Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2025.

The following discussion and analysis contain forward-looking statements within the meaning of the federal securities laws. You are urged to carefully review our description and examples of forward-looking statements included earlier in this Quarterly Report immediately prior to Part I, under the heading "Special Note Regarding Forward-Looking Statements." Forward-looking statements are subject to risk that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2025, as well as any of those made in our other reports filed with the SEC. You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are described in the notes to our consolidated financial statements included in this report and in our Annual Report on Form 10-K for the year ended June 30, 2025, have not changed during the three and six months ended December 31, 2025. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, warrants and stock-based compensation are the most critical.

Our Business

We are a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin receptor systems. Our product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. Our primary focus is the development of novel 'next generation' melanocortin-4 receptor ("MC4R") agonists for treatment of rare neuroendocrine diseases.

Melanocortin Receptor System. The melanocortin receptor ("MCR") system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1R through MC5R. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.

Our prior commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration ("FDA") in June 2019 and was initially marketed in the United States by AMAG Pharmaceuticals, Inc. ("AMAG") for the treatment of hypoactive sexual desire disorder ("HSDD") in premenopausal women pursuant to a license agreement for Vyleesi for North America, which was entered into on January 8, 2017 (the "AMAG License Agreement"). The AMAG License Agreement was terminated effective July 24, 2020, and we commenced marketing Vyleesi in North America. Effective December 19, 2023, Cosette Pharmaceuticals, Inc.("Cosette") acquired all rights to Vyleesi. As disclosed in Note 6 to the Consolidated Financial Statements, effective June 5, 2025, we entered into a Release and Settlement Agreement with Cosette.

In August 2025, as disclosed in Note 5 to the Consolidated Financial Statements, we entered into a Research Collaboration, License and Patent Assignment Agreement with Boehringer-Ingelheim International GmbH ("Boehringer Ingelheim") to research, develop and commercialize first-in-class melanocortin receptor-targeted peptides we developed for the treatment of retinal diseases, including diabetic retinopathy.

In January 2026, as disclosed in Note 13 to the Consolidated Financial Statements, we entered into a sublicense agreement with Altanispac Labs, LLC to exclusively license PL9643, a clinical development MCR1 agonist for the treatment of dry eye disease.

Our new product development activities focus on obesity, primarily MC4R agonists for the treatment of rare MC4R pathway diseases, like hypothalamic obesity (HO) and Prader-Willi syndrome (PWS); and secondarily on ocular, gastroenterology, and renal indications. We are actively engaged in discussions with potential partners and licensees that have the financial and operational resources to progress non-obesity products through development, approval and commercialization.

Pipeline Overview

The following charts illustrate the status of our drug development programs. Multiple clinical trials are planned in calendar year 2026 for treatment of rare MC4R pathway diseases:

The following programs have been out-licensed, or are available to out-license or otherwise transfer:

Our Strategy

Key elements of our business strategy include:

	●	Maintaining a team to create, develop and commercialize MC4R agonists addressing unmet medical needs for rare MC4R pathway diseases;
	●	Entering into strategic alliances and partnerships with companies to facilitate the development, manufacture, marketing, sale, and distribution of product candidates that we are developing, including products for indications other than obesity;
	●	Partially funding our product development programs with the cash flow generated from the sale of Vyleesi to Cosette, our agreement with Boehringer Ingelheim, and existing license agreements, as well as any future research, collaboration, or license agreements; and
	●	Completing development and seeking regulatory approval of certain of our product candidates.

Corporate Information

We were incorporated under the laws of the State of Delaware on November 21, 1986 and commenced operations in the biopharmaceutical area in 1996. Our corporate offices are located at 301 Carnegie Center Drive, Suite 304 Princeton, New Jersey 08540, and our telephone number is (609) 495-2200. We maintain an Internet site, where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and Section 16 of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained in it or connected to it are not incorporated into this Quarterly Report on Form 10-Q. The reference to our website is an inactive textual reference only.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov).

Results of Operations

As we continue to explore commercial opportunities and partners in both U.S. and international markets, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics. Although these factors have not had a material impact on our operations to date, future changes in trade regulations, tariff structures, or logistical constraints could influence the cost, availability, or timing of materials, services and other components associated with the development of our product candidates and manufacturing capabilities. We continue to monitor these developments closely to maintain operational efficiency and help mitigate potential future impacts.

Three and Six months ended December 31, 2025, Compared to the Three and Six months ended December 31, 2024:

Revenues - For the three and six months ended December 31, 2025, we recognized $116,036 and $8,963,586 in collaboration and license revenue compared to $0 for the three and six months ended December 31, 2024. The increase in collaboration and license revenue is related to the BI Agreement which consisted of an upfront payment, the achievement of a research milestone during the three months ended September 30, 2025, and FTE related reimbursements.

Research and Development - Research and development expenses were $4,319,767 and $6,845,533 for the three and six months ended December 31, 2025, respectively, compared to $3,429,479 and $9,173,233 for the three and six months ended December 31, 2024, respectively. The increase for the three months ended December 31, 2025 compared to the three months ended December 31, 2024 was primarily related to an increase in spending on our MCR programs. The decrease for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was primarily related to a decrease in spending on our MCR programs.

