PALATIN TECHNOLOGIES INC

Our management has determined that there is substantial doubt about our ability to continue as a going concern, which make it more difficult and more expensive for us to raise capital.

Our management has determined that there is substantial doubt about our ability to continue as a going concern because of our need to raise significant additional financing to complete clinical trials and development of our product candidates. Because we have not yet generated sufficient revenues from our operations, our ability to continue as a going concern is currently heavily dependent upon our ability to obtain additional financing to sustain our operations. Such financing may take the form of the issuance of common or preferred stock or debt securities or may involve bank financing. Our independent registered public accounting firm has issued their report, which includes an explanatory paragraph for going concern uncertainty on our consolidated financial statements as of and for the year ended June 30, 2026. The existence of a “going concern” conclusion may hinder our ability to obtain additional financing in the future. Currently, we have no commitments to obtain any additional financing, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.

We have a history of substantial net losses, including a net loss of $8.4 million for the year ended June 30, 2026. We expect to incur substantial net losses over the next few years, and we may never achieve or maintain profitability.

As of June 30, 2026, we had an accumulated deficit of $467.5 million. We had $8.4 million in net loss for the year ended June 30, 2026, compared to $17.3 million in net loss for the year ended June 30, 2025. We may not achieve or sustain profitability in future years, depending on numerous factors, including whether and when development and product commercialization milestones are met, whether and when we enter into license agreements for any of our products under development, regulatory actions by the FDA and other regulatory bodies, the performance of our licensees, and market acceptance of our products.

We expect to incur significant expenses as we continue our development of MC4R and MC1R products. These expenses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity, total assets and working capital.

We sold our Vyleesi® rights to Cosette Pharmaceuticals, Inc. in December 2023 and entered into a Release and Settlement Agreement (the “Settlement Agreement”) with Cosette. Under the Settlement Agreement, we retained the right to receive 20% of a $3.0 million milestone payment, or $600,000, upon the first commercial sale of Vyleesi in Korea. The timing of any such commercial sale is uncertain, and we do not expect to receive this milestone payment in the foreseeable future, if at all.

On August 14, 2025, the Company entered into the Boehringer Ingelheim Agreement to research, develop, and commercialize proprietary melanocortin receptor-targeted compounds for the treatment of retinal diseases. Under the terms of the Agreement, BI agreed to pay the Company a non-refundable upfront payment of €2.0 million ($2.3 million USD), and success-based development, regulatory, and commercial milestone payments of up to €280,000,000 (approximately $328,000,000), and tiered royalties on net sales of licensed products, if commercialized. The Company assigned certain patent rights and granted BI a license to related intellectual property (the “Assigned Patents”). The Company will also perform research and development services in collaboration with BI for a period of up to 2.5 years, with all approved costs reimbursed by BI. The Company retains an exclusive, fully paid-up license to PL9643 for the treatment of dry eye disease. During the year ended June 30, 2026, we recognized revenue of €7,500,000 (approximately $8,830,000), consisting of the non-refundable upfront payment and the first research milestone payment. Reimbursements for research and development services are recognized as the services are performed.

On January 8, 2026, the Company entered into a sublicense agreement (the “Altanispac Agreement”) with Altanispac Labs, LLC (“Altanispac”), granting an exclusive license to PL9643, an MC1R agonist for the treatment of dry eye disease. Under the terms of the Altanispac Agreement, Altanispac agreed to pay the Company a non-refundable upfront payment in the form of non-cash debt cancellation, plus future payments based on the sublicensing or the sale of PL9643, and tiered royalties on net sales of licensed products, if commercialized. The Company assigned certain patent rights and granted Altanispac a license to related intellectual property.

We recognized $3,751,122 as license revenue in the Consolidated Statements of Operations for the year ended June 30, 2026. The $3,751,122 of license revenue was received in the form of non-cash debt cancellation.

For the foreseeable future, we will have to fund our operations and capital expenditures from contract revenue under license agreements, existing cash balances and outside sources of financing, which may not be available on acceptable terms, if at all. We will not have product revenue from our products in development unless and until we receive approval from the FDA or other equivalent regulatory authorities outside the United States. We have devoted substantially all of our efforts to research and development, including preclinical and clinical trials. Because of the numerous risks associated with developing drugs, we are unable to predict the extent of future losses, whether or when any of our product candidates will become commercially available, or when we will become profitable, if at all.

We will need additional funding, including funding to complete clinical trials for our product candidates, which may not be available on acceptable terms, if at all.

Our principal strategic development focus is the advancement of MC4R agonists for the treatment of obesity, with an emphasis on rare neuroendocrine and other MC4R pathway diseases. We are developing selective MC4R long-acting peptide agonists and oral small-molecule agonists with potential utility in hypothalamic obesity, Prader-Willi syndrome, Bardet-Biedl syndrome and other rare obesity and orphan indications. As of June 30, 2026, we had cash and cash equivalents of $7.5 million, with current liabilities of $1.8 million. Based on our available cash and cash equivalents, we have concluded that substantial doubt exists about our ability to continue as a going concern for one year from the date our consolidated financial statements are issued and we are seeking additional funding to complete development activities and required clinical trials for our MC4R product candidates and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA.

We may raise additional funds through public or private equity or debt financings, collaborative arrangements on our product candidates, or other sources. However, such financing arrangements may not be available on acceptable terms, or at all. To obtain additional funding, we may need to enter into arrangements that require us to develop only certain of our product candidates or relinquish rights to certain technologies, product candidates and/or potential markets.

If we are unable to raise sufficient additional funds when needed, we may be required to curtail operations significantly, cease clinical trials and decrease staffing levels. We may seek to license, sell or otherwise dispose of our product candidates, technologies and contractual rights on the best possible terms available. Even if we are able to license, sell or otherwise dispose of our product candidates, technologies and contractual rights, it is likely to be on unfavorable terms and for less value than if we had the financial resources to develop or otherwise advance our product candidates, technologies and contractual rights ourselves.

We have limited experience successfully commercializing pharmaceutical products, and our experience with Vyleesi may not be indicative of our ability to successfully develop or commercialize our current or future product candidates.

Our operations have primarily focused on discovering and developing proprietary product candidates, conducting preclinical and clinical studies, obtaining regulatory approvals, and formulating and manufacturing product candidates through third-party contract manufacturers. Although we successfully developed Vyleesi® through Phase 3 clinical trials, obtained FDA approval in collaboration with our then-licensee and achieved commercial sales of Vyleesi, our experience successfully commercializing pharmaceutical products is limited. We sold our rights to Vyleesi to Cosette Pharmaceuticals, Inc. in December 2023, and Vyleesi is currently marketed and sold by Cosette.

We have not demonstrated our ability to successfully develop, obtain regulatory approval for and commercialize any of our current product candidates. Successful development and commercialization of our current or future product candidates, either independently or through collaborators, will require us or our collaborators to perform a variety of functions, including:

Our limited experience performing certain of these activities at commercial scale could adversely affect our ability to successfully develop or commercialize our current or future product candidates.

If we are unable to obtain regulatory approval of any of our product candidates, to successfully commercialize any products for which we receive regulatory approval or to obtain additional capital, we may not be able to recover our investment in our development efforts.

The clinical and commercial success of our product candidates will depend on a number of factors, including the following:

If we do not achieve one or more of these factors, many of which are beyond our control, in a timely manner or at all, we could experience significant delays or an inability to obtain regulatory approvals or commercialize our product candidates. Even if regulatory approvals are obtained, we may never be able to successfully commercialize any of our product candidates. Accordingly, we cannot assure our investors that we will be able to generate sufficient revenue through the sale of our product candidates or any future product candidates to continue our business.

