings and any changes in fair value are recognized in earnings. We have elected to not apply the fair value option to our financial assets and liabilities.
Financial instruments, including cash, cash equivalents, receivables, inventory, prepaid expenses, other current assets, accounts payable and accrued expenses are carried at cost, which is considered to be representative of their respective fair values because of the short-term maturity of these instruments. Short-term available-for-sale investments are carried at fair value. Our notes payable and convertible notes payable outstanding at September 30, 2026 and December 31, 2025 do not have a readily available ascertainable market value; however, their carrying value, which is measured at carrying value less unamortized debt issuance costs and debt discounts, is considered to approximate their fair value, as the terms were based on market conditions.
5. Short-Term Investments
The following is a summary of our short-term investments (in thousands):
|
|
September 30, 2026 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
U.S. treasury bills and government agency obligations |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
U.S. corporate debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
U.S. commercial paper |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Foreign commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign corporate debt securities |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
16
|
|
December 31, 2025 |
|
|||||||||||||
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
||||
U.S. treasury bills and government agency obligations |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
U.S. corporate debt securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
U.S. commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign commercial paper |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign corporate debt securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. We regularly monitor and evaluate the realizable value of our marketable securities. We did
Unrealized gains and losses associated with our investments are reported in accumulated other comprehensive loss. Realized gains and losses associated with our investments, if any, are reported in the statements of operations and comprehensive loss. We did
6. Inventory
Inventory consists of the following (in thousands):
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
|
|
September 30, 2026 |
|
|
December 31, 2025 |
|
||
CINVANTI |
|
$ |
|
|
$ |
|
||
SUSTOL |
|
|
|
|
|
|
||
ZYNRELEF |
|
|
|
|
|
|
||
APONVIE |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
For the three and nine months ended September 30, 2026, cost of product sales included charges of $
7. Commitments and Contingencies
Litigation and Other Contingencies
The Company is, from time to time, subject to a variety of litigation and other proceedings incidental to its business, including lawsuits involving claims relating to intellectual property matters, employment matters, commercial disputes, as well as regulatory investigations or enforcement. The Company may also become subject to lawsuits as a result of past or future acquisitions, or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with divested businesses. Some of these lawsuits may include claims for punitive and consequential as well as compensatory damages. The outcomes of the Company's legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. We have not reserved any amounts for contingencies related to such litigation because they are neither probable nor reasonably estimable based on information currently available. See "Part II. Item 1. Legal Proceedings" in this Quarterly Report on Form 10-Q for further discussion of pending legal proceedings. There can be no assurance that there will not be a change in the scope of one or more of these matters or that any other future legal matters will or will not be material to the Company's financial position, results of operations or cash flows for a particular period.
17
Leases
In August 2025, we entered into an operating lease agreement for
In December 2025, we entered into a short-term operating lease agreement for
During the three and nine months ended September 30, 2026, we recognized $
During the three and nine months ended September 30, 2025, we recognized $
Annual future minimum lease payments as of September 30, 2026 are as follows (in thousands):
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: discount |
|
|
|
|
Total lease liabilities |
|
$ |
|
8. Long-Term Debt and Convertible Notes
Working Capital Facility Agreement
On August 9, 2023, we entered into a working capital facility agreement (the "Initial Working Capital Facility Agreement") with Hercules Capital, Inc., as administrative agent, collateral agent, and lender ("Hercules"). The Initial Working Capital Facility Agreement provided for an aggregate principal amount of up to $
In addition, in connection with the tranche 1A funding, we issued warrants to Hercules to purchase up to
18
On August 8, 2025, we entered into an amendment to the Initial Working Capital Facility Agreement, as amended by the First Amendment to the Working Capital Facility Agreement (the "Second Amendment to the Working Capital Facility Agreement'). The Second Amendment to the Working Capital Facility Agreement (i) provides for an aggregate principal amount of up to $
The Second Amendment to the Working Capital Facility Agreement contains a minimum cash covenant, a minimum revenue covenant and a minimum EBITDA covenant. In the event of a default under the Working Capital Facility Agreement or any future debt agreement, our lenders could declare all outstanding principal, together with accrued and unpaid interest, to be immediately due and payable. The Second Amendment to the Working Capital Facility Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions.
On January 30, 2026, we entered into an amendment to the Initial Working Capital Facility Agreement, as amended by the First Amendment to the Working Capital Facility Agreement and the Second Amendment to the Working Capital Facility Agreement (the "Third Amendment to Working Capital Facility Agreement") to increase the end of term charge to be up to
On August 7, 2026, we entered into a Waiver, Consent and Fourth Amendment to the Working Capital Facility Agreement (the "Fourth Amendment to the Working Capital Facility Agreement") to the Initial Working Capital Facility Agreement, as amended by the First Amendment to the Working Capital Facility Agreement, the Second Amendment to the Working Capital Facility Agreement and the Third Amendment to the Working Capital Facility Agreement. The Fourth Amendment to the Working Capital Facility Agreement, among other things, (a) waives the minimum revenue and minimum EBITDA financial covenants for the fiscal quarter ended June 30, 2026 and (b) amends the Working Capital Facility Agreement to (i) require a prepayment by the Company of $
On September 17, 2026, we entered into the Fifth Amendment to the Working Capital Facility Agreement (the "Fifth Amendment to the Working Capital Facility Agreement") to the Initial Working Capital Facility Agreement, as amended by the First Amendment to the Working Capital Facility Agreement, the Second Amendment to the Working Capital Facility Agreement, the Third Amendment to the Working Capital Facility Agreement, and the Fourth Amendment to the Working Capital Facility Agreement. The Fifth Amendment to the Working Capital Facility Agreement, among other things, amended the terms of the
19
September 15, 2026 payment of $
The Initial Working Capital Facility Agreement, together with the First Amendment to the Working Capital Facility Agreement, the Second Amendment to the Working Capital Facility Agreement, the Third Amendment to the Working Capital Facility Agreement, the Fourth Amendment to the Working Capital Facility Agreement and the Fifth Amendment to the Working Capital Facility Agreement is referred to collectively as the "Working Capital Facility Agreement".
Pursuant to the terms of the Asset Purchase Agreement, all outstanding amounts under the Working Capital Facility Agreement will be repaid upon the closing of the Asset Sale.
The Second Amendment to the Working Capital Facility Agreement was accounted for in accordance with ASC Topic 470, Debt. Amendments are assessed by management to determine appropriate treatment as troubled debt restructurings, extinguishments or modifications. The Second Amendment to the Working Capital Facility Agreement qualifies as a debt extinguishment and issuance of a new debt instrument. We recorded a loss on extinguishment during the quarter ended September 30, 2025, of $
The Third Amendment to the Working Capital Facility Agreement, the Fourth Amendment to the Working Capital Facility Agreement and the Fifth Amendment to the Working Capital Facility Agreement were accounted for in accordance with ASC Topic 470, Debt. Amendments are assessed by management to determine appropriate treatment as troubled debt restructurings, extinguishments or modifications. The Third Amendment to the Working Capital Facility Agreement, the Fourth Amendment to the Working Capital Facility Agreement and the Fifth Amendment to the Working Capital Facility Agreement each qualified as a modification.
The tranche 1 funding under the Second Amendment to the Working Capital Facility Agreement is accounted for as debt and was recorded as a liability on the condensed consolidated balance sheets. In addition, the additional borrowings available under the Second Amendment to the Working Capital Facility Agreement are accounted for as a single freestanding financial instrument that are not assets or obligations of ours and will be accounted for when and if we borrow additional tranches in the future.
In connection with the Second Amendment to the Working Capital Facility Agreement, we incurred debt issuance costs of $
For the three months ended September 30, 2026, interest expense related to the Working Capital Facility Agreement was $
For the nine months ended September 30, 2026, interest expense related to the Working Capital Facility Agreement was $
For the three months ended September 30, 2025, interest expense related to the Working Capital Facility Agreement was $
For the nine months ended September 30, 2025, interest expense related to the Working Capital Facility Agreement was $
20
As of September 30, 2026, the carrying value of the Working Capital Facility Agreement was $
2026 Senior Unsecured Convertible Notes
In May 2021, we entered into a note purchase agreement with funds affiliated with Baker Bros. Advisors LP for a private placement of $
On August 8, 2025, we entered into an exchange agreement pursuant to which $
For the three months ended September 30, 2025, interest expense related to the 2026 Convertible Notes was $
For the nine months ended September 30, 2025, interest expense related to the 2026 Convertible Notes was $
2031 Senior Unsecured Convertible Notes
On August 8, 2025, we entered into the 2031 Convertible Notes Purchase Agreement with a fund affiliated with Rubric Capital Management LP ("Rubric") for a private placement of $
The 2031 Convertible Notes were issued at par. The 2031 Convertible Notes bear interest at a rate of
The 2031 Convertible Notes are subject to redemption at our option, after September 1, 2026, but only if the last reported sale price per share of our common stock exceeds
The 2031 Convertible Notes can be settled in either shares of common stock, cash or a combination of cash and shares of common stock based on the conversion rate in effect on the date of conversion. The initial conversion rate for the 2031 Convertible Notes is
If a holder of the 2031 Convertible Notes converts upon a make-whole fundamental change or Company redemption, the holder may be eligible to receive a make-whole premium through an increase to the conversion rate.
The
At a special meeting of stockholders held on October 13, 2025, the Company's stockholders approved, pursuant to Nasdaq Listing Rule 5635(d), the issuance of shares of common stock in connection with the conversion of the 2031 Convertible Notes, which could, under certain circumstances that may occur in the future, exceed
21
with the Asset Sale, subject to minimum quarterly amounts of $
The 2031 Convertible Notes were accounted for in accordance with ASC 470-20 and ASC 815-40. Under ASC 815-40, to qualify for equity classification (or non-bifurcation, if embedded), the instrument (or embedded feature) must be both (1) indexed to the issuer's stock and (2) meet the requirements of the equity classification guidance. Based upon our analysis, it was determined that the 2031 Convertible Notes do contain embedded features indexed to our common stock, but do not meet the requirements for bifurcation, and therefore do not need to be separately accounted for as an equity component. Since the embedded conversion feature meets the equity scope exception from derivative accounting, and since the embedded conversion option does not need to be separately accounted for as an equity component under ASC 470-20, the proceeds received from the issuance of the 2031 Convertible Notes were recorded as a liability on the condensed consolidated balance sheets.
We incurred issuance costs related to the 2031 Convertible Notes of $
For the three months ended September 30, 2026, interest expense related to the 2031 Convertible Notes was $
For the nine months ended September 30, 2026, interest expense related to the 2031 Convertible Notes was $
For the three and nine months ended September 30, 2025, interest expense related to the 2031 Convertible Notes was $
As of September 30, 2026, the carrying value of the 2031 Convertible Notes was $
9. Private Placement Equity Offering
On August 8, 2025, we entered into a securities purchase agreement with the purchasers, for a private placement of (i)
22
common stock. Upon a liquidation, the proceeds available for distribution would be paid pari passu among the holders of shares of common stock and Series A convertible preferred stock, pro rata based on the number of shares held by each such holder and on an as converted basis.
