10-Q: Raphael Pharma Launches RA Supplement Amidst Losses

Raphael Pharmaceutical Inc. reported continued net losses and a going concern warning, despite launching its RaphaWell formula for rheumatoid arthritis support as a dietary supplement.

Summary

• Raphael Pharmaceutical Inc. reported a net loss of $322,000 for the three months ended June 30, 2025, an increase from $248,000 in the same period of 2024.
• For the six months ended June 30, 2025, the net loss was $751,000, a decrease from $798,000 in the prior year period, primarily due to a decrease in research and development expenses.
• The company has not generated any revenues since its inception and reported an accumulated deficit of $9,640,000 as of June 30, 2025.
• Cash and cash equivalents stood at $20,000 as of June 30, 2025, with total current liabilities increasing to $1,078,000 from $769,000 at December 31, 2024.
• Raphael Pharmaceutical launched its proprietary natural formula, RaphaWell, for rheumatoid arthritis (RA) support in the United States in August 2025, marketing it as a clinically tested dietary supplement.
• The company explicitly stated substantial doubt about its ability to continue as a going concern, citing insufficient cash to fund operations beyond the third quarter of 2025 and the need for significant additional financing.
• An outstanding debt of 1,120,623 NIS (approximately $300,000 USD) is owed to Rambam MedTech LTD as of June 30, 2025, with an agreement to repay 80% of any new investments towards this debt by April 30, 2026.

Sentiment

Score: 3

Explanation: The company faces severe financial distress, evidenced by a going concern warning, critically low cash, and a substantial accumulated deficit. While the launch of a new product is positive, its classification as a dietary supplement rather than a pharmaceutical drug limits its market potential compared to a prescription drug. The significant need for capital and reliance on future financing, coupled with increasing liabilities, indicates a high-risk investment.

Positives

• Successfully completed a proof-of-concept clinical study for its lead product candidate for rheumatoid arthritis (RA) in the United States, with promising results.
• Launched its proprietary natural formula, RaphaWell, for RA support in the United States in August 2025, positioning it as a clinically tested dietary supplement.
• RaphaWell formula is 100% natural, plant-based, and was associated with no reported side effects during the study, addressing an unmet need in RA symptom management.
• Net cash used in operating activities decreased to $239,000 for the six months ended June 30, 2025, from $390,000 in the corresponding period of 2024.
• Operating loss for the six months ended June 30, 2025, decreased by 7% to $740,000 compared to $796,000 in the prior year period.

Negatives

• Reported a net loss of $322,000 for the three months ended June 30, 2025, an increase of 30% from $248,000 in the same period of 2024.
• Has not generated any revenues since inception and does not expect to generate significant revenues in the near future.
• Accumulated deficit reached $9,640,000 as of June 30, 2025, indicating significant historical losses.
• Cash and cash equivalents are critically low at $20,000 as of June 30, 2025, which is insufficient to fund projected operating requirements through the third quarter of 2025.
• Total current liabilities increased significantly to $1,078,000 as of June 30, 2025, from $769,000 at December 31, 2024.
• Financial expense, net, increased substantially to $11,000 for the six months ended June 30, 2025, from $2,000 in the prior year period, primarily due to a risk premium on a related party loan and exchange differences.
• Outstanding debt of 1,120,623 NIS (approximately $300,000 USD) to Rambam MedTech LTD, with an additional $57,000 added due to late payment, and a requirement to allocate 80% of new investments towards its repayment.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses, negative cash flows, and insufficient liquidity.
• Requires significant additional financing in the near future to fund operations, with no assurance that such funding will be available on acceptable terms or at all.
• Future operating losses are uncertain, and the timing of becoming profitable is unknown.
• Regulatory pathways for product candidates (FDA, EMA) are uncertain, and obtaining approvals is costly and not guaranteed.
• Commercial launch and future sales of product candidates are subject to market acceptance, competition, and third-party payor reimbursement.
• Reliance on third parties for manufacturing and commercialization introduces dependency risks.
• Ability to complete research and development projects or product development within allotted or expected timelines is uncertain.
• Costs and timing of obtaining regulatory approval or permits in various geographical markets are significant challenges.
• Intellectual property protection and patent issuance are critical for commercial success and are not guaranteed.

Future Outlook

Management expects to continue generating losses from development, clinical development, and regulatory activities, resulting in negative cash flow from operating activities. The company requires significant additional financing to complete research and development, clinical trials, attain regulatory approvals, begin commercialization efforts, and support its cost structure. It anticipates needing approximately $700,000 for R&D and $500,000 for capital expenditures (primarily clinical trials and operating costs) over the next 12 months. The company plans to submit an IND application to the FDA and MOH for its RA product candidate and intends to seek EMA and other international regulatory approvals. The long-term vision is to become a pioneering company in formulating pharmaceutical drugs using purified cannabinoids and full-spectrum CBD oil, focusing on inflammation-linked conditions.

Management Comments

• Management concluded that substantial doubt about the company's ability to continue as a going concern exists in the event that additional funding does not occur.
• If sufficient financing is not received timely, the company will not have sufficient cash flows and liquidity to finance its business operations as currently contemplated and would then need to pursue a plan to license its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection.
• Management plans include, but are not limited to, raising capital in the United States.
• We believe that RaphaWell formula holds strong commercial potential and first-mover advantage.

