S-1/A: Onconetix Files Amendment No. 1 to Form S-1 for Resale of Common Stock

Onconetix, a commercial-stage biotech company, files an amendment to its Form S-1 registration statement to allow selling stockholders to resell 7,828,812 shares of common stock.

Summary

• Onconetix, Inc. has filed Amendment No. 1 to a Form S-1 registration statement related to the resale of 7,828,812 shares of its common stock by selling stockholders.
• The shares being registered include those issuable upon exercise of warrants and preferred investment options (PIOs) previously issued to Armistice Capital Master Fund Ltd., H.C. Wainwright & Co., LLC, and Sabby.
• The company will not receive any proceeds from the sale of these shares.
• Onconetix is a commercial-stage biotechnology company focused on men's health and oncology, with products including ENTADFI (for BPH) and Proclarix (a prostate cancer diagnostic test).
• The company is currently pausing commercialization of ENTADFI while considering strategic alternatives and focusing on commercializing Proclarix, expecting revenue from Proclarix sales by 2025.
• Onconetix has a working capital deficit of approximately $11.4 million and an accumulated deficit of approximately $56.8 million as of December 31, 2023, and needs to raise additional capital within the next 12 months.
• If stockholder approval for the conversion of Series B Preferred Stock is not obtained by January 1, 2025, the company may be obligated to cash settle the Series B Preferred Stock for approximately $32.9 million based on the stock price as of April 24, 2024.
• The company acknowledges substantial doubt about its ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While there are positive aspects such as the ownership of Proclarix and the potential for future revenue, the company's financial challenges and going concern warning weigh heavily on the sentiment.

Positives

• The company owns Proclarix, an in vitro diagnostic test for prostate cancer approved for sale in the European Union.
• The company expects to generate revenue from sales of Proclarix by 2025.
• The company is exploring strategic alternatives to optimize its existing Proclarix diagnostic program.

Negatives

• The company has a working capital deficit of approximately $11.4 million and an accumulated deficit of approximately $56.8 million as of December 31, 2023.
• The company needs to raise additional capital within the next 12 months to sustain operations.
• The company has paused commercialization of ENTADFI while considering strategic alternatives.
• The company acknowledges substantial doubt about its ability to continue as a going concern.

