HERON THERAPEUTICS, INC. /DE/

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 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)

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.

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

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 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 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.

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.

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 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

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.