Larimar Therapeutics, Inc.: Form 10-Q for the period ended Jun 30, 2023

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2023 (the "2022 Annual Report") and our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2023. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. We undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise. You should read the “Risk Factors” section included in our 2022 Annual Report, in addition to the "Risk Factors" and “Cautionary Note Regarding Forward-Looking Statements” sections of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide ("CPP") technology platform. Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver frataxin ("FXN"), an essential protein, to the mitochondria of patients with Friedreich's ataxia (“FA”). FA is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality. Currently, there are no treatment options that address the core deficit of FA, low levels of FXN. CTI-1601 represents the first potential therapy designed to increase FXN levels in patients with FA.

We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.

Since our inception, we have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, and providing general and administrative support for such operations.

CTI-1601 Program Update

We have completed two phase 1 clinical trials of CTI-1601 and the first cohort of a phase 2 trial in patients with FA:

• In May 2021, we reported positive top-line data from our Phase 1 FA program after completing dosing of the single ascending dose ("SAD") trial in December 2020 and of the multiple ascending dose ("MAD") trial in March 2021. Data from these trials demonstrate proof-of-concept by showing that daily subcutaneous injections of CTI-1601 for up to 13 days resulted in dose-dependent increases in FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets). FXN levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of FXN levels that would be expected in phenotypically normal heterozygous carriers. There were no serious adverse events associated with either the MAD or SAD trials.
• In May 2023, we reported preliminary unblinded top-line data from the 25 mg cohort of our Phase 2 four-week, placebo-controlled, dose exploration trial of CTI-1601 in FA patients. Data from the cohort indicate CTI-1601 was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14.

From May 2021 through July 2023, we have had ongoing interactions and discussions with the FDA regarding the clinical development of CTI-1601:

• In May 2021, the FDA placed a clinical hold on our CTI-1601 clinical program after we notified the agency of mortalities at the highest dose levels of a 26-week non-human ("NHP") toxicology study that was designed to support extended dosing of patients with CTI-1601. At the time the hold was placed, we had no interventional clinical trials with patients enrolling or enrolled.
• In February 2022, in response to the complete response we submitted to the FDA, the FDA stated that it was maintaining the clinical hold and that additional data were needed to resolve the clinical hold. We subsequently submitted a request to the FDA for a Type C meeting, which was granted and held in July 2022. We submitted a complete response incorporating additional information requested by the FDA at the meeting as well as information on the proposed study in August 2022.
• In September 2022, following the Type C meeting and the submission of the Company's complete response, the FDA allowed the 25 mg cohort of a Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in FA patients discussed above to proceed. In connection with this decision, the FDA lifted its full clinical hold on the CTI-1601 clinical development program and imposed a partial clinical hold.
• In June 2023 we met with the Agency. Following that meeting, we submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, pharmacokinetic (“PK”) and frataxin data from the Phase 2 trial’s completed 25 mg cohort.
• Following the FDA’s review of our complete response, in July 2023, the FDA cleared initiation of a second cohort of our four-week, placebo-controlled, Phase 2 dose exploration trial of CTI-1601 in patients with FA to proceed to a 50 mg cohort in which participants will be dosed daily for the first 14 days, and then every other day until day 28. This second cohort is designed to further characterize CTI-1601’s safety, PK and pharmacodynamic profiles. We expect to report data from the Phase 2 trial’s 50 mg cohort in the first half of 2024. In addition, the FDA cleared for initiation our open label extension (“OLE”) trial in which participants will receive 25 mg of CTI-1601 daily. Participants who complete treatment in the first or second cohort of our Phase 2 dose exploration trial, or who previously participated in and completed a prior phase 1 clinical trial of CTI-1601, are eligible to screen for this OLE trial. The OLE trial is expected to begin in the first quarter of 2024 with interim data expected in the last quarter of 2024. Further dose escalation in the Phase 2 and OLE trials and the initiation of additional U.S. clinical trials evaluating CTI-1601 are contingent on FDA review of results from the Phase 2 trial’s 50 mg cohort in accordance with a partial clinical hold.

CTI-1601 has been granted Orphan Drug (U.S. and Europe), Rare Pediatric Disease (U.S.), Fast Track (U.S.), and PRIME (Europe) designations for FA. We have also begun to engage with regulators and investigators outside the U.S. as we prepare to expand our clinical program to additional geographies. With approximately 75% of individuals with FA living outside the U.S., establishing global clinical trial capabilities is important for addressing the pressing unmet needs of the FA community.

