ZEVRA THERAPEUTICS INC
For the period ended Dec 31, 2023. Filed Apr 1, 2024.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2023 · Filed Apr 1, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
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Item 1C. Cybersecurity
| Item 2. | Properties | 82 |
|---|---|---|
| Item 3. | Legal Proceedings | 82 |
| Item 4. | Mine Safety Disclosures | 82 |
| PART II | ||
| Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities | 87 |
| Item 6. | [Reserved] | 87 |
| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 88 |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 102 |
| Item 8. | Financial Statements and Supplementary Data | 102 |
| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosures | 102 |
| Item 9A. | Controls and Procedures | 102 |
| Item 9B. | Other Information | 103 |
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 103 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 104 |
| Item 11. | Executive Compensation | 104 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 104 |
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 104 |
| Item 14. | Principal Accounting Fees and Services | 104 |
| PART IV | ||
| Item 15. | Exhibits and Financial Statement Schedules | 105 |
| Signatures | 155 | |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “assume,” “intend,” “potential,” “continue” or other similar words or the negative of these terms. We have based these forward-looking statements largely on our current expectations about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in “Risk Factors” and elsewhere in this report. Accordingly, you should not place undue reliance upon these forward-looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, the timing of events and circumstances and actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements contained in this report include, but are not limited to, statements about:
| ● | our ability to integrate Acer (as defined below) into our business successfully or realize the anticipated synergies and related benefits of the Merger (as defined below); |
| ● | the progress of, outcome or and timing of any regulatory approval for any of our product candidates and the expected amount or timing of any payment related thereto under any of our collaboration agreements; |
| ● | our ability to remediate the material weakness we have identified, the timing thereof, and the impact of the restatements described herein; |
| ● | our ability to continue as a going concern; |
| ● | the progress of, timing of and expected amount of expenses associated with our research, development and commercialization activities; |
| ● | our ability to raise additional funds on commercially reasonable terms, or at all, in order to support our continued operations; |
| ● | the sufficiency of our cash resources to fund our operating expenses and capital investment requirements for any period; |
| ● | the expected timing of our clinical trials for our product candidates and the availability of data and results of those trials; |
| ● | our expectations regarding federal, state and foreign regulatory requirements; |
| ● | the potential therapeutic benefits and effectiveness of our products and product candidates; |
| ● | the size and characteristics of the markets that may be addressed by our products and product candidates; |
| ● | our intention to seek to establish, and the potential benefits to us from, any strategic collaborations or partnerships for the development or sale of our products and product candidates, if approved; |
| ● | our expectations as to future financial performance, expense levels and liquidity sources; |
| ● | the timing of commercializing our products and product candidates, if approved; |
| ● | senior leadership and board member transitions and refreshments; and |
| ● | other factors discussed elsewhere in this report. |
The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We have included important factors in the cautionary statements included in this report, particularly in the section entitled “Risk Factors” that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. Except as required by law, we do not assume any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or circumstances or otherwise.
RISK FACTORS SUMMARY
The risk factors summarized below could materially harm our business, operating results, and/or financial condition, impair our future prospects, and/or cause the price of our common stock to decline. These risks are discussed more fully in the section titled "Risk Factors". Material risks that may affect our business, financial condition, results of operations, and trading price of our common stock include the following:
| ● | If commercialization of our approved products or our product candidates is not successful, or we experience significant delays in commercialization, our business will be harmed. |
| ● | If we are not able to obtain required regulatory approvals for our product candidates, or the approved labels are not sufficiently differentiated from other competing products, we will not be able to commercialize them and our ability to generate revenue or profits or to raise future capital could be limited. |
| ● | Our research and development activities are focused on discovering and developing transformational, patient-focused therapies for rare diseases with limited or no treatment options, which may never lead to additional marketable products. |
| ● | Arimoclomol is currently available to Niemann-Pick disease Type C patients in the United States. France, Germany, and other EU member states through our expanded access program, or EAP. The EAP is expected to remain in place until arimoclomol becomes commercially available in each of the current EAP markets. If the EAP is terminated prior to commercialization of arimoclomol, it will have a material adverse effect on our business, results of operations, cash flows, financial condition and/or prospects. |
| ● | The restatement of our consolidated financial statements for the year ended December 31, 2023, has subjected us to a number of additional risks and uncertainties. |
| ● | Management recently identified a material weakness in our internal control over financial reporting, which could have a significant adverse effect on our business and the price of our common stock. |
| ● | Our recurring operating losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. |
| ● | Clinical drug development involves a lengthy and expensive process, with an uncertain outcome. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates. |
| ● | We may need substantial additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to delay, reduce or altogether cease our prodrug development programs or commercialization efforts or cease operations altogether. |
