Adial Pharmaceuticals (ADIL) risk factors, FY2024 10-K

Risks Relating to Our Company

1. 01We have incurred net losses every year and quarter since our inception and anticipate that we will continue to incur net losses in the future
2. 02Our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern
3. 03We currently have no product revenues and may not generate revenue at any time in the near future, if at all. Currently, we have no products approved for commercial sale
4. 04We have had limited operations to date and there can be no assurance that we will be able to execute on our business strategy
5. 05We have identified material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future
6. 06The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal controls over financial reporting
7. 07We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future
8. 08Our business is dependent upon the success of our lead product candidate, AD04, which requires significant additional clinical testing before we can seek regulatory approval and potentially launch commercial sales
9. 09The active ingredient of our product candidate, ondansetron, is currently available in generic form
10. 10Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results
11. 11We intend to market our products, particularly AD04, for long-term use by patients seeking to reduce their number of days of heavy drinking, and we assume future sales volumes reflecting such extended use
12. 12The current data for our lead product candidate, AD04 are the result of Phase 2 clinical trials conducted by third parties as well as data generated from the ONWARD trial we conducted and do not currently provide sufficient evidence that our products are viable as potential pharmaceutical products
13. 13The FDA and/or other global regulators may not accept our planned Phase 3 endpoints for final approval of AD04 and may determine additional clinical trials are required for approval of AD04
14. 14Our use of the currently manufactured clinical trial material in the planned Phase 3 trial is dependent upon the review and approval of the relevant regulatory agencies and authorities
15. 15Our investigational product, AD04, is dependent on a successful development, approval, and commercialization of a genetic test, which is expected to be classified as a companion diagnostic
16. 16Our product candidate will require extensive clinical and other testing
17. 17Our clinical trials may fail to demonstrate adequately the safety and efficacy of AD04 or any future product candidates, which would likely prevent or delay regulatory approval and commercialization
18. 18If we experience delays in the enrollment of patients in our clinical trials our receipt of necessary regulatory approvals could be delayed or prevented
19. 19Our success will be dependent upon adoption by physicians and others
20. 20Rapid technological change and substantial competition may impair the business

Risks Relating to Our Business and Industry

1. 21If we do not obtain the necessary regulatory approvals in the United States and/or other countries, we will not be able to sell our product candidates
2. 22Obtaining and maintaining regulatory approval of product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of product candidates in other jurisdictions
3. 23Clinical trials are very expensive, time-consuming and difficult to design and implement
4. 24AD04 and any future product candidates may cause undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential or result in significant negative consequences
5. 25We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits
6. 26There is uncertainty as to market acceptance of our technology and product candidates
7. 27Because we expect virtually all of our product revenues for the foreseeable future to be generated from sales of AD04, if approved, the failure of this product to find market acceptance would substantially harm our business and would adversely affect our revenue
8. 28Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements
9. 29Additionally, we are subject to state and foreign equivalents of each of the healthcare laws described above, among others, some of which may be broader in scope and may apply regardless of the payor
10. 30We have no experience selling, marketing or distributing products and have no internal capability to do so
11. 31We may not be successful in establishing and maintaining strategic partnerships, which could adversely affect our ability to develop and commercialize products
12. 32To the extent we elect to enter into licensing or collaboration agreements to partner AD04 or any future product candidates, our dependence on such relationships may adversely affect our business
13. 33We may face particular data protection, data security and privacy risks in connection with the European Union’s Global Data Protection Regulation and other privacy regulations
14. 34We rely extensively on our information technology systems, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks
15. 35Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches
16. 36We have limited protection for our intellectual property. Our licensed patents and proprietary rights may not prevent us from infringing on the rights of others or prohibit potential competitors from commercializing products
17. 37The technology we license, our products or our development efforts may be found to infringe upon third-party intellectual property rights
18. 38We may be involved in lawsuits to protect or enforce the patents of our licensors, which could be expensive, time-consuming and unsuccessful
19. 39Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements
20. 40Patents are subject to changing legal interpretation by the USPTO and the Courts
21. 41We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties
22. 42Our ability to generate product revenues will be diminished if our products sell for inadequate prices or patients are unable to obtain adequate levels of reimbursement
23. 43If we are unable to obtain adequate coverage and reimbursement for our tests, it is unlikely that our tests will gain widespread acceptance
24. 44A variety of risks associated with marketing AD04 or any future product candidates internationally could materially adversely affect our business
25. 45We may not successfully effect our intended expansion
26. 46Because of the specialized nature of our business, our ability to maintain a competitive position depends on our ability to attract and retain qualified management and other personnel. We cannot assure you that we will be able to continue to attract or retain such persons
27. 47Declining general economic or business conditions and changes to trade policy, including tariff and customs regulations, may have a negative impact on our business
28. 48Government payors, such as Medicare and Medicaid, have taken steps and can be expected to continue to take steps to control the cost, utilization and delivery of health care services, including clinical laboratory test services

Risks Related to Our Securities and Investing in Our Securities

1. 49Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans and outstanding warrants, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall
2. 50We have additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock
3. 51If we issue preferred stock with superior rights than our common stock, it could result in a decrease in the value of our common stock and delay or prevent a change in control of us
4. 52We have never paid dividends and have no plans to pay dividends in the future
5. 53Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock
6. 54We are a “smaller reporting company,” and we cannot be certain if the reduced SEC reporting requirements applicable to smaller reporting companies will make our common stock less attractive to investors
7. 55As a result of being a public company, we are subject to additional reporting and corporate governance requirements that will require additional management time, resources and expense
8. 56Our common stock has often been thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares
9. 57Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses
10. 58Our need for future financing may result in the issuance of additional securities which will cause investors to experience dilution
11. 59The application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares
12. 60Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management
13. 61If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline
14. 62The warrants that we have issued are speculative in nature
15. 63Holders of the warrants will have no rights as a common stockholder except as otherwise provided in the warrants until they acquire our common stock
16. 64There is no established market for the warrants