Financing Activities

We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities and restricted cash upon the merger with Zafgen, Inc. ("Zafgen") and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

In September 2022, we sold 25,558,750 shares of common stock in an underwritten offering for net proceeds of $75.2 million, after issuance costs.

In November 2022, we entered into a Sales Agreement (the "ATM Agreement") with an investment bank in connection with the establishment of an “at-the-market” offering program providing for the sale of up to an aggregate of $50.0 million of shares of our common stock from time to time through this investment bank as sales agent. To date, we have made no sales under this ATM agreement.

Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales, and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations.

Operating Expenses

The majority of our operating expenses since inception have consisted primarily of research and development and general and administrative costs.

Research and Development Expenses

Research and development expenses consist primarily of costs associated with our product research and development efforts and are expensed as incurred. Research and development expenses consist primarily of:

• third-party contract costs relating to research, formulation, manufacturing, non-clinical studies, and clinical trial activities;
• employee related costs, including cash compensation, benefits and stock-based compensation expenses for employees engaged in scientific research and development functions;
• external costs of outside consultants and vendors;
• payments made under our third-party licensing agreements;
• laboratory consumables; and
• allocated facility-related costs.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of CTI-1601 or any other product candidates we may develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of CTI-1601 or any other product candidates we develop will depend on a variety of factors, including:

• the scope, rate of progress and expense of clinical trials and other research and development activities;
• clinical trial results;
• uncertainties in clinical trial enrollment rate or design;
• significant and changing government regulation;
• the timing and receipt of any regulatory approvals;
• the influence of the FDA or other regulatory authorities on our clinical trial design and timing;
• our ability to expand or establish new manufacturing capabilities or making arrangements with third-party manufacturers and risks involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;
• liquidity constraints, failure and instability of the U.S. and international banking systems, including possible impacts of a default by the U.S. government on its debt obligation, which could have broad macroeconomic effects that could, among other things, disrupt access to capital markets and deepen recessionary conditions;
• our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates; and
• our ability to recruit and retain key research and development personnel.

A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, composed of cash compensation, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expense

Costs for certain research and development activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly, are considered an area of significant judgement and management's review of manufacturing, nonclinical and clinical expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable. We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials. As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.

Stock Compensation Expense

We measure all stock-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, and thus are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock. Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies with comparable characteristics including enterprise value, risk profiles and position within the industry. Beginning on January 1, 2023, the Company began blending it historical data starting in June 2020 (following its merger with Zafgen in 2020) with its historical peer group. We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. We expect to continue to do so until we have full historical data regarding the volatility of our own traded stock price.

The expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur.

We classify stock-based compensation expense in our condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Results of Operations

Comparison of three months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022:

(in thousands)

Research and development expenses

Research and development expenses for the three months ended June 30, 2023 increased $0.2 million compared to the three months ended June 30, 2022. The increase in research and development expenses was primarily driven by an increase of $0.5 million in test method development and optimization, an increase of $0.4 million in personnel related costs, an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023, partially offset by a decrease of $1.1 million in clinical supply manufacturing costs.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2023 increased $0.7 million compared to the three months ended June 30, 2022. The increase in general and administrative expense was primarily driven by an increase of $0.3 million of professional fees primarily related to increased legal expense, an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023 and an increase of $0.2 million in personnel related costs related to increases in headcount.

Other income (expense), net

Other income (expense), net was $1.3 million of income in the three months ended June 30, 2023 compared to less than $0.1 million in the three months ended June 30, 2022. The increase primarily relates to interest income on a higher investment base and higher interest rates on that base during the period.

Results of Operations

Comparison of six months ended June 30, 2023 and 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022:

(in thousands)

Research and development expenses

Research and development expenses for the six months ended June 30, 2023 decreased $1.0 million compared to the six months ended June 30, 2022. The decrease in research and development expenses was primarily driven by a decrease of $1.5 million in clinical supply manufacturing costs, a decrease in assay development costs of $0.2 million partially offset by an increase of $0.5 million in personnel related costs, an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2023 increased $0.7 million compared to the six months ended June 30, 2022. The increase in general and administrative expense was primarily driven by an increase of $0.3 million in stock-based compensation expense associated with stock option grants made in 2022 and 2023, an increase of $0.3 million of professional fees primarily related to increased legal expense, and an increase of $0.2 million in personnel related costs related to increases in headcount.

Other income (expense), net

Other income (expense), net was $2.4 million of income in the six months ended June 30, 2023 compared to less than $0.1 million of net expense in the six months ended June 30, 2022. The increase primarily relates to interest income on a higher investment base and higher interest rates on that base during the period.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing CTI-1601, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations.

