Dermata Therapeutics (DRMA) risk factors, FY2024 10-K

Other

1. 01Summary of Risks Associated with Our Business

Risks Related to Our Financial Position and Need for Capital

1. 02We are a clinical stage pharmaceutical company with a limited operating history
2. 03We have incurred losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability
3. 04We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our product candidates
4. 05personnel, facilities and equipment requirements
5. 06the time and costs involved in obtaining regulatory approval for our product candidates;
6. 07market acceptance of our products
7. 08The reports of our independent registered public accounting firm for the fiscal years ended December 31, 2024 and 2023 contain an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern
8. 09Changes in tax laws may materially adversely affect our business financial condition, results of operations and cash flows
9. 10We are exposed to risks related to foreign currency exchange rates
10. 11Disruptions in the global economy and supply chains may have a material adverse effect on our business, financial condition and results of operations
11. 12Global conditions, dislocations in the financial markets, any negative financial impacts affecting United States as a result of tax reform or changes to existing trade agreements or tax conventions, may adversely impact our business

Risks Related to Development, Regulatory Approval and Commercialization

1. 13Our business is dependent on the successful development, regulatory approval and commercialization of our product candidates, in particular XYNGARI™ and DMT410
2. 14our ability to in-license or acquire additional product candidates or commercial-stage products that we believe we can successfully develop and commercialize
3. 15Clinical drug development for our product candidates is very expensive, time-consuming and uncertain. Our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates, which could prevent or delay regulatory approval and commercialization
4. 16difficulty in maintaining contact with subjects during or after treatment, which may result in incomplete data
5. 17Our industry is subject to extensive regulatory obligations and policies that may be subject to change, including due to judicial challenges
6. 18We face risks related to public health emergencies, epidemics and other outbreaks of communicable diseases, which could significantly disrupt our operations, including our clinical trials and preclinical studies, and adversely affect our business and results of operations
7. 19interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines; and interruptions, difficulties or delays arising in our existing operations and company culture as a result of many of our employees working remotely
8. 20Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay
9. 21Approval may be delayed or denied because we cannot satisfy FDA’s Chemistry, Manufacturing and Control Requirements
10. 22change its approval policies or adopt new regulations in a manner rendering our clinical data or regulatory filings insufficient for approval
11. 23We have completed enrollment of our first Phase 3 clinical trials for XYNGARI™, but that does not guarantee successful completion. We may be unable to successfully complete it or any future clinical trials
12. 24Even if our current product candidates or any future product candidates obtain regulatory approval, they may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success
13. 25potential product liability claims
14. 26We intend to seek NCE exclusivity for XYNGARI™ and future product candidates, and we may be unsuccessful in obtaining such exclusivity
15. 27Our product candidates, if approved, will face significant competition and our failure to effectively compete may prevent us from achieving significant market penetration
16. 28We expect to face generic or similar type of product competition for our product candidates, which could adversely affect our business, financial condition, operating results and prospects
17. 29Any product candidates that we commercialize, or that any partner with which we may collaborate commercializes, will be subject to ongoing and continued regulatory review
18. 30seize or detain products or require us or our partners to initiate a product recall
19. 31We may in the future conduct clinical trials for our product candidates outside the United States and the FDA and applicable foreign regulatory authorities may not accept data from such trials
20. 32Our product candidates may cause undesirable side effects or have other unexpected properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in post-approval regulatory action
21. 33our brand and reputation may suffer
22. 34We may face product liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate
23. 35We may choose not to continue developing or commercializing any of our product candidates at any time during development or after approval, which would reduce or eliminate our potential return on investment for those product candidates
24. 36We or our current and prospective partners may be subject to product recalls in the future that could harm our brand and reputation and could negatively affect our business
25. 37If we or any partners with which we may collaborate are unable to achieve and maintain coverage and adequate levels of reimbursement for any of our product candidates for which we receive regulatory approval, or any future products we may seek to commercialize, their commercial success may be severely hindered
26. 38Healthcare legislative or regulatory reform measures, including government restrictions on pricing and reimbursement, may have a negative impact on our business and results of operations
27. 39Other examples of proposed changes include, but are not limited to, expanding post-approval requirements, changing the Orphan Drug Act, and restricting sales and promotional activities for pharmaceutical products
28. 40additional recordkeeping
29. 41We may also be subject to healthcare laws, regulation and enforcement and our failure to comply with those laws could adversely affect our business, operations and financial condition
30. 42Our employees, independent contractors, principal investigators, consultants, vendors, CROs and any partners with which we may collaborate may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements
31. 43Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties
32. 44Development of test methodology for XYNGARI™ presents unique challenges due to the complex mixture of constituents in the product. Determination of appropriate assay(s) for release and quality control evaluations could require significant development time and cost to successfully complete and uncertain

