LB Pharmaceuticals (LBRX) risk factors, FY2025 10-K

Risks Related to Our Limited Operating History, Financial Position, and Need for Capital

1. 01We are a clinical-stage biopharmaceutical company with a limited operating history and no history of commercializing products, which may make it difficult to evaluate our approach to the discovery and development of our product candidate and the prospects for our future viability
2. 02We have incurred substantial losses since our inception. We anticipate incurring substantial and increasing losses for the foreseeable future and may never achieve or maintain profitability
3. 03incur additional costs, including legal, accounting, and other expenses, associated with operating as a public company
4. 04We will require substantial additional financing to achieve our goals, and failure to obtain additional capital when needed, or on acceptable terms to us, could cause us to delay, limit, reduce, or terminate our product development or future commercialization efforts
5. 05the extent to which we acquire or invest in businesses, products, and technologies
6. 06We have concentrated our research and development efforts on the treatment of psychiatric and neurological conditions, a field that faces certain challenges in drug development
7. 07The obligations from our royalty agreements may be a drain on our cash resources or may cause us to incur debt obligations to satisfy the payment obligations

Risks Related to Product Candidate Development and Commercialization

1. 08Most product candidates that commence clinical trials are never approved as commercial products and there can be no assurance that any of our current or future clinical trials will ultimately be successful or support the approval of our current or any future product candidates
2. 09Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us or any future collaboration partners from obtaining approvals for the commercialization of our product candidate
3. 10With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods, and agreements with pricing authorities
4. 11Even if our product candidate receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable
5. 12potential product liability claims
6. 13We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected
7. 14We cannot assure you that our assumptions used in determining expected clinical trial timelines are correct or that we will not experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected timelines
8. 15recruitment or the ability of enrolled patients to complete the trial or could result in potential product liability claims. Any of these occurrences may harm our business, financial condition, and prospects significantly
9. 16a product may become less competitive, and our reputation may suffer
10. 17We have never obtained regulatory approval for, or commercialized, a drug product in the United States or elsewhere
11. 18the FDA or comparable foreign regulatory authorities may find deficiencies in or fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies
12. 19Interim, “top-line,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data
13. 20If we fail to develop and commercialize our current product candidate for additional indications or fail to discover, develop, and commercialize other product candidates, we may be unable to grow our business and our ability to achieve our strategic objectives would be impaired
14. 21We may expend our resources to pursue a particular product candidate or indication and forgo the opportunity to capitalize on product candidates or indications that may ultimately be more profitable or for which there is a greater likelihood of success
15. 22Obtaining and maintaining regulatory approval of LB-102 or any future product candidates we may develop in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of such product candidate in other jurisdictions
16. 23Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay
17. 24We may conduct certain of our clinical trials for our product candidate outside of the United States in the future. However, the FDA may not accept data from such trials, in which case our development plans may be delayed, which could materially harm our business

Risks Related to Our Business and Operations

1. 25Neuroscience drug development is a field that has seen limited success. The ability to successfully develop drugs in this field is difficult and is subject to a number of unique challenges
2. 26Our business depends on the success of our product candidate. If we are ultimately unable to successfully commercialize our product candidate, or experience significant delays in doing so, our business will be materially harmed
3. 27assure that our product candidate, if approved, will be used as directed and that additional unexpected safety risks will not arise
4. 28We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business
5. 29We are dependent on the services of our management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer
6. 30Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements
7. 31Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could adversely affect our business, financial condition, results of operations, and prospects
8. 32retention of control evidence, and
9. 33These material weaknesses could result in a misstatement of our accounts or disclosures in our annual or interim financial statements that would not be prevented or detected on a timely basis
10. 34Our projections regarding the market opportunities for our product candidate may not be accurate, and the actual market for our products may be smaller than we estimate
11. 35Our business could be adversely affected by the effects of health pandemics or epidemics, which could cause significant disruptions in our operations and those of our current or future CDMOs, CROs, and other third parties upon whom we rely
12. 36Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties

Risks Related to Intellectual Property, Collaborations, and Related Agreements

1. 37achievements, thus eroding our competitive position in our market. We may also rely on protection afforded by in-licensed intellectual property rights and proprietary technology of third parties in the future
2. 38Issued patents covering our product candidate, or the method of use of our product candidate could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad
3. 39We may not be successful in obtaining or maintaining necessary rights to third party patents for our product candidate through acquisitions and in-licenses
4. 40We may form or seek collaborations or strategic alliances, enter into licensing arrangements or other business transactions in the future, and we may not realize the benefits of such transactions
5. 41a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings
6. 42We may not be able to protect our intellectual property rights throughout the world
7. 43Intellectual property rights do not necessarily address all potential threats to our competitive advantage
8. 44the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patent applications
9. 45We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope, or expiration of a third-party patent, which might adversely affect our ability to develop and market our product candidate
10. 46We may be involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful
11. 47Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidate
12. 48We may become subject to claims challenging the inventorship or ownership of our or our future licensors’ patents and other intellectual property
13. 49Patent terms may be inadequate to protect our competitive position on our product candidate for a sufficient amount of time
14. 50If we do not obtain patent term extension for our product candidate, our business may be materially harmed
15. 51Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated as a result of noncompliance with these requirements
16. 52If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed
17. 53If 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
18. 54We may be subject to claims asserting that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property

Risks Related to Our Reliance on Third Parties

1. 55in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products
2. 56If any third-party manufacturer of our product candidate is unable to increase the scale of its production of our product candidate, and/or increase the product yield of its manufacturing, then our costs to manufacture product candidate may increase and commercialization may be delayed
3. 57The operations of our suppliers that are located outside of the United States are subject to additional risks that are beyond our control and that could harm our business, financial condition, results of operations, and prospects
4. 58changes in local economic conditions in countries where our manufacturers or suppliers are located
5. 59We may have conflicts with our current or future licensors or collaborators that could delay or prevent the development or commercialization of our product candidate
6. 60Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed
7. 61We may engage third party collaborators to market and commercialize our product candidate, who may fail to effectively commercialize our product candidate

Risks Related to Government Regulation

1. 62EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the EU member states
2. 63The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidate and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity
3. 64The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses
4. 65Ongoing healthcare legislative and regulatory reform measures may adversely affect our business, results of operations, and financial condition
5. 66In addition, other legislative changes have been proposed and adopted since the ACA was enacted. These changes include aggregate reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and will remain in effect until 2032 unless additional Congressional action is taken
6. 67it could significantly impact the ability of the FDA or other comparable foreign regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business
7. 68In addition to data privacy and security laws, we are and may become contractually subject to industry standards adopted by industry groups. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful
8. 69Additional laws and regulations governing international operations could adversely affect our business, results of operations and financial condition
9. 70If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business