| ● | We have incurred significant recurring negative net operating losses since our inception. We expect to incur operating losses for the near future. |
| ● | If we are unable to obtain and maintain trade secret protection or patent protection for our technology, our approved products or our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology, our approved products and our product candidates, if approved, may be impaired. |
| ● | If we attempt to rely on Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act and the FDA does not conclude that our product candidates are sufficiently bioequivalent, or have comparable bioavailability, to approved drugs, or if the FDA does not allow us to pursue the 505(b)(2) NDA pathway as anticipated, the approval pathway for our product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and the FDA may not ultimately approve our product candidates. |
| ● | The FDA may determine that any NDA we may submit under the 505(b)(2) regulatory pathway for any of our product candidates in the future is not sufficiently complete to permit a substantive review. |
| ● | We have entered into collaborations with Commave Therapeutics, S.A., or Commave, to develop, manufacture and commercialize AZSTARYS worldwide. In addition, we may seek collaborations with third parties for the development, manufacturing or commercialization of our other product candidates, or in other territories. If those collaborations are not successful, we may not be able to capitalize on the market potential of our approved products or other product candidates, if approved. |
| ● | The trading price of the shares of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses. |
| ● | Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel. |
| ● | We could be negatively affected as a result of the actions of activist stockholders, which could be disruptive and costly and may conflict with or disrupt the strategic direction of our business. |
| ● | Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations. |
NOTE REGARDING COMPANY REFERENCE
*Unless the context otherwise requires, we use the terms “Zevra,” “Company,” “we,” “us” and “our” in this Annual Report on Form 10-K to refer to Zevra Therapeutics, Inc. We have proprietary rights to a number of trademarks used in this Annual Report on Form 10-K that are important to our business, including LAT®, OLPRUVA® and its related logo,*andthe Zevra logo. All other trademarks, trade names and service marks appearing in this Annual Report on Form 10-K are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
On August 30, 2023, the Company and Aspen Z Merger Sub, Inc., a wholly-owned subsidiary of Zevra ("Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Acer Therapeutics, Inc. ("Acer"). On November 17, 2023 (the "Closing Date"), we completed the acquisition of Acer. Pursuant to the Merger Agreement, on the Closing Date, Merger Sub was merged with an into Acer (the "Merger"), with Acer continuing as the surviving entity and as a wholly-owned subsidiary of Zevra.
NOTE REGARDING MARKET AND INDUSTRY DATA
This Annual Report on Form 10-K contains statistical data, estimates and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. While we believe the industry and market data included in this Annual Report on Form 10-K is reliable and is based on reasonable assumptions, this data involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” included in this Annual Report on Form 10-K.
EXPLANATORY NOTE
Restatement of Consolidated Financial Results
On March 25, 2024, the Audit Committee (the “Audit Committee”) of our Board of Directors, after discussion with senior management and the Company’s independent registered public accountants, concluded that our previously issued audited consolidated financial statements as of and for the fiscal years ended December 31, 2022 and December 31, 2021, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, (collectively, the “Prior Financial Statements”) should no longer be relied upon. In connection with the preparation of this Annual Report on Form 10-K for the fiscal year ended December 31, 2023, the Audit Committee concluded that, in prior years it had not appropriately accounted for certain common stock warrants as liabilities. These errors led to understatements of derivative and warrant liability and additional paid-in capital and fluctuations in fair value adjustment related to derivative and warrant liability during the impacted periods.
In addition, the Audit Committee concluded that the previously disclosed errors led to misstatements of fair value adjustment related to derivative and warrant liability, derivative and warrant liability, additional paid-in capital, and accumulated deficit that were previously disclosed in the unaudited condensed consolidated balance sheets and statements of operations included in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, June 30, 2023, and September 30, 2023 (collectively, the “Prior Interim Financial Statements”). On March 25, 2024, the Audit Committee, after discussion with senior management and the Company’s independent registered public accountants, concluded that the Prior Interim Financial Statements should no longer be relied upon.
As a result, we are restating our consolidated financial statements for the year ended December 31, 2022, and the Prior Interim Financial Statements in this Annual Report on Form 10-K. In addition, the following items of this Annual Report on Form 10-K include restated financial data: (i) Part II, Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations; (ii) Part II, Item 8—Financial Statements and Supplementary Data (which incorporated by reference the information from Part IV, Item 15—Exhibits and Financial Statement Schedules ) and (iii) Part IV, Item 15—Exhibits and Financial Statement Schedules. Note C to our consolidated financial statements sets forth, in a comparative presentation, the previously reported, restatement adjustments and restated amounts for those line items in the relevant periods affected by the restatement. This Annual Report on Form 10-K also includes disclosure regarding the impact of the restatement on the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures in Part II, Item 9A.— Controls and Procedures.
We have not amended our previously-filed Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q for the periods noted above. Instead, such financial statements are superseded by the audited consolidated financial statements for the year ended December 31, 2023, contained in this Annual Report on Form 10-K, which give effect to the restatements noted above
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