Quarterly report pursuant to Section 13 or 15(d)

Liquidity and Other Uncertainties

Liquidity and Other Uncertainties
6 Months Ended
Jun. 30, 2022
Liquidity, Going Concern and Other Uncertainties [Abstract]  



The unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”), which contemplate continuation of the Company as a going concern. The Company is in a development stage and has incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception and has an accumulated deficit of approximately $57.7 million as of June 30, 2022. Based on the current development plans for AD04 in both the U.S. and international markets, planned R&D activities to develop Purnovate drug candidates, and other operating requirements, the Company does not believe that the existing cash and cash equivalents are sufficient to fund operations for the next twelve months following the filing of these unaudited condensed consolidated financial statements, though the Company expects cash on hand to be sufficient to fund operations to the first month of the third quarter of 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern.


Based on the recently announced results of its ONWARD Phase 3 trial, the Company intends to share the results of the trial with the relevant health authorities in Europe and the United States to discuss the appropriate next steps towards the expeditious development of AD04 and to seek product approval. The results of these discussions may materially change the Company’s expectations concerning the expected development cost of AD04. The Company has also initiated a number of research and development projects associated with Purnovate, including Purnovate’s lead compound, PNV5030, for treatment of pain. Though the Company’s cash on hand at the filing date is not estimated to be sufficient to fund operations through the year subsequent to the date of this report, the Company believes funds on hand to be sufficient to bring the Purnovate program to the point of filing an IND for Purnovate lead compound for treatment of pain. The Company believes it has flexibility in the timing of its expenditures related to Purnovate projects which would allow it to extend the amount of time its current cash on hand can fund operations if necessary. However, there can be no guarantee that conditions will not change and that the Company will not require additional funding in order to fund these additional projects, which may not be available on acceptable terms or at all, in which case significant delays or cost increases may result in material disruption to the Company’s operations. In such case, the Company would be required to delay, scale back or eliminate some or all of its research and development programs or delay its approach to regulators concerning AD04, which would likely have a material adverse effect on the Company and its financial statements.


The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, grant funding, strategic relationships, or out-licensing in order to complete its subsequent clinical trial requirements for AD04. Management is actively pursuing financing and other strategic plans but can provide no assurances that such financing or other strategic plans will be available on acceptable terms, or at all. Without additional funding, the Company would be required to delay, scale back or eliminate some or all of its research and development programs, which would likely have a material adverse effect on the Company and its financial statements.


Other Uncertainties 


Generally, the industry in which the Company operates subjects the Company to a number of other risks and uncertainties that can affect its operating results and financial condition. Such factors include, but are not limited to: the timing, costs and results of clinical trials and other development activities versus expectations; the ability to obtain regulatory approval to market product candidates; the ability to manufacture products successfully; competition from products sold or being developed by other companies; the price of, and demand for, Company products once approved; the ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products.


With the results of the ONWARD trial having been released, the risk of delays to the Company’s development programs from COVID-19 are reduced. However, the effects of the ongoing coronavirus pandemic may increase non-trial costs such as insurance premiums, increase the demand for and cost of capital, increase loss of work time from key personnel, and negatively impact our other key vendors and suppliers. The full extent to which the COVID-19 pandemic impacts the clinical development of AD04, preclinical development of the Purnovate drug candidate for treatment of pain, research and development activities around other Purnovate drug candidates, and the Company’s suppliers and other commercial partners, will depend on future developments that are still highly uncertain and cannot be predicted with confidence at this time, all of which could have a material adverse effect on our business, financial condition, and results of operations.