The
At a special meeting of stockholders held on October 13, 2025, the Company's stockholders approved, pursuant to Nasdaq Listing Rule 5635(d), the issuance of shares of common stock in connection with the conversion of the Series A convertible preferred stock, which could, under certain circumstances that may occur in the future, exceed
Upon stockholder approval in October 2025,
10. Equity Incentive Plan
Option Plan Activity
The following table summarizes the stock option activity for the nine months ended September 30, 2026:
|
|
Shares |
|
|
Weighted- |
|
|
Weighted- |
|
|||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
$ |
|
|
|
|
|||
Exercised |
|
|
|
|
$ |
|
|
|
|
|||
Expired and forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
||
Outstanding at September 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|||
We estimated the fair value of each option grant on the grant date using the Black-Scholes option pricing model. The following are the weighted-average assumptions:
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Volatility |
|
|
% |
|
|
% |
||
Expected life (years) |
|
|
|
|
||||
The following table summarizes the restricted stock unit ("RSUs") activity for the nine months ended September 30, 2026:
|
|
Shares |
|
|
Weighted-Average Grant Date Fair Value |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Released |
|
|
( |
) |
|
$ |
|
|
Expired and forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2026 |
|
|
|
|
$ |
|
||
23
The fair value of RSUs is estimated based on the closing market price of our common stock on the date of the grant. RSUs generally vest quarterly over a
We estimated the fair value of each purchase right granted under our 1997 Employee Stock Purchase Plan, as amended, at the beginning of each new offering period using the Black-Scholes option pricing model. The following are the weighted average assumptions:
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
|
% |
|
|
% |
||
Volatility |
|
|
% |
|
|
% |
||
Expected life (months) |
|
|
|
|
|
|
||
Stock-Based Compensation
The following table summarizes stock-based compensation expense related to stock-based payment awards granted pursuant to all of our equity compensation arrangements (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026, there was $
11. Income Taxes
Deferred income tax assets and liabilities are recognized for temporary differences between financial statements and income tax carrying values using tax rates in effect for the years such differences are expected to reverse. Due to uncertainties surrounding our ability to generate future taxable income and consequently realize such deferred income tax assets, a full valuation allowance has been established. We continue to maintain a full valuation allowance against our deferred tax assets as of September 30, 2026.
The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will be recognized when it is more likely than not of being sustained. The disclosures regarding uncertain tax positions included in our 2025 Annual Report, continue to be accurate for the three and nine months ended September 30, 2026.
12. Subsequent Events
Proposed Asset Sale
On November 8, 2026, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with CorMedix, pursuant to which it has agreed to sell substantially all of its assets to CorMedix, other than certain excluded assets, including its federal income tax net operating loss carryforwards (the "NOLs") and certain other tax attributes, and CorMedix has agreed to acquire those assets and assume certain liabilities of the Company as set forth in the Asset Purchase Agreement (the "Asset Sale"). As consideration for the Asset Sale, CorMedix has agreed to (i) issue to the Company
24
escrow, at the closing of the Asset Sale to secure post-closing adjustments to the cash consideration, which post-closing adjustments may not exceed $
The Asset Sale, which has been unanimously approved by the board of directors of the Company (the "Board"), is currently expected to close in the first quarter of 2027, subject to approval by the Company's stockholders and the satisfaction of other customary closing conditions. The Asset Purchase Agreement contains certain termination rights in favor of each of the Company and CorMedix. In addition, the Asset Purchase Agreement provides that, in connection with certain terminations of the Asset Purchase Agreement, depending on the circumstances surrounding the termination, one party may be required to pay the other party a termination fee of $
If the Asset Sale closes, the Company will exit the operation of its current biotechnology business and other historical operations, but it does not intend to liquidate and will remain a publicly traded company. The Company will retain other material assets following the closing of the Asset Sale, including the shares of CorMedix common stock issued to the Company in the Asset Sale, the right to receive future royalties, earn-out payments, significant NOLs and cash on hand. Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets. Such opportunities may include, but are not limited to, the acquisition of products, product candidates, milestone payments and royalty streams, programs or technologies as well as pursuing strategic alliances, joint ventures, investments in complementary businesses, out-licensing and in-licensing agreements, divestitures or other transactions. It is currently uncertain what businesses or assets the Company may acquire or invest in following the closing of the Asset Sale, and the Board intends to evaluate opportunities to create value for the benefit of stockholders.
25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes included in our 2025 Annual Report. Some information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. You should review the sections entitled "Forward-Looking Statements" and "Risk Factors" in our 2025 Annual Report, Quarterly Reports on Form 10-Q and other reports for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Introduction
Management's discussion and analysis of financial condition and results of operations is provided as a supplement to the consolidated financial statements and notes, included in this Quarterly Report on Form 10-Q to help provide an understanding of our financial condition, the changes in our financial condition and our results of operations. Our discussion is organized as follows:
Overview
We are a commercial-stage biotechnology company focused on improving the lives of patients by developing and commercializing therapeutic innovations that improve medical care. Our advanced science, patented technologies, and innovative approach to drug discovery and development have allowed us to create and commercialize a portfolio of products that aim to advance the standard of care for acute care and oncology patients.
Acute Care Product Portfolio
ZYNRELEF
ZYNRELEF is a dual-acting local anesthetic that delivers a fixed-dose combination of the local anesthetic bupivacaine and a low dose of the nonsteroidal anti-inflammatory drug meloxicam. ZYNRELEF is the first and only modified-release local anesthetic to be classified by the FDA as an extended-release product because ZYNRELEF demonstrated in Phase 3 studies significantly reduced pain and a significantly increased proportion of patients requiring no opioids through the first 72 hours following surgery compared to bupivacaine solution, the current standard-of-care local anesthetic for postoperative pain control.
ZYNRELEF was initially approved by the FDA in May 2021, and we commenced commercial sales in the U.S. in July 2021. In each of December 2021 and January 2024, the FDA approved an expansion of ZYNRELEF's indication. ZYNRELEF is approved for use in adults for postsurgical analgesia for up to 72 hours after soft tissue and orthopedic surgical procedures including foot and ankle, and other orthopedic surgical procedures in which direct exposure to articular cartilage is avoided. In September 2024, the FDA approved the prior approval supplement ("PAS") application for ZYNRELEF Vial Access Needle ("VAN"), which is replacing the current vented vial spike.
26
Through March 31, 2025, ZYNRELEF was reimbursed outside of the surgical bundle payment in the Hospital Outpatient Department ("HOPD") setting of care through pass-through status granted by the Centers for Medicare and Medicaid Services ("CMS").
Effective April 1, 2025, ZYNRELEF is reimbursed through inclusion in the Non-Opioids Prevent Addiction in the Nation ("NOPAIN") Act, which directs CMS to provide separate Medicare reimbursement for non-opioid treatments that are used to manage pain during surgeries conducted in hospital outpatient departments or in ambulatory surgical centers. To qualify, the non-opioid treatment must demonstrate the ability to replace, reduce, or avoid intraoperative or postoperative opioid use or the quantity of opioids prescribed in a clinical trial or through data published in a peer-reviewed journal. The hospital outpatient prospective payment system and ambulatory surgical center rule for calendar year 2025 includes ZYNRELEF as a qualifying non-opioid requiring CMS to provide separate Medicare reimbursement in both the hospital outpatient department and ambulatory surgical center settings through December 31, 2027.
Effective October 1, 2025, CMS has approved a new permanent Healthcare Common Procedure Coding System J-code for ZYNRELEF. ZYNRELEF will continue to qualify under the Non-Opioid Policy for Pain Relief with the J-code and will be reimbursed outside the surgical supply package for Medicare, aligning with the policy goals to remove financial barriers to qualifying non-opioid pain management options.
APONVIE
APONVIE is the first and only commercially available intravenous formulation of aprepitant, a substance P/neurokinin-1 ("NK1") receptor antagonist indicated for postoperative nausea and vomiting ("PONV") in adults. Delivered via a single 30-second intravenous ("IV") injection, APONVIE has demonstrated rapid achievement of therapeutic drug levels ideally suited for the surgical setting.
APONVIE was approved by the FDA in September 2022 and became commercially available in the U.S. in March 2023. APONVIE is indicated for the prevention of PONV in adults. CMS granted pass-through payment status for APONVIE, effective April 1, 2023, which expired March 31, 2026. Effective April 1, 2026, CMS has approved a new permanent Healthcare Common Procedure Coding System J-code for APONVIE.
In 2025, APONVIE was included in the Fifth Consensus Guidelines for the Management of Postoperative Nausea and Vomiting as published in Anesthesia and Analgesia.
Oncology Care Product Portfolio
CINVANTI
CINVANTI is an IV formulation of aprepitant, a substance NK1 receptor antagonist. CINVANTI is the first IV formulation to directly deliver aprepitant, the active ingredient in EMEND® capsules. Aprepitant (including its prodrug, fosaprepitant) is a single-agent NK1 receptor antagonist to significantly reduce nausea and vomiting in both the acute phase (0–24 hours after chemotherapy) and the delayed phase (24–120 hours after chemotherapy). CINVANTI is the first IV formulation of an NK1 receptor antagonist indicated for the prevention of acute and delayed nausea and vomiting associated with Highly Emetogenic Cancer ("HEC") and nausea and vomiting associated with Moderately Emetogenic Cancer ("MEC") that is free of synthetic surfactants, including polysorbate 80.
CINVANTI, in combination with other antiemetic agents, is indicated in adults for the prevention of acute and delayed nausea and vomiting associated with initial and repeat courses of HEC including high-dose cisplatin as a single-dose regimen, delayed nausea and vomiting associated with initial and repeat courses of MEC as a single-dose regimen, and nausea and vomiting associated with initial and repeat courses of MEC as a 3-day regimen.
NK1 receptor antagonists are typically used in combination with 5-hydroxytryptamine ("5-HT3") receptor antagonists. The only other injectable NK1 receptor antagonist currently approved in the U.S. for both acute and delayed chemotherapy induced nausea and vomiting ("CINV"), EMEND® IV (fosaprepitant), contains polysorbate 80, a synthetic surfactant, which has been linked to hypersensitivity reactions, including anaphylaxis, and infusion site reactions. The CINVANTI formulation does not contain polysorbate 80 or any other synthetic surfactant. Our CINVANTI data has demonstrated the bioequivalence of CINVANTI to EMEND IV, supporting its efficacy for the prevention of both acute and delayed nausea and vomiting associated with HEC and
27
nausea and vomiting associated with MEC. Results also showed CINVANTI was better tolerated in healthy volunteers than EMEND IV, with significantly fewer adverse events reported with CINVANTI.
CINVANTI was approved by the FDA in November 2017, and we commenced commercial sales in the U.S. in January 2018.
On June 1, 2026, the U.S. District Court for the District of Delaware issued a decision in the patent litigation between the Company and Azurity Pharmaceuticals, Inc., Azurity Pharmaceuticals India LLP f/k/a Slayback Pharma India LLP, and Slayback Pharma LLC ("Azurity"), with respect to CINVANTI, holding that the asserted claims of the Company's U.S. Patent Nos. 12,115,255 and 12,290,520 are invalid under 35 U.S.C. § 112. The Court also entered a final judgment declaring that the asserted claims of U.S. Patent Nos. 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; and 11,744,800 are not infringed. This decision has no impact on any prior settlement agreement related to CINVANTI or APONVIE.
SUSTOL
SUSTOL is the first extended-release 5-HT3 receptor antagonist approved for the prevention of acute and delayed nausea and vomiting associated with both MEC and anthracycline and cyclophosphamide ("AC") combination chemotherapy regimens. A standard of care in the treatment of breast cancer and other cancer types, AC regimens are among the most commonly prescribed HEC regimens, as defined by both the National Comprehensive Cancer Network ("NCCN") and the American Society of Clinical Oncology ("ASCO").
SUSTOL is indicated in combination with other antiemetics in adults for the prevention of acute and delayed nausea and vomiting associated with initial and repeat courses of MEC or AC combination chemotherapy regimens. SUSTOL is an extended-release, injectable 5-HT3 receptor antagonist that utilizes our Biochronomer Technology to maintain therapeutic levels of granisetron for ≥5 days. The SUSTOL global Phase 3 development program was comprised of two, large, guideline-based clinical studies that evaluated SUSTOL's efficacy and safety in more than 2,000 patients with cancer. SUSTOL's efficacy in preventing nausea and vomiting was evaluated in both the acute phase (0–24 hours following chemotherapy) and the delayed phase (24–120 hours following chemotherapy).
SUSTOL was approved by the FDA in August 2016, and we commenced commercial sales in the U.S. in October 2016. We ceased commercial sales of SUSTOL on September 30, 2026.
Biochronomer Technology
Our proprietary Biochronomer Technology is designed to deliver therapeutic levels of a wide range of otherwise short-acting pharmacological agents over a period from days to weeks with a single administration. Our Biochronomer Technology consists of polymers that have been the subject of comprehensive animal and human toxicology studies that have shown evidence of the safety of the polymer. When administered, the polymers undergo controlled hydrolysis, resulting in a controlled, sustained release of the pharmacological agent encapsulated within the Biochronomer-based composition. Furthermore, our Biochronomer Technology is designed to permit more than one pharmacological agent to be incorporated, such that multimodal therapy can be delivered with a single administration.