Raising additional capital may cause dilution to existing stockholders, restrict our operations, or require us to relinquish rights.

We will seek the additional capital necessary to fund our operations through public or private equity offerings, collaboration agreements, debt financings, licensing arrangements or combinations of the foregoing. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interests will be diluted, and the terms may include liquidation or other preferences that adversely affect their rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through collaborations and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.

Our business strategy is increasingly focused on the development of our MC4R agonist programs for rare obesity disorders, and these programs are at an early stage of development and may not be successful.

We are focusing a significant portion of our development activities and financial resources on our next-generation MC4R selective agonist programs for the treatment of obesity, with a primary focus on rare neuroendocrine diseases and MC4R pathway disorders, including hypothalamic obesity, Prader-Willi syndrome and potentially Bardet-Biedl syndrome. Our lead programs include a long-acting peptide MC4R agonist intended for once-weekly subcutaneous administration and a next-generation oral small molecule MC4R agonist. These product candidates are currently in preclinical development and have not been demonstrated to be safe, well tolerated or effective in humans. Preclinical results may not be predictive of results in clinical trials, and we may experience delays or difficulties in candidate selection, IND-enabling studies, regulatory submissions or clinical development.

The commercial opportunity for our MC4R programs will also depend on our ability to develop product candidates that are meaningfully differentiated from approved and investigational therapies. Competing MC4R agonists are approved or in clinical development for certain rare obesity disorders, and additional therapies utilizing MC4R and other mechanisms may be approved before our product candidates reach the market. We are seeking to develop MC4R agonists that provide clinically meaningful efficacy with improved tolerability, reduced off-target effects, including hyperpigmentation, and convenient dosing; however, there can be no assurance that our product candidates will demonstrate these characteristics in clinical trials or provide advantages over existing or future competing therapies.

If our MC4R programs experience significant development or regulatory delays, fail to demonstrate acceptable safety, tolerability or efficacy, fail to achieve meaningful differentiation from competing therapies, or otherwise fail to advance successfully, our business, financial condition, results of operations and prospects could be materially and adversely affected.

We depend on our collaborations and licensing arrangements with third parties, including Boehringer Ingelheim and Altanispac Labs, to successfully develop and commercialize certain of our product candidates, and we may not receive anticipated milestone payments, royalties or other economic benefits from these arrangements.

Our business strategy includes entering into collaborations, licensing arrangements and other strategic transactions under which third parties assume responsibility for, or significantly influence, the further development and commercialization of certain of our product candidates. In August 2025, we entered into the Boehringer Ingelheim Agreement for the research, development and commercialization of certain melanocortin receptor-targeted compounds for the treatment of retinal diseases, including diabetic retinopathy and diabetic macular edema. In January 2026, we entered into a sublicense agreement with Altanispac Labs pursuant to which Altanispac acquired exclusive rights to develop and commercialize PL9643 for dry eye disease.

Under these arrangements, our collaborators control, or are expected to control, significant aspects of the future development, regulatory approval and commercialization of the applicable product candidates. Our collaborators may determine the amount and timing of resources devoted to these programs, experience development or regulatory delays, fail to obtain regulatory approval, encounter manufacturing or commercialization difficulties, change their strategic priorities, pursue competing programs, discontinue development or commercialization activities, or terminate their agreements with us in accordance with their terms. These activities and decisions may be outside our control.

Our agreements provide for potential future payments, including research, development, regulatory and commercial milestone payments and royalties or other payments based on future commercialization. The achievement and timing of these payments are uncertain and depend on numerous factors, including successful research and development activities, clinical trial results, regulatory approvals and commercial performance. Certain milestone payments may not be achieved for many years, if ever, and there can be no assurance that any licensed product candidate will ultimately receive regulatory approval or be successfully commercialized.

If Boehringer Ingelheim, Altanispac or any of our other current or future collaborators fails to successfully develop or commercialize the applicable product candidates, changes its development or commercialization priorities, or terminates or materially reduces its activities under an agreement with us, we may not receive anticipated milestone payments, royalties or other economic benefits. In such circumstances, we may also be required to identify another collaborator or determine whether to reassume development activities, which could require significant time and financial resources and may not be possible on acceptable terms or at all. Any such event could materially and adversely affect our business, financial condition, results of operations and prospects.

We may not receive the contingent payment retained in connection with our settlement with Cosette relating to Vyleesi.

In June 2025, we entered into a Release and Settlement Agreement with Cosette Pharmaceuticals, Inc. relating to Vyleesi®, pursuant to which, among other things, we retained the right to receive 20% of a $3.0 million milestone payment, or $600,000, upon the first commercial sale of Vyleesi in Korea. The timing and likelihood of achieving this milestone are uncertain and depend on activities and events outside of our control. There can be no assurance that the applicable milestone will be achieved or that we will receive any payment related to this milestone.

Geopolitical conflicts and instability could disrupt our operations, increase economic uncertainty and volatility in financial markets, and adversely affect our business, financial condition and results of operations.

Ongoing and future geopolitical conflicts and instability, including the continuing conflict between Russia and Ukraine and conflicts and tensions in the Middle East, could adversely affect global economic conditions, financial markets, energy and commodity prices, international trade and supply chains. These conflicts have resulted, and may continue to result, in sanctions, export controls and other governmental actions, disruptions to transportation and energy supplies, increased cybersecurity threats, inflationary pressures and volatility or disruption in the capital markets.

Although we do not currently have material operations in regions directly affected by these conflicts, geopolitical instability could adversely affect third parties upon which we rely, including contract research organizations, clinical trial sites, manufacturers, suppliers, collaborators and other service providers. Such events could increase the cost or delay the manufacture or transportation of clinical trial materials, disrupt clinical development activities, adversely affect our collaborators’ development programs, or otherwise impair our ability to achieve our operating objectives.

Geopolitical instability and related economic uncertainty may also adversely affect our ability to access the capital markets when needed or increase the cost of obtaining financing. If we are unable to obtain necessary financing on acceptable terms, or if geopolitical events materially disrupt our operations or those of third parties upon which we rely, we may be required to delay, reduce or discontinue development activities, including our clinical development programs, which could materially and adversely affect our business, financial condition, results of operations and prospects.

Our MC1R product candidates, including PL8177 for the treatment of ulcerative colitis, are still in the early stages of development and remain subject to clinical testing and regulatory approval. If we are unable to successfully develop and test our product candidates, we will not be successful.

Our MC1R product candidates, including PL8177 for the treatment of ulcerative colitis, are at various stages of research and development, will require regulatory approval, and may never be successfully developed or commercialized. Our product candidates will require significant further research, development and testing before we can seek regulatory approval to market and sell them. We must demonstrate that our product candidates are safe and effective for use in patients in order to receive regulatory approval for commercial sale. Preclinical studies in animals, using various doses and formulations, must be performed before we can begin human clinical trials. Even if we obtain favorable results in preclinical studies, the results in humans may be different. Numerous small-scale human clinical trials may be necessary to obtain initial data on a product candidate’s safety and efficacy in humans before advancing to large scale human clinical trials. We face the risk that the results of our trials in later phases of clinical trials may be inconsistent with those obtained in earlier phases. Adverse or inconclusive results could delay the progress of our development programs and may prevent us from filing for regulatory approval of our product candidates. Additional factors that could inhibit the successful development of our product candidates include:

You should evaluate us in light of these uncertainties, difficulties and expenses commonly experienced by early-stage biopharmaceutical companies, as well as unanticipated problems and additional costs relating to:

If clinical trials for our product candidates are prolonged or delayed, we may be unable to commercialize our product candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenue from potential product sales.

