10-K: Raphael Pharma: RA Product Launch Amidst Going Concern Doubt

Raphael Pharmaceutical Inc. reports a successful RA product launch and provisional patent filing, but faces significant operating losses and going concern doubts.

Summary

• Completed a proof-of-concept clinical study for its lead Rheumatoid Arthritis (RA) product candidate in December 2024, showing promising results.
• Launched RaphaWell, a proprietary natural formula for RA support, as a clinically tested dietary supplement in the U.S. in August 2025.
• Filed a provisional patent application in November 2025 for its cannabinoid-based technology platform for neutrophil-dominant autoimmune diseases, including RA, psoriatic arthritis, inflammatory bowel disease, systemic lupus erythematosus, and gout.
• Reported a net loss of $1.279 million for the year ended December 31, 2025, a decrease from $1.519 million in 2024.
• Accumulated deficit reached $10.168 million as of December 31, 2025.
• Cash and cash equivalents were approximately $0.05 million ($45 thousand) as of December 31, 2025.
• Management believes existing cash will only fund operations through the third quarter of 2026, raising substantial doubt about its ability to continue as a going concern.
• Developing novel asthma product candidates in the pre-clinical stage, leveraging COVID-19 research.
• Relies heavily on third parties for manufacturing, clinical trials, and API supply.
• Extended service agreements for CEO, CFO, and CTO until December 2026 or 2027, with adjusted compensation for CTO and CFO.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a high-risk, early-stage pharmaceutical company with promising initial clinical data and a patent filing, but critically hampered by severe liquidity issues, significant accumulated losses, and explicit going concern doubts from both management and auditors. The positive clinical results are overshadowed by the immediate financial instability.

Positives

• Successful completion of a proof-of-concept clinical study for the RA product candidate in December 2024, with overall findings emphasizing clinical potential and beneficial effects on symptom management and well-being for RA patients.
• Raphaels Formula showed a 19.2% reduction in DAS28 score, indicating a decrease from high to moderate disease activity.
• Percentage of participants in remission increased from 0% at baseline to 16.67% at week 8, and those with low disease activity increased from 8.33% to 16.67%.
• High participant satisfaction: 83.3% willing to continue using the product, 91.7% would recommend it.
• Launched RaphaWell, a 100% natural, plant-based dietary supplement for RA support in the U.S. in August 2025, with no reported side effects during the study.
• Filed a provisional patent application in November 2025 for its cannabinoid-based technology platform covering multiple neutrophil-dominant autoimmune diseases.
• Net loss decreased to $1.279 million in 2025 from $1.519 million in 2024.
• Research and development expenses decreased by 18.6% to $631 thousand in 2025.
• General and administrative expenses decreased by 16.23% to $614 thousand in 2025.

Negatives

• Incurred significant operating losses since inception, with an accumulated deficit of $10.168 million as of December 31, 2025.
• Has not generated any revenue from product candidates and may never be profitable.
• Cash and cash equivalents of only $45 thousand as of December 31, 2025, are insufficient to fund operations beyond the third quarter of 2026.
• The independent auditor's report contains an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern.
• Negative working capital of $1.435 million as of December 31, 2025.
• Outstanding balance of approximately $298 thousand owed to Rambam for the Research Agreement, with an extension granted until April 2026.
• Increased financing expense, net, to $34 thousand in 2025 from $10 thousand in 2024, primarily due to interest on a short-term credit from a related party.
• Warrants granted to CEO Shlomo Pilo (1,000,000 shares at $1.12) and CFO Guy Ofir (1,000,000 shares at $1.00) expired unexercised on December 31, 2025.
• The company has no employees, relying solely on officers and consultants, which could pose risks if key personnel depart.
• The company currently holds no issued patents, relying on know-how and trade secrets, increasing vulnerability to competition.
• The common stock is traded on OTCQB with limited and sporadic trading volume, indicating a lack of liquidity.
• Operations are located in Israel, exposing the company to political, economic, and military instability in the region, including the ongoing multi-front war.

