INFORMATION ON THE COMPANY A. History and Development of the Company We were incorporated under the name “Sol-Gel Technologies Ltd.” on October 28, 1997, and registered as a private company limited by shares under the laws of the State of Israel. Our principal executive offices are located at 7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650 Israel and our telephone number is 972-8-931 3433. Our website address is http://www.sol-gel.com. We use our website as a channel of distribution company information. The information we post through this channel may be deemed material. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. The information contained therein, or that can be accessed therefrom, does not constitute a part of this annual report and is not incorporated by reference herein. We have included our website address in this annual report solely for informational purposes. In February 2018, we completed our initial public offering on The Nasdaq Global Market, pursuant to which we issued 7,187,500 ordinary shares for aggregate gross proceeds of approximately $86.25 million before deducting underwriting discounts and commissions and offering expenses payable by us, including the full exercise by the underwriters of their option to purchase additional shares. Our ordinary shares are currently traded on The Nasdaq Capital Market under the symbol “SLGL”. Our capital expenditures for the years ended December 31, 2023, 2024 and 2025 were approximately $134, $2 and $47, respectively. Our current capital expenditure involves equipment and leasehold improvements. B. Business Overview Our Company We are an innovative dermatology company, leveraging innovative approaches to develop pioneering treatments for patients with severe skin conditions, with a successful track record of two NDA approvals and a pipeline of product candidates being developed for orphan indications. We successfully developed pioneer topical drugs Twyneo and Epsolay, respectively approved for the treatments of acne vulgaris and inflammatory lesions of rosacea. Our current product candidate pipeline includes SGT-610 (Patidegib Gel 2%), a new chemical entity hedgehog signaling pathway blocker, for the chronic use and prevention of new BCC in Gorlin syndrome patients, for which we are conducting a Phase 3 clinical trial, and plan to pursue the examination of SGT-610 for a potential new indication: high-frequency BCC, and the SGT-210 topical drug candidate platform for new indications with significant unmet need. Our FDA-approved product, Twyneo, is a novel, once-daily, non-antibiotic topical cream containing a fixed-dose combination of encapsulated benzoyl peroxide, or BPO, and encapsulated tretinoin, developed for the treatment of acne vulgaris, the most common type of acne. Our FDA-approved product, Epsolay, is a novel, once-daily topical cream containing encapsulated BPO that we have developed for the treatment of inflammatory lesions of rosacea. 41 From 2022 until April 2025, both products were marketed in the U.S. by our U.S. commercial partner, Galderma. In April 2025, we sold our rights related to Twyneo and Epsolay in the U.S. to Mayne, following the mutual termination by Sol-Gel and Galderma of the exclusive five-year license agreement in the U.S. for both products, which were entered into in June 2021. In June 2023, we entered into two exclusive license agreements with Searchlight pursuant to which Searchlight has the exclusive right, and is responsible for, all regulatory and commercial activities for Twyneo and Epsolay in Canada, over a fifteen-year term that is renewable for subsequent five-year periods. In May 2024, we entered into an asset purchase agreement with Beimei, pursuant to which Beimei purchased and licensed the rights to commercialize and manufacture Twyneo in China, Hong Kong, Macau, Taiwan and Israel. Lastly, during 2024, we also entered into commercialization agreements for commercialization of Twyneo and Epsolay in most European countries, South Africa and South Korea. Products and Pipeline The following chart represents our current approved products and candidate pipeline, with estimated timelines: We are developing the new chemical entity SGT-610 (patidegib Gel 2%), a hedgehog signaling pathway blocker, for the chronic use and prevention of new BCC in Gorlin syndrome patients. Gorlin syndrome is a rare disease with no therapies approved by the FDA or the EC for this disease. SGT-610 is aimed to prevent new BCCs in adults with Gorlin syndrome without systemic adverse events. We believe it has the potential to be the first drug approved for such indication. SGT-610 has been granted orphan drug designation by the FDA and the EC as well as Breakthrough Therapy designation by the FDA. If approved by the FDA, we believe SGT-610 has the potential to generate, at peak, annual net sales in excess of $600 million (based in part on independent sources and also based on our good faith estimates). Although we believe such data and estimate to be reliable, it involves a number of assumptions and limitations, including without limitations the number of patients, the penetration level of the treatment, and the expected treatment annual price. Our ongoing Phase 3 clinical trial of SGT-610, which commenced in November 2023, has led to growing physician interest in its potential use in patients with severe, high-frequency BCC. One such case, a non-Gorlin patient in France with a devastating form of high-frequency BCC, was found to have a lesion harboring a PTCH1 mutation, and we agreed to provide SGT-610 for compassionate use. We plan to supply the drug to additional high-frequency BCC patients with at least one PTCH1 mutated lesion and are evaluating the initiation of a feasibility study in SGT-610 for high-frequency BCC to further substantiate the rationale for a Phase 3 trial, subject to the successful completion of the Phase 3 Gorlin syndrome trial. High-frequency BCC is also a rare disease; however, its prevalence is estimated to be 51 per 100,000 in the U.S. Even if clinical development focuses only on patients with the most severe forms of high-frequency BCC, we believe a successful outcome is expected to exceed the commercial potential of SGT-610. For many patients with high-frequency BCC, there is a significant unmet need for an effective and well-tolerated treatment, as frequent and potentially disfiguring Mohs surgeries are often no longer sustainable. The rights to SGT-610 were purchased on January 30, 2023, pursuant to an asset purchase agreement with PellePharm, dated January 23, 2023. 42 Under the terms of the agreement upon closing of the transaction, we paid an upfront payment of $4 million to PellePharm, and the remaining principal amount outstanding of $0.7 million has not been transferred as of the issuance date of this annual report. We are also required to pay: • up to $6 million in total development and NDA acceptance milestone payments; • up to $64 million in commercial milestone payments, which amount increases to $89 million when sales exceed $500 million; and • single digit royalties, which increase to double digit royalties when sales exceed $500 million. SGT-210 is a topical platform designed to enable local EGFR inhibition with limited systemic exposure. Erlotinib is an epidermal growth factor receptor inhibitor (EGFRi). Sol-Gel’s expertise enabled the development of a high-concentration topical erlotinib intended to maximize local activity while minimizing systemic absorption. In our completed Phase 1 maximal-use pharmacokinetic study, SGT-210 was found to be well tolerated, with minimal systemic absorption, and no safety findings that affected treatment adherence. In addition, compassionate-use treatment with SGT-210 in a pediatric patient with Olmsted syndrome, an ultra-rare debilitating skin disorder with no approved therapy, was associated with improvement in facial and hand hyperkeratosis and reductions in pain and itching. Following the unblinding of clinical data from our vehicle-controlled Phase 1b proof-of-concept study of erlotinib ointment in Darier disease patients, we announced in December 2025 that the data did not show differentiation between the investigational drug products on the study’s efficacy assessments, and we decided not to advance development for this indication. We currently intend to pursue small feasibility studies in new indications with significant unmet need where we believe the mechanistic rationale for SGT-210 is strong. We currently intend to pursue a very small, low-cost feasibility studies in other areas of unmet medical need where we believe the mechanistic rationale for SGT-210 is strong Twyneo, is a once-daily, non-antibiotic topical cream, containing a fixed-dose combination of encapsulated benzoyl peroxide, or E-BPO, and encapsulated tretinoin for the treatment of acne vulgaris. Acne vulgaris is one of the three most prevalent skin diseases in the world and is the most commonly treated skin disease in the United States. According to the American Academy of Dermatology, acne vulgaris affects approximately 40 to 50 million people in the United States, of which approximately 10% are treated with prescription medications. Tretinoin and benzoyl peroxide, the two active components in Twyneo, are both widely-used therapies for the treatment of acne vulgaris that historically have not been conveniently co-administered due to stability concerns. Twyneo was approved for marketing by the FDA in July 2021 in the United States and was licensed in the United States exclusively to Galderma from June 2021 until April 2025 when we sold our rights related to Twyneo and Epsolay in the U.S. to Mayne, and in Canada exclusively to Searchlight in June 2023. The rights to commercialize and manufacture Twyneo in China, Hong Kong, Macau, Taiwan and Israel were purchased and in licensed by Beimei in May 2024. We also entered into commercialization agreements for commercialization of Twyneo in most European countries, South Africa and South Korea during 2024. In December 2025, Health Canada issued a Notice of Compliance, or NOC, for Twyneo for the treatment of acne vulgaris in adults and pediatric patients 9 year of age and above. In February 2026 we received marketing approval for Twyneo in Israel for the treatment of acne vulgaris in adults and pediatric patients 9 year of age and older. Epsolay, is a once-daily topical cream containing 5% encapsulated benzoyl peroxide, that we have developed for the treatment of inflammatory lesions of rosacea in adults. Rosacea is a chronic skin disease characterized by facial redness, inflammatory lesions, burning and stinging. According to the U.S. National Rosacea Society, approximately 16 million people in the United States are affected by rosacea. Subtype II rosacea is characterized by small, dome-shaped erythematous papules, tiny surmounting pustules on the central aspects of the face, solid facial erythema and edema, and thickening/overgrowth of skin. Subtype II rosacea resembles acne, except that comedowns are absent, and patients may report associated burning and stinging sensations. Current topical therapies for subtype II rosacea are limited due to tolerability concerns. For example, BPO, a common therapy for acne, is not used for the treatment of subtype II rosacea due to side effects. As encapsulated BPO, Epsolay is designed to redefine the standard of care for the treatment of subtype II rosacea. Epsolay, is the first product containing BPO that is marketed for the treatment of subtype II rosacea. Epsolay was approved for marketing by the FDA in April 2022 and was licensed in the United States exclusively to Galderma in June 2021 and in Canada exclusively to Searchlight in June 2023. We also entered into commercialization agreements for commercialization of Epsolay in most European countries, South Africa and South Korea during 2024. In August 2025, Health Canada issued a Notice of Compliance, or NOC, for Epsolay for the treatment of inflammatory lesions of rosacea in adults. In April 2025, we sold our rights related to Twyneo and Epsolay in the U.S. to Mayne, following the mutual termination by Sol-Gel and Galderma of the exclusive five-year license agreement in the U.S. for both products, which were entered into in June 2021. In May 2024, we entered into an asset purchase agreement with Beimei, pursuant to which Beimei purchased and licensed the rights to commercialize and manufacture Twyneo in China, Hong Kong, Macau, Taiwan and Israel. We expect to receive, subject to applicable government approvals, a total consideration of up to $15 million, out of which $10 million will be paid as upfront and regulatory milestones, and the remaining $5 million will be paid as royalties on net sales. In June 2023, we entered into exclusive license agreements with Searchlight, a private Canadian specialty pharmaceutical company, pursuant to which Searchlight has the exclusive right, and is responsible for all commercial activities for Twyneo and Epsolay in Canada, over a fifteen-year term that is renewable for subsequent five-year periods. Searchlight will be responsible for obtaining and maintaining ay regulatory approvals required to market and sell the drugs in Canada with support from us. In consideration for the grant of such rights, we will receive up to $11 million in potential upfront payments and regulatory and sales milestones for both drugs, combined. In addition, we will be entitled to royalty percentages of all Canadian net sales ranging from low-double-digits to high teens. 43 Our Products SGT-610 for Gorlin Syndrome We are developing SGT-610, topical patidegib gel 2%, for chronic use in Gorlin syndrome (GS) to reduce the significant clinical morbidity and tumor burden of persistently developing basal cell carcinomas (BCCs) ideally without the systemic tolerability issues seen with oral formulations of Hedgehog (HH) pathway inhibitors. GS is mostly caused by inheritance of one defective copy of the tumor suppressor gene PTCH1. The PTCH1 tumor suppressor gene encodes proteins that are key inhibitory components of the HH signaling pathway. Their loss leads to aberrant hyperactivation of the HH pathway. Proof of the HH signaling pathway as an essential driver of BCCs is demonstrated by the anti-BCC efficacy of smoothened (SMO) inhibitors (vismodegib, sonidegib) in the majority of BCC tumors. Patidegib, like vismodegib and sonidegib, blocks smoothened protein and thereby inhibits HH signaling. Oral HH inhibitors have poor long-term safety and tolerability records due to unacceptable side effects such as intense muscle cramps, loss of hair, sense of taste and weight and fatigue. The following is a depiction of mechanism of action in which patidegib antagonizes Smo in the HH pathway. Hh = hedgehog; Ptch = patched receptor; Smo = smoothened receptor; GLI1 = glioma-associated oncogene 1; SUFU = suppressor of fused homolog gene Patients who develop BCCs at a higher tempo (and often at a younger age) are referred to as having high-frequency BCC. Given the lack of alternate treatment options, patients who develop a high rate of BCCs often need surgery for their chronic tumors. Generally, a facial BCC of longest diameter ≥5 mm is considered a surgically eligible basal cell carcinoma (SEB). A BCC may also be considered eligible for surgery if there is a potential for possible functional/facial health impairment. However, surgery has significant morbidity (e.g., scarring, disfigurement, functional loss of eyelid, nose, ear) and multiple surgeries may lead to the psychological distress of the patient. The number of SEBs, and specifically the chronic surgical intervention, constitutes a significant burden of disease in patients with Gorlin syndrome. SGT-610 has been granted orphan drug designation by the FDA and the EC, as well as Breakthrough Therapy designation by the FDA. If approved by the FDA and EMA, SGT-610 has the market potential to generate, at peak, annual net sales of $600 million (based on good faith estimates derived from our knowledge and based in part on independent sources). Although we believe such data and estimate it to be reliable, it involves a number of assumptions and limitations, including without limitation the number of patients, the penetration level of the treatment, and the expected treatment annual price. We are currently conducting a multicenter, randomized, double-blind, vehicle-controlled study of the efficacy and safety of SGT-610 (patidegib gel 2%), applied topically twice daily to the face of adult subjects with Gorlin syndrome. Subjects were randomized (1:1) to receive either patidegib gel 2% or vehicle gel for 12 months. We began screening patients in November 2023 and in August 2025 we completed screening of 184 patients and randomized 113 patients at 41 treatment sites in the U.S., U.K. and Europe. Key inclusion criteria in the study include subjects that have a confirmed PTCH1 mutation and at least 10 BCCs on the face at the time of screening. The primary endpoint of the study is the number of new BCCs on the face at month 12 after twice daily treatment. The key secondary endpoint is the number of new surgically eligible BCCs at month 12 after twice daily treatment. The study will also assess safety based on the number of adverse events during the study as well as investigator and subject assessments. New BCCs during the study are confirmed by dermoscopy analysis and BCC images will be reviewed and assessed by a central photo review board. We plan on reporting top-line results from the study in the fourth quarter of 2026. 