We may be unable to commercialize our product candidates on a timely basis due to unexpected delays in our human clinical trials. Potential delaying events include:

Any of these events or other delaying events, individually or in the aggregate, could delay the commercialization of our product candidates and have a material adverse effect on our business, results of operations and financial condition.

We may not be able to secure and maintain relationships with research institutions and other organizations to conduct our clinical trials.

We rely on research institutions and other organizations to conduct our clinical trials, and we therefore have limited control over the timing and cost of clinical trials and our ability to recruit subjects. If we are unable to reach agreements with suitable research institutions or organizations on acceptable terms, or if any such agreement is terminated, we may be unable to quickly replace the research institution or organization with another qualified institution or organization on acceptable terms. We may not be able to secure and maintain suitable research institutions or organizations to conduct our clinical trials.

Even if our product candidates receive regulatory approval, they may never achieve market acceptance, in which case our business, financial condition and results of operations will be materially adversely affected.

Regulatory approval for the marketing and sale of any of our product candidates does not assure the product’s commercial success. Any approved product will compete with other products manufactured and marketed by major pharmaceutical and other biotechnology companies. If any of our product candidates are approved by the FDA and do not achieve adequate market acceptance, our business, financial condition, and results of operations will be materially adversely affected. The degree of market acceptance of any such product will depend on a number of factors, including:

Even if our product candidates receive regulatory approval in the United States, we may never receive approval or commercialize our products outside of the United States.

In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. Failure to obtain regulatory approval in other countries or any delay or setbacks in obtaining such approval would impair our ability to develop foreign markets for our product candidates and may have a material adverse effect on our results of operations and financial condition.

If side effects emerge that can be linked to any of our product candidates (either while they are in development or after they are approved and on the market), we may be required to perform lengthy additional clinical trials, change the labeling of any such products, or withdraw such products from the market, any of which would hinder or preclude our ability to generate revenues.

If we identify side effects or if other problems occur in future clinical trials, we may be required to terminate or delay clinical development of the product candidate. Furthermore, even if any of our product candidates receive marketing approval, as greater numbers of patients use a drug following its approval, if the incidence of side effects increases or if other problems are observed after approval that were not seen or anticipated during pre-approval clinical trials, or if the incidence of side effects increase or other problems, a number of potentially significant negative consequences could result, including:

Any of these events could substantially increase the costs and expenses of developing, commercializing, and marketing any such product candidates or could harm or prevent sales of any approved products.

We may not be able to keep up with the rapid technological change in the biotechnology and pharmaceutical industries, which could make any future approved products obsolete and reduce our revenue.

Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change. Our future will depend in large part on our ability to maintain a competitive position with respect to these technologies. Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages in our drug discovery process that we believe we derive from our research approach and proprietary technologies. In addition, any future products that we develop, including our clinical product candidates, may become obsolete before we recover expenses incurred in developing those products, which may require that we raise additional funds to continue our operations.

Competing products and technologies may make our product candidates less competitive or obsolete and may adversely affect the commercial potential of our development programs.

The biopharmaceutical industry is highly competitive and characterized by rapidly advancing technologies, evolving standards of care and the introduction of new products and therapeutic approaches. We expect to face significant competition with respect to our product candidates, particularly our MC4R agonist programs for rare obesity disorders, including hypothalamic obesity, Prader-Willi syndrome and Bardet-Biedl syndrome. There are approved therapies for certain of these indications, including an approved MC4R agonist, and additional MC4R agonists and therapies utilizing other mechanisms of action are in clinical development. Certain competing products and product candidates are more advanced in development than our product candidates and may achieve greater market acceptance or obtain regulatory approval before our product candidates.

The commercial potential of our MC4R programs will depend in significant part on our ability to develop product candidates that demonstrate clinically meaningful efficacy, acceptable safety and tolerability, convenient dosing and sufficient differentiation from approved and investigational therapies. We are developing a long-acting peptide MC4R agonist intended for once-weekly administration and a next-generation oral small molecule MC4R agonist, with the objective of achieving meaningful efficacy while improving tolerability and reducing off-target effects, including hyperpigmentation. However, there can be no assurance that our product candidates will demonstrate these characteristics in clinical trials or offer advantages over approved or future competing products.

We also face competition with respect to product candidates and programs that we have licensed or are seeking to out-license or partner. Our collaborators, including Boehringer Ingelheim and Altanispac Labs, operate in highly competitive therapeutic areas, and competing products or technologies could adversely affect their decisions to continue development, the commercial potential of licensed products and our ability to receive milestone payments, royalties or other economic benefits. Competition may also adversely affect our ability to enter into collaborations, licenses or other strategic transactions for our other development programs on favorable terms or at all.

Many of our existing and potential competitors have substantially greater financial, technical, research and development, clinical, regulatory, manufacturing, marketing and commercial resources and experience than we do. Academic institutions, governmental agencies and other public and private research organizations may also develop competing products or technologies independently or through collaborations with pharmaceutical or biotechnology companies. Competitors may develop products that are safer, more effective, better tolerated, more convenient or less expensive than our product candidates, or may obtain regulatory approval and establish market acceptance before we do. If competing products or technologies are successfully developed or commercialized, or if our product candidates fail to demonstrate sufficient differentiation from competing therapies, our product candidates could become less competitive or obsolete, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

We rely on third parties over whom we have no control to conduct preclinical studies, clinical trials and other research for our product candidates and their failure to timely perform their obligations could significantly harm our product development.

We have limited research and development staff. We rely on third parties and independent contractors, such as researchers at CROs and universities, in certain areas that are particularly relevant to our research and product development plans. We engage such researchers to conduct our preclinical studies, clinical trials and associated tests. These outside contractors are not our employees and may terminate their engagements with us at any time. In addition, we have limited control over the resources that these contractors devote to our programs, and they may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. There is also competition for these relationships, and we may not be able to maintain our relationships with our contractors on acceptable terms. If our third-party contractors do not carry out their duties under their agreements with us, fail to meet expected deadlines or fail to comply with appropriate standards for preclinical or clinical research, our ability to develop our product candidates and obtain regulatory approval on a timely basis, if at all, may be materially adversely affected.

We depend on third-party manufacturers and suppliers for our product candidates, and any inability to obtain adequate supplies of materials or product candidates of acceptable quality on a timely basis could delay or adversely affect our development programs.

We do not own or operate manufacturing facilities and rely, and expect to continue to rely, on third-party contract manufacturers and suppliers to manufacture active pharmaceutical ingredients, drug substance, drug product and other materials required for our preclinical studies and clinical trials. This includes our next-generation MC4R selective long-acting peptide agonist and oral small molecule agonist programs. We have limited control over the operations of these third parties and are dependent on their ability to manufacture and supply materials in accordance with our specifications, applicable regulatory requirements and our development timelines.

Manufacturing pharmaceutical product candidates is complex and may involve difficulties with process development, formulation, scale-up, technology transfer, analytical testing, stability, quality control and the availability of raw materials and other components. Our third-party manufacturers or suppliers could experience manufacturing failures, quality issues, contamination, equipment failures, shortages of raw materials, capacity constraints, supply chain disruptions or other events that could delay or interrupt the manufacture or delivery of materials required for our development programs. Certain materials, manufacturing processes or services may be available from a limited number of qualified suppliers, and identifying, qualifying and transferring manufacturing activities to an alternative supplier could be costly and time-consuming.