Risks

• Sales of a substantial number of our securities in the public market by the selling securityholders and/or by our existing securityholders could cause the price of our shares of Common Stock to fall.
• We have a very limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
• We have incurred significant net losses since inception, have only generated minimal revenue, and anticipate that we will continue to incur substantial net losses for the foreseeable future and may never achieve profitability.
• There is substantial doubt about our ability to continue as a going concern, and we will require substantial additional funding to finance our long-term operations.
• We owe a significant amount of money to Veru, which funds we do not have.
• Our current liabilities are significant, and if those to whom we owe accounts payable, such as Veru, IQVIA or other creditors or vendors, were to demand payment, we would be unable to pay.
• We may consider strategic alternatives in order to maximize stockholder value, including financing, strategic alliances, licensing arrangements, acquisitions or the possible sale of our business.
• If we license or acquire products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture.
• Raising additional capital may cause dilution to our existing stockholders and investors, restrict our operations, or require us to relinquish rights to our products on unfavorable terms to us.
• Due to the significant resources required for the commercialization of our products, and depending on our ability to access capital, we must prioritize commercialization of certain products.
• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited, each of which could harm our business.
• Our insurance coverage may be inadequate or expensive.
• We entered into an asset purchase agreement and management services agreement with WraSer, which have been terminated because we believe that a material adverse event has occurred with respect to the WraSer Assets.
• As a result of our failure to timely file our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, we are currently ineligible to file new short form registration statements on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
• Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
• We depend entirely on the success of a limited number of products.
• Obtaining and maintaining regulatory approval of our products in one jurisdiction does not mean that we will be successful in obtaining regulatory approval in other jurisdictions.
• Adverse events involving ENTADFI may result in product recalls that could harm our reputation, business, and financial results.
• If we decide to resume the commercialization of ENTADFI, it may not gain market acceptance among regulators, advisory boards, physicians, patients, third-party payors, and others in the medical community.
• Even if we are able to commercialize our products, they may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.
• Our products could be subject to marketing restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
• Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.
• Legislation, such as the Inflation Reduction Act, may impact our ability to market and commercialize ENTADFI and reduce our profitability from such asset.
• Company shareholders may not realize a benefit from the ENTADFI or Proteomedix acquisitions commensurate with the ownership dilution they have experienced in connection with the transactions.
• We expect to rely on third-party manufacturers for ENTADFI and Proclarix.
• Disruptions to or significantly increased costs associated with transportation and other distribution channels for ENTADFI and/or Proclarix may adversely affect our margins and profitability.
• We may fail or elect not to commercialize our products.
• We may not be able to gain and retain market acceptance for our products.
• Proclarix is subject to competition from other prostate cancer diagnostics and larger, well-established companies with substantially greater resources than us.
• ENTADFI is subject to competition from other BPH drugs and larger, well-established companies with substantially greater resources than us.
• We may not be able to successfully implement our strategy to grow sales of ENTADFI in the U.S. market and Proclarix in the European markets or, if authorized, grow sales of either in any other market.
• The commercial success of our in-development and future diagnostic tests and services and our revenue growth depend upon attaining significant market acceptance among payers, providers, clinics, patients, and biopharmaceutical companies.
• If we fail to increase our sales and marketing capabilities or develop broad awareness of our diagnostic tests in a cost-effective manner, we may not be able to generate revenue growth.
• If we cannot maintain our current relationships, or enter into new relationships, with CROs, universities, clinics, laboratories or tissue sample banks, our revenue prospects could be reduced.
• We need to ensure strong product performance and quality to maintain and grow our business.
• The sizes of the markets for our diagnostic tests and services and any future diagnostic tests and services may be smaller than we estimate and may decline.
• We have a significant customer concentration, with a limited number of customers accounting for a large portion or all of our revenues.
• Our results of operations will be materially harmed if we are unable to accurately forecast customer demand for, and utilization of, our diagnostic tests and manage our inventory.
• The timing of our new product offerings is uncertain.
• Our access to samples may hinder our ability to research, develop, and commercialize future products.
• Adherence to complex test protocols is required.
• Our reliance on third parties heightens the risks faced by our business.
• We are dependent on third parties to market, distribute and sell our products.
• We have no experience manufacturing our products on a commercial scale and are dependent on third parties for the manufacture of our products.
• Manufacturing risks may adversely affect our ability to manufacture our product and could reduce our gross margin and profitability.
• We maintain single supply relationships for certain key components, and our business and operating results could be harmed if supply is restricted or ends or the price of raw materials used in its manufacturing process increases.
• We may not be able to manage our manufacturing and supply chain effectively, which would harm our results of operations.
• We may in the future have conflicts with our current or future partners or third-party providers that could delay or prevent the commercialization of our current products.
• Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of our products.
• We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.
• Security threats to our information technology infrastructure and/or our physical buildings could expose us to liability and damage our reputation and business.
• We will need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.
• Our future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel.
• Members of our management team and board of directors have significant experience as founders, board members, officers, or executives of other companies.
• Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent review of regulatory submissions in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
• We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as terrorism and acts of war, that could disrupt our business operations and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
• Our employees, independent contractors, principal investigators, consultants, and vendors engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
• Macroeconomic pressures in the markets in which we operate, including, but not limited to, the current conflicts in Ukraine and the Middle East may alter the ways in which we conduct our business operations and manage our financial capacities.
• Economic uncertainty may adversely affect our access to capital, cost of capital and ability to execute our business plan as scheduled.
• Conditions in the global economy may adversely affect our business, financial condition, and results of operations.
• Misconduct and errors by our current and former employees and our third-party service providers could cause a material adverse effect on our business and reputation.
• Our ability to attract new and retain existing borrowers and investors and operate as an ongoing concern may be impaired.
• Our industry is subject to rapid change, which could make our solutions and the diagnostic tests we develop and services we offer obsolete.
• If we are unable to continue to innovate and improve our diagnostic tests and services, we could lose customers or market share.
• The development of new liquid biopsy and imaging technologies could negatively impact demand for our products.
• In the event that our products are the subject of guidelines, clinical studies or scientific publications that are unhelpful or damaging, or otherwise call into question the benefits of our products, we may have difficulty in convincing prospective customers to adopt our test.
• We face competition from many sources, including larger companies, and we may be unable to compete successfully.
• Performance issues, service interruptions or price increases by our shipping carriers and warehousing providers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis.
• Cost-containment efforts of our customers, purchasing groups and governmental purchasing organizations could have a material adverse effect on our future sales and profitability.
• We are highly dependent on our senior management team and key personnel, and our business could be harmed if we are unable to attract and retain the personnel necessary for our success.
• Our laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians.
• We depend on our information technology systems and any failure of these systems could harm our business.
• It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection.
• If our patent position does not adequately protect our products and/or product candidates, others could compete against us more directly, which would harm our business, possibly materially.
• We are dependent on licensed intellectual property.
• Licensing of intellectual property is of critical importance to our business and involves complex legal, business, and scientific issues.
• We may infringe the intellectual property rights of others, which may prevent or delay our method and/or product development efforts and stop us from commercializing or increase the costs of commercializing our methods and/or products and/or product candidates.
• We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.
• If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and product could be significantly diminished.
• We may be subject to claims that our employees or consultants have wrongfully used or disclosed alleged trade secrets.
• Our intellectual property may not be sufficient to protect our methods and/or products and/or product candidates from competition, which may negatively affect our business as well as limit our partnership or acquisition appeal.
• Intellectual property rights may be less extensive and enforcement more difficult in jurisdictions outside of the U.S.
• Therefore, we may not be able to protect our intellectual property and third parties may be able to market competitive products that may use some or all of our intellectual property.
• Intellectual property rights do not necessarily address all potential threats to our competitive advantage and changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our products.
• If we fail to comply with healthcare regulations, we could face substantial enforcement actions, including administrative, civil, and criminal penalties and our business, operations and financial condition could be adversely affected.
• Healthcare reform in the United States has been implemented in the past, and we expect further changes to be proposed in the future, leading to potential uncertainty in the healthcare industry.
• Violations of healthcare laws can have an adverse impact on our ability to advance Proclarix and/or ENTADFI and our operating results.
• Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
• We may rely on government funding and collaboration with government entities for our product development, which adds uncertainty to our research and development efforts and may impose requirements that increase the costs of development, commercialization and production of any programs developed under those government-funded programs.
• We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations.
• Compliance with these legal standards could impair our ability to compete in domestic and international markets.
• We can face criminal liability and other serious consequences for violations, which can harm our business.
• The market price of our common stock has been extremely volatile and may continue to be highly volatile due to numerous circumstances beyond our control, and stockholders could lose all or part of their investment.
• We may be subject to securities litigation, which is expensive and could divert our managements attention.
• We may have violated Section 13(k) of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
• If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
• We may have violated Section 13(k) of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
• Our Amended and Restated Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, other employees or stockholders for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholders counsel, which may have the effect of discouraging lawsuits against our directors, officers, other employees or stockholders.
• An active trading market for our common stock may not develop or be sustained.
• Our principal stockholders and management own a significant percentage of our capital stock and will be able to exert a controlling influence over our business affairs and matters submitted to stockholders for approval.
• There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
• If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
• Future sales of our shares by existing stockholders could cause our stock price to decline.
• The issuance or conversion of securities would result in significant dilution in the equity interest of existing shareholders and adversely affect the marketplace of the securities.
• CFIUS may delay, prevent or impose conditions on the Conversion.
• If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud which could subject us to regulatory sanctions, harm our business and operating results and cause the trading price of our stock to decline.
• We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
• We are subject to increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.
• Our management team has limited experience managing a public company.
• If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, our stock price and our trading volume could decline.
• Our stock repurchase program may adversely affect our liquidity and cause fluctuations in our stock price.
• Failure in, or security breaches or incidents impacting, our information technology or storage systems could significantly disrupt our operations and our research and development efforts.
• A possible short squeeze due to a sudden increase in demand of our common stock that largely exceeds supply may lead to price volatility in our common stock.