44 The following is a depiction of the Phase 3 trial design: Prior to the acquisition by us of patidegib topical 2% gel from Pellepharm, six clinical studies were completed, five of which investigated the efficacy of patidegib topical 2% gel in reducing tumor burden. In a previous multicenter, randomized, double-blinded, vehicle controlled Phase 3 clinical trial of patidegib topical 2% gel studying the efficacy and safety of patidegib topical 2% gel for the reduction of disease burden of persistently developing BCCs in subjects with basal cell nevus syndrome, the patidegib topical 2% arm was found to be as tolerable as the non-therapeutic vehicle substance with no adverse safety signals. The significant adverse events commonly seen with oral hedgehog inhibitors were not observed. Patidegib topical 2% gel was found to be beneficial for subjects with Gorlin syndrome in the reduction of burden associated with persistently developing BCCs, although the study did not meet its primary endpoint. Our decision to initiate the current Phase 3 study was preceded by an in-depth post-hoc analysis of a previous Phase 3 clinical trial of patidegib topical 2% gel in which we involved several independent statisticians and clinical experts. The analysis revealed two protocol decisions in the original Pellepharm study design which in retrospect we believe were incorrect. First, following the precedent set by previous studies with oral hedgehog inhibitors in BCC patients, Pellepharm randomized Gorlin patients including patients that did not carry the PTCH-1 mutation in the study. Second, Pellepharm enrolled patients with a minimum number of 3 facial BCCs at screening. As expected, these patients tended to develop few new BCCs during the study, which weakened the ability of the study to demonstrate the preventive value of patidegib topical 2% gel. After excluding these two patient groups - patients with low BCC counts at baseline and patients who were non-carriers of the PTCH-1 mutation, the remaining data - despite the reduced sample size –revealed a statistically significant decrease of 48% in the occurrence of new BCCs in the patidegib topical 2% gel arm. This is depicted in the following post-hoc analysis of Pellepharm’s Phase 3 study of PTCH1 positive subgroup with more than 10 facial BCCs when treated with patidegib topical 2% gel following of 12 months of treatment with 0.0098 P-value. 1 55 patients at baseline with more than 10 BCCs and positive PTCH1 mutation. 2 P-value is obtained from a Negative Binomial regression with number of BCCs at Baseline as covariate. Subjects who dropped out due to lack of efficacy or adverse events or used a prohibited concomitant medication were imputed based on Vehicle new BCC counts. Other subjects with missing data were imputed by randomized treatment new BCC counts. 45 In further post-hoc analysis, the PTCH1 positive, high-burden BCC subgroup demonstrated highly beneficial as depicted below. 1 Including patients with and without PTCH1 mutation and patients with more than 2 BCCs at baseline. Based on these findings, we designed our Phase 3 study protocol to exclude patients who do not have the PTCH1 mutation (in the Pellepharm Phase 3 study, patients with the PTCH1 mutation were not excluded) and who have at least 10 BCCs on the face at the time of screening (in the Pellepharm Phase 3 study, inclusion criteria were at least 3 BCCs on the face). In addition to these major modifications of the Pellepharm Phase 3 study design, we have introduced several improvements in the study execution. Dermoscopy is now mandatory for diagnosis and a central photography review board led by a key opinion leader has been assigned to evaluate the endpoint data of each patient. To increase patient study compliance, the number of visits during the 12 months of treatment has been reduced from 14 to 6 onsite visits and 8 remote visits, and a patient retention function was established. We believe that these improvements, which are aimed to address the weaknesses in the Pellepharm study design, will reduce variability and statistical “noise” ensuring more accurate diagnosis and counting of BCCs at each patient visit. Basal Cell Carcinomas Basal cell carcinomas, BCCs are the most common of human cancers, with approximately 3.6 million cases diagnosed each year in the U.S. The overwhelming majority of BCCs occur at a low tempo with a strong predilection for sun exposed skin sites in persons of Northern European descent who have had excessive sun exposure. They are most commonly seen starting in the fourth decade of life. Some patients develop BCCs at a higher tempo and often at a younger age. They are referred to as having High Frequency BCC (HF-BCC). These include patients with rare genetic BCC syndromes that have been well characterized along a spectrum of severity and frequency of BCC formation. Gorlin syndrome is the most common of these rare conditions. More recently, a subset of patients with HF-BCC has been identified who develop multiple BCCs throughout life at an unusually high frequency, but who do not qualify for a diagnosis of Gorlin syndrome. This patient population is referred to as non Gorlin high frequency basal cell carcinoma. 46 Gorlin Syndrome Gorlin syndrome (GS) is a rare disease with no therapies currently approved by the FDA or the EC for this disease. Gorlin syndrome is estimated to affect approximately 1 in 31,000 people (an estimated 11,000 people in the U.S.) with an estimated birth incidence of 1 in 19,000 and is an autosomal dominant genetic disorder, mostly caused by inheritance of one defective copy of the tumor suppressor gene PTCH1. GS is mostly caused by inheritance of one defective copy of the tumor suppressor gene PTCH1. The PTCH1 tumor suppressor gene encodes proteins that are key inhibitory components of the HH signaling pathway. Their loss leads to aberrant hyperactivation of the HH pathway. Gorlin syndrome is also called nevoid BCC syndrome because approximately 90% of individuals with this syndrome develop multiple BCCs by age of 35, ranging from a few to many thousands of lesions during a patient’s lifetime. Gorlin syndrome patients are also susceptible to many abnormalities, including, most frequently, palmar and plantar pits and jaw cysts, and, most devastatingly, medulloblastomas. Positive PTCH1 mutation is observed in the vast majority of GS patients, with Pellepharm Phase 3 study reporting 82% patients with positive PTCH1 and Sol-Gel’s ongoing Phase-3 study 87% of the screened patients carry positive PTCH1 mutation. Painful surgical excision is currently the treatment of choice for BCCs. However, as multiple BCCs continue to evolve, repeated surgical intervention becomes practically impossible, which makes the prevention of the development of new BCCs a critical treatment consideration. Patidegib, the active substance in SGT-610, is designed to block the SMO signal, thus allowing cells to function normally and reduce production of new tumors. Current Treatment Options for Gorlin Syndrome In general, patients with Gorlin syndrome have their BCCs treated as they become problematic, such as when the BCCs present a risk of invasion of vital structures on the face such as eyes, nose, or ears, or become large enough off the face that they are uncomfortable, bleed, etc. Patients with Gorlin syndrome are typically never free of BCCs. Although currently available oral drug treatments can produce partial or complete clinical clearing, once the drug is stopped the BCCs recur. Topical Treatment: There are no approved drugs for preventing formation of new BCC lesions. Several topically-applied drugs are used in the treatment of BCCs, in particular imiquimod and 5-fluorouracil. Based on clinical trials performed both of these topical products can cure approximately 80% of the superficial subtype of BCCs, most of which generally occur off the face. However, clinical trials demonstrate that these treatments generally are not useful against nodular BCCs, which are the more prevalent subtype, especially on the face. In addition, clinical trials show that both typically cause significant inflammation at sites of application, which render them inadequate for the long-term management of a chronic condition. Retinoid Treatment: Oral retinoid treatment of patients with Gorlin syndrome can reduce the rate of development of BCCs, but based on clinical trials it does so only at a dose that usually produces intolerable side effects. Oral HH Inhibitors: With identification of uncontrolled HH signaling as the driving molecular abnormality in all BCCs, several anti-HH drugs have been developed for oral treatment of BCCs, and two of these - vismodegib and sonidegib - have been approved for systemic treatment of advanced BCCs defined as BCCs whose surgical excision likely would produce unsatisfactory results (i.e. “locally advanced”) or those which have become metastatic. Clinical trials demonstrate that approximately 50% of such advanced BCCs fail to respond initially, frequently due to mutations in the smoothened (SMO) gene, which encodes the protein to which these HH inhibitor drugs bind. Clinical trials further evidence that of those that do respond, a significant proportion develop secondary resistance, often due to mutations in the drug binding pocket of the Smo protein. Vismodegib has been studied for efficacy against BCCs in patients with Gorlin syndrome and has demonstrated a combined result of shrinkage of existing BCCs and prevention of the development of new BCCs as long as patients continue to take vismodegib. However, clinical trials show that most patients discontinue vismodegib because of class-specific side effects that affect their quality of life. Clinical trials demonstrate that oral HH inhibitors have a poor long-term safety and tolerability record for a chronic condition due to unacceptable side effects such as loss of hair, sense of taste, and weight; fatigue; and intense muscle cramps. The severity of the adverse events (AEs) associated with vismodegib is illustrated by the fact that 54% of patients with Gorlin syndrome in an oral vismodegib clinical trial discontinued treatment because of adverse effects despite clear efficacy against their BCCs. Surgical Treatment of BCCs: Given the lack of alternative treatment options, patients who develop a high rate of BCCs often need surgery for their chronic tumors. However, studies show that surgery has significant morbidity (e.g., scarring, disfigurement, functional loss of eyelid, nose, ear) and multiple surgeries may lead to psychological distress of the patient. The number of surgically eligible BCCs and specifically, the chronic surgical intervention, constitutes a significant burden of disease in patients with Gorlin syndrome. High Frequency BCC: High-frequency basal cell carcinoma, or HF-BCC, is a severe form of basal cell carcinoma characterized by the occurrence of more than nine BCC lesions over a three-year period. Somatic mutations in PTCH1 may contribute to the development of BCC and, under certain environmental and epigenetic influences, may be associated with progression to multiple lesions. Based on published literature, the prevalence of HF-BCC in the United States was estimated at 51 per 100,000 individuals. There are currently no therapies specifically approved for HF-BCC. Management of HF-BCC is primarily based on surgical intervention and, in some cases, off-label use of oral hedgehog pathway inhibitors, which may be associated with significant adverse reactions that can limit treatment duration. We believe that, if successfully developed and approved, therapies targeting even a very small subset of patients with severe HF-BCC may represent a significant commercial opportunity, with sales potential that could be at least double that of the Gorlin syndrome indication. 47 SGT-210 for new indications with significant unmet need SGT-210 (erlotinib) is a topical drug candidate platform designed to enable local EGFR inhibition with limited systemic exposure. Erlotinib is an epidermal growth factor receptor inhibitor (EGFRi). Sol-Gel’s expertise enabled the development of a high-concentration topical erlotinib intended to maximize local activity while minimizing systemic absorption. In our completed Phase 1 maximal-use pharmacokinetic study, SGT-210 was found to be well tolerated, with minimal systemic absorption, and no safety findings that affected treatment adherence. In addition, compassionate-use treatment with SGT-210 in a paediatric patient with Olmsted syndrome, an ultra-rare debilitating skin disorder with no approved therapy, was associated with improvement in facial and hand hyperkeratosis and reductions in pain and itching. Following the unblinding of clinical data from our vehicle-controlled Phase 1b proof-of-concept study of erlotinib ointment in Darier disease patients, we announced in December 2025 that the data did not show differentiation between the investigational drug products on the study’s efficacy assessments, and we decided not to advance development for this indication. We currently intend to pursue small feasibility studies in new indications with significant unmet need where we believe the mechanistic rationale for SGT-210 is strong. Twyneo for Acne Vulgaris Using our proprietary, silica-based microencapsulation technology platform, we developed Twyneo to become a preferred treatment for acne vulgaris by dermatologists and their patients. Twyneo was approved for marketing by the FDA in July 2021. Twyneo is a novel, once-daily, non-antibiotic topical cream containing a fixed-dose combination of encapsulated benzoyl peroxide and encapsulated tretinoin that we developed for the treatment of acne vulgaris. Studies have shown that benzoyl peroxide and tretinoin are effective in treating acne as monotherapies; moreover, according to an article in the American Academy of Dermatology (2009), dermatologists recommend combining the two monotherapies as a first-line approach for acne, but a drug-drug interaction that causes the degradation of tretinoin has previously prohibited the development of a combination therapy. By encapsulating the two agents separately through the use of our technology platform, Twyneo is designed to be a fixed-dose combination that otherwise would not be stable. Similar to other combination drug products, such as clindamycin and benzoyl peroxide, Twyneo is required to be kept refrigerated throughout the supply chain and then stored in ambient conditions upon its distribution to patients. Pre-clinical data suggests that Twyneo may be more tolerable than generic tretinoin gel 0.1% and Epiduo, a branded fixed-dose combination of benzoyl peroxide and adapalene, without a corresponding loss in efficacy. In addition, Epiduo and its successor Epiduo Forte contain adapalene as opposed to tretinoin, which is widely considered to be more effective than adapalene, but generally causes greater irritation. In the U.S. Twyneo competes directly with Winlevi, Aklief, Epiduo, Epiduo Forte and Cabtreo. On December 30, 2019, we announced top-line results from two pivotal Phase 3 clinical trials evaluating Twyneo for the treatment of acne vulgaris. Twyneo met all co-primary endpoints in both Phase 3 trials. The Phase 3 program enrolled an aggregate of 858 patients aged nine and older in two multicenter, randomized, double-blind, parallel group, vehicle-controlled trials at 63 sites across the United States. Twyneo demonstrated statistically significant improvement in each of the co-primary endpoints of (1) the proportion of patients who succeeded in achieving at least a two grade reduction from baseline and Clear (grade 0) or Almost Clear (grade 1) at Week 12 on a 5-point Investigator Global Assessment (IGA) scale, (2) an absolute change from baseline in inflammatory lesion count at Week 12, and (3) and an absolute change from baseline in non-inflammatory lesion count at Week 12. In addition, Twyneo was found to be well-tolerated. Acne Market Opportunity Acne vulgaris is a disease characterized by areas of scaly red skin, non-inflammatory blackheads and whiteheads, inflammatory lesions, papules and pustules and occasionally boils and scarring that occur on the face, neck, chest, back, shoulders and upper arms. The development of acne lesions is caused by genetic and environmental factors that arise from the interplay of the following pathogenic factors: • blockage of hair follicles through abnormal keratinization in the follicle, which narrows pores; • increase in oils, or sebum production, secreted by the sebaceous gland; • overgrowth of naturally occurring bacteria caused by the colonization by the anaerobic lipohilic bacterium Propionibacterium acnes, or P. acnes; • inflammatory response due to relapse of pro-inflammatory mediators into the skin. Due to the frequency of recurrence and relapse, acne vulgaris is characterized as a chronic inflammatory disease, which may require treatment over a prolonged period of time. Acne vulgaris is one of the three most prevalent skin diseases in the world and is the most commonly treated skin disease in the United States. According to the American Academy of Dermatology, acne affects approximately 40 to 50 million people in the United States and approximately 85% of people between the ages of 12 and 24 experience some form of acne. Acne vulgaris patients suffer from the appearance of lesions on areas of the body with a large concentration of oil glands, such as the face, chest, neck and back. These lesions can be inflamed (papules, pustules, nodules) or non-inflamed (comedones). Early effective treatment is recommended to lessen the overall long-term impact. For most people, acne diminishes over time and tends to disappear, or at least to decrease, by the age of 25. There is, however, no way to predict how long it will take for symptoms to disappear entirely, and some individuals continue to suffer from acne well into adulthood. 