Our third-party manufacturers are required to comply with applicable regulatory requirements, including current good manufacturing practices (“cGMP”), and their facilities may be subject to inspection by the FDA and other regulatory authorities. We have limited ability to control the compliance or performance of our third-party manufacturers beyond our contractual rights and quality oversight. If a manufacturer fails to comply with applicable regulatory requirements or is unable to manufacture our product candidates in accordance with required specifications, regulatory authorities could take enforcement action or require corrective measures, and we could experience delays in preclinical studies, clinical trials, regulatory submissions or potential regulatory approvals.

If we are unable to obtain sufficient quantities of our product candidates or other required materials of acceptable quality and on a timely basis, or if we are required to qualify alternative manufacturers or suppliers, our development programs could be delayed, suspended or discontinued and our business, financial condition, results of operations and prospects could be materially and adversely affected.

Changes in international trade policies, tariffs, import restrictions or other governmental actions affecting pharmaceutical products, active pharmaceutical ingredients, raw materials or other components could also increase our manufacturing costs, limit the availability of materials or disrupt our supply chain.

We currently have limited sales, marketing and distribution capabilities, and if we are unable to establish appropriate commercialization capabilities or enter into arrangements with third parties to commercialize our product candidates, we may be unable to successfully commercialize any products that receive regulatory approval.

We currently have limited internal sales, marketing and distribution capabilities and do not maintain a commercial organization capable of independently commercializing our product candidates. If any of our product candidates receive regulatory approval, including product candidates arising from our MC4R agonist programs, we will need to determine the appropriate commercialization strategy, which may include establishing or expanding internal sales, marketing and distribution capabilities, entering into licensing, co-promotion, distribution or other commercialization arrangements with third parties, or a combination of these approaches.

Establishing an internal commercial organization would require significant financial and management resources and the recruitment and retention of personnel with appropriate sales, marketing, market access, distribution and other commercial expertise. Competition for qualified personnel in the biopharmaceutical industry is significant, and we may be unable to recruit, retain and effectively manage the personnel necessary to successfully commercialize our products. Developing these capabilities could also divert management attention and financial resources from our research and development activities.

Alternatively, we may rely on pharmaceutical companies or other third parties to commercialize some or all of our product candidates. We may be unable to identify appropriate partners or enter into commercialization arrangements on acceptable terms or at all, and any such arrangements could result in our receiving a smaller portion of the economic benefits from a product than if we commercialized it independently. We would also have less control over the timing, resources and strategies employed in commercialization, and the success of the applicable product would depend substantially on the efforts and capabilities of our commercialization partner.

If we are unable to establish appropriate commercialization capabilities, either independently or through arrangements with third parties, or if our commercialization partners fail to successfully market, sell and distribute an approved product, we may not realize the anticipated commercial value of our product candidates, which could materially and adversely affect our business, financial condition, results of operations and prospects.

Our ability to successfully commercialize any approved product candidates will depend in part on obtaining adequate pricing, coverage and reimbursement from governmental authorities, private health insurers and other third-party payers, which may be difficult to obtain or maintain.

The commercial success of any of our product candidates that receive regulatory approval will depend substantially on the extent to which patients have access to such products and the costs of such products are covered and adequately reimbursed by governmental healthcare programs, private health insurers and other third-party payers. Obtaining and maintaining adequate pricing, coverage and reimbursement can be time-consuming and uncertain, and there can be no assurance that coverage will be available or that reimbursement levels will be sufficient to support successful commercialization.

Third-party payers increasingly seek to control healthcare costs by limiting coverage, imposing prior authorization requirements, establishing restrictive eligibility criteria, requiring step therapy or use of alternative treatments, negotiating price discounts or rebates, and challenging the prices charged for pharmaceutical products. These considerations may be particularly important for our MC4R agonist programs targeting rare obesity disorders, for which approved or investigational therapies may be available and the potential cost of chronic or lifelong treatment may be significant. Payers may require evidence demonstrating meaningful clinical benefit, durability of treatment effect or advantages in safety, tolerability, dosing convenience or other characteristics compared with existing therapies before providing favorable coverage and reimbursement.

Outside the United States, pharmaceutical pricing, coverage and reimbursement are subject to governmental regulation and vary significantly among countries. In the European Union, although certain aspects of health technology assessment have become subject to increased coordination at the European Union level, pricing and reimbursement decisions generally remain the responsibility of individual Member States and may involve health technology assessments, comparative effectiveness evaluations, price negotiations, reference pricing, budget impact assessments and other cost-containment measures. As a result, obtaining regulatory approval for a product in the European Union does not assure that we or our commercialization partners will obtain an acceptable price or reimbursement for that product in any particular Member State, and pricing and reimbursement decisions may delay or limit commercial availability following regulatory approval. If we or our collaborators are unable to obtain adequate pricing and reimbursement, the commercial potential of an approved product could be materially adversely affected.

Healthcare laws, reimbursement policies and cost-containment measures may change in ways that adversely affect the pricing or reimbursement of our products. If we or our current or future collaborators are unable to obtain or maintain adequate pricing, coverage and reimbursement for an approved product, or if coverage is subject to significant restrictions, the market acceptance and commercial potential of that product could be materially reduced, which could materially and adversely affect our business, financial condition, results of operations and prospects.

Our ability to successfully commercialize our products in development will depend, in significant part, on the extent to which we or our marketing partners can obtain reimbursement for our products and also reimbursement at appropriate levels for the cost of our products. Obtaining reimbursement from governmental payers, insurance companies, HMOs and other third-party payers of healthcare costs is a time-consuming and expensive process.

We may be subject to product liability claims arising from the testing, manufacture or commercialization of our product candidates or products, which could result in substantial liabilities and adversely affect our business.

The development, clinical testing, manufacture and commercialization of pharmaceutical products involve an inherent risk of product liability claims. We may be subject to claims arising from the use of our product candidates in clinical trials and, if any of our product candidates receive regulatory approval, from their commercial use. Product liability claims could also arise from manufacturing defects, unexpected adverse events, misuse of a product or other risks associated with pharmaceutical products. Regardless of merit, such claims could result in substantial costs, divert management’s attention, damage our reputation, delay or terminate clinical trials, or limit or prevent the commercialization of our product candidates.

We maintain product liability and clinical trial insurance that we believe is appropriate for our current activities. However, our insurance coverage may not be sufficient to cover all liabilities that we may incur, and we may be unable to maintain or obtain additional coverage in the future at an acceptable cost or in sufficient amounts. As our product candidates advance through clinical development or if we commercialize products in the future, we may need to increase our insurance coverage, which could result in additional expense.

Certain of our agreements with collaborators, licensees, manufacturers and other third parties may provide for indemnification with respect to specified liabilities. However, any such indemnification may be limited, unavailable or insufficient to satisfy claims against us, and the applicable third party may lack sufficient financial resources to satisfy its indemnification obligations. If we are required to pay substantial amounts in connection with product liability claims that are not covered by insurance or indemnification, our business, financial condition, results of operations and prospects could be materially and adversely affected.

Cybersecurity incidents, failures of our information technology systems or those of third parties upon which we rely, or unauthorized access to or disclosure of confidential information could disrupt our operations, compromise sensitive information and adversely affect our business.