Recent Events
Proposed Asset Sale
On November 8, 2026, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with CorMedix, pursuant to which it has agreed to sell substantially all of its assets to CorMedix, other than certain excluded assets, including its federal income tax net operating loss carryforwards (the "NOLs") and certain other tax attributes, and CorMedix has agreed to acquire those assets and assume certain liabilities of the Company as set forth in the Asset Purchase Agreement (the "Asset Sale"). As consideration for the Asset Sale, CorMedix has agreed to (i) issue to the Company 14,583,333 shares of CorMedix common stock, (ii) pay to the Company a purchase price equal to $145.0 million in cash, subject to certain adjustments for the Company's closing cash and net working capital as set forth in the Asset Purchase Agreement, of which $2.0 million will be deposited into escrow, at the closing of the Asset Sale to secure post-closing adjustments to the cash consideration, which post-closing adjustments may not exceed $10.0 million in either direction, (iii) pay to the Company royalties equal to 5.0% of the amount, if any, by which aggregate annual net sales of CINVANTI, SUSTOL and the products covered by the Company's multi-product Development and License Agreement (the "License Agreement") with Long Grove Pharmaceuticals, LLC, a Delaware limited liability company ("Long Grove"), exceed $25.0 million in each of calendar years 2027, 2028 and 2029, if and when payable, on the terms set forth in the Asset Purchase Agreement, (iv) pay to the Company earn-out payments of $25.0 million if net sales of ZYNRELEF for calendar year 2028 equal or exceed $65.0 million and an additional $30.0 million if such net sales equal or exceed $95.0 million, payable at CorMedix’s election in cash, shares of CorMedix common stock or a combination thereof (provided that any portion that would cause the
28
aggregate shares of CorMedix common stock issued under the Asset Purchase Agreement to exceed 19.9% of the CorMedix common stock outstanding as of the closing of the Asset Sale will be paid in cash), if and when payable, on the terms set forth in the Asset Purchase Agreement and (v) assume certain of the Company's liabilities as specified in the Asset Purchase Agreement.
The Asset Sale, which has been unanimously approved by the board of directors of the Company (the "Board"), is currently expected to close in the first quarter of 2027, subject to approval by the Company's stockholders and the satisfaction of other customary closing conditions. The Asset Purchase Agreement contains certain termination rights in favor of each of the Company and CorMedix. In addition, the Asset Purchase Agreement provides that, in connection with certain terminations of the Asset Purchase Agreement, depending on the circumstances surrounding the termination, one party may be required to pay the other party a termination fee of $4.0 million.
If the Asset Sale closes, the Company will exit the operation of its current biotechnology business and other historical operations, but it does not intend to liquidate and will remain a publicly traded company. The Company will retain other material assets following the closing of the Asset Sale, including the shares of CorMedix common stock issued to the Company in the Asset Sale, the right to receive future royalties, earn-out payments, significant NOLs and cash on hand. Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets. Such opportunities may include, but are not limited to, the acquisition of products, product candidates, milestone payments and royalty streams, programs or technologies as well as pursuing strategic alliances, joint ventures, investments in complementary businesses, out-licensing and in-licensing agreements, divestitures or other transactions. It is currently uncertain what businesses or assets the Company may acquire or invest in following the closing of the Asset Sale, and the Board intends to evaluate opportunities to create value for the benefit of stockholders.
Long Grove Development and License Agreement
On September 23, 2026, we entered into a multi-product License Agreement with Long Grove, and Capstone Development Services Company, LLC, a Delaware limited liability company ("Capstone"). For additional information regarding the License Agreement, see "Contractual Obligations and Commitments—Licensing Commitments" below.
Fifth Amendment to Working Capital Facility
On September 17, 2026, we entered into the Fifth Amendment to the Working Capital Facility Agreement (the "Fifth Amendment to the Working Capital Facility Agreement") to the Initial Working Capital Facility Agreement with Hercules Capital, Inc., as administrative agent, collateral agent, and lender ("Hercules"). See Note 8 - Long-Term Debt and Convertible Notes.
Amendment No. 1 and Amendment No. 2 to Tax Benefit Preservation Plan
On August 14, 2026, we entered into Amendment No. 1 to Tax Benefit Preservation Plan ("Amendment No. 1"), which amends our Tax Benefit Preservation Plan, dated as of August 14, 2025 (the "Original Plan"), with Computershare Trust Company, N.A., as rights agent. Amendment No. 1 revises the definition of "Final Expiration Date" and all references to August 14, 2026 in the Plan to mean August 14, 2029.
On November 8, 2026, we entered into Amendment No. 2 to the Plan ("Amendment No. 2," together with the Original Plan and Amendment No. 1, the "Plan"), which amends the Original Plan, as amended by Amendment No. 1, with Computershare Trust Company, N.A., as rights agent. Amendment No. 2 revises the Plan to (i) include an exception to the definition of "Acquiring Person" in the Plan providing that no person will become an Acquiring Person as a result of an agreement pursuant to which such person has the right to acquire, vote or dispose of, or otherwise beneficially own, shares of the Company's common stock, if such agreement is executed by the Company and approved by the Board for purposes of such exception before such person would otherwise become an Acquiring Person and (ii) provide that, upon the closing of any merger, acquisition or other transaction of the type described in the Plan, the Plan and the Rights (as defined in the Plan) will terminate only if the Board approves such termination, and absent such approval, the Plan will continue in full force and effect following the closing of such transaction.
Material Trends and Developments
There are no material changes to our material trends and developments disclosures included in our 2025 Annual Report during the three and nine months ended September 30, 2026.
29
Contractual Obligations and Commitments
Purchase Obligations
Framework Agreement
On August 6, 2025, we entered into a Framework Agreement (the "Framework Agreement") with Patheon Austria GmbH & Co KG ("Patheon") and Thermo Fisher Scientific Inc. (solely for purposes as specified therein). Under the Framework Agreement, Patheon will manufacture and supply specific quantities of certain products, continue to perform certain ongoing stability studies related to such products and provide warehousing services, subject to the terms of a manufacturing and supply agreement previously entered into by us and Patheon, as amended by the amendments set forth in the Framework Agreement. We are required to purchase certain quantities of such products through December 31, 2026, but our monthly payment for such products may be reduced for unreleased products or non-conforming products if the products are not released by specified release dates. On November 13, 2025, we entered into Amendment No. 1 to Framework Agreement, pursuant to which certain payment terms were amended. On July 20, 2026, we entered into Amendment No. 2 to Framework Agreement (the "Amendment No. 2 to Framework Agreement"), pursuant to which certain scheduled payments were deferred. The Framework Agreement was effective on August 6, 2025 and will be in effect through and terminate automatically on December 31, 2026, other than with respect to any ongoing project addendums for stability studies entered into prior to December 31, 2026 and the payment of the scheduled payments deferred pursuant to Amendment No. 2 to Framework Agreement.
Lease Obligations
We have entered into two operating leases for laboratory and office space. Our laboratory and office space in San Diego, California, a portion of which had been subleased to a third party, had a lease term that expired on December 31, 2025. The lease for office space in Cary, North Carolina has commenced on May 1, 2026 and expires 111 months from the lease commencement date, with the option to extend for one additional period of 84 months upon written notice.
Licensing Commitments
On September 23, 2026, we entered into a multi-product License Agreement with Long Grove, and Capstone Development Services Company, LLC, a Delaware limited liability company ("Capstone"), which provided for, among other things, the grant by Long Grove to us of an exclusive (as to the licensed patents), sublicensable license to import, distribute, sell and market certain products in the United States, including its territories, commonwealths and possessions (the "Territory"), and a non-exclusive license to manufacture such products worldwide for sale in the Territory and certain obligations to collaborate on developing and commercializing such products. Capstone is a party to the License Agreement solely to provide certain exclusivity covenants and backstop obligations. Under the License Agreement, the Company shall pay to Long Grove certain regulatory milestone payments, sales-based milestone payments, and royalty payments and be reimbursed for certain expenses. The License Agreement has an initial term of ten (10) years following the first commercial sale of any product, with automatic two (2)-year renewal terms, and may be terminated by either party upon the occurrence of certain conditions customary for agreements of this type.
Other Obligations and Contingencies
We are, from time to time, subject to a variety of litigation and other proceedings incidental to our business, including lawsuits involving claims relating to intellectual property matters, employment matters, commercial disputes, as well as regulatory investigations or enforcement. We may also become subject to lawsuits as a result of past or future acquisitions, or as a result of liabilities retained from, or representations, warranties or indemnities provided in connection with divested businesses. Some of these lawsuits may include claims for punitive and consequential as well as compensatory damages. The outcomes of the Company's legal proceedings and other contingencies are inherently unpredictable and subject to significant uncertainties. We have not reserved any amounts for contingencies related to such litigation because they are neither probable nor reasonably estimable based on information currently available. See "Part II. Item 1. Legal Proceedings" in this Quarterly Report on Form 10-Q for further discussion of pending legal proceedings. There can be no assurance that there will not be a change in the scope of one or more of these matters or that any other future legal matters will or will not be material to our financial position, results of operations or cash flows for a particular period.
30
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to revenue recognition, investments, inventory and the related reserves, accrued clinical and manufacturing liabilities, income taxes, stock-based compensation and accounting for debt and equity transactions. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Our critical accounting estimates include: revenue recognition, investments, inventory and the related reserves, accrued clinical and manufacturing liabilities, income taxes, stock-based compensation and accounting for debt and equity transactions. There are no material changes to our critical accounting estimates disclosures included in our 2025 Annual Report during the three and nine months ended September 30, 2026.
Recent Accounting Pronouncements
See Note 3 - Accounting Policies - Recent Accounting Pronouncements to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Results of Operations for the Three and Nine Months Ended September 30, 2026 and 2025
The following table summarizes the results of our operations for the three and nine months ended September 30, 2026 and 2025 (in thousands):
|
|
Three Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||||||||||||||||||||||||||
($ in thousands) |
|
2026 |
|
|
% of Sales |
|
|
2025 |
|
|
% of Sales |
|
|
|
2026 |
|
|
% of Sales |
|
|
2025 |
|
|
% of Sales |
|
||||||||
Net product sales |
|
$ |
35,250 |
|
|
|
|
|
$ |
38,213 |
|
|
|
|
|
|
$ |
107,627 |
|
|
|
|
|
$ |
114,316 |
|
|
|
|
||||
Cost of product sales |
|
|
8,958 |
|
|
|
25.4 |
% |
|
|
11,914 |
|
|
|
31.2 |
% |
|
|
|
31,168 |
|
|
|
29.0 |
% |
|
|
30,228 |
|
|
|
26.4 |
% |
Gross profit |
|
|
26,292 |
|
|
|
|
|
|
26,299 |
|
|
|
|
|
|
|
76,459 |
|
|
|
|
|
|
84,088 |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
|
3,099 |
|
|
|
8.8 |
% |
|
|
3,470 |
|
|
|
9.1 |
% |
|
|
|
8,186 |
|
|
|
7.6 |
% |
|
|
8,683 |
|
|
|
7.6 |
% |
General and administrative |
|
|
12,341 |
|
|
|
35.0 |
% |
|
|
13,980 |
|
|
|
36.6 |
% |
|
|
|
35,762 |
|
|
|
33.2 |
% |
|
|
41,153 |
|
|
|
36.0 |
% |
Sales and marketing |
|
|
12,521 |
|
|
|
35.5 |
% |
|
|
12,942 |
|
|
|
33.9 |
% |
|
|
|
40,989 |
|
|
|
38.1 |
% |
|
|
36,828 |
|
|
|
32.2 |
% |
(Loss) income from operations |
|
$ |
(1,669 |
) |
|
|
(4.7 |
%) |
|
$ |
(4,093 |
) |
|
|
(10.7 |
%) |
|
|
$ |
(8,478 |
) |
|
|
(7.9 |
%) |
|
$ |
(2,576 |
) |
|
|
(2.3 |
%) |
Net Product Sales
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Acute Care Net Product Sales |
|
$ |
15,128 |
|
|
$ |
12,347 |
|
|
$ |
44,088 |
|
|
$ |
33,300 |
|
Oncology Net Product Sales |
|
|
20,122 |
|
|
|
25,866 |
|
|
|
63,539 |
|
|
|
81,016 |
|
Total Net Product Sales |
|
$ |
35,250 |
|
|
$ |
38,213 |
|
|
$ |
107,627 |
|
|
$ |
114,316 |
|
Total acute care net product sales increased by $2.8 million or 22.5% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The increase was primarily attributable to an increase in units sold, as a result of an increase in market share and new customers for both ZYNRELEF and APONVIE.