48 Current Treatment Landscape for Acne The treatment options for acne depend on the severity of the disease and consist of topical and oral drugs: • Mild acne: characterized by few papules or pustules (both comedonal and inflammatory); treated with an over-the-counter product or topical prescription therapies. • Moderate acne: characterized by multiple papules and pustules with moderate inflammation and seborrhea (scaly red skin); treated with a combination of oral antibiotics and topical therapies. • Severe acne: characterized by substantial papulopustular disease, many nodules and/or cysts and significant inflammation and seborrhea; treated with oral and topical combination therapies and photodynamic therapy as a third-line treatment. Topical therapies dominate the acne market as physicians and patients often prefer therapies that act locally on the skin, while minimizing side effects. For more pronounced symptoms, patients are typically treated with a combination of topical and oral therapies. The acne prescription treatment landscape is comprised of four classes of topical products and two classes of oral products: • Topical over-the-counter monotherapies such as adapalene 0.1%, benzoyl peroxide and salicylic acid, in different concentrations, are the most commonly used therapies. These are generally tolerable first-line treatments for mild acne, but less efficacious than prescription therapies. • Topical prescription antibiotic monotherapies such as clindamycin and erythromycin that are most commonly used as topical therapies in cases of mild-to-moderate acne. • Topical prescription retinoid monotherapies such as tretinoin, adapalene 0.3% and tazarotene. Physicians view retinoids as moderately efficacious, but they have high rates of skin irritation. • Topical prescription combination products such as combinations of BPO/adapalene, BPO/clindamycin, BPO/adapalene/clindamycin, BPO/erythromycin and clindamycin/tretinoin. These target multiple components that contribute to the development of acne, though topical side effects are common. • Oral prescription antibiotics such as doxycycline and minocycline. These are typically used as step-up treatments for more severe cases of acne, with risk of systemic side effects. • Oral prescription isotretinoin, which is primarily used for severe cystic acne and acne that has not responded to other treatments. The use of oral prescription isotretinoin is tightly controlled due to tolerability issues. Epsolay for Subtype II Rosacea Epsolay Overview Epsolay is a once-daily investigational topical cream containing 5% encapsulated benzoyl peroxide that we have developed for the treatment of papulopustular (subtype II) rosacea. Subtype II rosacea is characterized by small, dome-shaped erythematous papules, tiny surmounting pustules on the central aspects of the face, solid facial erythema and edema, and thickening/overgrowth of skin. Subtype II rosacea resembles acne, except that comedones are absent, and patients may report associated burning and stinging sensations. In the U.S. Epsolay competes directly with Soolantra. We utilized the FDA’s 505(b)(2) regulatory pathway in seeking approval of Epsolay in the United States. On July 8, 2019, we announced positive top-line results from our Phase 3 program evaluating Epsolay. The program enrolled 733 patients aged 18 and older in two identical, double-blind, vehicle-controlled Phase 3 clinical trials at 54 sites across the United States. Epsolay demonstrated statistically significant improvement in both co-primary endpoints of (1) the number of patients achieving “clear” or “almost clear” in the Investigator Global Assessment (IGA) relative to baseline at week 12 and (2) absolute mean reduction from baseline in inflammatory lesion count at week 12. In an additional analysis, Epsolay demonstrated rapid efficacy, achieving statistically significant improvements on both co-primary endpoints compared with vehicle as early as Week 2. In addition, Epsolay was found to be well- tolerated. On February 12, 2020, we announced positive topline results from our open-label, long-term safety study, evaluating Epsolay for a treatment duration up to 52 weeks. Epsolay was approved for marketing by the FDA in April 2022. 49 Current Treatment Landscape for Subtype II Rosacea As there is no cure for rosacea, treatment is largely focused on managing the disease. We believe that a significant market opportunity exists for a subtype II rosacea treatment option that can provide both efficacy and higher tolerability than existing treatments. There are currently five approved drugs for the treatment of subtype II rosacea: Soolantra, Metrogel, Oracea, Zilixi and generic metronidazole. In certain cases, dermatologists often prescribe oral antibiotics either as monotherapies or in conjunction with approved medications. Our Solution for Subtype II Rosacea — Epsolay Benzoyl peroxide is approved by the FDA for the treatment of acne and is widely considered to be safe and effective. Previously, there was no benzoyl peroxide product approved for the treatment of rosacea as a result of potential tolerability issues, despite clinical studies showing that treatment with benzoyl peroxide could be efficacious. According to a published study, benzoyl peroxide was found to be an effective treatment for rosacea but caused irritation. Using our proprietary, silica-based microencapsulation technology platform, we believe our Epsolay treatment of papulopustular (subtype II) rosacea can improve on current subtype II rosacea treatments in the following ways: • Epsolay creates a silica-based barrier between benzoyl peroxide crystals and the skin and, as a result, can reduce irritation typically associated with topical application of benzoyl peroxide, increasing the potential for more tolerable application to rosacea-affected skin. • Epsolay’s release of the drug can reduce irritation while maintaining efficacy. Epsolay is an innovative topical cream, and the first FDA approved product containing benzoyl peroxide for the treatment of subtype II rosacea. Generic Drug Product Candidates We previously had collaboration arrangements with Perrigo to develop a portfolio of 11 generic topical dermatological product candidates. In November 2021, we announced that we had signed an agreement with Padagis, pursuant to which we sold our rights related to 10 generic collaborative agreements between the parties. Under the terms of this agreement with Padagis, effective as of we received $21.5 million over 24 months, in lieu of our share in the ten generic programs, two of which were approved by the FDA, and eight of which are unapproved. Pursuant to the agreement, effective as of November 1, 2021, we ceased paying any outstanding and future operational costs related to these 10 collaborative agreements. Following the agreement, we had one remaining active collaboration agreement with Padagis for the development, manufacturing and commercialization of a generic drug product to Zoryve® Cream (roflumilast cream 0.3%). On August 15, 2024, we signed a new agreement with Padagis, which replaced the parties’ prior collaboration agreement for the development and commercialization of such generic drug product. Under this new agreement, we are to unconditionally receive eight quarterly payments which will be paid over 24 months and low single digit royalties from gross profits from sales of roflumilast cream for a period of five years, in lieu of our share in future gross profits from such sales. In addition, Sol-Gel ceased paying any outstanding and future costs related to this prior collaboration agreement. To date, we have received from Padagis approximately $5 million in quarterly payments. Our Proprietary Silica-Based Microencapsulation Technology Platform Encapsulation of a drug substance can be made using a variety of techniques, such as solvent evaporation, coacervation, and interfacial polymerization. Most encapsulations involve organic polymers, such as poly-methyl methacrylate, chitosan and cellulose. The resultant encapsulated drug substance can be an aqueous dispersion of varying payload and volume fraction or a dried powder. Control over the encapsulation process when organic polymers are used is challenging and is mainly limited to shell thickness. Other properties of the organic polymer encapsulating material are hard to control. In contrast, we use proprietary ‘sol-gel’ processes to shape silica on site to form microcapsule shells of almost any size and release profile. Sol-gel is a chemical process whereby amorphous silica, or other metal oxides, are made by forming interconnections among colloidal particles (the “sol”) under increasing viscosity until a rigid silica shell (the “gel”) is formed. The drug substance that is added during the sol-gel reaction is encapsulated, using a patented technique, by which a core-shell structure is formed. The drug substance is in the core and the silica is the capsule shell. At the end of the process, the microcapsules are in the shape of small beads ranging from 1 – 50 micron in size. This process results in an aqueous suspension in which the drug substances are entrapped in silica particles. Intellectual Property Our intellectual property and proprietary technology are directed to the development, manufacture and sale of our products. We seek to protect our intellectual property, core technologies and other know-how, through a combination of patents, trademarks, trade secrets, non-disclosure and confidentiality agreements, assignments of invention and other contractual arrangements with our employees, consultants, partners, suppliers, customers and others. 50 We will be able to protect our technology from unauthorized use by third parties only to the extent it is covered by valid and enforceable patents or is effectively maintained as trade secrets. Patents and other proprietary rights are an essential element of our business. If any of the below described applications are not approved, or any of the below described patents are invalidated, deemed unenforceable or otherwise successfully challenged, such loss would have a material effect on the commercialization of Twyneo, Epsolay, our product candidates (once approved), if approved, and our future prospects. Our patent portfolio that is directed to SGT-610, Twyneo, Epsolay and our product candidates includes 166 patents and patent applications and claims processes for manufacture (including silica microencapsulation platform and other technologies), formulations, composition of matter, and methods of use. Of these 166 patents and patent applications, 104 are granted foreign patents and 23 granted patents in the United States) and 39 are pending applications (5 in the United States and 34 in other countries). For SGT-610, we have pending applications that refer to a method of treatment with SGT-610 in US, Europe, United Arab Emirates, The African Regional Intellectual Property Organization (ARIPO), Australia, Brazil, Canada, Chile, China, Eurasia, Israel, Japan, South Korea, Mexico, Malaysia, New Zealand, Singapore, Thailand, Ukraine, and South Africa; one international application that refers to a method of treatment with SGT-610 for a period of more than 12 months; one international application and one pending application in the United States that refer to a process for preparation of SGT-610; and one pending application in the United States that refers to Cyclopamine, the starting material of SGT-610. These patent applications, if granted, will protect SGT-610 until 2046. We purchased from PellePharm 3 granted patents in the US (with a term until 2036 which may be extended until 2041 if PTE is approved by the FDA), 2 granted patents in South Africa, and granted patents in Israel, Japan, Mexico, Canada, Chile, Brazil, Europe, and Australia and a pending application in Hong Kong. We also licensed from Royalty Security LLC (as part of the asset purchase from PellePharm) 19 granted patents in the US (with terms 2027-2031), and 4 granted patents in the rest of the world (Chile, Mexico, and Russia). For SGT-610, we have one trademark, 'Saquelta', registered in Israel, Albania, Armenia, Australia, Azerbaijan, Aruba, Belarus, Bhutan, Bosnia & Herzegovina, Honduras, Botswana, Brazil, China, Colombia, Costa Rica, Canada, Chile, Denmark, Dominican Republic, Egypt, El Salvador, Georgia, Iceland, Jamaica, Japan, Kazakhstan, Kenya, Kyrgyzstan, Liechtenstein, Madagascar, Moldova, Monaco, Montenegro, Morocco, Mozambique, Mexico, Namibia, New Zealand, North Macedonia, Norway, Panama, Russian Federation, San Marino, Serbia, Singapore, South Africa, South Korea, Switzerland, Tajikistan, Turkey, Turkmenistan, Taiwan, Ukraine, USA, Uzbekistan, Uruguay, Vietnam, Zambia, Curacao, European Union, United Kingdom, Venezuela, Peru, Andorra, Hong Kong, Ecuador, and Argentina. Saquelta was also filed for registration in India, Thailand, and Sri Lanka. We also purchased the rights to the trademark ‘Saquelta’ in Barbados, Guatemala, OAPI, Paraguay, Nicaragua, and are yet to record this trademark in our name in such countries. For Twyneo, we have obtained patent protection for the composition of matter in the Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland and the United Kingdom) and Mexico (with a term until 2028). There are four patent families protecting the process for the encapsulation of the active agents of our Twyneo product (one patent family has patents granted in India, Mexico, and Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland and the United Kingdom) (with a term until 2028); the second patent family has patents granted in Mexico (with a term until 2029); the third patent family has patents granted in Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland and the United Kingdom), India, and Mexico (with a term until 2030); and the fourth patent family has patents granted in China, India, Israel and Mexico (with a term until 2026). We own patents granted for the formulation of our Twyneo product in Mexico and Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland, United Kingdom) (with a term until 2032). We have patents granted in Europe (validated in Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, and United Kingdom) India and Mexico (with a term until 2038), for the composition of our Twyneo product, patent granted in Mexico (with a term until 2038) and patent application pending in Europe for the method of treatment of Twyneo (with a term until 2038). All our patents and patent applications protecting Twyneo in the United States were sold to Mayne The trademark ‘Twyneo’ is registered in Israel, Europe (including the United Kingdom), Norway, Canada, Mexico, Brazil, Montenegro, Serbia, and Australia. Twyneo was also filed for registration in India, Iceland, Bosnia & Herzegovina, Albania, North Macedonia, New Zealand, South Korea, Kosovo, and South Africa. In addition, we have registered several other trademarks that may be used as alternatives to Twyneo if needed. For Epsolay, we have obtained patents in China, Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland and the United Kingdom), and Mexico (with a term until 2032) covering the composition for topical treatment of rosacea. There are two patent families directed to the process for encapsulation of the active agents of Epsolay (one patent family has granted patents in Mexico, India and Europe (validated in France, Germany, Ireland, Italy, Spain, Switzerland and the United Kingdom); and the second patent family has patents granted in China, India, Israel and Mexico. 51 We have pending applications in Australia, Brazil, Chile, Colombia, South Korea, Malaysia, New Zealand, Thailand, and in South Africa covering the compositions of Epsolay and Twyneo, the processes for the encapsulation of the active agents of our Epsolay and Twyneo, the processes for the encapsulation of the active agents of our Epsolay and Twyneo, and the methods of use. We have two additional pending applications in China covering the composition, process, and use of Epsolay. All our patents and patent applications protecting Epsolay in the United States were sold to Mayne The trademark ‘Epsolay’ is registered in Europe (including the United Kingdom), Canada, Australia, Iceland, Montenegro, Norway, Serbia, Mexico, and Israel. Epsolay was also filed for registration in Bosnia & Herzegovina, Albania, North Macedonia, New Zealand, China, South Korea, Kosovo, and South Africa. In addition, we have registered several other trademarks that may be used as alternatives to Epsolay if needed. For SGT-210, we have two pending applications in the United States for non-melanoma skin cancers and multiple types of skin keratodermas, and one granted patent in the United States that refer to methods and compositions of use in the treatment of psoriasis. Competition The pharmaceutical industry is subject to intense competition as well as rapid technological changes. Our ability to compete is based on a variety of factors, including product efficacy, safety, cost-effectiveness, patient compliance, patent position and effective product promotion. Competition is also based upon the ability of a company to offer a broad range of other product offerings, large direct sales forces and long-term customer relationships with target physicians. Competition in the dermatology market is also influenced by factors such as reimbursement and formulary placement by government and private payors, pricing and discounting strategies, patient access programs, prescribing restrictions, treatment guidelines, physician and patient familiarity with competing products, and the availability of generic or compounded alternatives. In addition, the increasing use digital prescribing platforms may affect prescribing patterns and competitive dynamics. There are numerous companies that have branded or generic products or product candidates in the dermatology market. Among them are Aclaris Therapeutics, Inc., Akorn, Inc., Almirall S.A., Aqua Pharmaceuticals LLC, Arcutis Biotherapeutics, Bausch Health Companies Inc., Bayer HealthCare AG, Cassiopea SpA, Organon, Galderma Pharma S.A., Glenmark Pharmaceuticals Ltd., G&W Laboratories, Inc., LEO Pharma A/S, Mylan N.V., Mayne Pharma, Novan, Inc., Novartis AG, Palvella Therapeutic, Padagis US LLC, Pfizer, Inc., Spear Therapeutics, Ltd., Sun Pharmaceutical Industries Ltd., Teligent, Inc., Teva Pharmaceutical Industries Ltd. This list is not exhaustive, and additional competitors may emerge. Many of our current and potential competitors market products that are well established, including branded, authorized generic and generic formulations, some of which may be available at significantly lower prices than our products. Generic competition, compounded formulations, and off-label use of approved products may reduce demand for, or pricing of, our products and product candidates. 