We rely extensively on information technology systems, cloud-based services and other digital infrastructure to conduct our business and to collect, store, process and transmit confidential, proprietary and sensitive information. We also depend on the information systems of third parties, including contract research organizations, contract manufacturers, consultants, collaborators, licensees and other service providers. In addition, we utilize external providers with artificial intelligence (“AI”) and machine learning (“ML”) capabilities in connection with certain of our research and drug discovery activities. Our increasing reliance on third-party systems and digital technologies may increase our exposure to cybersecurity and data security risks.

Our systems and those of third parties upon which we rely may be vulnerable to cybersecurity incidents, including ransomware, malware, phishing and other social engineering attacks, denial-of-service attacks, unauthorized access, credential theft, exploitation of software vulnerabilities and other malicious activities, as well as failures resulting from human error, equipment or software failures, natural disasters, power or telecommunications outages, geopolitical conflicts or other events. Cybersecurity threats continue to evolve and may become increasingly sophisticated, including through the use of AI and other emerging technologies, which may make such threats more difficult to detect, prevent or mitigate.

A cybersecurity incident or information technology failure could disrupt our operations or those of third parties upon which we rely; result in the loss, corruption or unauthorized disclosure of clinical, preclinical, regulatory, financial or other data; compromise trade secrets, intellectual property or other confidential information; delay our research and development programs or regulatory submissions; or result in significant costs associated with investigation, remediation, restoration of systems and data, litigation or regulatory proceedings. Unauthorized access to confidential information provided to or maintained by third-party service providers, including information used in AI- or ML-based modeling and drug discovery activities, could also result in the loss or unauthorized use of proprietary information or intellectual property.

Although we implement security measures designed to protect our information systems and confidential information and seek to require appropriate protections from third parties, these measures may not prevent all cybersecurity incidents, and we may not discover an incident promptly or accurately assess its scope or impact. Our insurance coverage may also be insufficient to cover losses arising from cybersecurity incidents. Any material cybersecurity incident, information technology failure or loss or unauthorized disclosure of confidential information could materially and adversely affect our business, financial condition, results of operations and prospects.

We use artificial intelligence and machine learning technologies in certain of our research and drug discovery activities, and the use of these technologies may not produce the anticipated benefits and could expose us to additional risks.

We utilize external providers with artificial intelligence (“AI”) and machine learning (“ML”) capabilities in connection with certain of our research and drug discovery activities, including the analysis of proprietary compound and pharmacology data and the identification, design and optimization of potential product candidates. We expect that our use of AI and ML technologies may increase as we continue to develop our product candidate portfolio. However, AI- and ML-based technologies are rapidly evolving, and there can be no assurance that their use will improve the efficiency, accuracy or success of our research and development activities or result in the identification or development of successful product candidates.

AI and ML models depend on the quality, quantity and appropriateness of the data and methodologies used to develop, train and operate them, and their outputs may be inaccurate, incomplete, biased or otherwise unreliable. Results generated or assisted by AI or ML models may not be reproducible or predictive of results obtained in preclinical studies, clinical trials or other development activities. If we rely on inaccurate or misleading outputs, we could make incorrect research or development decisions, expend resources on product candidates that ultimately prove unsuccessful, or fail to identify potentially promising product candidates.

Our use of external AI and ML providers may require us to provide or permit access to proprietary data, confidential information or intellectual property. Although we seek to protect such information through contractual, technical and other safeguards, these measures may not prevent unauthorized access, use or disclosure. We may also be subject to disputes concerning ownership or rights in data, models, inventions or other intellectual property developed or generated through the use of AI or ML technologies, and third-party AI or ML technologies may incorporate data or intellectual property for which sufficient rights have not been obtained.

The legal and regulatory frameworks applicable to AI and ML technologies are rapidly evolving in the United States and other jurisdictions and may impose additional requirements relating to transparency, data protection, intellectual property, validation, cybersecurity or the use of AI in pharmaceutical research and development. Compliance with new or evolving requirements could increase our costs, restrict our use of certain technologies or require changes to our research and development practices. Any failure of AI or ML technologies to perform as anticipated, loss or unauthorized disclosure of proprietary information, intellectual property disputes, cybersecurity incidents, or failure to comply with applicable legal or regulatory requirements could adversely affect our research and development activities, competitive position, business, financial condition and results of operations.

We may be subject to claims that our employees, consultants, collaborators or other third parties with whom we work have wrongfully used or disclosed confidential information, trade secrets or other intellectual property of third parties.

We employ or engage individuals, consultants, contractors and other service providers who may have previously worked for or provided services to universities, biotechnology or pharmaceutical companies, including our competitors or potential competitors. We also collaborate with academic institutions, research organizations and other third parties and utilize external providers with specialized capabilities, including artificial intelligence and machine learning technologies, in certain of our research and drug discovery activities. Although we seek to ensure that persons and organizations working with us do not improperly use or disclose confidential information, trade secrets or other proprietary information belonging to others, we may be subject to claims that we or persons or entities associated with us have inadvertently or otherwise used, disclosed or incorporated such information into our research, technology or product development activities.

Litigation or other proceedings may be necessary to defend against these claims, and we may not be successful. If we fail to defend ourselves against such claims, we could be required to pay monetary damages, obtain licenses on unfavorable terms, cease using certain information or technology, modify or discontinue research or development activities, or lose valuable intellectual property rights or personnel. We could also become subject to disputes concerning the ownership of inventions or other intellectual property developed through collaborations or other third-party relationships. Even if we are successful in defending against such claims, litigation or other proceedings could result in substantial costs, divert management and scientific resources and adversely affect our business, financial condition, results of operations and prospects.

We are subject to healthcare laws and regulations, including fraud and abuse, false claims, transparency, and data privacy and security laws, and failure to comply with these laws could result in substantial penalties and adversely affect our business.

Our current and future operations may be subject, directly or indirectly, to various federal, state and foreign healthcare laws and regulations, including fraud and abuse, false claims, transparency, privacy and data security requirements. These laws may apply to our clinical development activities, interactions with healthcare professionals and organizations, relationships with collaborators and other third parties and, if any of our product candidates receive regulatory approval, our commercialization activities.

The laws and regulations that may affect our operations include, among others:

The scope and enforcement of these laws and regulations continue to evolve, and applicable requirements may differ among jurisdictions. Certain laws may apply to arrangements even if the applicable activities do not involve products reimbursed by a federal healthcare program. In addition, relationships with healthcare professionals, clinical investigators, consultants, collaborators, contract research organizations and other third parties may subject us to additional compliance obligations or risks.

Efforts to ensure that our business arrangements and activities comply with applicable healthcare laws and regulations may involve substantial costs. Because these laws are complex and their application may be uncertain, governmental authorities could determine that our activities or arrangements do not comply with applicable requirements despite our compliance efforts. If our operations or arrangements are found to violate applicable healthcare laws or regulations, we could be subject to significant civil, criminal or administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs, additional reporting or compliance obligations, contractual damages, reputational harm or restrictions on our operations. Any such event could materially and adversely affect our business, financial condition, results of operations and prospects.

We are highly dependent on our management team, scientific and technical personnel and third-party contractors, consultants and collaborators, and the loss of their services or our inability to attract and retain qualified personnel could materially and adversely affect our business.

We operate with a relatively small number of employees and rely extensively on our management team, scientific and technical personnel and third-party contractors, consultants, scientific advisors and collaborators to conduct our business and advance our development programs. Our ability to execute our business strategy, including the development of our next-generation MC4R selective long-acting peptide and oral small molecule agonist programs, depends substantially on the continued service and performance of key members of our management and scientific teams who possess significant experience, technical expertise and institutional knowledge.