Industry Context

Raphael Pharmaceutical operates in the emerging and evolving cannabinoid-based drug therapy market, specifically targeting autoimmune diseases like rheumatoid arthritis and respiratory conditions like asthma. The industry is characterized by significant research and development costs, lengthy clinical trial processes, and complex regulatory hurdles. The company's pivot to launching RaphaWell as a dietary supplement, rather than a pharmaceutical drug, indicates a strategy to enter the wellness market, which has lower regulatory barriers but potentially different market dynamics and pricing power compared to prescription pharmaceuticals. This positions the company in a competitive landscape that includes both traditional pharmaceutical companies and a growing number of wellness brands offering CBD products.

Comparison to Industry Standards

• The company is still in its development and clinical stage and has not yet generated revenues, making direct financial performance comparisons to established pharmaceutical companies difficult.
• The filing mentions other cannabinoid-based pharmaceutical products that have received regulatory approvals, such as Nabiximols (Sativex) for MS symptoms, Dronabinol (Marinol) for anorexia in AIDS patients and CINV, and Nabilone (Cesamet) for anti-emetic and analgesic uses. These serve as examples of regulatory pathways for cannabinoid-derived products, but the filing does not provide specific comparable financial or clinical results from these companies or their projects to benchmark Raphael's performance.
• Raphael's launch of RaphaWell as a dietary supplement, rather than pursuing a full pharmaceutical drug approval for RA, suggests a different market entry strategy compared to companies developing prescription cannabinoid drugs, which typically involve more extensive and costly clinical trials and regulatory processes.

Management Changes

Corporate Governance

Legal Proceedings

• No material changes to legal proceedings from those described in the Annual Report on Form 10-K filed on March 31, 2025.

Related Party Transactions

• Short-term credit from a related party (a director) of $41,000 as of June 30, 2025, bearing an annual interest rate of 12% and due December 2025.
• Payables to related parties (Officers, including CEO, CFO, CTO) increased to $564,000 as of June 30, 2025, from $228,000 at December 31, 2024.
• The CEO received 200,000 shares of common stock and 100,000 warrants for $100,000 on March 2, 2025.
• Ajay Kumar Dhadha, a new Board member and Chairman, was granted 350,000 restricted shares and 250,000 warrants with a total value of $22,000 on March 5, 2025.
• A director had their service agreement updated on March 10, 2025, extending the term and granting 200,000 warrants with a total value of $8,000.
• Consulting services from related parties totaled $264,000 for the six months ended June 30, 2025, up from $120,000 in the prior year period.
• Stock-based compensation to related parties totaled $205,000 for the six months ended June 30, 2025, up from $61,000 in the prior year period.
• Chief Financial Officer fee from related parties totaled $72,000 for the six months ended June 30, 2025, consistent with the prior year period.

Stakeholder Impact

• **Shareholders:** Face significant risk of value erosion due to ongoing losses, accumulated deficit, and the explicit going concern warning. Potential for substantial dilution from future capital raises and share-based compensation.
• **Employees:** Job security may be at risk given the company's precarious financial position and reliance on future funding.
• **Creditors (including Rambam MedTech LTD and related parties):** Face repayment risk, as evidenced by the extended payment deadline for the debt owed to Rambam and the company's overall liquidity issues.
• **Customers (potential):** The launch of RaphaWell as a dietary supplement provides a new product, but the company's financial instability could impact long-term product availability or support.
• **Suppliers:** May face payment delays or non-payment risks due to the company's limited cash and ongoing financial challenges.

Next Steps

• Further investigate mechanisms and refine Raphaels Formula through continued pre-clinical research.
• Ensure the formula meets all necessary standards and regulations set forth by the FDA to progress towards clinical treatments.
• Submit an IND application to the FDA and MOH for the RA product candidate.
• Apply for European Medicines Agency (EMA) and other countries' governmental regulatory agencies approvals for product candidates.
• Enter into royalty agreements with GMP-approved medical manufacturers and distributors upon obtaining FDA approvals.
• Continue building an experienced team of senior executives and scientists for pharmaceutical research and development, drug formulation, clinical trial execution, and regulatory submissions.
• Raise additional financing to fund research and development, clinical trials, regulatory approvals, and commercialization efforts.

Key Dates

Recommendation

The company is in a highly precarious financial position, explicitly stating 'substantial doubt about our ability to continue as a going concern.' With only $20,000 in cash, a rapidly growing accumulated deficit, and increasing current liabilities, its liquidity is severely constrained. While the launch of RaphaWell is a positive development, its classification as a dietary supplement rather than a pharmaceutical drug limits its immediate revenue potential and market impact. The company's heavy reliance on future capital raises, which are not guaranteed, and the significant debt owed to a related party, create an extremely high-risk investment profile. The financial metrics indicate a deteriorating situation, making the stock a strong sell for any seasoned investor or institution.

Keywords

Pharmaceutical, Cannabinoid, CBD oil, Rheumatoid Arthritis, RA, RaphaWell, Dietary Supplement, Biotech, Clinical Trials, SEC Filing, 10-Q, Going Concern, Drug Development, Autoimmune Diseases, Asthma