Total acute care net product sales increased by $10.8 million or 32.4% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily attributable to an increase in units sold, as a result of an increase in market share and new customers for both ZYNRELEF and APONVIE.
31
Total oncology net product sales decreased by $5.7 million or 22.2% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The decrease was primarily attributable to a decrease in units sold as a result of continued competitive pressure.
Total oncology net product sales decreased by $17.5 million or 21.6% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a decrease in units sold as a result of continued competitive pressure.
Cost of Product Sales and Gross Profit
Cost of product sales decreased by $3.0 million or 24.8% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025 and as a percentage of sales decreased 5.8% during the same period.
Cost of product sales increased by $0.9 million or 3.1% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025 and as a percentage of sales increased 2.6% during the same period.
Gross profit for the three months ended September 30, 2026 was 74.6%, compared to 68.8% during the three months ended September 30, 2025.
Gross profit for the nine months ended September 30, 2026 was 71.0%, compared to 73.6% during the nine months ended September 30, 2025.
The decrease in cost of product sales for the three months ended September 30, 2026, as compared to the same period in 2025, is primarily attributable to a reduction in inventory reserves recorded in the three months ended September 30, 2026 as compared to the same period in 2025 of $1.7 million and a reduction in the units sold during the three months ended September 30, 2026 as compared to the same period in 2025 of $1.1 million.
The increase in cost of product sales for the nine months ended September 30, 2026, as compared to the same period in 2025, is primarily attributable to an increase in units sold during the nine months ended September 30, 2026 as compared to the same period in 2025 of $2.0 million, offset by a reduction in inventory reserves recorded in the nine months ended September 30, 2026 as compared to the same period in 2025 of $1.0 million.
Research and Development Expense
Research and development expense consisted of the following (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
ZYNRELEF-related costs |
|
$ |
1,379 |
|
|
$ |
1,944 |
|
|
$ |
3,536 |
|
|
$ |
3,861 |
|
CINVANTI-related costs |
|
|
38 |
|
|
|
— |
|
|
|
260 |
|
|
|
302 |
|
APONVIE-related costs |
|
|
66 |
|
|
|
— |
|
|
|
229 |
|
|
|
1 |
|
SUSTOL-related costs |
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
75 |
|
Other costs |
|
|
500 |
|
|
|
— |
|
|
|
500 |
|
|
|
— |
|
Personnel costs and other expenses |
|
|
859 |
|
|
|
1,249 |
|
|
|
2,870 |
|
|
|
3,647 |
|
Stock-based compensation expense |
|
|
257 |
|
|
|
277 |
|
|
|
789 |
|
|
|
797 |
|
Total research and development expense |
|
$ |
3,099 |
|
|
$ |
3,470 |
|
|
$ |
8,186 |
|
|
$ |
8,683 |
|
Research and development expense decreased by $0.4 million or 10.7% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $0.4 million decrease in personnel and related expenses due to lower headcount and a decrease in expense with external vendors of $0.5 million due to timing. These decreases were offset by the expense for the first regulatory milestone with Long Grove of $0.5 million.
Research and development expense decreased by $0.5 million or 5.7% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $0.7 million decrease in personnel and related expenses due to lower headcount and a decrease in expense with external vendors of $0.2 million due to timing. These decreases were offset by the expense for the first regulatory milestone with Long Grove of $0.5 million.
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General and Administrative Expense
General and administrative expense decreased by $1.6 million or 11.7% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $0.9 million decrease in rent expense due to the closure of our San Diego, California office in December 2025 and a $0.7 million decrease in legal spend due to timing of litigation.
General and administrative expense decreased by $5.4 million or 13.1% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The decrease was primarily attributable to a $4.2 million decrease in legal spend due to timing of litigation, a $2.7 million decrease in rent expense due to the closure of our San Diego, California office in December 2025 and a $0.2 million decrease in expense with external vendors due to timing. These decreases were offset by a $1.8 million increase in personnel and related expenses due to an increase in headcount.
Sales and Marketing Expense
Sales and marketing expense decreased by $0.4 million or 3.3% during the three months ended September 30, 2026, as compared to the three months ended September 30, 2025. The decrease was primarily attributable to a $1.4 million decrease in expense with external vendors, due to timing. This decrease was offset by a $0.4 million increase in marketing spend related to ZYNRELEF and a $0.5 million increase in personnel and related cost due to an increase in headcount.
Sales and marketing expense increased by $4.2 million or 11.3% during the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025. The increase was primarily attributable to a $3.6 million increase in personnel and related expenses due to an increase in headcount and a $1.7 million increase in marketing spend related to ZYNRELEF. These increases were offset by a $1.1 million decrease in expense with external vendors due to timing.
Other Expense, Net
For the three months ended September 30, 2026, other expense, net was $3.3 million, compared to $13.4 million, for the three months ended September 30, 2025. The decrease was primarily attributable to the loss on debt extinguishment recognized during the three months ended September 30, 2025 of $11.3 million, offset by an increase in interest expense of $0.9 million, a decrease in sublease income of $0.3 million related to the San Diego, California lease that ended on December 31, 2025, and a decrease in interest income of $0.2 million.
For the nine months ended September 30, 2026, other expense, net was $10.1 million, compared to $14.7 million, for the nine months ended September 30, 2025. The decrease was primarily attributable to the loss on debt extinguishment recognized during the three months ended September 30, 2025 of $11.3 million, offset by an increase in interest expense of $5.5 million, a decrease in sublease income of $0.9 million related to the San Diego, California lease that ended on December 31, 2025, and a decrease in interest income of $0.4 million.
Liquidity and Capital Resources
Sources of Liquidity
As of September 30, 2026, we had cash, cash equivalents and short-term investments of $23.4 million. Our net loss for the three months ended September 30, 2026 was $5.0 million, or loss per share of $0.03, compared to net loss of $17.5 million, or loss per share of $0.10, for the same period in 2025. Our net loss for the nine months ended September 30, 2026 was $18.6 million, or loss per share of $0.10, compared to net loss of $17.2 million, or $0.11 loss per share, for the same period in 2025. We have incurred significant operating losses and negative cash flows from operations and had an accumulated deficit of $2.0 billion as of September 30, 2026. From our inception through September 30, 2026, we have financed our operations, including technology and product research and development, primarily through the issuance of common stock, convertible notes and warrants, product sales and debt financings.
Based on our current operating plan and projections, management believes that our cash, cash equivalents and short-term investments will be sufficient to meet our anticipated cash requirements for operations for at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. However, our Working Capital Facility Agreement contains a minimum cash covenant, a minimum revenue covenant and a minimum EBITDA covenant. Based on our results of operations for the nine months ended September 30, 2026 and without additional funding from the closing of the Asset Sale or otherwise, there is a possibility we may not satisfy one or more covenants under our Working Capital Facility Agreement within the next twelve months, absent a waiver, consent or amendment under our Working Capital Facility Agreement. If an event of default occurs under the Working Capital Facility Agreement due to the failure to satisfy certain covenants, our lenders could declare
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all outstanding principal, together with accrued and unpaid interest and end of term fee, to be immediately due and payable. If the payment of the debt is accelerated, absent any additional funding, cash flows from our operations will be insufficient to repay such debt in full. Therefore, if all outstanding amounts under the Working Capital Facility Agreement are accelerated, management expects there will be substantial doubt about our ability to continue as a going concern for a period of at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. If an event of default occurs under the note purchase agreement in connection with the 2031 Convertible Notes (the "2031 Convertible Notes Purchase Agreement") due to the acceleration of all outstanding amounts under the Working Capital Facility Agreement, the required purchasers under the 2031 Convertible Notes Purchase Agreement could also declare the acceleration of all outstanding amounts under the 2031 Convertible Notes, subject to applicable notice requirements and cure periods.
Pursuant to the Asset Purchase Agreement, a portion of the cash consideration in the Asset Sale will be used to repay all amounts outstanding under the Working Capital Facility Agreement. A portion of the stock consideration in the Asset Sale will be used to exchange all or a portion of the outstanding 2031 Convertible Notes as described in Note 8 - Long-Term Debt and Convertible Notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. The completion of the Asset Sale is subject to approval by the Company’s stockholders and the satisfaction of other customary closing conditions, and there can be no assurance that the Company will be successful in obtaining stockholder approval or closing the Asset Sale on the anticipated timeline, on the terms currently contemplated, or at all.
Cash Flows
The net change in cash and cash equivalents consisted of the following:
Our net cash used in operating activities for the nine months ended September 30, 2026 and 2025 was $4.5 million and $18.4 million, respectively. The decrease in net cash used in operating activities of $13.9 million or 75.3%, was primarily attributable to the loss on debt extinguishment recognized during the nine months ended September 30, 2025 and variability in payments for operating assets and liabilities including, inventory, prepaid expenses and other assets, accounts payable and accrued clinical and manufacturing liabilities.
Our net cash provided by investing activities for the nine months ended September 30, 2026 was $5.9 million compared to net cash provided by investing activities for the nine months ended September 30, 2025, which was $21.5 million. The change in net cash used in investing activities of $15.6 million, was primarily attributable to net maturities of short-term investments of $6.5 million for the nine months ended September 30, 2026 compared to net maturities of short-term investments of $21.7 million for the nine months ended September 30, 2025.
Our net cash used in financing activities for the nine months ended September 30, 2026 was $18.4 million, compared to net cash provided by financing activities for the nine months ended September 30, 2025, which was $14.2 million. The change in net cash used in financing activities was primarily attributable to net cash provided by the financing transactions during the nine months ended September 30, 2025, compared to net cash used in financing transactions during the nine months ended September 30, 2026 of $18.4 million for principal payments for the Working Capital Facility Agreement.
Material Cash Requirements
There are no material changes to our material cash requirements disclosures included in our 2025 Annual Report during the three and nine months ended September 30, 2026.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are included in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk" in our 2025 Annual Report. There are no material changes to the quantitative and qualitative disclosures included in our 2025 Annual Report during the three and nine months ended September 30, 2026.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive and principal financial officers concluded that our disclosure controls and procedures were effective as of such time.
Limitations on Effectiveness of Controls
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, including, without limitation, controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to our management, including our principal executive officer, principal financial officer, and principal accounting officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as discussed below, there are no material changes from the legal proceedings previously disclosed in our 2025 Annual Report during the three and six months ended June 30, 2026.
On June 14, 2022, the Company received a Paragraph IV notice of certification (the "Fresenius Kabi Notice") from Fresenius Kabi advising that Fresenius Kabi had submitted an abbreviated new drug application ("ANDA") to the U.S. Food and Drug Administration ("FDA") seeking approval to manufacture, use or sell a generic version of CINVANTI in the U.S. prior to the expiration of U.S. Patent Nos.: 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; and 11,173,118 (the "CINVANTI Patents"), which are listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations (the "Orange Book"). The Fresenius Kabi Notice alleges that the CINVANTI Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Fresenius Kabi's ANDA.
On July 27, 2022, the Company filed a complaint for patent infringement of the CINVANTI Patents against Fresenius Kabi and a related entity in the U.S. District Court for the District of Delaware (the "Court") in response to Fresenius Kabi's ANDA filing. The complaint seeks, among other relief, equitable relief enjoining Fresenius Kabi from infringing the CINVANTI Patents. On May 15, 2024, the Court granted partial summary judgment of infringement for the Company and found no indefiniteness of U.S. Patent Nos. 9,561,229 and 9,974,794. On June 24, 2024, the parties commenced a four-day bench trial centered on Fresenius Kabi's defense of obviousness of claims from U.S. Patent Nos. 9,561,229 and 9,974,794 that cover CINVANTI. Oral argument was held on August 29, 2024.