Research and development expenses related to our MCR programs were $2,290,073 and $3,260,702 for the three and six months ended December 31, 2025, respectively, compared to $1,888,065 and $5,969,102 for the three and six months ended December 31, 2024, respectively. The increase for the three months ended December 31, 2025 compared to the three months ended December 31, 2024 was primarily related to an increase in spending on our MCR programs. The decrease for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was primarily related to a decrease in spending on our MCR programs.

The amounts of project spending above exclude general research and development spending which was $2,029,694 and 3,584,831 for the three and six months ended December 31, 2025, respectively, compared to $1,662,717 and $3,204,131 for the three and six months ended December 31, 2024. The increase is primarily attributable to an increase in compensation-related expenses.

Cumulative spending from inception to December 31, 2025, was approximately $311,900,000 on our Vyleesi program and approximately $254,500,000 on all our other programs (which include melanocortin receptor agonists, other discovery programs and terminated programs). Due to various risk factors described in our Annual Report on Form 10-K for the year ended June 30, 2025, under "Risk Factors," including the difficulty in currently estimating the costs and timing of future Phase 1 clinical trials and larger-scale Phase 2 and Phase 3 clinical trials for any product under development, we cannot predict with reasonable certainty when, if ever, a program will advance to the next stage of development or be successfully completed, or when, if ever, related net cash inflows will be generated.

General and Administrative - Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $3,124,817 and $4,785,548 for the three and six months ended December 31, 2025, respectively, compared to $1,681,844 and $3,702,775 for the three and six months ended December 31, 2024, respectively. The increase is a result of increased compensation costs and professional fees.

Other Income (Expense) - For the three and six months ended, December 31, 2025, total other income (expense), net was $64,687 and $81,168, respectively. For the three and six months ended, December 31, 2024, total other income (expense), net was $168,841 and $109,877, respectively. The decrease was a result of a decrease in investment income and foreign currency translation gain, offset by a decrease in interest expense.

Liquidity and Capital Resources

Since inception, we have generally incurred net operating losses, primarily related to spending on our research and development programs. We have financed our net operating losses primarily through debt and equity financings and amounts received under collaborative and license agreements.

Our product candidates are at various stages of development and will require significant further research, development, and testing and some may never be successfully developed or commercialized. We may experience uncertainties, delays, difficulties, and expenses commonly experienced by early-stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:

	●	the development and testing of products in animals and humans;
	●	product approval or clearance;
	●	regulatory compliance;
	●	good manufacturing practices ("GMP") compliance;
	●	intellectual property rights;
	●	product introduction;
	●	marketing, sales, and competition; and
	●	obtaining sufficient capital.

Failure to enter into or successfully perform under collaboration agreements and obtain timely regulatory approval for our product candidates and indications would impact our ability to generate revenues and could make it more difficult to attract investment capital for funding our operations. Any of these possibilities could materially and adversely affect our operations and require us to curtail or cease certain programs.

During the six months ended December 31, 2025, net cash used in operating activities was $6,426,227 compared to $11,863,319 for the six months ended December 31, 2024. The decrease was primarily related to license and produce revenue recognized during the six months ended December 31, 2025.

During the six months ended December 31, 2025, net cash used in investing activities was $12,816 which consisted of cash used for the purchase of property and equipment. During the six months ended December 31, 2024, net cash provided by investing activities was $2,500,000, which consisted of proceeds from the sale of Vyleesi.

During the six months ended December 31, 2025, net cash provided by financing activities was $18,350,940 which consisted of proceeds $16,911,453 of proceeds from an equity financing and $1,458,932 of proceeds from the exercise of warrants, offset by $19,444 for payment of withholding taxes related to RSUs. During the six months ended December 31, 2024, net cash provided by financing activities was $3,252,527, which consisted of $3,398,023 of proceeds from the exercise of warrants, offset by $99,482 for payment of withholding taxes related to RSUs and $46,014 for payment of finance lease obligations

We have incurred cumulative negative cash flows from operations since our inception, and have expended substantial funds to advance our planned product development efforts. Continued operations are dependent upon our ability to complete equity or debt financing activities and to enter into additional licensing or collaboration arrangements. As of December 31, 2025, our cash and cash equivalents were $14,476,162 and our current liabilities were $6,332,648.

On January 8, 2026, we entered into a sublicense agreement (the "Altanispac Agreement") with Altanispac Labs, LLC ("Altanispac"), exclusively licensing PL9643, an MCR1 agonist for dry eye disease. In partial consideration for the rights to PL9643, the Altanispac Agreement provided for upfront consideration in the form of non-cash debt cancellation of approximately $3,800,000, which is reflected in our current liabilities as of December 31, 2025. We will recognize this $3,800,000 million as license revenue in our Consolidated Statements of Operations for quarter ending March 31, 2026. There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2025.

We intend to utilize existing capital resources for general corporate purposes and working capital requirements, including preclinical and clinical development of our MC4R programs for the treatment of rare MC4R pathway diseases.

Based on the Company's current operating and development plans, the Company expects that its existing cash and cash equivalents as of the date of this filing will be sufficient to enable it to fund operations through the next twelve months following the issuance of the financial statements.

We will need additional funding to complete required clinical trials for our product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA. However, current economic conditions (including current economic uncertainty, high interest rates, rising inflation, tariffs, and the potential for local and/or global economic recession) may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2026 and beyond.