Risks Related to Ownership of Our Common Stock

1. 71An active and liquid trading market for our common stock may not be sustained, or we may in the future fail to satisfy the continued listing requirements of Nasdaq and our stock may be delisted, and you may not be able to resell your shares of common stock at or above the public offering price, if at all
2. 72Our quarterly and annual operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts or any guidance we may publicly provide, each of which may cause our stock price to fluctuate or decline
3. 73changes in general market and economic conditions
4. 74Our stock price may be volatile, which could result in substantial losses for investors
5. 75the occurrence of any of the risks described in this section titled “Risk Factors”
6. 76We do not intend to pay dividends on our common stock for the foreseeable future, so any returns will be limited to the value of our stock
7. 77Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval
8. 78We are an emerging growth company and a smaller reporting company, and the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors
9. 79Conflicts of interest may arise because some members of our board of directors are representatives of our principal stockholders
10. 80If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale lapse, the trading price of our common stock could decline
11. 81Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock
12. 82require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation
13. 83any action asserting a claim against us that is governed by the internal-affairs doctrine
14. 84Our ability to use our net operating loss carryforwards and certain other tax attributes to offset taxable income or taxes may be limited
15. 85Recent and future changes to tax laws could materially adversely affect our company
16. 86Unstable economic and market conditions may have serious adverse consequences on our business, financial condition, and stock price
17. 87If securities or industry analysts do not publish research or reports about our business, or if they publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline
18. 88We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices
19. 89Failure to establish and maintain effective internal control over financial reporting could adversely affect our business and if investors lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected
20. 90Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud
21. 91We may be subject to securities litigation, which is expensive and could divert management attention
22. 92Risk Management and Strategy
23. 93Our cybersecurity risk assessment and management processes are implemented and maintained by certain Company management, including the Information Technology Manager (IT Manager) and the fractional CIO who have over 30 years of combined experience addressing cybersecurity related issues through prior work experience
24. 94Ite m 3. Legal Proceedings
25. 95Holders of Our Common Stock
26. 96Issuances Pursuant to our Equity Plans
27. 97Issuances Outside of Our Equity Plans
28. 98Use of Proceeds from our Public Offering of Common Stock
29. 99It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
30. 100In January 2026, we announced the initiation of the Phase 2 trial (ILLUMINATE-1) evaluating the efficacy and safety of LB-102 in patients with bipolar depression
31. 101add operational, legal, financial, and management information systems and personnel to support our product development and clinical execution, as well as to support our transition to a public company
32. 102Research and Development Expenses
33. 103expenses related to regulatory affairs
34. 104A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate
35. 105General and Administrative Expenses
36. 106other expenses including travel expenses, rent expense, and other operating costs
37. 107investor and public relations costs
38. 108Non-operating Income (Expense)
39. 109Comparison of the Years Ended December 31, 2025 and 2024
40. 110Liquidity and Capital Resources
41. 111Cash used in investing activities for the year ended December 31, 2025 was $39.9 million primarily related to $44.8 million for the purchase of marketable securities to invest our excess cash, partially offset by $5.0 million in proceeds from sale and maturities of marketable securities
42. 112Cash provided by financing activities for the year ended December 31, 2025 was $302.6 million primarily related to the proceeds from the IPO, net of issuance costs
43. 113We expect our expenses to increase substantially in connection with our ongoing activities, in particular as we continue to advance LB-102 and any of our future product candidates through clinical trials, as well as additional costs associated with operating as a public company
44. 114the costs of operating as a public company
45. 115Recently Issued Accounting Pronouncements
46. 116Critical Accounting Estimates
47. 117matters that are uncertain and are likely to have a material impact on our financial condition and results of operations
48. 118As part of the process of preparing our financial statements, we are required to estimate our accrued research and
49. 119We base our expenses related to research and development activities on our estimates of the services received and
50. 120We estimate the fair value of each award on the date of grant using the Black-Scholes option-pricing model. This model
51. 121term of the awards and the contract period, or simplified method
52. 122Emerging Growth Company and Smaller Reporting Company Status
53. 123Evaluation of Disclosure Controls and Procedures
54. 124Management’s Annual Report on Internal Control over Financial Reporting
55. 125As of December 31, 2025, our management assessed the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework)
56. 126Based on this assessment, our management concluded that, as of December 31, 2025, our internal control over financial reporting was not effective based on those criteria
57. 127Remediation Plan for the Material Weaknesses
58. 128Changes in Internal Control over Financial Reporting
59. 129Item 9B. Othe r Information
60. 130It em 10. Directors, Executive Officers and Corporate Governance