On December 3, 2024, the Court issued a ruling in the Company's favor. The Court found that the Company's U.S. Patent Nos. 9,561,229 and 9,974,794, which expire in 2035, are valid and would be infringed by Fresenius Kabi's proposed generic product. In view of the decision, the Court ordered that the effective date of any final approval by the FDA of Fresenius Kabi's ANDA shall not be a date earlier than September 18, 2035, the expiration date of each of U.S. Patent Nos. 9,561,229 and 9,974,794. On January 8, 2025, Fresenius Kabi filed notice of appeal to the U.S. Court of Appeals for the Federal Circuit. On September 24, 2025, the briefing was completed, and on November 3, 2026, oral argument was completed. The Company intends to vigorously enforce its intellectual property rights relating to CINVANTI.
On August 4, 2023, the Company received a Notice Letter (the "Mylan August Notice") from Mylan Pharmaceuticals Inc. ("Mylan") advising that Mylan had submitted an ANDA to the FDA seeking approval to manufacture, use or sell a generic version of CINVANTI ("Mylan's ANDA for a generic version of CINVANTI") in the U.S. prior to the expiration of the CINVANTI Patents, which are listed in the Orange Book. On September 15, 2023, the Company filed a complaint for patent infringement of the CINVANTI Patents against Mylan in the U.S. District Court for the District of Delaware in response to the filing of Mylan's ANDA for a generic version of CINVANTI. On May 6, 2025, the Company announced that it entered into a settlement agreement with Mylan to resolve the ongoing patent litigation in the U.S. District Court for the District of Delaware related to Mylan's ANDA for a generic version of CINVANTI. Pursuant to the terms of the settlement agreement, the Company has granted Mylan a license under the Orange Book-listed patents for CINVANTI to market a generic version of CINVANTI in the United States beginning June 1, 2032, or earlier under certain customary circumstances. In connection with the settlement, on May 6, 2025, the Court granted the Stipulation and Order of Dismissal with the U.S. District Court for the District of Delaware requesting that the Court dismiss the pending litigation between the parties.
On December 16, 2023, the Company received a Notice Letter (the "Mylan December Notice") from Mylan advising that Mylan had submitted an ANDA to the FDA seeking approval to manufacture, use or sell a generic version of APONVIE in the U.S. ("Mylan's ANDA for a generic version of APONVIE") prior to the expiration of U.S. Patent Nos.: 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; and 11,744,800 (the "APONVIE Patents"), which are listed in the Orange Book. On January 11, 2024, the Company filed a complaint for patent infringement of the APONVIE Patents against Mylan in the U.S. District Court for the District of Delaware in response to Mylan filing its ANDA for a generic version of APONVIE. On May 6, 2025, the Company announced that it entered into a settlement agreement with Mylan to resolve the ongoing patent litigation in the U.S. District Court for the District of Delaware related to Mylan's ANDA for a generic version of APONVIE. Pursuant to the terms of the settlement agreement, the Company has granted Mylan a license under the Orange Book-listed patents for APONVIE to market a generic version of APONVIE in the United States beginning June 1, 2032, or earlier under certain customary circumstances. In connection with the settlement, on May 6, 2025, the Court granted the Stipulation and Order of Dismissal with the U.S. District Court for the District of Delaware requesting that the Court dismiss the pending litigation between the parties.
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On December 11, 2023, the Company received a Paragraph IV notice of certification (the "Slayback Notice") from Slayback Pharma LLC ("Slayback") (now owned by Azurity Pharmaceuticals, Inc. ("Azurity")) advising that Slayback had submitted a new drug application ("NDA") under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act to the FDA seeking approval to manufacture, use or sell a generic version of CINVANTI in the U.S. ("Slayback's NDA") prior to the expiration of the patents listed in the Orange Book. The Slayback Notice alleges that the CINVANTI Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Slayback's NDA. On January 24, 2024, the Company filed a complaint for patent infringement of the CINVANTI Patents against Slayback and a related entity in the U.S. District Court for the District of New Jersey in response to Slayback's NDA filing. The complaint seeks, among other relief, equitable relief enjoining Slayback from infringing those patents. On July 2, 2024, the U.S. District Court for the District of New Jersey granted Slayback's motion to transfer this matter to the U.S. District Court for the District of Delaware. On December 12, 2024, the Company filed a complaint against Slayback, Azurity, and related entities in the U.S. District Court for District of Delaware for patent infringement of U.S. Patent Nos. 12,115,254 and 12,115,255. On May 23, 2025, the Company filed an amended complaint against Slayback, Azurity and related entities adding an allegation of patent infringement of U.S. Patent No. 12,290,520. On September 16, 2025, the parties entered into a stipulation (Case No. 24-1363, D.I. 119) limiting the issues for trial. On November 17, 2025, the parties commenced a two-day bench trial centered on Azurity's § 112 defenses of claims from U.S. Patent Nos. 12,115,255 and 12,290,520 that cover CINVANTI. On February 6, 2026, the post-trial briefing was completed, and, on March 24, 2026, the Court held closing arguments. On June 1, 2026, the Court issued a ruling holding that the asserted claims of the '255 Patent and the '520 Patent are invalid under 35 U.S.C. § 112. The Court also entered a final judgment declaring that the asserted claims of U.S. Patent Nos. 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; and 11,744,800 are not infringed. On June 30, 2026, the Company appealed both final judgments to the U.S. Court of Appeals for the Federal Circuit. On July 31, 2026, the appeals were consolidated. On November 4, 2026, the briefing was completed. The Company intends to vigorously enforce its intellectual property rights relating to CINVANTI.
On February 28, 2025, Azurity, Azurity Pharma India LLP, and Slayback requested Post-Grant Review ("PGR") of U.S. Patent Nos. 12,115,254 and 12,115,255 in PGR2025-00035 and PGR2025-00036, respectively. On April 14, 2025, the Petitions were accorded a filing date. On June 16, 2025, the Company filed a brief requesting discretionary denial of the Petitions in PGR2025-00035 and PGR2025-00036. On July 14, 2025, the Company filed its Patent Owner Preliminary Response. On August 14, 2025, the Patent Trial and Appeal Board discretionarily denied institution of Azurity's PGRs.
On February 7, 2025, the Company received a Notice Letter (the "Qilu Notice") from Qilu Pharmaceutical (Hainan) Co., Ltd and Qilu Pharma, Inc. ("Qilu") advising that Qilu had submitted an ANDA to the FDA seeking approval to manufacture, use or sell a generic version of APONVIE in the U.S. ("Qilu's ANDA for a generic version of APONVIE") prior to the expiration of U.S. Patent Nos.: 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; 11,744,800, 11,878,074, 12,115,254, and 12,115,255 (the "Noticed APONVIE Patents"), which are listed in the Orange Book. On March 21, 2025, the Company filed a complaint for patent infringement of the Noticed APONVIE Patents against Qilu in the U.S. District Court for the District of Delaware in response to Qilu's ANDA for a generic version of APONVIE.
On June 11, 2025, the Company received a Notice Letter (the "Qilu CINVANTI Notice") from Qilu advising that Qilu had submitted an ANDA to the FDA seeking approval to manufacture, use or sell a generic version of CINVANTI in the U.S. ("Qilu's ANDA for a generic version of CINVANTI") prior to the expiration of U.S. Patent Nos.: 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; 11,744,800; 12,115,254; 12,115,255; and 12,290,520 (the "Noticed CINVANTI Patents"), which are listed in the Orange Book for CINVANTI. On July 3, 2025, the Company filed a complaint for patent infringement of the Noticed CINVANTI Patents against Qilu in the U.S. District Court for the District of Delaware in response to Qilu's ANDA for a generic version of CINVANTI.
On July 15, 2025, the Qilu CINVANTI and APONVIE litigations were consolidated. The Company entered into a settlement agreement with Qilu to resolve the ongoing patent litigation in the U.S. District Court for the District of Delaware related to Qilu's ANDAs for generic versions of CINVANTI and APONVIE. In connection with the settlement, on November 6, 2025, the Court granted the Stipulation and Order of Dismissal with the U.S. District Court for the District of Delaware requesting that the Court dismiss the pending litigation between the parties.
On November 19, 2025, the Company received a Paragraph IV notice of certification (the "Baxter Notice") from Baxter Healthcare Corporation ("Baxter") advising that Baxter had submitted an ANDA to the FDA seeking approval to manufacture, use or sell a generic version of CINVANTI ("Baxter's ANDA for a generic version of CINVANTI") in the U.S. prior to the expiration of the
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Noticed CINVANTI Patents, which are listed in the Orange Book. On December 23, 2025, the Company filed a complaint for patent infringement of the Noticed CINVANTI Patents against Baxter and a related entity in the U.S. District Court for the District of Delaware in response to the filing of Baxter's ANDA for a generic version of CINVANTI. The Company entered into a settlement agreement with Baxter to resolve the ongoing patent litigation in the U.S. District Court for the District of Delaware related to Baxter's ANDA for a generic version of CINVANTI. In connection with the settlement, on April 28, 2026, the Court granted the Stipulation and Order of Dismissal with the U.S. District Court for the District of Delaware requesting that the Court dismiss the pending litigation between the parties.
On June 26, 2026, the Company received a Paragraph IV notice of certification (the "Long Grove Notice") from Long Grove Pharmaceuticals, LLC ("Long Grove") advising that Long Grove had submitted an application seeking approval to manufacture, use, or sell a generic version of CINVANTI in the U.S. ("Long Grove's NDA") prior to the expiration of the Noticed CINVANTI Patents, which are listed in the Orange Book for CINVANTI. The Long Grove Notice alleges that the Noticed CINVANTI Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the Long Grove NDA product. On August 7, 2026, the Company filed a complaint for patent infringement of the Noticed CINVANTI Patents against Long Grove and a related entity in the U.S. District Court for the District of Delaware in response to Long Grove's NDA filing. On October 7, 2026, the case was closed pursuant to a notice of dismissal filed on September 29, 2026.
ITEM 1A. RISK FACTORS
Investing in our common stock involves risks. We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. The risks and uncertainties that we believe are most important for you to consider are discussed in Part I, Item 1A. "Risk Factors" in our 2025 Annual Report, Quarterly Reports on Form 10-Q, and other reports, including our financial statements and the related notes thereto, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the information contained in the section entitled "Forward-Looking Statements." The occurrence of any of the events or developments described below could adversely affect our business, financial condition, results of operations and prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. Other than the factors described below, there are no material changes to the risk factors described in our 2025 Annual Report.
Risks Related to the Asset Sale
The Asset Sale is subject to significant conditions, including stockholder approval. Failure to complete the Asset Sale and the transactions contemplated thereby within the intended timeframe, or at all, could materially harm the Company's business, financial condition, the trading price of the Company's common stock and its ability to continue as a going concern.
On November 8, 2026, the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with CorMedix Inc., a Delaware corporation ("CorMedix"), pursuant to which the Company agreed to sell substantially all of its assets to CorMedix, other than certain excluded assets, including its federal income tax net operating loss carryforwards (the "NOLs") and certain other tax attributes, and CorMedix has agreed to acquire those assets and assume certain liabilities of the Company as set forth in the Asset Purchase Agreement (the "Asset Sale"). Pursuant to the terms of the Asset Purchase Agreement, all outstanding amounts under the Working Capital Facility Agreement will be repaid upon the closing of the Asset Sale. Pursuant to the terms of the Exchange Agreement, all outstanding principal amount of 2031 Convertible Notes will be exchanged in quarterly installments for shares of CorMedix common stock issued to the Company in connection with the Asset Sale, subject to the terms and conditions as set forth in the Exchange Agreement. The Company, and not its stockholders, will receive the stock and cash consideration from the Asset Sale described in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Recent Events – Proposed Asset Sale." The completion of the Asset Sale is subject to approval by the Company's stockholders and the satisfaction of other customary closing conditions, and there can be no assurance that the Company will be successful in obtaining stockholder approval or closing the Asset Sale on the anticipated timeline, on the terms currently contemplated, or at all.