The loss of one or more key employees or other personnel could result in the loss of important scientific, technical, operational or business knowledge and could delay our research, development, regulatory or other activities, particularly because our limited internal staffing may make it difficult to replace such expertise promptly. As our product candidates advance through development, we may also need to recruit additional personnel or engage additional contractors and consultants with expertise in areas such as clinical development, regulatory affairs, manufacturing, quality assurance and other functions.

Competition for qualified personnel and specialized contractors and consultants in the biopharmaceutical industry is significant, and we may be unable to attract, retain or motivate individuals with the qualifications and experience necessary to execute our business strategy. We also depend on our ability to establish and maintain productive relationships with contract research organizations, contract manufacturers, consultants, scientific advisors, academic institutions, collaborators and other third parties. These third parties may terminate their relationships with us, become unavailable, experience personnel changes or fail to perform their obligations in accordance with our expectations or applicable timelines.

If we are unable to retain key personnel, recruit additional qualified personnel when needed, or maintain effective relationships with the contractors, consultants, collaborators and other third parties upon whom we rely, our development programs could be delayed or adversely affected, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

Risks Related to Government Regulation

Both before and after regulatory approval, our product candidates are subject to extensive and continuing regulatory requirements, and failure to comply with these requirements could delay development, prevent or limit commercialization, or result in significant penalties.

Our product candidates and our research, development, clinical testing, manufacturing and other activities are subject to extensive regulation by the FDA and other regulatory authorities in the United States and comparable authorities in other countries. Regulatory requirements govern, among other things, preclinical and clinical testing, manufacturing, quality control, labeling, packaging, storage, recordkeeping, reporting, advertising, promotion and distribution. We and the third parties upon whom we rely, including contract research organizations, clinical investigators and contract manufacturers, are required to comply with applicable regulatory requirements throughout the development process and, if any of our product candidates receive regulatory approval, following approval.

Failure to comply with applicable regulatory requirements could result in regulatory or enforcement actions, including:

Regulatory requirements, policies and interpretations may change during the development of our product candidates, and regulatory authorities have substantial discretion in applying applicable requirements. Such changes or differing interpretations could require us to modify our development programs, conduct additional preclinical studies or clinical trials, change manufacturing processes or controls, or provide additional data or analyses, any of which could result in significant additional costs or delays.

If any of our product candidates receive regulatory approval, the approval may be limited to specified indications, patient populations, doses or conditions of use and may be subject to significant labeling restrictions, postmarketing requirements or commitments, additional clinical studies or a Risk Evaluation and Mitigation Strategy (“REMS”). An approved product would also remain subject to continuing regulatory requirements relating to manufacturing, quality control, adverse-event reporting, labeling, advertising, promotion, recordkeeping and other matters. Regulatory authorities may impose additional requirements or take enforcement action if safety, efficacy, manufacturing or compliance issues arise following approval.

Regulatory approval by the FDA does not assure approval by regulatory authorities in other countries, and approval by a regulatory authority in one jurisdiction does not assure approval in another jurisdiction. Regulatory requirements and review processes vary among jurisdictions and may require additional studies, data or other information. Failure to obtain or maintain required regulatory approvals, or significant delays in doing so, could prevent or delay the development or commercialization of our product candidates and materially and adversely affect our business, financial condition, results of operations and prospects.

The regulatory approval process is lengthy, expensive and uncertain, and may prevent us from obtaining the approvals that we require.

Government authorities in the United States and other countries extensively regulate the research, development, testing, manufacture, quality, safety, efficacy, labeling, storage, recordkeeping, advertising, promotion, marketing and distribution of pharmaceutical products. In the United States, our product candidates are subject to regulation by the FDA. Before a new drug may generally be marketed in the United States, the regulatory process typically requires, among other things:

The development and regulatory approval process is lengthy, expensive and uncertain and may take many years. The FDA may delay, limit or deny approval of a product candidate for numerous reasons, including if the FDA determines that the product candidate is not sufficiently safe or effective, clinical trial results are insufficient or inconclusive, the manufacturing processes or facilities do not meet applicable requirements, or additional preclinical studies, clinical trials, analyses or other information are required. The FDA may also place a clinical trial on hold, require changes to trial design or endpoints, request additional patient enrollment or require additional safety monitoring.

Success in preclinical studies or early-stage clinical trials does not assure success in later-stage clinical trials or regulatory approval. Data obtained from preclinical studies and clinical trials may be subject to differing interpretations, and results observed in preclinical models may not be replicated in humans. In addition, delays in enrollment, manufacturing, availability of clinical trial materials, regulatory review or other aspects of development could increase our costs and delay or prevent regulatory approval.

If a product candidate receives regulatory approval, the approval may be limited to particular indications, patient populations, doses or conditions of use and may be subject to labeling restrictions, postmarketing requirements or commitments, additional clinical trials, a Risk Evaluation and Mitigation Strategy or other conditions. The FDA also has broad postmarketing regulatory and enforcement authority and may require labeling changes, restrict the use or distribution of an approved product, require a product recall, suspend or withdraw an approval or take other enforcement action if safety, efficacy, manufacturing or compliance issues arise.

Outside the United States, our ability or the ability of our collaborators or licensees to market product candidates will depend on obtaining required authorizations from applicable regulatory authorities. Foreign regulatory requirements and approval processes vary among jurisdictions and may differ from those of the FDA. Approval by the FDA does not assure approval by regulatory authorities outside the United States, and approval in one foreign jurisdiction does not assure approval in another. Failure or delay in obtaining required regulatory approvals could materially and adversely affect our business, financial condition, results of operations and prospects.

Legislative, regulatory or policy changes could increase the costs of developing or commercializing our product candidates, delay or prevent regulatory approval, or otherwise adversely affect our business.

The laws, regulations, policies and guidance governing the development, approval, manufacture, pricing, reimbursement and commercialization of pharmaceutical products are subject to change. Congress, federal and state agencies, including the FDA and the Centers for Medicare & Medicaid Services (“CMS”), courts and other governmental authorities may enact, promulgate, revise or reinterpret laws, regulations, policies or guidance in ways that materially affect our business.

Changes in applicable laws, regulations or policies could, among other things, require additional preclinical or clinical studies, alter clinical trial or regulatory approval requirements, require changes to manufacturing methods or facilities, impose additional recordkeeping, reporting or postmarketing requirements, restrict promotional or commercialization activities, alter available regulatory or intellectual property protections or exclusivities, or increase the time and costs required to develop, manufacture or commercialize our product candidates. Regulatory authorities may also adopt new approaches intended to accelerate or modernize drug development, but there can be no assurance that our product candidates will qualify for or benefit from such programs. FDA, for example, is currently pursuing initiatives intended to modernize both early- and late-stage clinical development.

Changes in laws, regulations, policies or their interpretation could require substantial expenditures, delay our development programs or regulatory submissions, restrict our ability to commercialize an approved product or otherwise materially and adversely affect our business, financial condition, results of operations and prospects.

Changes in healthcare laws, drug pricing, reimbursement policies and other healthcare reforms could adversely affect our business and the commercial potential of our product candidates

The United States healthcare industry is subject to significant governmental regulation and continues to experience substantial legislative and policy changes intended to control healthcare expenditures, reduce prescription drug prices and modify coverage and reimbursement practices. These initiatives, and future healthcare reform measures, could affect the prices that may be charged for pharmaceutical products, the availability and amount of reimbursement, patient access to therapies and the commercial potential of any product candidates that we or our collaborators may successfully develop.