Risks Related to Our Dependence on Third Parties

1. 45We are dependent on one supplier for the raw material used to produce XYNGARI™ and DMT410. The termination of this contract would result in a disruption to product development and our business will be harmed
2. 46other unforeseen geopolitical factors that limit our ability access our supply of raw material
3. 47Our business may be affected by new sanctions, import restrictions, and export controls targeting Russia and other responses to Russia’s invasion of Ukraine
4. 48discontinue production or manufacturing of necessary drug substances or products
5. 49Our reliance on contract manufacturers and suppliers further exposes us to the possibility that they, or third parties with access to their facilities, will have access to and may misappropriate our trade secrets or other proprietary information
6. 50If we are not able to establish and maintain collaborations, we may have to alter our development and commercialization plans
7. 51Collaborations typically impose detailed obligations on each party. If we were to breach our obligations, we may face substantial consequences, including potential termination of the collaboration, and our rights to our partners’ product candidates, in which we have invested substantial time and money, would be lost

Risks Related to Managing Our Growth, Our Employees and Our Operations

1. 52We will need to further increase the size and complexity of our organization in the future, and we may experience difficulties in executing our growth strategy and managing any growth
2. 53manage our development efforts effectively while carrying out our contractual obligations to partners and other third parties
3. 54If we fail to attract and retain management and other key personnel, we may be unable to continue to successfully develop or commercialize our product candidates or otherwise implement our business plan
4. 55We currently have limited marketing capabilities and no outside sales organization. If we are unable to establish sales and marketing capabilities on our own or through third parties, we will be unable to successfully commercialize our product candidates, if approved, or generate product revenue
5. 56Our failure to successfully in-license, acquire, develop, and market additional product candidates or approved products would impair our ability to grow our business
6. 57Accordingly, there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, and any transaction that we do complete could harm our business, financial condition, operating results, and prospects
7. 58latent defects that may become apparent after the product has been released and which may result in recall and destruction of product
8. 59Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations
9. 60Our operating results and liquidity needs could be negatively affected by market fluctuations and economic downturn
10. 61Our business and operations would suffer in the event of failures in our internal computer systems
11. 62We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks

Risks Related to Our Intellectual Property

1. 63We may not be able to obtain or enforce patent rights or other intellectual property rights that cover our product candidates and technologies that are of sufficient breadth to prevent third parties from competing against us
2. 64we may not develop additional proprietary technologies that are patentable
3. 65Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our future patents
4. 66We may not be able to protect our intellectual property rights throughout the world
5. 67Obtaining and maintaining our 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
6. 68The complexity and uncertainty of European laws have increased in recent years
7. 69If we fail to comply with our obligations under our intellectual property license agreements, we could lose license rights that are important to our business
8. 70If we are sued for infringing intellectual property rights of third parties, it will be costly and time-consuming, and an unfavorable outcome in that litigation could have a material adverse effect on our business
9. 71redesigning our products or processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time
10. 72We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive and time-consuming
11. 73We consider proprietary trade secrets or confidential know-how and unpatented know-how to be important to our business. We may rely on trade secrets or confidential know-how to protect our technology, especially where patent protection is believed by us to be of limited value
12. 74We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their former employers or their former or current customers
13. 75If our patent term expires before or soon after our products are approved, or if manufacturers of generic or biosimilar drugs successfully challenge our patents, our business may be materially harmed
14. 76If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected
15. 77Our proprietary information may be lost, or we may suffer security breaches

Risks Related to the Securities Markets and Ownership of Our Common Stock and Warrants

1. 78The market price of our common stock and Warrants have been volatile and can fluctuate substantially, which could result in substantial losses for holders of our securities
2. 79general economic, market or political conditions in the United States or elsewhere
3. 80proposals for legislation that would place restrictions on the price of medical therapies
4. 81Our Warrants may not have any value
5. 82A Warrant does not entitle the holder to any rights as common stockholders until the holder exercises the Warrant for a share of our common stock
6. 83We are an “emerging growth company,” and will be able take advantage of reduced disclosure requirements applicable to “emerging growth companies,” which could make our common stock and Warrants less attractive to investors
7. 84If 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
8. 85Future sales of our common stock, Warrants or securities convertible into our common stock may depress our stock price
9. 86Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock
10. 87Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt
11. 88These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management
12. 89Our ability to use our net operating loss carryforwards may be limited
13. 90We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future
14. 91The exclusive forum provision is limited to the extent permitted by law, and it will not apply to claims arising under the Securities Exchange Act of 1934, as amended, or the Exchange Act, or for any other federal securities laws which provide for exclusive federal jurisdiction