61. 131It em 11. Executive Compensation
62. 132It em 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
63. 133It em 13. Certain Relationships and Related Transactions, and Director Independence
64. 134Ite m 14. Principal Accounting Fees and Services
65. 135Financial Statements. See Index to Financial Statements included in the financial statements in this Annual Report on Form 10-K
66. 136Cover Page Interactive Data File (embedded within the Inline XBRL document)
67. 137Opinion on the Financial Statements
68. 138Series Seed preferred stock, $ 0.0001 par value, zero and 295,467 shares authorized, zero and 295,467 shares issued and outstanding as of December 31, 2025 and 2024. Liquidation preference of zero and $ 443 as of December 31, 2025 and 2024, respectively
69. 139Series B preferred stock, $ 0.0001 par value, zero and 301,119 authorized, zero and 301,119 shares issued and outstanding as of December 31, 2025 and 2024, respectively. Liquidation preference of zero and $ 903 as of December 31, 2025 and 2024, respectively
70. 140LB Pharmaceuticals Inc (the “Company” or “LB”) was incorporated under the laws of the State of Delaware in September 2015 and is headquartered in New York, New York
71. 141Notes to Financial Statements
72. 142Cash and Cash Equivalents
73. 143Impairment of Long-Lived Assets
74. 144According to ASC 842 Leases , the Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the use of the identified asset over the term of the arrangement
75. 145The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets
76. 146Level 3 – Unobservable inputs supported by little or no market data and requires management to develop its own assumptions based on best estimates of what market participants would use in pricing an asset or liability at the reporting date
77. 147judgment and involve uncertainty. Changes in fair value measurements could have a significant impact on the results of operations in any given period
78. 148The Company uses equity-based compensation programs to provide long-term performance incentives for its employees, directors and consultants. These incentives consist primarily of stock options and restricted stock grants
79. 149Expected Dividend Yield: The Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Accordingly, estimated dividend yield is zero
80. 150Common Stock Warrants and Warrant Liability
81. 151Redeemable Convertible Preferred Stock
82. 152General and Administrative
83. 153Recently Issued Accounting Pronouncements Not Yet Adopted
84. 1543. Fair Value Measurements
85. 155For the years ended December 31, 2025 and 2024, the change in the fair value of the Level 3 warrant liability resulted in the recording of a gain (loss) on change in fair value of derivative instruments of $ 0.04 million and ($ 0.9 ) million , respectively, in the accompanying statements of operations
86. 156Balance, December 31, 2025
87. 157During the year ended December 31, 2025, the Company transferred certain warrant liabilities from Level 3 to Level 2 within the fair value hierarchy. Transfers between levels are recognized at the beginning of the reporting period in which the transfer occurs
88. 1584. Cash Equivalents, Marketable Securities and Restricted Cash
89. 1595. Property and Equipment, Net
90. 1606. Prepaid Expenses and Other Current Assets and Accrued Expenses
91. 161The Company’s lease agreement does not contain material residual value guarantees, restrictions, or covenants. The Company has no other operating leases recognized on the accompanying balance sheets
92. 162Weighted average discount rate
93. 163Cash paid for amounts included in the measurement of lease liabilities
94. 1648. Redeemable Convertible Preferred Stock and Equity
95. 165All issued shares of common stock are entitled to vote on a one share/one vote basis
96. 166connection with the Series C Offering, the exercise price of the outstanding Placement Agent Warrants was reduced to $ 0.28 per share. The placement agent warrants expire in August 2033
97. 16710. Stock-Based Compensation
98. 168Issuances Outside of Equity Plans
99. 169The weighted average grant date fair value of the stock options granted during the year ended December 31, 2025 was $ 11.42 . The weighted average grant date fair value of the stock options granted during the year ended December 31, 2024 was $ 31.23
100. 170As of December 31, 2025 , there was $ 29.1 million unrecognized stock-based compensation expense which is expected to be recognized over a weighted average period of 3.56 years
101. 171As a result, the Company determined the fair market value of all awards expected to vest over the duration of the Separation Agreement as of the modification date using the Black-Scholes option pricing model. The total amount of $ 1.7 million was recognized immediately
102. 172No restricted stock was granted during the years ended December 31, 2025 and 2024
103. 173Total stock-based compensation expense
104. 174The Company expects to incur total restructuring charges of approximately $ 0.7 million, primarily related to termination benefits, partially offset by a reduction in stock-based compensation expenses
105. 175All restructuring costs associated with the RIF were recognized in the second quarter of 2025, when the plan was communicated to affected employees and obligations were incurred. The remaining severance payments, which were accrued as of December 31, 2025, are expected to be paid through May 2026
106. 176for healthcare coverage. As of December 31, 2024, the Company recorded $ 0.8 million of accrued termination benefits in the balance sheet
107. 177Total current tax expense
108. 178Total deferred tax assets
109. 179As of December 31, 2025 , the Company has federal NOL carryforwards of approximately $ 70.3 million, of which $ 1.5 million is subject to the 20-year carryforward period and begins to expire in 2036 . The remaining federal NOL carryforward of $ 68.8 million has an indefinite carryforward period
110. 180As of December 31, 2025 , the Company had federal research and development credits of approximately $ 4.9 million. The research and development credits, if not utilized, will begin to expire in 2036
111. 18113. Commitments and Contingencies
112. 18214. Related-Party Transactions