The Inflation Reduction Act of 2022 established, among other provisions, a Medicare Drug Price Negotiation Program under which CMS negotiates maximum fair prices for certain high-expenditure, single-source drugs covered under Medicare. CMS continues to implement and revise requirements under the program, including for future price applicability years. Future legislation, regulatory actions or judicial decisions could modify these or other drug-pricing and reimbursement requirements.

The federal government has also pursued additional initiatives intended to reduce prescription drug prices, including policies seeking to align prices paid in the United States with prices available in other developed countries, commonly referred to as most-favored-nation pricing, and initiatives facilitating direct-to-consumer access to discounted pharmaceutical products. The current administration has entered into voluntary most-favored-nation pricing arrangements with a number of pharmaceutical manufacturers and has indicated that it may pursue additional measures relating to drug pricing.

Federal and state governments may adopt additional measures affecting pharmaceutical pricing and reimbursement, including price controls, rebates, discounts, transparency requirements, restrictions on patient access, changes in government healthcare program reimbursement, international reference pricing or other cost-containment measures. Private payers may similarly impose restrictive coverage criteria, prior authorization requirements, step therapy, formulary restrictions, discounts or rebates.

Healthcare reform measures and increased governmental and private payer scrutiny of pharmaceutical pricing could limit the prices we or our collaborators may obtain for approved products, reduce coverage or reimbursement, increase our costs or reduce the commercial potential of our product candidates. We cannot predict the nature, timing or impact of future healthcare legislation, regulations, executive actions or policies. Any such measures could materially and adversely affect our business, financial condition, results of operations and prospects.

For more information regarding government healthcare reform, see “U.S. Governmental Regulation of Pharmaceutical Products” in Part I, Item 1 of this Annual Report.

Risks Related to Our Intellectual Property

If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish.

Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors to obtain and maintain patent protection for our products, methods, processes, and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. We cannot predict:

If our products, methods, processes, and other technologies infringe the proprietary rights of other parties we could incur substantial costs and we may have to:

Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringement claims to stop third-party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that our patent claims do not cover its technology or that the factors necessary to grant an injunction against an infringer are not satisfied.

An adverse determination of any litigation or other proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference, derivation, or other proceedings brought at USPTO may be necessary to determine the priority or patentability of inventions with respect to our patent applications or those of our licensors or collaborators. Litigation or USPTO proceedings brought by us may fail or may be invoked against us by third parties. Even if we are successful, domestic, or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or collaborators, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

If we infringe or are alleged to infringe intellectual property rights of third parties, our business could be harmed.

Our research, development and commercialization activities may infringe or otherwise violate or be claimed to infringe or otherwise violate patents owned or controlled by other parties. There may also be patent applications that have been filed but not published that, when issued as patents, could be asserted against us. These third parties could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

As a result of patent infringement claims, or to avoid potential claims, we may choose or be required to seek licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees, royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms, if at all.

There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical industry. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference, derivation or post-grant proceedings declared or granted by the USPTO and similar proceedings in foreign countries, regarding intellectual property rights with respect to our current or future products. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, or results of operations.

Our patent applications and the enforcement or defense of our issued patents may be impacted by the application of or changes in U.S. and foreign standards.

The standards that the USPTO and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. Consequently, our pending patent applications may not be allowed and, if allowed, may not contain the type and extent of patent claims that will be adequate to conduct our business as planned. Additionally, any issued patents we currently own or obtain in the future may have a shorter patent term than expected or may not contain claims that will permit us to stop competitors from using our technology or similar technology or from copying our product candidates. Similarly, the standards that courts use to interpret patents are not always applied predictably or uniformly and may evolve, particularly as new technologies develop. In addition, changes to patent laws in the United States or other countries may be applied retroactively to affect the validation enforceability, or term of our patent. For example, the U.S. Supreme Court has recently modified some legal standards applied by the USPTO in examination of U.S. patent applications, which may decrease the likelihood that we will be able to obtain patents and may increase the likelihood of challenges to patents we obtain or license. In addition, changes to the U.S. patent system have come into force under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, which was signed into law in September 2011. The Leahy-Smith Act included significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and also affect patent litigation. Under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in opposition, derivation, reexamination,inter partes review or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, which could adversely affect our competitive position.

While we cannot predict with certainty the impact the Leahy-Smith Act or any potential future changes to the U.S. or foreign patent systems will have on the operation of our business, the Leahy-Smith Act and such future changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, results of operations, financial condition and cash flows and future prospects.

Filing, prosecuting, and defending patents for product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States and in some cases may even force us to grant a compulsory license to competitors or other third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

In addition, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in domestic and foreign intellectual property laws.

If we are unable to keep our trade secrets confidential, our technologies and other proprietary information may be used by others to compete against us.

In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on trade secret laws and agreements with our employees and other persons who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for our proprietary technologies and processes in the event of unauthorized use or disclosure of such information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, our competitors may independently develop substantially equivalent technologies and processes or gain access to our trade secrets or technology, either of which could materially or adversely affect our competitive position.

The market price of our common stock has been, and is likely to continue to be, highly volatile, and investors may lose all or a substantial portion of their investment.

The market price of our common stock has experienced significant volatility and may continue to fluctuate substantially in response to numerous factors, many of which are beyond our control. As a result, investors may be unable to sell their shares at or above the price at which they purchased them. Factors that may affect the market price of our common stock include, among others:

Many of these factors are beyond our control. Because we are a biopharmaceutical company with product candidates in development, our operating results and market valuation may be particularly sensitive to announcements concerning our development programs, regulatory matters, financing activities and competitive developments. Our results may also fluctuate significantly from period to period, including as a result of the timing and recognition of payments under collaboration and licensing arrangements, and period-to-period comparisons may not be indicative of future performance.

For the 12-month period ended June 30, 2026, the market price of our common stock was highly volatile, ranging from a high of $31.00 per share to a low of $5.00 per share. The stock market generally, and the market for biotechnology and other life sciences companies in particular, has experienced significant price and trading-volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. Broad market and industry factors, as well as changes in investor sentiment toward biotechnology companies, could materially reduce the market price of our common stock regardless of our operating performance. The market price of our common stock may therefore continue to be highly volatile, and investors could lose all or a substantial portion of their investment.

If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, our ability to produce accurate and timely financial statements or comply with applicable reporting requirements could be impaired, which could adversely affect our business and the market price of our common stock.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and applicable rules and regulations of the SEC and the securities exchange on which our common stock is listed. These requirements include maintaining effective disclosure controls and procedures and internal control over financial reporting. Designing, implementing, maintaining and evaluating these controls requires significant management attention and financial and other resources.

Our internal control over financial reporting may not prevent or detect all errors or misstatements on a timely basis, and we may identify deficiencies in our internal controls in the future. If we identify a material weakness or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, we may be unable to prepare accurate financial statements or file our periodic reports with the SEC on a timely basis. We could also be required to expend significant resources to remediate any deficiencies or material weaknesses.

If we are unable to comply with applicable financial reporting and disclosure requirements, we could become subject to regulatory scrutiny, investigations or sanctions by the SEC or the securities exchange on which our common stock is listed, become ineligible to use certain short-form registration statements or otherwise experience limitations on our ability to access the capital markets. In addition, investors could lose confidence in our financial reporting, which could adversely affect the market price and liquidity of our common stock. Any of these events could materially and adversely affect our business, financial condition and results of operations.