In addition, the Company's current liquidity position and its ability to remain in compliance with the covenants of its Working Capital Facility Agreement are significantly dependent on the closing of the Asset Sale. As of September 30, 2026, the Company had cash, cash equivalents and short-term investments of $23.4 million. Based on the Company's current operating plan and projections, management believes that its cash, cash equivalents and short-term investments will be sufficient to meet its anticipated cash requirements for operations for at least one year from the date of issuance of the condensed consolidated financial statements included
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in this Quarterly Report on Form 10-Q. However, the Company's Working Capital Facility Agreement contains a minimum cash covenant, a minimum revenue covenant and a minimum EBITDA covenant. Based on the Company's results of operations for the nine months ended September 30, 2026 and without additional funding from the closing of the Asset Sale or otherwise, there is a possibility the Company may not satisfy one or more covenants under its Working Capital Facility Agreement within the next twelve months, absent a waiver, consent or amendment under its Working Capital Facility Agreement. If an event of default occurs under the Working Capital Facility Agreement due to the failure to satisfy certain covenants, its lenders could declare all outstanding principal, together with accrued and unpaid interest and end of term fee, to be immediately due and payable. If the payment of the debt is accelerated, absent any additional funding, cash flows from its operations will be insufficient to repay such debt in full. Therefore, if all outstanding amounts under the Working Capital Facility Agreement are accelerated, management expects there will be substantial doubt about the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. If an event of default occurs under the 2031 Convertible Notes Purchase Agreement due to the acceleration of all outstanding amounts under the Working Capital Facility Agreement, the required purchasers under the 2031 Convertible Notes Purchase Agreement could also declare the acceleration of all outstanding amounts under the 2031 Convertible Notes, subject to applicable notice requirements and cure periods.
If the Asset Sale does not close on the anticipated timeline, on the terms currently contemplated, or at all, or the Company is unable to obtain a waiver, consent or amendment under its Working Capital Facility Agreement, the Company will require additional funding to maintain compliance with its debt covenants, which may include public or private equity financings, or securities convertible into equity securities, debt financings, or refinancing of existing debt financings, strategic transactions and collaborations or a combination of these approaches. The Company may experience difficulties in accessing the capital markets due to external factors beyond its control, such as volatility in the equity markets and general economic and market conditions, and such risks may be increased due to its inability to close the Asset Sale or obtain a waiver, consent or amendment under its Working Capital Facility Agreement. There can be no assurance that the Company will be successful in acquiring additional funding or entering into strategic transactions to maintain compliance with its debt covenants and fund its operations on terms acceptable to it, if at all. If the Company is unable to continue as a going concern, the trading price of its stock will be materially and adversely affected, existing or potential investors, business partners, customers and vendors may decline to do business with the Company or participate in any future financings, and the Company may have to liquidate its assets and receive less than the value at which those assets are carried on its financial statements, in which case, it is likely that investors will lose all or part of their investment.
The Asset Purchase Agreement contains provisions that limit the Company's ability to pursue alternatives to the Asset Sale, which could deter or discourage a competing acquirer from making a favorable alternative transaction proposal.
Under the Asset Purchase Agreement, the Company has agreed, subject to certain exceptions with respect to unsolicited proposals, not to directly or indirectly solicit competing proposals or to enter into discussions concerning, or provide confidential information in connection with, any competing proposals. The Company has also agreed to cease all existing discussions with third parties regarding any competing proposals. Further, the Board is required to recommend that the Company's stockholders vote in favor of the Asset Sale, subject to certain exceptions, including if the Board determines in good faith, after consulting with the Company's financial advisor and outside legal counsel, that the competing proposal is a superior proposal and determines in good faith that the failure to effect such a change in recommendation in response to such superior proposal would be reasonably likely to be inconsistent with the directors' fiduciary duties under applicable law. The Company may also terminate the Asset Purchase Agreement in order to enter into a definitive agreement providing for a superior proposal, but only if (i) the Company complied in all material respects with its obligations, including, the non-solicit provisions, set forth in the Asset Purchase Agreement with respect to the superior proposal, (ii) the Company pays a $4.0 million termination fee and (iii) the Board has authorized the Company to enter into a definitive agreement providing for the superior proposal. Such provisions of the Asset Purchase Agreement could discourage or deter a third party that may be willing to pay more than CorMedix for the Company's assets from considering or proposing such a transaction.
While the Asset Purchase Agreement is in effect, the Company is subject to restrictions on its business activities.
The Asset Purchase Agreement contains customary representations, warranties and covenants of the parties, including covenants concerning the conduct of the Company's business prior to the closing of the Asset Sale. During the pendency of the Asset Sale, the Company has agreed, subject to certain exceptions, not to take certain actions in connection with its business and the assets to be sold. Among other things, the Company may not (i) sell, assign, transfer, lease, license or otherwise dispose of any assets to be sold, (ii) change the nature or scope of its business in any material respect, (iii) incur any obligation or liability, including indebtedness that would be assumed by CorMedix, (iv) enter into, materially modify or terminate certain material contracts, including contracts with related persons or that would restrict its business after the closing of the Asset Sale; (v) acquire businesses or assets, (vi)
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commence or settle certain material legal actions or waive material claims, (vii) increase compensation or benefits or take certain other employment and labor actions, (viii) make or change material tax elections or tax accounting periods or (ix) engage in sales, pricing, discount or inventory practices outside the ordinary course of business. Due to these restrictions, the Company may be prevented from taking certain actions with respect to the conduct of its business that it might otherwise have taken if not for the Asset Purchase Agreement, including responding effectively or in a timely manner to competitive pressures and industry developments, which could have a material adverse effect on its business, results of operations, cash flows and financial condition.
Stockholder litigation could prevent or delay the closing of the Asset Sale or otherwise negatively impact the Company's business, operating results and financial condition.
During the pendency of the Asset Sale and following its closing, the Company may incur additional costs in connection with the defense or settlement of any stockholder litigation relating to the Asset Sale. Such litigation may adversely affect the Company's ability to complete the Asset Sale within the intended timeframe or at all; materially and adversely affect the trading price of the Company's common stock; may result in negative reactions from the Company's investors, business partners, customers, vendors and employees; and may impair or materially impede the Company's strategies to acquire or invest in additional businesses or assets following the closing of the Asset Sale. The Company could incur significant costs in connection with any such litigation, including costs associated with its indemnification obligations to its directors and officers.
The Company will be subject to business uncertainties while the Asset Sale is pending, which could adversely affect its business.
During the pendency of the Asset Sale, the Company may also face ongoing operational risks, including potential disruptions to business relationships with its partners and customers. Parties with which the Company has a business relationship may delay or defer certain business decisions, seek alternative relationships with third parties, or seek to alter their present business relationships with the Company. Parties with which the Company otherwise may have sought to establish business relationships may seek alternative relationships with third parties. In addition, customers who would otherwise use the Company's products may choose not to use its products due to the uncertainty associated with the Company's business and operations during the Asset Sale and the continued availability and access to the Company's products. The pursuit of the Asset Sale will also continue to place a significant burden on the Company's internal resources and divert time and attention from the day-to-day operation of the Company's business and the execution of other strategic initiatives.
In addition, the Company has incurred, and will continue to incur, significant costs for legal, accounting, financial advisory and other professional services and other transaction costs in connection with the Asset Sale, and many of these costs are payable regardless of whether or not the Asset Sale successfully closes. Furthermore, the cash consideration from the Asset Sale is subject to adjustment based on, among other things, the amount of cash the Company has immediately following the closing of the Asset Sale. If the Company's business performance suffers or it incurs increased expenses prior to the closing of the Asset Sale, it may materially affect the cash consideration that the Company will receive upon closing of the Asset Sale and the amount of cash that would be available following the closing of the Asset Sale that will be used to acquire or invest in additional businesses or assets. Any of the foregoing could adversely affect the Company's business, results of operations, cash flows and financial condition, and the trading price of its common stock.
The Company's ability to retain key personnel may be adversely affected by the pending Asset Sale and its transition of leadership following the closing of the Asset Sale.
The uncertainty regarding the successful completion of the Asset Sale, as well as the transition of leadership following closing, may create significant doubt regarding the Company's future direction, operations and strategies. During the pendency of the Asset Sale, this uncertainty could lead to increased employee attrition and hinder the Company's ability to attract and motivate key personnel. The Company expects that its executive officers and substantially all employees will cease to be employed by the Company at or shortly after the closing of the Asset Sale and the Company will be managed by limited personnel. The Company's executive officers and other employees could terminate their employment relationship at any time. The loss of key personnel during this transition period, or the Company's inability to promptly identify suitable successors, could have an adverse effect on its business.
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Risks Related to the Company's Future Operations
Following the closing of the Asset Sale, the Company will have limited operations and no material sources of revenue until it is able to acquire or invest in additional operating businesses or assets, which may negatively impact the value and liquidity of its common stock.
With the closing of the Asset Sale, the Company will exit the operation of its current biotechnology business and other historical operations, but it does not intend to liquidate and will remain a publicly traded company. Until the Company acquires or invests in additional operating businesses or assets, it will have limited operations and no material sources of revenue. The Company will retain other material assets following the closing of the Asset Sale, including the shares of CorMedix common stock issued to the Company in the Asset Sale, the right to receive future royalties, earn-out payments, significant NOLs and cash on hand. Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets. Such opportunities may include, but are not limited to, the acquisition of products, product candidates, milestone payments and royalty streams, programs or technologies as well as pursuing strategic alliances, joint ventures, investments in complementary businesses, out-licensing and in-licensing agreements, divestitures or other transactions. It is currently uncertain what businesses or assets the Company may acquire or invest in following the closing of the Asset Sale, and the Board intends to evaluate opportunities to create value for the benefit of stockholders. There can be no assurances that the Board will be able to identify suitable businesses or assets that will be available for the Company to acquire or invest in, or that any assets acquired will generate the revenues anticipated or any revenue at all. If the Company is not able to acquire suitable businesses or assets, the value of its remaining tax attributes and NOLs may be limited and the value and liquidity of its common stock will be adversely affected.
Following the closing of the Asset Sale, strategic transactions could disrupt the Company's business, cause dilution to its stockholders and otherwise harm its business.
Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets. Such opportunities may include, but are not limited to, the acquisition of products, product candidates, milestone payments and royalty streams, programs or technologies as well as pursuing strategic alliances, joint ventures, investments in complementary businesses, out-licensing and in-licensing agreements, divestitures or other transactions. It is currently uncertain what businesses or assets the Company may acquire or invest in following the closing of the Asset Sale, and the Board intends to evaluate opportunities to create value for the benefit of stockholders. Suitable acquisition or in-licensing opportunities on acceptable prices, terms and conditions may be limited. The acquisition or investment in additional businesses and assets following the closing of the Asset Sale will be material to the Company's financial condition and operating results and could subject the Company to a number of risks, including:
• disruption in the Company's relationships with existing strategic partners, suppliers or customers as a result of such a transaction;
• unanticipated liabilities related to acquired companies;
• difficulties integrating acquired personnel, technologies, operations, products, product candidates or programs;
• retention of key employees;
• diversion of time and focus from operating the business to management of strategic alliances or joint ventures or acquisition integration challenges;
• risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products, regulatory risks and other liabilities;
• increases in the Company's expenses and reductions in cash available for operations and other uses; and
• possible write-offs or impairment charges relating to acquired businesses and assets.
The Company faces intense competition from larger, better-resourced companies in acquiring or in-licensing promising assets. The Company also faces competition from other companies, funds and investment vehicles seeking to aggregate royalties or provide alternative financing to biotechnology companies. These competitors may have a lower cost of capital or access to greater amounts of capital and thereby may be able to successfully acquire assets that the Company may also target for acquisitions. There is a limited
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number of suitable and attractive acquisition or partnering opportunities available in the market, and competition to acquire such assets may be intense. In order to compete successfully, the Company may have to pay higher prices for assets than may have been paid historically, which may make it more difficult for the Company to realize an adequate return on any acquisition. Any future acquisitions or dispositions could result in dilutive issuances of the Company's equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm the Company's financial condition or reputation. The Company cannot predict the number, timing or size of any future strategic alliances, joint ventures, investments, acquisitions or other strategic transactions, or the effect that any such transactions might have on its operating results.