Future Outlook

The company expects to generate revenue from sales of Proclarix by 2025 and anticipates that expenses will increase substantially in connection with ongoing activities.

Industry Context

The announcement reflects a company navigating the challenges of the biotechnology industry, including the need for capital, regulatory hurdles, and competition. The focus on men's health and oncology aligns with growing market demand and investment in these areas.

Comparison to Industry Standards

• The company's reliance on third-party manufacturers is a common practice in the pharmaceutical and diagnostics industries, comparable to companies like Catalent and Thermo Fisher Scientific.
• The company's focus on men's health and oncology aligns with growing market demand and investment in these areas, similar to companies like Veru Inc. and Myriad Genetics.
• The company's need to raise additional capital is a common challenge for biotechnology companies, especially those in the early stages of commercialization.
• The company's decision to pause commercialization of ENTADFI while considering strategic alternatives is a common strategy for companies facing financial challenges.
• The company's focus on commercializing Proclarix and expects revenue from sales of Proclarix by 2025 is a positive sign for the company's future prospects.

Management Changes

Related Party Transactions

• The company has entered into various agreements with related parties, including loans, consulting agreements, and stock issuances.
• The company has identified irregularities with regards to a related party balance and has recorded a reserve for the full amount.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Employees may be affected by cost reduction plans and changes in management.
• Customers may experience changes in product availability and pricing.
• Suppliers and creditors may be affected by the company's financial challenges.

Next Steps

• The company will focus on commercializing Proclarix.
• The company will consider strategic alternatives for ENTADFI.
• The company will seek stockholder approval for the conversion of Series B Preferred Stock.
• The company will seek additional funding to sustain operations.

Key Dates

Keywords

common stock, Onconetix, resale, securities, PIOs, warrants, ENTADFI, Proclarix, stockholders, registration