52 In order for SGT-610, Twyneo, Epsolay and our product candidates, if approved, to compete successfully in the dermatology market, we must demonstrate that their efficacy, safety, tolerability, patient compliance profile and cost-effectiveness provide a compelling alternative to existing therapies, some of which are widely known and accepted by physicians and patients, as well as to future new therapies. Even if clinical benefits are demonstrated, physicians, patients and payors may not perceive our products as offering sufficient incremental value to justify their cost. Competitive pressures, including pricing and discounting by competitors, increased availability of generic alternatives, payor step-edit requirements, prior authorization policies and formulary exclusions, could lead to reduced market share for SGT-610, Twyneo, Epsolay and our product candidates, if approved, and exert downward pressure on pricing. Any such factors could adversely affect our revenues, profitability, business, financial condition, operating results and prospects. Our competitive position also depends in part on the scope, strength and duration of our intellectual property rights and regulatory exclusivity. If our patents or other proprietary protections are challenged, invalidated, circumvented or expire earlier than expected, or if we are unable to obtain or maintain sufficient regulatory exclusivity, our products may face increased competition from generic or alternative products sooner than anticipated, which could materially adversely affect our business and results of operations. Many of the companies, academic research institutions, governmental agencies and other organizations involved in the field of dermatology have substantially greater financial, technical and human resources than we do, and may be better equipped to discover, develop, test and obtain regulatory approvals for products that compete with ours. They may also be better equipped to manufacture, market and sell products. These companies, institutions, agencies and organizations may develop and introduce products and drug delivery technologies competitive with or superior to ours which could inhibit our market penetration efforts. SGT-610 is intended, if approved, for the prevention of new BCCs in patients with Gorlin syndrome. There are currently no approved pharmacologic therapies specifically indicated for the treatment or prevention of BCCs in patients with Gorlin syndrome. Patients are primarily managed through surgical and procedural interventions, off-label therapies and other non-pharmacologic or emerging treatment approaches. In addition, other companies may be developing or may in the future develop competing therapies for this indication. Accordingly, even if SGT-610 is approved, we may face competition sooner or to a greater extent than anticipated. Twyneo and Epsolay target the well-established acne and rosacea markets. Twyneo and Epsolay compete with current standard-of-care treatments, whether branded, generic or over-the-counter, as well as with new treatments to be approved in the future. The current standard-of-care for acne includes topical anti-bacterial drugs such as benzoyl peroxide that are broadly available over-the-counter, prescription drug products that are based on single retinoid drug products such as Differin, Atralin, Retin-A, Retin-A Micro, Tazorac and Altreno, fixed-dose combinations of benzoyl peroxide and adapalene, such as Epiduo and Epiduo Forte, fixed-dose combinations of benzoyl peroxide and clindamycin, such as Duac, Benzaclin, Onexton and Acanya, and fixed-dose combinations of benzoyl peroxide, clindamycin and adapalene, such as Cabtreo, fixed-dose combinations of tretinoin and clindamycin such as Ziana and Veltin, topical antiandrogen such as Winlevi and topical antibiotics such as Aczone and Amzeeq. The current standard of care for rosacea includes Metrogel, Finacea, Soolantra and Zilxi, as well as oral Oracea (doxycycline embedded in a technology platform). As a fixed-dose combination product candidate, Twyneo may also compete with drug products utilizing other technologies that can separate two drug substances, such as dual chamber tubes, dual pouches or dual sachets. In addition to these products, our generic drug product candidates are expected to face direct competition from branded drugs and authorized generics which are prescription drugs produced by the branded pharmaceutical companies and marketed under a private label, at generic prices. Marketing, Sales and Distribution For SGT-610, we are exploring various commercialization strategies, including strategic partnerships or licensing arrangements, particularly outside the U.S. Given the relatively specialized patient population for SGT-610, we may also consider commercializing SGT-610 in the U.S. directly by establishing a focused sales and marketing infrastructure tailored to the targeted audience. Based on a third-party assessment, we currently expect the net annual cost of treatment to be approximately $270,000. Gorlin syndrome is a rare disease with no therapies currently approved by the FDA or the European Commission specifically for this disease. Gorlin syndrome affects approximately 1 in 31,000 people and is an autosomal dominant genetic disorder, mostly caused by inheritance of one defective copy of the tumor suppressor gene PTCH1. Based on this prevalence rate, we estimate that Gorlin syndrome affects approximately 11,000 patients in the United States, though prevalence estimates may vary and the number of diagnosed patients may be lower. At peak, we estimate the number of treatable patients is approximately 4,000 in the United States, 3,200 in the European Union and 2,000 in the rest of the world. We believe this relatively small patient population will require targeted disease education and focused patient identification efforts. There can be no assurance that we will successfully implement any commercialization strategy for SGT-610, or that any such strategy, if implemented, will be successful. We currently have limited internal sales, marketing and distribution capabilities. Accordingly, we have historically relied, and expect to continue to rely, on third-party partners to commercialize our products in most jurisdictions. In April 2025, we sold our rights related to Twyneo and Epsolay in the U.S. to Mayne Pharma, following the mutual termination of the exclusive five-year license agreements between Sol-Gel and Galderma. As a result of that transaction, we no longer conduct, and do not expect to conduct, direct commercial activities for Twyneo or Epsolay in the US. In June 2023, we entered into exclusive license agreements with Searchlight Pharma Inc., pursuant to which Searchlight has the exclusive right and responsibility for all commer Sol-Gel is cial activities for Twyneo and Epsolay in Canada for an initial term of fifteen years, renewable for successive five-year terms. We are eligible to receive up to $11.0 million in aggregate upfront and milestone payments in respect of both products, and tiered royalties ranging from low-double-digit to high-teen percentages on net sales in Canada. In May 2024, Beimei Pharmaceutical Co., Ltd. purchased and licensed the exclusive rights to commercialize Twyneo in mainland China, Hong Kong, Macau, Taiwan and Israel. In August 2025, we entered into a license agreement with Viatris Pty Ltd., a subsidiary of Viatris Inc., for the commercialization of Twyneo and Epsolay in Australia and New Zealand. We have also granted rights to third-party licensees to commercialize Twyneo and Epsolay in the most European countries, the United Kingdom, South Africa and South Korea. We expect to continue to rely on third-party partners with established sales, marketing and distribution capabilities to commercialize Twyneo, Epsolay and, if approved, our product candidates, in lieu of building and maintaining a comprehensive internal sales force and distribution system. If we are unable to enter into such arrangements on acceptable terms, or at all, our ability to successfully commercialize our products and product candidates could be materially adversely affected. 53 Manufacturing For the supply of current good manufacturing practice-grade, or cGMP-grade and clinical trial materials we rely on and expect to continue to rely on third-party CMOs, or on in-house manufacturing capabilities. As of August 2018, our in-house manufacturing operations have been audited for current good manufacturing, or cGMP, compliance, and were granted a cGMP certification by the Israel Ministry of Health. This certification allowed us to manufacture Twyneo and its intermediates to support Phase 3 clinical trials. This cGMP certification expired in 2020, and since no other manufacturing is currently planned at the Company, the Company and the Israel Ministry of Health mutually concluded that the cGMP certification will be reassessed and renewed for other products as they reach relevant stages of development. We have not renewed our ISO 14001:2015 and ISO 45001:2018 certifications due to the limited workload in our laboratories, however we continue to maintain all relevant SOPs for safety and environmental management. For commercial manufacturing of our product candidates, we intend to rely solely on CMOs. It is our policy to have multiple or alternative sources where possible for every service and material we use in our products. Government Regulation Regulation by governmental authorities in Israel, the United States and other countries is a significant factor in the development, manufacturing and commercialization of SGT-610, Twyneo, Epsolay and our product candidates and in our ongoing research and development activities. Our business is subject to extensive government regulation in Israel for its manufacturing activities involving drug products, drug product intermediates, and drug product active substances to be used in clinical trials. Product Approval Process in the United States Review and approval of drugs In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug and Cosmetic Act, or FDCA, and other federal and state statutes and implementing regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions and enforcement actions brought by the FDA, the Department of Justice or other governmental entities. Possible sanctions may include the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties. FDA approval of a new drug application is required before any new unapproved drug or dosage form, can be marketed in the United States. Section 505 of the FDCA describes three types of new drug applications: (1) an application that contains full reports of investigations of safety and effectiveness (section 505(b)(1)); (2) an application that contains full reports of investigations of safety and effectiveness but where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference (section 505(b)(2)); and (3) an application that contains information to show that the proposed product is comparable in active ingredient, dosage form, strength, route of administration, labeling, quality, performance characteristics, and intended use, among other things, to a previously approved product (section 505(j)). Section 505(b)(1) and 505(b)(2) new drug applications are referred to as NDAs, and section 505(j) applications are referred to as abbreviated NDAs, or ANDAs. In general, the process required by the FDA prior to marketing and distributing a new drug, as opposed to a generic drug subject to section 505(j), in the United States usually involves the following: • completion of pre-clinical (or non-clinical) laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practices, or GLP, requirements and other applicable regulations; • submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials in the United States may begin; • approval by an independent institutional review board, or IRB, or ethics committee covering each clinical site before each trial may be initiated at such sites; • performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements and other clinical trial-related requirements to establish the safety and efficacy of the proposed drug for its intended use; • preparation and submission to the FDA of an NDA; • satisfactory completion of an FDA advisory committee review, if applicable; 54 • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with current good manufacturing practice, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; • satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; and • payment of applicable user fees and FDA review and approval of the NDA. Pre-clinical studies Pre-clinical studies generally include laboratory evaluation or product chemistry, formulation and toxicity, as well as animal studies to assess the potential safety and efficacy of the product candidate. Pre-clinical safety tests must be conducted in compliance with the FDA regulations. The Consolidated Appropriations Act for 2023, amended the FDCA to specify that nonclinical testing for drugs may, but is not required to, include in vivo animal testing. According to the amended language, a sponsor may fulfill nonclinical testing requirements by completing various in vitro assays (e.g., cell-based assays, organ chips, or microphysiological systems), in silico studies (i.e., computer modeling), other human or non-human biology-based tests (e.g., bioprinting), or in vivo animal tests. The conduct of nonclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the pre-clinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND which must become effective before clinical trials may commence. An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for clinical studies. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30- day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor, and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial. Long-term non-clinical studies, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND application is submitted. Clinical trials Clinical trials involve the administration of an investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written trial protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. An IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review at least annually. The IRB must review and approve, among other things, the trial information to be provided to trial subjects, including any informed consent forms and other proposed communications with subjects. An IRB must operate in compliance with FDA regulations. Some studies also include oversight by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. The FDA or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the investigational drug has been associated with unexpected serious harm to patients. Clinical trials are typically conducted in three sequential phases, which may overlap or be combined: • Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage. • Phase 2: The drug is administered to a limited patient population to identify possible short-term adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. • Phase 3: The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. 55 In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase 4 studies may be conducted after initial marketing approval, and may be used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA. Congress recently amended the FDCA, as part of the Consolidated Appropriations Act for 2023, in order to require each sponsor of a Phase 3 clinical trial, or other “pivotal study” of a new drug to support marketing authorization, to design and submit a diversity action plan for such clinical trial. The action plan must include the sponsor’s diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. A sponsor must submit a diversity action plan to the FDA by the time the sponsor submits the relevant clinical trial protocol to the agency for review. The FDA may grant a waiver for some or all of the requirements for a diversity action plan. It is unknown at this time how the diversity action plan may affect Phase 3 trial planning and timing, but if the FDA objects to a sponsor’s diversity action plan or otherwise requires significant changes to be made, it could delay initiation of the relevant clinical trial. Sponsors of certain clinical trials generally must register such trials and disclose certain trial information within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on the ClinicalTrials.gov data registry. Information related to the investigational product, patient population, phase of investigation, trial sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion, but such disclosures may be delayed in some cases for up to two years after the date of completion of the trial. Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government. The U.S. Department of Health and Human Services’ Final Rule and NIH’s complementary policy on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and the government has brought enforcement actions against non-compliant clinical trial sponsors. Competitors may use the publicly available information about clinical trials to gain knowledge regarding the progress of development programs. Sponsors or distributors of investigational products for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a publicly available policy on evaluating and responding to requests for expanded access requests. Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. While the IND is active and before approval, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure. In addition, during the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use the meetings at the end of the Phase 2 trial to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new drug. Submission of an NDA to the FDA Assuming successful completion of all required testing with all applicable regulatory requirements, the results of the pre-clinical studies and clinical trials, together with other detailed information, including among other things information on the manufacture, control and composition of the product and proposed labeling, are submitted to the FDA as part of an NDA requesting approval to market the product candidate for one or more indications. In particular, an NDA must demonstrate that the manufacturing methods and quality controls used to produce the drug product are adequate to preserve the drug’s identity, strength, quality, and purity. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of a use of the product, or from a number of alternative sources, including studies initiated by investigators. FDA approval of an NDA must be obtained before the corresponding drug may be marketed in the United States. 56 Under the Prescription Drug User Fee Act, as amended, or PDUFA, each NDA submission is subject to a substantial application user fee, and the sponsor of an approved NDA is also subject to an annual program fee. The FDA adjusts the PDUFA user fees on an annual basis. The application user fee must be paid at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for products with orphan designation or for the first application filed by a small business. The FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information and subject to payment of required user fees. The resubmitted application is also subject to review before the FDA accepts it for filing. If found complete, the FDA will accept the NDA for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. Under PDUFA, the FDA has agreed to certain performance goals in the review of NDAs through a two-tiered classification system, standard review and priority review. FDA’s goal is to review NDAs subject to standard review within 10 months of the filing date, or within six months of the filing date for priority review. The FDA, however, may not approve a drug within these established goals, as the review process is often significantly extended by FDA requests for additional information or clarification, and its review goals are subject to change from time to time. During the review process, the FDA reviews the NDA to determine, among other things, whether the product is safe and effective and whether the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the product’s continued strength, quality, and purity. The FDA may also refer applications for novel drug products or drug products which present difficult questions of safety or efficacy to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations carefully when making final decisions on approval. Before approving an NDA, the FDA will typically inspect the facility or facilities at which the product is manufactured. The agency will not approve the product unless cGMP compliance is satisfactory. Additionally, the FDA will typically inspect one or more clinical sites to assure compliance with GCP requirements. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies as part of the review process and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. An approval letter authorizes commercial marketing of the product with specific prescribing information for one or more indications. A complete response letter indicates that the review cycle for an application is complete and that the application will not be approved in its present form. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application. Even with submission of this additional information, the FDA may ultimately decide that an application does not satisfy the regulatory criteria for approval. If, or when, the deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. If a product is approved, the approval will impose limitations on the indicated uses for which the product may be marketed, may require that warning statements be included in the product labeling, may require that additional studies or trials be conducted following approval as a condition of the approval, may impose restrictions and conditions on product distribution, prescribing or dispensing in the form of a risk management plan, or impose other limitations. For example, as a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug outweigh the potential risks. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA determines a REMS is necessary during review of the application, the drug sponsor must submit a proposed REMS plan to obtain approval for the drug product. A REMS may be required to include various elements, such as a medication guide or patient package insert, a communication plan to educate healthcare providers of the drug’s risks, limitations on who may prescribe or dispense the drug, or other elements to assure safe use, such as special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries. In addition, the REMS must include a timetable to periodically assess the strategy. The requirement for a REMS can materially affect the potential market and profitability of a drug. Further changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented, which may require manufacturers to develop additional data or conduct additional pre-clinical studies and clinical trials. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses similar procedures in reviewing NDA supplements as it does in reviewing NDAs. 57 Fast Track, Priority Review, and Breakthrough Therapy Designations A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of new drugs that meet certain criteria. Specifically, new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition. Fast track designation provides increased opportunities for sponsor interactions with the FDA during preclinical and clinical development, in addition to the potential for rolling review once a marketing application is filed, meaning that the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept the sections and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the application. A fast track designated product candidate may also qualify for accelerated approval (described below) or priority review, under which the FDA sets the target date for FDA action on the NDA or biologics license application at six months after the FDA accepts the application for filing. Priority review is granted when there is evidence that the proposed product would be a significant improvement in the safety or effectiveness of the treatment, diagnosis, or prevention of a serious condition. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation. If criteria are not met for priority review, the application is subject to the standard FDA review period of 10 months after FDA accepts the application for filing. In addition, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Breakthrough therapy designation provides all the features of fast track designation in addition to intensive guidance on an efficient development program beginning as early as Phase 1, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review and regulatory staff in a proactive, collaborative, cross-disciplinary review, where appropriate. A drug designated as breakthrough therapy is also eligible for accelerated approval if the relevant criteria are met. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Fast track, priority review and breakthrough therapy designations do not change the scientific or medical standards for approval or the quality of evidence necessary to support approval but may expedite the development or approval process. Accelerated Approval In addition, products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval from the FDA and may be approved on the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug or biologic when it has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform post-marketing clinical trials to verify and describe the predicted effect on IMM or other clinical endpoint, and the product may be subject to expedited withdrawal procedures. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug or biologic, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval when the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate long-term clinical benefit of a drug. The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit. 58 The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the product candidate’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or to confirm the predicted clinical benefit of the product during post-marketing studies, would allow the FDA to withdraw approval of the product. As part of the Consolidated Appropriations Act for 2023, Congress provided the FDA additional statutory authority to mitigate potential risks to patients from continued marketing of ineffective drugs or biologics previously granted accelerated approval. Under the act’s amendments to the FDCA, the FDA may require the sponsor of a product being considered for accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial is complete, and such reports are published on the FDA’s website. The amendments also give the FDA the option of using expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. All promotional materials for product candidates being considered and approved under the accelerated approval program are subject to prior review by the FDA. Post-approval Requirements Any drug products receiving FDA approval will be subject to continuing regulation by the FDA. Certain requirements include, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information on an annual basis or more frequently for specific events, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying with FDA promotion and advertising requirements. The promotion and advertising requirements include standards for direct-to-consumer advertising, prohibitions against promoting drugs for uses or patient populations that are not described in the drug’s approved labeling, known as “off-label use,” and other promotional activities, such as those considered to be false or misleading. Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses. As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act, violations of which are subject to significant civil fines and penalties. In addition, manufacturers of prescription products are required to disclose annually to the Center for Medicaid and Medicare any payments made to physicians in the United States under the Physician Payments Sunshine Act of 2012. These payments could be in cash or kind, could be for any reason, and are required to be disclosed even if the payments are not related to the approved product. A failure to fully disclose or not report in time could lead to significant penalties. The manufacturing of any drug products must comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations. The FDA’s cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are also required to register their establishments and list any products they make with the FDA and to comply with related requirements in certain states. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. These entities are further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in serious and extensive restrictions on a product, manufacturer or holder of an approved NDA, as well as lead to potential market disruptions. These restrictions may include recalls, suspension of a product until the FDA is assured that quality standards can be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes the imposition of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review and approval. There also are continuing, annual program user fee requirements for any approved products, as well as new application fees for supplemental applications with clinical data. The FDA also may require post-marketing testing, or Phase IV testing, as well as surveillance to monitor the effects of an approved product or place conditions on an approval that could otherwise restrict the distribution or use of our product candidates. 59 Once approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties. In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. Furthermore, the Drug Supply Chain Security Act, or DSCSA, was enacted with the aim of building an electronic system to identify and trace certain prescription drugs distributed in the United States, including most biological products. The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers over a ten-year period, which culminated in November 2023. After an additional one-year stabilization period to give entities subject to the DSCSA additional time to finalize interoperable tracking systems and to ensure supply chain continuity, the applicable requirements under the DSCSA became fully enforceable as of November 27, 2024. From time to time, new legislation and regulations may be implemented that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. It is impossible to predict whether further legislative or regulatory changes will be enacted, whether FDA regulations, guidance or interpretations will be changed or what the impact of such changes, if any, may be. Pediatric trials and exclusivity Even when not pursuing a pediatric indication, under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that is adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. A sponsor that is planning to submit a marketing application for a product that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan, or PSP, within 60 days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 clinical trial. The initial PSP must contain an outline of the proposed pediatric trials the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric trials along with supporting information. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon the PSP. The FDA or the applicant may request an amendment to the plan at any time. The FDA may also, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Separately, pediatric exclusivity is a type of non-patent marketing exclusivity available in the United States and, if granted, it provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity or listed patents. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. The issuance of a written request does not require the sponsor to undertake the described studies. Orphan Drugs Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, defined as a disease or condition with a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 individuals in the United States and when there is no reasonable expectation that the cost of developing and making available the drug in the United States will be recovered from sales in the United States for that drug. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan indication are disclosed publicly by the FDA. 60 If a drug product that has orphan drug designation subsequently receives the first FDA approval for a particular active ingredient for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan product exclusivity or if the FDA finds that the holder of the orphan product exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan product to meet the needs of patients with the disease or condition for which the drug was designated. Orphan product exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee. A drug with orphan drug designation may not receive orphan product exclusivity if it is approved for a use that is broader than the indication for which it received orphan drug designation. In addition, orphan product exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Court cases have challenged FDA’s approach to determining the scope of orphan drug exclusivity; however, at this time the agency continues to apply its long-standing interpretation of the governing regulations and has stated that it does not plan to change any orphan drug implementing regulations. The Hatch-Waxman Amendments ANDA Approval Process The Hatch-Waxman Amendments established abbreviated FDA approval procedures for drugs that are shown to be equivalent to proprietary drugs previously approved by the FDA through the NDA process. Approval to market and distribute these drugs is obtained by submitting an ANDA to the FDA. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data, and quality control procedures. Premarket applications for generic drugs are termed abbreviated because they generally do not include pre-clinical and clinical data to demonstrate safety and effectiveness. Instead, a generic applicant must demonstrate that its product is bioequivalent to a drug product previously approved under an NDA, known as the reference listed drug, or RLD, and may rely on the preclinical and clinical testing previously conducted for the RLD. Under the statute, a generic drug is bioequivalent to an RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” In certain situations, the FDA may permit an applicant to submit an ANDA for a generic product with a route of administration, strength or dosage form that differs from an RLD, or that has one different active ingredient from an RLD if the product is a fixed-combination drug, pursuant to the filing and approval of a suitability petition. The FDA will permit the submission of an ANDA in such cases if it finds, among other things, that the proposed generic product does not raise new questions of safety and effectiveness as compared to the RLD. A product is not eligible for ANDA approval if the FDA determines that it is not bioequivalent to the RLD, if it is intended for a different use, or if it is not subject to an approved suitability petition. However, such a product might be approved under an NDA, with supportive data from clinical trials. 505(b)(2) NDAs Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments and permits the filing of an NDA where at least some of the information required for approval comes from studies or trials not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2) typically serves as an alternative path to FDA approval for modifications to formulations or uses of products previously approved by the agency. If the 505(b)(2) applicant can establish that reliance on the FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain pre-clinical studies or clinical trials for the new product. The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved reference drug. The FDA may then approve the new product candidate for all, or some, of the labeled indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant. Orange Book Listing In seeking approval for a drug through an NDA, including a 505(b)(1) and 505(b)(2) NDA, applicants are required to list with the FDA certain patents whose claims cover the applicant’s product or method of using the product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in the FDA’s publication of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the “Orange Book.” Any applicant who submits an ANDA seeking approval of a generic equivalent of a drug listed in the Orange Book or a Section 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) the required patent information on the drug product has not been filed by the original applicant; (2) the listed patent has expired; (3) the listed patent has not expired but will expire on a particular date and approval for the follow-on product is sought after patent expiration; or (4) that such patent is invalid, unenforceable or will not be infringed by the manufacture, use or sale of the follow-on drug product. This last certification is known as a Paragraph IV certification. The applicant may also elect to submit a “section viii” statement certifying that it is not seeking approval for the proposed label does not contain (or carves out) any language regarding a condition of use that is the subject of a valid listed patent for the RLD. 61 If a Paragraph I or II certification is filed, the FDA may make approval of the application effective immediately upon completion of its review. If a Paragraph III certification is filed, the approval may be made effective on the patent expiration date specified in the application, although a tentative approval may be issued before that time. Further, the FDA will also not approve, as applicable, an ANDA or Section 505(b)(2) NDA until any non-patent exclusivity, as described in greater detail below, has expired. If the ANDA or Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and relevant patent holders within 20 days after the ANDA or Section 505(b)(2) NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement suit against the ANDA or Section 505(b)(2) applicant. Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the ANDA or Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date of receipt of the Paragraph IV certification notice, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant. Even if a patent infringement claim is not brought within the 45-day period, a patent infringement claim may be brought under traditional patent law, but it does not invoke the 30-month stay. The court may shorten or lengthen either the 30-month or the seven and one-half year period if either party is found not to be reasonably cooperating in expediting the litigation. Non-Patent Exclusivity In addition to patent exclusivity, NDA holders may be entitled to a period of non-patent exclusivity, during which the FDA may not approve an ANDA or 505(b)(2) application that relies on the listed drug. For example, a pharmaceutical manufacturer may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity, or NCE, which is a drug that contains an active moiety that has not been approved by FDA in any other NDA. An “active moiety” is defined as the molecule or ion responsible for the drug substance’s physiological or pharmacologic action. During the five year exclusivity period, the FDA cannot accept for filing any ANDA seeking approval of a generic version of that drug or any 505(b)(2) NDA for the same active moiety and that relies on the FDA’s findings regarding that drug, except that FDA may accept an application for filing after four years if the ANDA or 505(b)(2) applicant makes a Paragraph IV certification. The FDCA also provides for a period of three years of exclusivity for an NDA, 505(b)(2) NDA or supplement thereto if one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant are deemed by the FDA to be essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication. The three-year exclusivity covers only the conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving follow-on applications for drugs containing the original active agent. Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2) application for the protected modification until after that three-year exclusivity period has run. However, unlike NCE exclusivity, the FDA can accept an application and begin the review process during the exclusivity period. Review and Approval of Drug Products Outside the United States To market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, manufacturing, clinical trials, marketing authorization, commercial sales and distribution of our products. The foreign regulatory approval process includes all of the risks associated with FDA approval set forth above, as well as additional country-specific regulation. Whether or not we obtain FDA approval for a product candidate, we must obtain approval of the product by the comparable regulatory authorities of foreign countries before commencing clinical trials or marketing in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing, promotion and reimbursement vary greatly from country to country. Non-clinical Studies and Clinical Trials in the EU Similarly to the United States, the various phases of non-clinical and clinical research in the EU are subject to significant regulatory controls. In the EU, non-clinical (pharmaco‑toxicological) studies must comply with a comprehensive regulatory framework, including Directive 2001/83/EC and Regulation (EC) No 726/2004, the animal welfare requirements of Directive 2010/63/EU, the GLP principles laid down in Directive 2004/10/EC, as well as the relevant ICH guidelines. 62 Unless otherwise justified for particular medicinal products (e.g., radio‑pharmaceutical precursors for radio‑labeling), these studies must be conducted in full compliance with Good Laboratory Practice (GLP). In particular, non‑clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported, and archived according to the GLP rules, which define quality‑system requirements governing the organizational processes and study conditions. The GLP standards also reflect the principles of the Organization for Economic Co‑operation and Development (OECD). Together, these EU‑level requirements ensure that safety, ethical standards, and scientific integrity are consistently upheld before any investigational product progresses to human clinical trials. Clinical trials of medicinal products in the EU must be conducted in accordance with EU and national regulations and the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use, or ICH, guidelines on GCP as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint a natural or legal person that is established in the EU as its legal representative (e.g. a CRO). This legal representative shall be responsible for ensuring compliance with the sponsor's oblig n EU entity to act as its legal representative. ations under the CTR, and shall be the addressee for all communications with the sponsor. Moreover, the sponsor must take out a clinical trial insurance policy, and in most EU member states, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial. The regulatory landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives, the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law. The CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information System, which contains a centralized EU portal an The CTR introduced a transitional period to allow sponsors and authorities to adapt to the new regulatory framework. During the first year of implementation, until 30 January 2023, sponsors could choose whether to submit applications for clinical trials under the Clinical Trials Directive or via the Clinical Trials Information System (CTIS). From 31 January 2023 onwards, all new clinical trial applications must be submitted through CTIS. Furthermore, by 31 January 2025, any ongoing clinical trials that were previously authorized under the Clinical Trials Directive must be brought into compliance with the CTR, and their sponsors must ensure that the relevant trial information has been recorded in CTIS. d database. While the EU Clinical Trials Directive required a separate clinical trial application, or CTA, to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and an ethics committee in each member state, leading to a single decision per member state. The CTA must include, among other things, a copy of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the medicinal product under investigation. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory, including ethics rules. All decisions by the member states, as well as any communications, are transmitted to the sponsor via CTIS. CTIS is used to submit the application, coordinate the assessment between Member States, handle regulatory queries, and communicate the respective national decisions to the sponsor. According to Art. 5 CTR, the sponsor submits the application for approval of a clinical trial, together with the complete application dossier, to the member states concerned via the CTIS and proposes a reporting member state. The concerned member states may, within three days of submission of the application, raise objections to the proposal or declare their willingness to act as the reporting member state. The reporting member state is designated no later than six days after submission. The reporting member state validates the application within ten days and requests additional documentation if it is incomplete. The sponsor has ten days (max.) to supply the requested documents. The reporting Member State decides on the completeness of the application within five days. Once validation has been successful, the evaluation phase begins. Therefore, CTIS ensures the harmonized and transparent approval system envisaged by the CTR. The CTR introduces a uniform, binding deadline regime. According to Article 6 (4) CTR, the reporting Member State generally has 45 days to conduct the scientific evaluation of the application (Part I). An extension is only permitted in strictly limited exceptional cases (e.g., for complex investigational medicinal products). The national evaluations for Part II must also be completed within 45 days in accordance with Article 8(4) CTR. Once the CTA is approved, clinical study development may proceed. Medicinal product candidates used in clinical trials must be manufactured in accordance with applicable cGMP requirements. Other national and EU-wide regulatory requirements may also apply. 63 Marketing Authorization In order to market our product candidates in the EU and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EU, medicinal product candidates can only be commercialized after obtaining a marketing authorization, or MA. To obtain regulatory approval of a product candidate under EU regulatory systems, we must submit a MA application, or MAA. The process for doing this depends, among other things, on the nature of the medicinal product. There are four types of MAs: • “Centralized MAs” are issued by the EC through the centralized procedure based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and are valid throughout the EU as well as Iceland, Lichtenstein and Norway. The centralized procedure is compulsory for certain types of medicinal products such as (i) medicinal products derived from biotechnological processes, (ii) designated orphan medicinal products, (iii) advanced therapy medicinal products, or ATMPs (such as gene therapy, somatic cell therapy and tissue engineered products) and (iv) medicinal products containing a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases or autoimmune diseases and other immune dysfunctions, and viral diseases. The centralized procedure is optional for products that do not meet such criteria and that contain a new active substance not yet authorized in the EU, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU. • “National MAs” are issued by the competent authorities of the EU member states, only cover their respective territory, and are available for product candidates not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized for marketing in an EU member state, this national MA can be recognized in another member state through the mutual recognition procedure. If the product has not received a national MA in any member state at the time of application, it can be approved simultaneously in various member states through the decentralized procedure. Under the decentralized procedure an identical dossier is submitted to the competent authorities of each of the member states in which the MA is sought, one of which is selected by the applicant as the reference member state. • The Mutual Recognition Procedure (MRP) allows a marketing authorisation holder to obtain additional national authorisations in other EU/EEA Member States (Concerned Member States, CMS) based on an existing national authorisation granted by the Reference Member State (RMS). The procedure relies on the RMS’s assessment of the product’s quality, safety and efficacy, which the CMS recognise. The MRP is mandatory whenever a national marketing authorisation already exists in an EU/EEA Member State. Its legal basis is Article 28 ,29 of Directive 2001/83/EC and § 25b German Medicines Act (AMG). • TThe Decentralised Procedure (DCP) follows the same basic principle as the Mutual Recognition Procedure (MRP), namely the recognition of one Member State’s assessment of a medicinal product’s quality, safety and efficacy by the other involved Concerned Member States (CMS). Unlike the MRP, the DCP does not require a prior national marketing authorisation. Instead, the applicant submits the marketing authorisation application simultaneously in all chosen Member States. The legal basis for the DCP is Article 28, 29 of Directive 2001/83/EC and § 25b of the AMG. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest from the point of view of therapeutic innovation, defined by three cumulative criteria: the seriousness of the disease to be treated; the absence of an appropriate alternative therapeutic approach, and anticipation of exceptional high therapeutic benefit. In this circumstance, the EMA ensures that the evaluation for the opinion of the CHMP is completed within 150 days, excluding clock stops. Within the standard timetable, a clock stop occurs at Day 120 to allow the applicant to respond to the questions raised in the Rapporteur’s and Co‑Rapporteur’s Assessment Report. Upon submission of the complete response, the clock restarts at Day 121. If, thereafter, aspects of the dossier still require clarification, the EMA may request an Oral Explanation at Day 180, during which the applicant must appear before the CHMP to provide the additional information sought. On Day 210, the CHMP will vote to adopt its opinion recommending approval or non‑approval of the application. The final decision under the centralised procedure is taken by the European Commission and is binding in all EU Member States. Where the CHMP opinion is positive, the Commission decision typically issues on average within 60 days following the CHMP recommendation. In the event of a negative opinion, the applicant may submit a written request for re‑examination within 15 days from the date of the opinion; the detailed grounds for re‑examination must then be filed with the EMA within 60 days of that date. 64 Under the above described procedures, in order to grant the MA, the EMA or the competent authorities of the EU member states make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. MAs have an initial duration of five years. After these five years, the authorization may be renewed on the basis of a revaluation of the risk-benefit balance. A renewal application must be submitted to the Agency at the latest 9 months before the expiry date of the MA. The MA validity period is calculated from the date of notification of the Commission Decision. Once renewed, the marketing authorization is valid for an unlimited period, unless the EC, or the applicable competent authority decides on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any marketing authorization which is not followed by the actual placing of the drug on the market in the EU (in case of centralized procedure) or on the market in the authorizing member state within three years after authorization ceases to be valid (the so-called sunset clause). After the MA has been granted, the company must submit periodic safety reports to the EMA, if approval was granted under the Centralized Procedure, or the National Health Authorities, under the MRP and DCP. In addition, several pharmacovigilance measures must be implemented and monitored including Adverse Event collection, evaluation and expedited reporting and implementation, as well as update Risk Management Plans. For some medications, post -approval studies (Phase IV) my be required to complement available data with additional data to evaluate long-term effects (Post Approval Safety Study) or to gather additional efficacy data (Post-Approval Efficacy Study) In April 2023 the EC adopted a legislative proposal to revise and replace the existing general pharmaceutical legislation. As of March 2025, the proposal is under technical examination by the Council of the EU. If such revisions are ultimately implemented, they will significantly change several aspects of drug development and approval in the EU. Data and Marketing Exclusivity In the EU, new products authorized for marketing (i.e., reference products) generally receive eight years of data exclusivity and an additional two years of market exclusivity upon MA. If granted, the data exclusivity period prevents generic and biosimilar applicants from relying on the preclinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date on which the reference product was first authorized in the EU. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial MA of the reference product in the EU. The overall 10-year market exclusivity period can be extended to a maximum of 11 years if, during the first eight years of those 10 years, the MA holder obtains an authorization for one or more new therapeutic indications, which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical or biological entity, and products may not qualify for data exclusivity. Orphan Medicinal Products The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States. A medicinal product can be designated as an orphan if its sponsor can establish that: (1) the product is intended for the diagnosis, prevention or treatment of a life threatening or chronically debilitating condition (2) either (a) such condition affects not more than five in 10,000 persons in the EU when the application is made, or (b) the product, without the benefits derived from the orphan status, would not generate sufficient return in the EU to justify the necessary investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized for marketing in the EU or, if such method exists, the proposed orphan product will be of significant benefit to those affected by such condition. Orphan designation must be requested before submitting an MAA. An EU orphan designation entitles a party to incentives such as reduction of fees or fee waivers, protocol assistance, and access to the centralized procedure. Upon grant of a MA, orphan medicinal products are entitled to 10 years of market exclusivity for the approved indication, which means that the competent authorities cannot accept another MAA, or grant a MA, or accept an application to extend a MA for a similar medicinal product for the same indication during such period. The period of market exclusivity is extended by two years for orphan medicinal products that have also complied with an agreed pediatric investigation plan, or PIP. No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The orphan exclusivity period may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteria for which it received orphan destination, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity or where the prevalence of the condition has increased above the threshold. Additionally, MA may be granted to a similar medicinal product for the same indication at any time if (i) the second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; (ii) the applicant consents to a second orphan medicinal product application; or (iii) the applicant cannot supply enough orphan medicinal product. 65 Pediatric Development In the EU, MAAs for new medicinal products have to include the results of studies conducted in the pediatric population, in compliance with a PIP agreed with the EMA’s Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data is not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. If such studies are not included in a MAA, a decision from the EMA regarding a waiver or deferral must be provided at the time of MAA submission, in accordance with Article 7 of the Pediatric Regulation. Once the MA is obtained in all the EU member states and study results are included in the product information, even when negative, the product is eligible for six months’ supplementary protection certificate extension (if any is in effect at the time of approval) or, in the case of orphan pharmaceutical products, a two year extension of the orphan market exclusivity is granted. The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Failure to comply with EU and member state laws that apply to the conduct of clinical trials, manufacturing approval, MA of medicinal products and marketing of such products, both before and after grant of the MA, manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties. Pharmaceutical Coverage, Pricing and Reimbursement Significant uncertainty exists as to the coverage and reimbursement status of Twyneo, Epsolay, and any product candidates for which we obtain regulatory approval. In the United States and other markets, sales of any product candidates for which we receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors. Third-party payors include government health administrative authorities, managed care providers, private health insurers and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drug products for a particular indication. Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. We or our licensing partners may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of Epsolay, Twyneo or any of our product candidates that may receive regulatory approval. For example, some third-party payors may not consider Epsolay, Twyneo or any of our product candidates that may receive regulatory approval medically necessary or cost-effective and may decide to impose coverage or other utilization limits on their use. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Adequate third-party payor reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries operate positive and negative list systems under which products may be marketed only after a reimbursement price has been agreed to by the government. To obtain reimbursement or pricing approval, some countries may require the completion of additional studies or trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. For example, the EU provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU member states may approve a specific price or level of reimbursement for a pharmaceutical product, or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the pharmaceutical product on the market, including volume-based arrangements, caps and reference pricing mechanisms. Other member states allow companies to fix their own prices for drug products but monitor and control company profits. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, there are increasingly high barriers to entry for new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements. 66 Healthcare Reform In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product and therapeutic candidates, restrict or regulate post-approval activities, and affect the ability to profitably sell product and therapeutic candidates that obtain marketing approval. The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product and therapeutic candidates. In addition, future legislative and regulatory proposals may materially impact the ability of the FDA and other regulatory agencies to operate as they have historically operated. We cannot be sure whether additional legislative changes will be enacted, or whether any of the FDA’s regulations, guidances or interpretations will be changed, or what the impact of such changes on the agency and its scientific review staff, if any, may be. For example, the next FDA user fee reauthorization package began stakeholder negotiations on July 14, 2025, with any agreement to be sent to Congress in early 2027 for purposes of initiating the legislative process. Reauthorization of the prescription drug user fee program would need to be finalized by Congress by the end of September 2027 in order to avoid a disruption in FDA’s review goals for NDAs and other activities supported by user fees assessed against industry. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations. As previously mentioned, the primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medical products and services, implementing reductions in Medicare and other healthcare funding and applying new payment methodologies. The U.S. Congress has considered reductions in Medicare reimbursement levels for medicines administered by physicians. CMS, the agency that administers the Medicare and Medicaid programs, also has authority to revise reimbursement rates and to implement coverage restrictions for most drugs and biologics. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products we may market in the future. While Medicare regulations apply only to pharmaceutical benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors. In recent years, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Notably, the CREATES Act, which became effective on December 20, 2019, addresses concerns articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a REMS for certain products, to deny generic and biosimilar product developers access to samples of brand products. Because generic and biosimilar product developers need samples to conduct certain comparative testing required by the FDA, some have attributed the inability to timely obtain samples as a cause of delay in the entry of generic and biosimilar products. To remedy this concern, the CREATES Act establishes a private cause of action that permits a generic or biosimilar product developer to sue the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable, market-based terms.” Although lawsuits have been filed under the CREATES Act since its enactment, those lawsuits have settled privately; therefore, to date no federal court has reviewed or opined on the statutory language and there continues to be uncertainty regarding the scope and application of the law. More recently, in August 2022, the IRA was signed into law. Among other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. For example, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation. This calculation is made on a product-by-product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS will negotiate drug prices annually for a select number of single-source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. CMS has begun to implement these new authorities and entered into the first set of agreements with drug and biologic manufacturers for negotiated prices of 10 products, which will become applicable for payment year 2026. However, the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing. There have also been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. On September 24, 2020, the FDA released a final rule providing guidance for states to build and submit importation plans for drugs from Canada. In 2025, HHS began implementation of “Most Favored Nation” drug pricing by setting the Medicare price of single-source brand drugs without generic or biosimilar competition to the lowest price available in wealthy countries with a per capita GDP of at least 60% of that in the United States. 67 At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, in recent years, several states have formed prescription drug affordability boards, or PDABs. Much like the IRA’s drug price negotiation program, these PDABs have attempted to implement upper payment limits, or UPLs, on drugs sold in their respective states in both public and commercial health plans. For example, in August 2023, Colorado’s PDAB announced a list of five prescription drugs that would undergo an affordability review. The effects of these efforts remain uncertain pending the outcomes of several federal lawsuits challenging state authority to regulate prescription drug payment limits. We expect that federal, state and local governments in the United States will continue to consider legislation directed at lowering the total cost of health care. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate PBMs and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area. The FTC in mid-2022 also launched sweeping investigations into the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’ operations, pharmacy networks, or financial arrangements. On February 3, 2026, Congress enacted the Consolidated Appropriations Act of 2026, which limits the fees charged by PBMs, as well as requiring PBMs to fully pass through manufacturer rebates to a Medicare Part D plan sponsor. Significant efforts to change the PBM industry as it currently exists in the United States may affect the entire pharmaceutical supply chain and the business of other stakeholders, including pharmaceutical developers like us. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. Similar political, economic and regulatory developments are occurring in the EU and may affect the ability of pharmaceutical companies to profitably commercialize their products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the EU or member state level may result in significant additional requirements or obstacles. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could restrict or regulate post-approval activities and affect the ability of pharmaceutical companies to commercialize their products. In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. On December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place in the interim. Once applicable, it will have a phased implementation depending on the concerned products. The Regulation intends to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. We expect that additional federal, state and foreign healthcare initiatives will be adopted in the future, any of which could impact the coverage and reimbursement for drugs, including Twyneo Epsolay and any of our product candidates that may receive regulatory approval. Healthcare Laws and Regulations Our current and future business operations may be subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. In the U.S., such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, price reporting and physician and other healthcare provider payment transparency laws. Some of our pre-commercial activities, and our or our licensing partners’ commercial activities, in the U.S. are subject to such laws, some of which are described below. 68 The federal Anti-Kickback Statute makes it illegal for any person or entity or a party acting on its behalf to knowingly and willfully solicit, receive, offer, or pay any remuneration, directly or indirectly, overtly or covertly, to induce, or in return for, the referral of business, including the purchase, order, lease or recommendation of or arrangement for any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid. The term “remuneration” has been broadly interpreted to include anything of value, including cash, improper discounts, and free or reduced-price items and services. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, formulary managers, and beneficiaries on the other. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the Anti-Kickback Statute has been violated. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. The federal civil False Claims Act, or FCA, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, the federal government, including any federal healthcare program, claims for items or services, including drugs, that are false or fraudulent or not provided as claimed, from knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. Persons and entities can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Drug manufacturers can be held liable under the FCA even when they do not submit claims directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. Our or our licensing partners’ activities relating to the reporting of wholesaler or estimated retail prices for our products or product candidates, once approved, the reporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our products and product candidates, once approved, and the sale and marketing of our products and product candidates, once approved, are subject to scrutiny under the FCA. Moreover, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. HIPAA created federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. HIPAA, as amended by the HITECH Act and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information. The Civil Monetary Penalties Law prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program. The federal Physician Payment Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the federal government information about such manufacturers’ payments and other “transfers of value” provided to physicians, certain non-physician advanced healthcare practitioners, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, such entities, as well as certain ownership and investment interests held by physicians as defined by statute and their immediate family members. Many U.S. states have similar fraud and abuse statutes or regulations that may be broader in scope and may apply regardless of payor, in addition to items and services reimbursed under Medicaid and other state programs. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to clinicians and other healthcare providers or marketing expenditures. Some states and local jurisdictions require the registration of pharmaceutical sales representatives. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Additionally, to the extent that any of our products or product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may also be broader in scope than the provisions described above. These laws and regulations may differ from one another in significant ways, thus further complicating compliance efforts. For instance, in the EU, many EU member states have adopted specific anti-gift statutes that further limit commercial practices for medicinal products, in particular vis-à-vis healthcare professionals and organizations. Additionally, there has been a recent trend of increased regulation of payments and transfers of value provided to healthcare professionals or entities and many EU member states have adopted national “Sunshine Acts” which impose reporting and transparency requirements (often on an annual basis), similar to the requirements in the United States, on pharmaceutical companies. Certain countries also mandate implementation of compliance programs, or require reporting of marketing expenditures and pricing information. 69 If our operations are found to be in violation of any of such laws or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations, and imprisonment, any of which could adversely affect our ability to operate our business and our financial results. Data Privacy and Security Laws Numerous state, federal and foreign laws, regulations and standards govern the collection, use, access to, confidentiality and security of health-related and other personal information, many of which differ from each other in significant ways and apply simultaneously, thus complicating compliance efforts. Such laws, regulations and standards may apply now or in the future to our operations or the operations of our partners. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health, or HITECH, and its implementing regulations, strengthens and expands requirements relating to the privacy, security, and transmission of individually identifiable health information; and requires notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. HITECH strengthened and expanded HIPAA and increased penalties for violations. Under HITECH, regulated entities are subject to enforcement by the federal government and by state Attorneys General, who were given authority to enforce HIPAA under HITECH. Some state laws impose privacy protections more stringent than HIPAA and data security requirements applicable to information beyond health care information (for example, the California Consumer Privacy Act of 2018 (the “CCPA”)). These state laws create an additional level of enforcement and may require additional reporting in the event of breach. Most of the health care providers in the United States with whom we collaborate to develop and test our products must comply with HIPAA and applicable state law. We may not be directly subject to these laws, however, we must structure our activities in compliance with these laws to ensure that we can access and use health information to support our research, development and other activities. Our failure to comply with these privacy and security laws or a breach of health information or personal data could prompt enforcement against our health care provider partners, create third party liability for our company and/or cause significant financial or reputational harm to our company. Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal data as well. For example, the European Parliament and the Council of the European Union adopted a comprehensive general data privacy framework called the General Data Protection Regulation, orGDPR, which went into effect in 2018 and implemented a broad data protection framework that expanded the scope of EU data protection law, and applies to entities located inside and outside of the EU that process, or control the processing of, personal data relating to individuals located in the EU, including clinical trial data. We also continue to see other jurisdictions proposing and enacting data localization laws. Evolving legal, contractual, and other privacy and data protection obligations, could impose significant limitations, require changes to our business, or restrict our collection, use, storage or processing of personal data, which may increase our compliance expenses and make our business more costly or less efficient to conduct. In addition, any such changes could impact our ability to develop an adequate marketing strategy and pursue our growth strategy effectively, or even prevent us from providing our products in jurisdictions in which we receive marketing authorization, or potentially cause us to incur liability in an effort to comply, which, in turn, could adversely affect our business, financial condition, results of operations and prospects. Complying with these numerous, complex and often evolving requirements is expensive and difficult, and suspected and actual failure to comply, whether by us, our service providers, CROs, business partners or other third parties, or any inadvertent or unauthorized access to or use or disclosure of data that we store or handle as part of operating our business, could adversely affect our business, financial condition, results of operations and prospects. Innovation Authority We have received royalty-bearing grants from the IIA, for the financing of a portion of our research and development expenditures in Israel. Under the Innovation Law and the IIA’s rules and guidelines, recipients of grants, or Recipient Company(ies), are subject to certain obligations and restrictions with respect to the use of their IIA Funded Know-How, including, the following: • Royalty Payment Obligation. In general, the Recipient Company may be obligated to pay the IIA royalties from any income deriving from the products (and related know-how and services), whether received by the grant recipient or any affiliated entity, developed (in all or in part), directly or indirectly, as a result of, an Approved Program, or deriving therefrom, at rates which are determined under the IIA’s rules and guidelines (currently a yearly rate of between 3% to 5% on sales of products or services developed under the Approved Programs, depending on the type of the Recipient Company — i.e., whether it is a “Small Company,” or a “Large Company” as such terms are defined in the IIA’s rules and guidelines), up to the aggregate amount of the total grants received by the IIA, plus Annual Interest for a File (as such term is defined in the IIA’s rules and guidelines). 70 • Reporting Obligations. The Recipient Company is subject to certain reporting obligations (such as, periodic reports regarding the progress of the research and development activities under the Approved Program and the related research expenses, and regarding the scope of sales of the Recipient Company’s products). In addition, any direct change in control of a Recipient Company must be notified to the IIA. In the event that a non-Israeli entity or a non-Israeli citizen or resident person becomes an “Interested Party” (as such term is defined in the Israeli Securities Law, 5728-1968) in the Recipient Company, notification to the IIA is required, accompanied by a written undertaking (in the form available on the IIA's website) by such party to be bound by the Innovation Law and by the terms of the Approved Program. • Local Manufacturing Obligation. Products developed using the IIA grants must, as a general matter, be manufactured in Israel. The transfer of manufacturing capacity outside of Israel in a manner that exceeds the manufacturing capacity that was declared in the Recipient Company's original IIA grant application is subject to prior written approval from the IIA (except for the transfer of less than 10% of the manufacturing capacity in the aggregate, which event requires only a notice to the IIA, which shall be provided in writing prior to the transfer of such manufacturing rights abroad, while the IIA has a right to deny such transfer within 30 days following the receipt of such notice). In general, the transfer of manufacturing capacity outside of Israel may be subject an increase in the royalties' cap (inter alia, depending on the manufacturing volume that is performed outside of Israel) and such transfer will be subject to payment of royalties in accelerated rate. • IIA Funded Know-How transfer limitation. Under the IIA’s rules and guidelines, a Recipient Company is prohibited from transferring the IIA Funded Know-How outside of Israel except with the approval of the Research Committee and in certain circumstances, subject to certain payments to the IIA calculated according to formulas provided under the IIA’s rules and guidelines (which are capped to amounts specified under such rules and guidelines, generally up to 6 time the grants received plus Annual Interest as such term is defined under the rules, or A Redemption Fee). For calculating the Redemption Fee which shall be paid to the IIA in the event of a transfer of IIA Funded Know-How outside of Israel, inter alia, the following factors will be taken into account: the scope of the IIA support received, the royalties that have already paid to the IIA, the amount of time that has lapsed since the Recipient Company has finalized the IIA Approved Program, the sale price and the form of transaction. A transfer for the purpose of the Innovation Law and the IIA’s rules means an actual sale of the IIA-Funded Know-How, or any other transaction which in essence constitutes a transfer of such know-how (such as providing an exclusive license to a foreign entity for R&D purposes, which precludes the Recipient Company from further using such IIA Funded Know-How). A mere license solely to market products resulting from the IIA Funded Know-How would not be deemed a transfer for the purpose of the Innovation Law and the IIA’s rules. Upon payment of the Redemption Fee, the IIA Funded Know-How and the manufacturing rights of the products developed using such IIA funding cease to be subject to the Innovation Law and the IIA’s rules. • Subject to the IIA’s prior approval, a Recipient Company may transfer IIA Funded Know-How to another Israeli company, provided that the acquiring company assumes all of the Recipient Company’s responsibilities towards the IIA. Such transfer will not be subject to the payment of the Redemption Fee; however, the income from such transaction will generally be subject to the obligation to pay royalties to the IIA (other than in specific circumstances that will be examined by the IIA, mainly when the transfer is between related entities). • IIA Funded Know-How license limitation. The grant to a foreign entity of a right to use the IIA Funded Know-How for R&D purposes (which does not entirely prevent the Recipient Company from using the Funded Know-How) is subject to receipt of the IIA’s prior approval. This approval is subject to payment to the IIA in accordance with the formulas stipulated in the IIA's rules (which distinguish between the manner of the payment for such license grant, i.e., one-time payment or payment in installments) and such payment shall be no less than the amount of the IIA grants received (plus Annual Interest), and no more than the cap stated in the IIA’s rules and will generally be due only upon the receipt of the license fee from the licensee. • Imposition of Liens over IIA Funded Know-How. The Recipient Company is required to receive an IIA approval for every transaction involving the grant of liens over IIA Funded Know-How (i.e., for both the imposing and the realization of the liens). This obligation refers to fixed charges as well as to floating charges. In addition, to the extent that the transaction involves a foreign pledgee, the pledgee must execute an undertaking (in the form available on the IIA's website) to comply with the Innovation Law in the event of realization of the lien. The IIA’s rules also include a mechanism with respect to the grant of a license by a Recipient Company (which is part of a multinational corporation) to its group entities to use its IIA Funded Know-How. Such license is subject to the IIA’s prior approval and to the payment of 5% royalties from the income deriving from such license, with the cap of the royalties increasing to 150% of the grant amount. Such mechanism includes certain requirements which must be met in order to be able to enjoy such lower royalty payment. 71 We have received grants from the IIA in connection with our research and development of a peripheral line of product candidates, which forms a negligible part of our activities, and therefore, we are subject to the aforementioned restrictions with respect to such product candidates. The obligation to comply with the Innovation Law and the IIA's rules (including with respect to the restriction of the transfer of IIA Funded Know-How and manufacturing rights outside of Israel) remains in effect even after full repayment of all amounts payable to the IIA. Once a Redemption Fee is paid on a transfer of IIA Funded Know-How outside Israel, all obligations towards the IIA (including the royalty obligation) cease. The government of Israel does not own intellectual property rights in technology developed with IIA funding and the IIA’s approval is not required for the export of any products resulting from the IIA research or development grants. Environmental, Health and Safety Matters We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions including Israel. These laws and regulations govern, among other things, (i) the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage and (ii) chemical, air, water and ground contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage. Our operations at our Ness Ziona facility use chemicals and produce waste materials and sewage. Our activities require permits from various governmental authorities, including local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the Ministry of Health, local authorities and the municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations. Our business permit is currently in effect until December 31, 2026. These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation. If we fail to comply with such laws, regulations or permits, we may be subject to fines and other civil, administrative or criminal sanctions, including the revocation of permits and licenses necessary to continue our business activities. In addition, we may be required to pay damages or civil judgments in respect of third-party claims, including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport, manufacture or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several liability for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments could have a material adverse effect on our business, financial condition and results of operations. In addition, laws and regulations relating to environmental, health and safety matters are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance measures or to penalties for activities which were previously permitted. The operations of our subcontractors and suppliers are also subject to various Israeli and foreign laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product candidates, or increase the costs for the development or manufacture of our product candidates. Properties Our principal executive offices are located in a leased facility in Weizmann Science Park, Ness Ziona 7403650, Israel. The facility is 1416 square meters, and houses our offices, warehouse, laboratories and production area. Our lease will expire on December 31, 2027, with an option to extend the agreement for another two years. Legal Proceedings We are not subject to any material legal proceedings. C. Organizational Structure Not applicable. D. Property, Plant and Equipment See “Item 4. Information on the Company—B. Business Overview—Properties”. 72