The Company will continue to incur the expense of complying with public company reporting requirements following the closing of the Asset Sale.
Following the closing of the Asset Sale, the Company will remain a publicly traded company and will continue to be required to comply with the applicable reporting requirements of the Exchange Act. Compliance with such reporting requirements is economically burdensome and will require the time and attention of its remaining directors and personnel.
Following the closing of the Asset Sale, the Company may be deemed to be an investment company, and investment company status would materially restrict its operations.
Under Sections 3(a)(1)(A) and (C) of the Investment Company Act of 1940 (the "1940 Act"), a company generally will be deemed to be an "investment company" if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the 1940 Act generally provides that notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an "investment company" for purposes of the 1940 Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees' securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity.
Upon consummation of the Asset Sale, the Company will need to determine whether it may be considered an "investment company" as defined in Section 3(a)(1)(A) or Section 3(a)(1)(C) of the 1940 Act. The Company does not intend to conduct its business so as to become regulated as an investment company.
The Company has been a biotechnology company since its formation. Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets, and as such, the Company does not intend to hold itself out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the 1940 Act.
Following the closing of the Asset Sale, until the Company acquires or invests in additional operating businesses or assets, it will have limited operations and no material sources of revenue. The Company will retain other material assets following the closing of the Asset Sale, including the shares of CorMedix common stock issued to the Company in the Asset Sale, the right to receive future royalties, earn-out payments, significant NOLs and cash on hand.
If the Company were to be deemed an investment company following the closing of the Asset Sale, Rule 3a-2 under the 1940 Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company's business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the company owns securities and/or cash having a value exceeding 50% of the company's total assets on either a consolidated or unconsolidated basis or (ii) the date on which the company owns or proposes to acquire investment securities having a value exceeding 40% of the value of such company's total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Accordingly, if the Company were to rely on Rule 3a-2, it expects that the one-year grace period would begin upon the closing of the Asset Sale, and there can be no assurances that it will be engaged primarily in a business other than that of investing, reinvesting, owning, holding, or trading in securities by the end of such period; however, Rule 3a-2 is a safe
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harbor and the Company may rely on any exemption or exclusion from investment company status available to it under the 1940 Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require the Company to take actions to dispose of securities, limit its ability to make certain investments or enter into joint ventures, or otherwise limit or change its service offerings and operations. If the Company were to be deemed an investment company in the future, it would be subject to restrictions imposed by the 1940 Act, including limitations on its ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons, which could have a material adverse effect on its business, results of operations, financial condition, and prospects.
Risks Related to Our Business
Our Products may face competition from lower-cost generic products offered by our competitors, which may limit our ability to sell our Products or require us to reduce our pricing.
Pricing for therapeutics can be extremely competitive, and strict formulary guidelines enforced by payors may create significant challenges in the acceptance and profitability of branded products. The market for generic products can be very lucrative, and it is dominated by companies that may have much larger distribution capabilities than we may have in the future. It can be very difficult to predict the timing of the launch of generic products given the commonality of litigation with manufacturers over anticipated patent expiration. Our inability to accurately foresee and plan for generic product launches that may compete with our Products may significantly impact our potential revenues from such Products. On the expiration or loss of patent protection for a branded product, or on the "at-risk" launch (despite pending patent infringement litigation against the generic product) by a manufacturer of a generic version of a drug that may compete with one of our products, we could quickly lose a significant portion of our sales of that Product. The inability of a branded Product we may sell to successfully compete against generic products could negatively impact sales of our Product, reduce our ability to grow our business and significantly harm our business prospects.
We face competition from newly developed generic products as the Hatch-Waxman Act seeks to stimulate competition by providing incentives to generic pharmaceutical manufacturers to introduce non-infringing forms of patented pharmaceutical products and to challenge patents on branded pharmaceutical products. For example, we filed a complaint for patent infringement of certain CINVANTI patents against Fresenius Kabi USA, LLC ("Fresenius Kabi") in connection with its Abbreviated New Drug Application ("ANDA"), which seeks approval to manufacture, use or sell a generic version of CINVANTI in the U.S. prior to expiration of certain CINVANTI patents. While in December 2024, the District Court found that the Company's '229 Patent and '794 Patent are valid and would be infringed by Fresenius Kabi's proposed generic product, this decision is currently pending appeal and there is no guarantee that other similar or future litigation will be resolved in our favor. In addition, we filed a complaint for patent infringement of certain CINVANTI patents against Azurity Pharmaceuticals, Inc., Azurity Pharmaceuticals India LLP f/k/a Slayback Pharma India LLP, and Slayback Pharma LLC (collectively, "Azurity") in connection with its new drug application ("NDA") submission to the FDA under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (the "FDCA"). On June 1, 2026, the District Court issued a decision holding that the Company's asserted claims of Azurity's infringement of the '255 Patent and the '520 Patent are invalid under 35 U.S.C. § 112. The Court also entered a final judgment declaring that the asserted claims of U.S. Patent Nos. 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; and 11,744,800 are not infringed. On June 30, 2026, the Company appealed both final judgments to the U.S. Court of Appeals for the Federal Circuit. On July 31, 2026, the appeals were consolidated. On November 4, 2026, the briefing was completed. While the Company intends to vigorously enforce its intellectual property rights relating to CINVANTI, there can be no assurance that this matter will be resolved in the Company's favor. An adverse outcome could have a material effect on the Company's business, results of operations and financial position. In addition, the Company has entered into settlement agreements in connection with patent infringement litigations related to ANDA filings from (i) Mylan with respect to CINVANTI and APONVIE, (ii) Qilu with respect to CINVANTI and APONVIE and (iii) Baxter with respect to CINVANTI, and such settlements are not impacted by the U.S. District Court for the District of Delaware's June 1, 2026 decision on the Company's patent infringement litigation against Azurity with respect to certain CINVANTI patents. For more information about the Company;s patent litigations, see "Part I. Item 3. Legal Proceedings" in our 2025 Annual Report and "Part II. Item 1. Legal Proceedings" in subsequent Quarterly Reports on Form 10-Q.
If the Company is unsuccessful in demonstrating infringement of its patents by an ANDA or 505(b)(2) product, or the validity of the Company's patents is successfully challenged, lower-cost generic versions of our Products may be launched commercially and may compete with our Products, as they may be favored by insurers and third-party payors, which would significantly harm our business.
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Risks Related to Our Intellectual Property
If we are unable to adequately protect or enforce our intellectual property rights, we may lose valuable assets or incur costly litigation to protect our rights.
Our policy is to actively seek patent protection in the U.S. and selected foreign countries, to obtain coverage for novel technologies and compositions of matter that may be commercially important to the development of our business. Granted patents include claims covering the product composition, methods of use and methods of preparation. Our existing patents may not cover future products, additional patents may not be issued and current patents, or patents issued in the future, may not provide meaningful protection or prove to be of commercial benefit.
The patent positions of pharmaceutical companies, including ours, are uncertain and involve complex legal and factual questions. In addition, the coverage claimed in a patent application can be significantly changed or reduced before the patent is issued. Consequently, our patent applications may not issue into patents, and any issued patents may not provide sufficient protection for our product candidates or provide sufficient protection to afford us a commercial advantage against competitive technologies or may be held invalid if challenged or circumvented. Patent applications in the U.S. are maintained in confidence by the U.S. Patent and Trademark Office for at least 18 months after their filing. Consequently, we cannot be certain that the patent applications we are pursuing will lead to the issuance of any patent or that the claimed inventions will be free from infringement or other claims from other parties. Our competitors may also independently develop products similar to ours or design around or otherwise circumvent patents issued to us or controlled (e.g., licensed) by us. In addition, the laws of some foreign countries may not protect our proprietary rights to the same extent as U.S. laws.
We may have to enforce and defend our intellectual property rights against third parties who infringe our patents and other intellectual property or who challenge our patents or trademarks. For example, in the U.S., manufacturers of putative generics of innovator drug products (including products in which the innovation comprises a new drug delivery method for an existing product, such as the drug delivery market occupied by us) may file Abbreviated New Drug Applications ("ANDA") (or New Drug Applications pursuant to Section 505(b)(2) of the FDCA) and, in doing so, certify that their products either do not infringe the innovator's patents and/or that the innovator's patents are invalid. Under the Hatch-Waxman Act, the owners of patents listed in the FDA's publication "Approved Drug Products With Therapeutic Equivalence Evaluations ("Orange Book") and referenced by an ANDA applicant (or a 505(b)(2) applicant) may bring a patent infringement suit, commonly known as "Paragraph IV Litigation," against the applicant after receipt of the applicant's notice of paragraph IV certification. Paragraph IV litigations, of which there are often multiple in process by several applicants covering similar patents, could result in new or additional generic competition to any of our products and our product candidates and a potential reduction in product revenue.
For example, on July 27, 2022, we filed a complaint for patent infringement of certain CINVANTI patents against Fresenius Kabi and a related entity in the District of Delaware in response to Fresenius Kabi's ANDA application seeking FDA approval to manufacture, use or sell a generic version of CINVANTI in the U.S. prior to expiration of the CINVANTI patents, including U.S. Patent Nos. 9,561,229 (the "'229 Patent") and 9,974,794 (the "'794 Patent"). While in December 2024, the District Court found that the Company's '229 Patent and '794 Patent are valid and would be infringed by Fresenius Kabi's proposed generic product, this decision is currently pending appeal and there is no guarantee that other similar or future litigation will be resolved in our favor. Similarly, on January 24, 2024, we filed a complaint for patent infringement of certain CINVANTI patents, U.S. Patent Nos. 12,115,255 (the "'255 Patent") and 12,290,520 (the "'520 Patent"), against Azurity in the District of Delaware in response to Azurity's New Drug Application ("NDA") submission to the FDA under Section 505(b)(2) of the FDCA. On June 1, 2026, the District Court issued a decision holding that the Company's asserted claims of Azurity's infringement of the '255 Patent and the '520 Patent are invalid under 35 U.S.C. § 112. The Court also entered a final judgment declaring that the asserted claims of U.S. Patent Nos. 9,561,229; 9,808,465; 9,974,742; 9,974,793; 9,974,794; 10,500,208; 10,624,850; 10,953,018; 11,173,118; and 11,744,800 are not infringed. On June 30, 2026, the Company appealed both final judgments to the U.S. Court of Appeals for the Federal Circuit. On July 31, 2026, the appeals were consolidated. On November 4, 2026, the briefing was completed. While the Company intends to vigorously enforce its intellectual property rights relating to CINVANTI, there can be no assurance that this matter will be resolved in the Company's favor. An adverse outcome could have a material effect on the Company's business, results of operations and financial position. In addition, the Company has entered into settlement agreements in connection with patent infringement litigations related to ANDA filings from (i) Mylan with respect to CINVANTI and APONVIE, (ii) Qilu with respect to CINVANTI and APONVIE and (iii) Baxter with respect to CINVANTI, and such settlements are not impacted by the District Court's June 1, 2026 decision with respect to certain CINVANTI patents. For more information about the Company's patent litigations, see "Part I. Item 3. Legal Proceedings" in our 2025 Annual Report and "Part II. Item 1. Legal Proceedings" in subsequent Quarterly Reports on Form 10-Q.
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We may enter into collaborative agreements that may subject us to obligations that must be fulfilled and require us to manage complex relationships with third parties. In the future, if we are unable to meet our obligations or manage our relationships with our collaborators under these agreements our revenue may decrease. The loss or diminution of our intellectual property rights could result in a decision by our third-party collaborators to terminate their agreements with us. In addition, these agreements are generally complex and contain provisions that could give rise to legal disputes, including potential disputes concerning ownership of intellectual property and data under collaborations. Such disputes can lead to lengthy, expensive litigation or arbitration, requiring the Company to divert time and resources to such dispute.