The trading market for our common stock may be influenced by research and reports that securities or industry analysts publish about us, our business, our product candidates or our industry. We do not control whether analysts cover our company or the content, opinions, estimates or recommendations included in their reports. As a smaller biotechnology company, we may have limited analyst coverage, and analysts currently covering us may discontinue coverage at any time.

If one or more analysts downgrade our common stock, issue unfavorable commentary or research regarding us or our product candidates, lower their estimates or price targets, or publish views that differ materially from investor expectations, the market price of our common stock could decline. In addition, if analysts do not initiate or maintain coverage of us, fail to publish reports on us regularly, or if we are unable to attract additional analyst coverage, investor interest in our common stock could decrease, which could adversely affect the market price, trading volume and liquidity of our common stock.

Holders of our Series A Preferred Stock and Series D Preferred Stock may have interests different from our common stockholders.

We are permitted under our certificate of incorporation to issue up to 10,000,000 shares of preferred stock. We can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common stockholders. As of September 25, 2026, there are 4,030 shares of Series A Preferred Stock outstanding, convertible into an aggregate of 1,534 shares of common stock, and 3,400 shares of Series D Preferred Stock outstanding, convertible into an aggregate of 61,816 shares of common stock. Each share of Series A Preferred Stock and Series D Preferred Stock is convertible into common stock at any time, at the option of the holder, and such conversion could dilute the value of our common stock to current stockholders and could adversely affect the market price of our common stock. The conversion price decreases if we sell common stock (or equivalents) for a price per share less than the conversion price or less than the market price of the common stock and is also subject to adjustment upon the occurrence of a merger, reorganization, consolidation, reclassification, stock dividend or stock split which results in an increase or decrease in the number of shares of common stock outstanding. Upon (i) liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, (ii) sale or other disposition of all or substantially all of the assets of the Company, or (iii) any consolidation, merger, combination, reorganization or other transaction in which the Company is not the surviving entity or in which the shares of common stock constituting in excess of 50% of the voting power of the Company are exchanged for or changed into other stock or securities, cash and/or any other property, after payment or provision for payment of the debts and other liabilities of the Company, the holders of Series A Preferred Stock and Series D Preferred Stock will be entitled to receive, pro rata and in preference to the holders of any other capital stock, an amount per share equal to $100 plus accrued but unpaid dividends, if any.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be our stockholders’ sole source of gains.

We do not anticipate paying any cash dividends in the foreseeable future and intend to retain future earnings, if any, for the development and expansion of our business. Our outstanding Series A Preferred Stock, consisting of 4,030 shares on September 25, 2026, provides that we may not pay a dividend or make any distribution to holders of any class of stock unless we first pay a special dividend or distribution of $100 per share to the holders of the Series A Preferred Stock. In addition, the terms of existing or future agreements may limit our ability to pay dividends. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

Anti-takeover provisions of Delaware law and our charter documents may make potential acquisitions more difficult and could result in the entrenchment of management.

We are incorporated in Delaware. Anti-takeover provisions of Delaware law and our charter documents may make a change in control or efforts to remove management more difficult. Also, under Delaware law, our board of directors may adopt additional anti-takeover measures. Under Section 203 of the Delaware General Corporation Law, a corporation may not engage in a business combination with an “interested stockholder” for a period of three years after the date of the transaction in which the person first becomes an “interested stockholder,” unless the business combination is approved in a prescribed manner.

We are authorized to issue up to 300,000,000 shares of common stock. To the extent that we sell or otherwise issue authorized but currently unissued shares, this could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

Our charter authorizes us to issue up to 10,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If we exercise this right, it could be more difficult for a third party to acquire a majority of our outstanding voting stock.

In addition, our equity incentive plans generally permit us to accelerate the vesting of options and other stock rights granted under these plans in the event of a change of control. If we accelerate the vesting of options or other stock rights, this action could make an acquisition more costly.

The application of these provisions could have the effect of delaying or preventing a change of control, which could adversely affect the market price of our common stock.

We are currently a “smaller reporting company” as defined under the Securities Exchange Act of 1934, as amended, and are therefore permitted to take advantage of certain reduced disclosure requirements applicable to smaller reporting companies, including reduced executive compensation disclosure and certain other scaled disclosure requirements in our SEC filings.

We cannot predict whether investors will find our common stock less attractive because we rely on these reduced disclosure requirements. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, the market price of our common stock may be more volatile, and our ability to raise capital could be adversely affected.

As of September 25, 2026, there were 8,763,962 shares of common stock underlying outstanding convertible preferred stock, options, restricted stock units and warrants. Stockholders may experience dilution from the conversion of preferred stock, exercise of outstanding options and warrants and vesting and delivery of restricted stock units.

As of September 25, 2026, approximately 180 holders of our outstanding dilutive securities had the right to acquire the following amounts of underlying common stock:

If the holders convert, exercise, or receive these securities, or similar dilutive securities we may issue in the future, stockholders may experience dilution in the net book value of their common stock. In addition, the sale or availability for sale of the underlying shares in the marketplace could depress our stock price. We have registered or agreed to register for resale, substantially all of the underlying shares listed above. Holders of registered underlying shares could resell the shares immediately upon issuance, which could result in significant downward pressure on our stock price.

If we fail to comply with the continued listing requirements of the Nasdaq Capital Market, our common stock could be delisted, which could adversely affect the market price and liquidity of our common stock and our ability to raise capital.

Our common stock is currently listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “PTN.” To maintain our listing on Nasdaq, we must satisfy applicable continued listing requirements, including requirements relating to, among other things, the market price of our common stock, stockholders’ equity, market value of publicly held shares, number of publicly held shares, number of stockholders and corporate governance.

Our common stock was delisted from NYSE American in 2025. On May 7, 2025, NYSE American suspended trading in our common stock after NYSE Regulation determined that we were no longer suitable for listing under Section 1003(f)(v) of the NYSE American Company Guide, and from May 8, 2025, until November 11, 2025, our common stock was quoted only on the OTC Pink and OTCQB markets. To regain compliance, we effected a 1-for-50 reverse stock split effective August 8, 2025, and our common stock resumed trading on NYSE American on November 12, 2025. On May 29, 2026, we voluntarily transferred the listing of our common stock to the Nasdaq Capital Market, which requires, among other things, a minimum bid price of $1.00 per share, stockholders’ equity of at least $2.5 million and a minimum market value of publicly held shares. As of June 30, 2026, our stockholders’ equity was $6.7 million. There can be no assurance that we will continue to satisfy Nasdaq’s continued listing requirements. The market price of our common stock, our stockholders’ equity and other factors relevant to our continued listing may be affected by matters outside of our control.

If we fail to satisfy one or more of Nasdaq’s continued listing requirements, we may receive a deficiency notice and may be required to take actions to regain compliance. Such actions could include, among other things, seeking stockholder approval of or implementing a reverse stock split, raising additional capital or taking other actions that may be costly, disruptive to our business or dilutive to our stockholders. There can be no assurance that any actions we take would enable us to regain or maintain compliance with applicable listing requirements.

If our common stock were delisted from Nasdaq and was not eligible for listing on another national securities exchange, trading could occur in the over-the-counter market. A delisting could result in reduced liquidity and trading volume, increased volatility, limited availability of market quotations, reduced analyst and institutional investor interest and a reduced ability to raise capital on terms acceptable to us or at all. A delisting could also result in our common stock no longer qualifying as a “covered security” under the National Securities Markets Improvement Act of 1996, which could subject the offer and sale of our securities to additional state securities law requirements. Any of these consequences could materially and adversely affect the market price of our common stock and our ability to access the capital markets.