Cash Flows

The following table summarizes our sources and uses of cash for each of the periods presented below:

(in thousands)

24

Net cash used in operating activities

During the six months ended June 30, 2023, operating activities used $14.9 million of cash, resulting from our net loss of $14.9 million, adjusted for noncash expenses of $3.3 million and changes in our operating assets and liabilities utilizing cash of $3.4 million. Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above. Noncash expenses primarily relate to stock-based compensation expenses. The change in operating assets and liabilities was primarily due to a decrease in accrued expenses and offset by an increase in accounts payable.

During the six months ended June 30, 2022, operating activities used $15.0 million of cash, resulting from our net loss of $17.6 million, adjusted for noncash expenses of $3.5 million. Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above. Noncash expenses are primarily stock-based compensation expense. The change in operating assets and liabilities was primarily due to decreases in prepaid expenses and accounts payable.

Net cash provided by (used in) investing activities

During the six months ended June 30, 2023, investing activities provided $82.4 million of cash, including $92.3 million from maturities of marketable securities and partially offset by $9.8 million in purchases of marketable securities.

During the six months ended June 30, 2022, investing activities used $35.3 million of cash, including $35.2 million in purchases of new marketable securities and $0.1 million in purchases of property and equipment.

Net cash provided by financing activities

During the six months ended June 30, 2023 and 2022 there were no financing activities.

Operating Capital Requirements

We have not yet commercialized any products and do not expect to generate revenue from the commercial sale of any products for several years, if at all.

We have to date incurred net losses. We incurred net losses of approximately $14.9 million and $17.6 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $166.5 million and cash, cash equivalents and marketable securities of $104.2 million, excluding restricted cash of $1.3 million.

Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of CTI-1601 and our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we:

• continue to advance the development of CTI-1601 through additional clinical trials;
• seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates;
• seek to obtain regulatory approvals for CTI-1601 and other potential product candidates;
• identify, acquire or in-license other product candidates and technologies;
• maintain, leverage and expand our intellectual property portfolio; and
• expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.

We believe that based on our current operating plan our cash, cash equivalents and marketable securities will be able to fund operating expenses and capital expenditure requirements for at least the next twelve months from the filing of these financial statements with the SEC. If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources. Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements or other sources. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or we do not have sufficient authorized shares, we may be required to delay, limit, or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition, and results of operations will be materially adversely affected. We could also be required to seek funds through arrangements with collaborative partners, strategic alliances or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, bank instability and the ability of the U.S. government to manage federal debt limits, as well as the potential impact of health crises on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

If we are unable to obtain sufficient funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion and/or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Off-Balance Sheet Arrangements

During the periods presented we did not have, and we currently do not have, any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

Recently Issued Accounting Pronouncements

Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report for a description of recent accounting pronouncements applicable to our business, if any.

Other Company Information

None.

We are a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are not required to provide the information under this item.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

The design of disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

With respect to the quarter ended June 30, 2023, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2023 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

You should carefully consider the risk factors described in our 2022 Annual Report under the caption “Item 1A. Risk Factors.” Except as set forth below, there have been no material changes in our risk factors disclosed in our 2022 Annual Report. The risks described in our 2022 Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Risks Related to Our Product Development and Regulatory Approvals

Further dose escalation in our Phase 2 and OLE trials and the initiation of additional U.S. clinical trials evaluating CTI-1601 will be contingent on the FDA allowing such trials to proceed following review of data from the 50 mg cohort of our Phase 2 clinical trial; if the FDA does not allow additional trials to proceed, we may be unable to complete our CTI-1601 clinical trials without delays and our business may be adversely affected and our stock price may decline.

In July 2023, the FDA cleared our four-week, placebo-controlled, Phase 2 dose exploration trial of CTI-1601 in patients with FA to proceed to a 50 mg cohort in which participants will be dosed daily for the first 14 days, and then every other day until day 28. Additionally, the FDA cleared for initiation our OLE trial in which participants will receive 25 mg of CTI-1601 daily. Further dose escalation in the Phase 2 and OLE trials and the initiation of additional U.S. clinical trials evaluating CTI-1601 are contingent on FDA review of results from any ongoing clinical trials in accordance with a partial clinical hold. If, following completion of our Phase 2 trial’s 50 mg cohort, we are unable to reach agreement with the FDA to conduct additional clinical trials, we may be unable to complete our CTI-1601 clinical trials without delays in our clinical development plans and anticipated data milestones and additional clinical development costs, any of which could impair our ability, cost or timeline to obtain U.S. regulatory approval for CTI-1601.