Because the patent positions of pharmaceutical and biotechnology companies involve complex legal and factual questions, enforceability of patents cannot be predicted with certainty. The ultimate degree of patent protection that will be afforded to products and processes, including ours, remains uncertain and is dependent on the scope of protection decided on by the patent offices, courts and lawmakers in the U.S. and other countries in which we seek patent protection. The America Invents Act, which was enacted in 2011 and reformed certain patent laws in the U.S., may create additional uncertainty. Patents, if issued, may be challenged, invalidated or circumvented. As more products are commercialized using our proprietary product platforms, or as any product achieves greater commercial success, our patents become more likely to be subject to challenge by potential competitors.
We also rely on trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive position. We require our employees, consultants, advisors and collaborators to execute appropriate confidentiality and assignment-of-inventions agreements with us. These agreements typically provide that all materials and confidential information developed or made known to the individual during the course of the individual's relationship with us are to be kept confidential and not disclosed to third parties except in specific circumstances, and that all inventions arising out of the individual's relationship with us shall be our exclusive property. These agreements may be breached, and in some instances, we may not have an appropriate remedy available for such breach. Furthermore, our competitors may independently develop substantially equivalent proprietary information and techniques, reverse engineer our information and techniques, or otherwise gain access to our proprietary technology. We may be unable to meaningfully protect our rights in trade secrets, technical know-how and other non-patented technology. We may have to resort to litigation to protect our intellectual property rights, or to determine their scope, validity or enforceability. In addition, interference proceedings declared by the U.S. Patent and Trademark Office may be necessary to determine the priority of inventions with respect to our patent applications. Enforcing or defending our proprietary rights is expensive, could cause diversion of our resources and may not prove successful. In addition, courts outside the U.S. may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights. Any failure to enforce or protect our rights could cause us to lose the ability to exclude others from using our technology to develop or sell competing products.
We may be subject to claims that we have infringed on the intellectual property rights of others, and any litigation could force us to stop developing or selling potential products and could be costly, divert time, attention and resources and harm our business.
We must be able to develop products without infringing the proprietary rights of other parties. Because the markets in which we operate involve established competitors with significant patent portfolios, including patents relating to the composition of a variety of polymers, specific products, product groups and processing technology, it could be difficult for us to use our technologies or develop products without infringing the proprietary rights of others. Therefore, there is a risk that third parties may make claims of infringement against our products, our product candidates or our technologies. We may not be able to design around the patented technologies or inventions of others, and we may not be able to obtain licenses to use patented technologies on acceptable terms, or at all. If we cannot operate without infringing the proprietary rights of others, we will not be able to develop or commercialize some or all of our product candidates, and consequently will not be able to earn product revenue.
There is considerable uncertainty within the pharmaceutical industry about the validity, scope and enforceability of many issued patents in the U.S. and elsewhere in the world. We cannot currently determine the ultimate scope and validity of patents that may be granted to third parties in the future or which patents might be asserted to be infringed by any future manufacture, use or sale of our products and our product candidates. In part, and as a result of this uncertainty, there has been, and we expect that there may continue to be, significant litigation in the pharmaceutical industry regarding patents and other intellectual property rights.
If we are required to defend ourselves in a patent-infringement lawsuit, we could incur substantial costs, and the lawsuit could divert time, attention and other resources, regardless of the lawsuit's merit or outcome. These legal actions could seek damages and seek to enjoin testing, manufacturing and marketing of the accused product or process. In addition to potential liability for significant damages, we could be required to redesign affected products or obtain a license to continue to manufacture or market the accused
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product or process and any license required under any such patent may not be made available to us on acceptable terms, if at all. Competitors may sue us as a way of delaying the introduction of our products and our product candidates into the market. Any litigation, including any interference or derivation proceedings to determine priority of inventions, oppositions or other post-grant review proceedings to patents in the U.S. or in countries outside the U.S., or litigation against our partners may be costly and time-consuming and could harm our business. We expect that litigation may be necessary in some instances to determine the validity and scope of certain of our proprietary rights. Litigation may be necessary in other instances to determine the validity, scope and/or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products and our product candidates. For more information about the Company's patent litigations, see "Part I. Item 3. Legal Proceedings" in our 2025 Annual Report and "Part II. Item 1. Legal Proceedings" in subsequent Quarterly Reports on Form 10-Q. Ultimately, the outcome of such litigation could adversely affect the validity and scope of our patent or other proprietary rights or hinder our ability to manufacture and market our Products and our product candidates.
Periodically, we review publicly available information regarding the development efforts of others to determine whether these efforts may violate our proprietary rights. We occasionally determine that litigation is necessary to enforce our proprietary rights against others. Such litigation can result in substantial expense, regardless of its outcome, and may not be resolved in our favor.
Risks Related to Our Financial Condition
Provisions contained in our debt instruments may have a negative impact on our business.
Our Working Capital Facility Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions. Our 2031 Convertible Notes also contain provisions that trigger events of default for incurring certain additional indebtedness or any default of our obligations under certain material agreements we may enter into. As a result, we may not be able to raise funds through the issuance of additional debt in the future, which could impair our ability to finance our business obligations or pursue business expansion initiatives. In addition, our Working Capital Facility Agreement contains a minimum cash covenant, a minimum revenue covenant and a minimum EBITDA covenant. On September 17, 2026, we entered into the Fifth Amendment to the Working Capital Facility Agreement (the "Fifth Amendment to the Working Capital Facility Agreement") to the Initial Working Capital Facility Agreement, as amended by the First Amendment to the Working Capital Facility Agreement, the Second Amendment to the Working Capital Facility Agreement, the Third Amendment to the Working Capital Facility Agreement and the Fourth Amendment to the Working Capital Facility Agreement. The Fifth Amendment to the Working Capital Facility Agreement, among other things amended the terms of the September 15, 2026 payment of $4,000,000 as specified in the Fourth Amendment to the Working Capital Facility Agreement to separate the payment into a $1,000,000 payment payable on September 15, 2026 and a $3,000,000 payment payable on September 30, 2026. We completed these prepayments, together with End of Term Fees of $49,000 and $147,000, respectively, plus accrued PIK Interest due on such Prepayment with any fees associated with the Prepayment to be waived.
Our ability to comply with these restrictions and covenants, including meeting any financial ratios and tests, may be affected by events beyond our control. Based on our results of operations for the nine months ended September 30, 2026 and without additional funding from the closing of the Asset Sale or otherwise, there is a possibility we may not satisfy one or more covenants under our Working Capital Facility Agreement within the next twelve months, absent a waiver, consent or amendment under our Working Capital Facility Agreement. If an event of default occurs under the Working Capital Facility Agreement due to the failure to satisfy certain covenants, our lenders could declare all outstanding principal, together with accrued and unpaid interest and end of term fee, to be immediately due and payable. If the payment of the debt is accelerated, absent any additional funding, cash flows from our operations will be insufficient to repay such debt in full. Therefore, if all outstanding amounts under the Working Capital Facility Agreement are accelerated, management expects there will be substantial doubt about our ability to continue as a going concern for a period of at least one year from the date of issuance of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. If an event of default occurs under the 2031 Convertible Notes Purchase Agreement due to the acceleration of all outstanding amounts under the Working Capital Facility Agreement, the required purchasers under the 2031 Convertible Notes Purchase Agreement could also declare the acceleration of all outstanding amounts under the 2031 Convertible Notes, subject to applicable notice requirements and cure periods.
Pursuant to the Asset Purchase Agreement, a portion of the cash consideration in the Asset Sale will be used to repay all amounts outstanding under the Working Capital Facility Agreement. A portion of the stock consideration in the Asset Sale will be used to exchange all or a portion of the outstanding 2031 Convertible Notes as described in Note 8 - Long-Term Debt and Convertible
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Notes to the condensed consolidated financial statements included in the Quarterly Report on Form 10-Q. The completion of the Asset Sale is subject to approval by the Company’s stockholders and the satisfaction of other customary closing conditions, and there can be no assurance that the Company will be successful in obtaining stockholder approval or closing the Asset Sale on the anticipated timeline, on the terms currently contemplated, or at all.
We may not be able to satisfy the continued listing requirements of Nasdaq to maintain a listing of our common stock.
As a company listed on the Nasdaq Capital Market, the Company must meet certain financial and liquidity criteria to maintain such listing. On June 25, 2026, we received a letter from Nasdaq, notifying us that, for the previous 30 consecutive business day period prior to the date of the letter, the closing bid price of our common stock was below $1.00 and that we did not meet the minimum bid price required for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided with an initial period of 180 calendar days, or until December 22, 2026, to regain compliance with Nasdaq's bid price requirement. If, at any time before December 22, 2026, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive business days, we will regain compliance with the bid price requirement. If we are unable to regain compliance during this initial 180-calendar day compliance period, we may be eligible for an additional 180-calendar day compliance period, subject to meeting other continued listing standards and providing written notice to Nasdaq of our intent to cure the deficiency.
Following the closing of the Asset Sale, the Company will have limited operations and no material sources of revenue until it is able to acquire or invest in additional operating businesses or assets, which may negatively impact the value and liquidity of its common stock. The Company will retain other material assets following the closing of the Asset Sale, including the shares of CorMedix common stock issued to the Company in the Asset Sale, the right to receive future royalties, earn-out payments, significant NOLs and cash on hand. Following the closing of the Asset Sale, the Board intends to actively evaluate various strategic transactions and opportunities for the use of the proceeds of the Asset Sale, including acquiring or investing in additional businesses or assets, which may or may not be pharmaceutical or biotechnology businesses or assets.
While the Company intends to monitor the closing bid price of its common stock and is considering its options to regain compliance on or before December 22, 2026, there are no assurances that the Company will be able to regain compliance with the minimum bid price requirement or that it would continue to meet other requirements for continued listing on Nasdaq. If we are unable to satisfy the Nasdaq criteria for continued listing, our common stock would be subject to delisting. Any perception that we may not regain compliance or a delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage of us; limiting our ability to issue additional securities or obtain additional financing in the future; and materially impairing the closing of the Asset Sale and the acquisition or investment in additional businesses or assets following the closing of the Asset Sale. In addition, delisting from Nasdaq may negatively impact our reputation and, consequently, our business.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2026, no new Rule 10b5-1 trading arrangements (as defined in Item 408(a)(1)(i) of Regulation S-K) and non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K) intended to satisfy the affirmative defense of Rule 10b5-1(c) of the Exchange Act were
During the three months ended September 30, 2026, the Company did not adopt or terminate a Rule 10b5-1 trading arrangement (as defined in Item 408(a)(1)(i) of Regulation S-K).
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ITEM 6. EXHIBITS
The exhibits listed on the Exhibit Index hereto are filed or furnished (as stated therein) as part of this Quarterly Report on Form 10‑Q.
Exhibit Number |
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Description |
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4.1 |
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Amendment No. 1 to Tax Benefit Preservation Plan, dated August 13, 2026, by and between Heron Therapeutics, Inc. and Computershare Trust Company, N.A., as rights agent (incorporated by reference to our Current Report on Form 8-K, as Exhibit 4.1, filed on August 14, 2026) |
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10.1+* |
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Development and License Agreement, dated September 23, 2026, by and among Heron Therapeutics, Inc., Long Grove Pharmaceuticals, LLC and Capstone Development Services Company, LLC |
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10.2+* |
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Fifth Amendment to the Working Capital Facility Agreement, dated September 17, 2026, by and between Heron Therapeutics, Inc., and Hercules Capital, Inc., as administrative agent, collateral agent and lender |
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31.1+ |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2+ |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1++ |
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Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
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XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document included as Exhibit 101) |
+ Filed herewith
++ Furnished herewith
* Certain information has been omitted from the exhibit in compliance with Item 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Company if publicly disclosed.
† Management contract or compensatory plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements 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.
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Heron Therapeutics, Inc. |
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Date: November 9, 2026 |
By: |
/s/ Craig Collard |
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Craig Collard |
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Chief Executive Officer |
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(Principal Executive Officer) |
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By: |
/s/ Ira Duarte |
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Ira Duarte |
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Executive Vice President, Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
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50