Risks

• Limited operating history and significant accumulated operating losses since inception, with anticipated continued losses.
• No revenue generated from any product candidate, and profitability is uncertain.
• Substantial additional funding is required to complete product development, which may not be available on acceptable terms or at all, potentially forcing delays or termination of development efforts.
• Lack of an active trading market for common stock could adversely impact the ability to raise working capital and continue operations.
• Heavy dependence on the success of product candidates (in pre-clinical stages), with no assurance of clinical development or regulatory approval.
• Regulatory approval processes (FDA, foreign authorities) are lengthy, time-consuming, and unpredictable.
• Clinical drug development is lengthy, expensive, and uncertain, with earlier study results not predictive of future outcomes.
• No issued patents, reliance on proprietary technology (know-how) and information that may be difficult to protect or may infringe on third-party IP rights.
• Management through a small number of officers and key consultants, with high dependence on the Chief Technology Officer.
• Need to expand the organization and potential difficulties in recruiting additional employees and consultants.
• Reliance on third parties (CROs, API suppliers, manufacturers) to conduct studies and supply products; failure could harm the business.
• Manufacturing facilities may not meet regulatory requirements and have limited capacity.
• Executive officers, directors, and certain stockholders (e.g., CEO with 20.1% beneficial ownership) possess the majority of voting power, controlling corporate actions.
• Illiquidity of common stock on OTCQB makes reselling shares difficult.
• As a former shell company, resales of restricted common stock are subject to Rule 144(i) requirements.
• Headquarters and significant operations in Israel expose the company to political, economic, and military instability, including the ongoing multi-front war, which could disrupt business.
• Operations are subject to currency and interest rate fluctuations.
• Difficulty enforcing U.S. court judgments against the company and its Israeli officers/directors in Israel.
• Future changes in financial accounting standards or practices may cause adverse financial reporting fluctuations.
• Raising additional capital would cause dilution to existing shareholders.
• Failure in information technology systems, including cybersecurity attacks, could disrupt operations.
• Potential for securities litigation due to stock price volatility.
• Requirements of being a reporting company strain resources and distract management.
• Failure to maintain proper and effective internal controls could impair financial reporting.
• Penny stock rules may make buying or selling common stock difficult.
• FINRA sales practice requirements may limit stockholders' ability to buy and sell stock.
• Reduced disclosure requirements as a smaller reporting company may make common stock less attractive to investors.
• Product candidates may cause undesirable side effects, delaying or preventing regulatory approval or limiting commercial profile.
• Even if approved, product candidates remain subject to regulatory scrutiny, and non-compliance could lead to sanctions.
• Subject to numerous complex regulations (FDA, DEA, healthcare fraud and abuse laws), and failure to comply could result in substantial penalties.
• Market opportunities for product candidates may be smaller than believed, adversely affecting revenue.
• Intense competition and rapid technological change from major pharmaceutical, biotech companies, and even medical/recreational marijuana markets.
• Uncertainty regarding insurance coverage and reimbursement status of newly approved products.
• Healthcare legislative reform measures (e.g., Affordable Care Act, IRA) may adversely affect the business.
• Reduced funding for FDA and other government agencies could hinder timely review and approval.
• The use of any product candidates could result in product liability or similar claims.

Future Outlook

The company plans to continue investigating and refining Raphaels Formula through pre-clinical research to meet FDA standards for clinical treatments. The goal is to emerge as a pioneering company in purified cannabinoid and full-spectrum CBD oil pharmaceutical drugs, focusing on inflammation-linked conditions like autoimmune diseases, asthma, and RA. They intend to obtain FDA and MOH approvals, and subsequently EMA and other international approvals, for product candidates. If successful, they plan to enter royalty agreements with GMP-approved manufacturers and distributors. They anticipate needing significant additional financing to fund operations beyond Q3 2026 and to support planned R&D and capital expenditures.

Management Comments

• "Encouraged by the promising results of the Study, we will continue to investigate our product for the treatment of autoimmune diseases."
• "Our vision is to emerge as a pioneering company at the forefront of formulating pharmaceutical drugs that harness the potential of purified cannabinoids and full-spectrum CBD oil."
• "Our primary mission is to cater to the unmet medical requirements of patients grappling with various disorders, with a particular focus on conditions linked to inflammation, such as autoimmune diseases, asthma, RA and COVID-19."
• "We believe that our RA product candidate, if approved for commercialization by regulators, will be available to patients at a lower price than that of other available treatments."
• "We believe that our existing cash and cash equivalents will only be sufficient to fund operations through the end of third quarter of 2026."
• "This has led management to conclude that substantial doubt about the Companys ability to continue as a going concern exists in the event that additional funding does not occur."

Industry Context

StockSavvy.ai notes that Raphael Pharmaceutical operates in the rapidly evolving and highly competitive pharmaceutical and biotechnology industries, specifically targeting the growing market for cannabinoid-based therapies. The company's focus on CBD-X for RA and asthma aligns with increasing scientific interest in cannabinoids' anti-inflammatory properties, as evidenced by published research and other approved cannabis-derived drugs like Sativex and Epidiolex. However, the industry is dominated by major pharmaceutical players with significantly greater resources, and Raphael faces competition not only from traditional drug developers but also from the expanding legal medical and recreational marijuana markets. The regulatory landscape for cannabis-derived products is complex and changing, with federal illegality in the U.S. contrasting with state-level legalization, creating both opportunities and uncertainties. The company's strategy to position its RA product as a dietary supplement (RaphaWell) initially allows it to bypass the full drug approval pathway, but its long-term pharmaceutical goals will require navigating stringent FDA and EMA regulations.

Comparison to Industry Standards

• Raphael's RA product candidate, if approved, is believed to be available at a lower price than existing treatments like Sarilumab (Kevzara, $18,200 annually), Abatacept (Orencia, $19,037-$20,582 annually), Adalimumab (Humira, $20,019 annually), and Tofacitinib (Xeljanz, $17,151 annually).
• The company's approach of using highly purified cannabinoid formulations from non-psychoactive strains with anti-inflammatory potential is a differentiated strategy compared to some existing cannabis-derived drugs like Dronabinol (Marinol) and Nabilone (Cesamet) which primarily contain THC.
• The successful proof-of-concept study for RA, showing a 19.2% reduction in DAS28 score and an increase in remission rates, provides early positive data, but these are from a single-group study with 12 participants, which is a very small scale compared to the hundreds or thousands of patients typically involved in later-stage clinical trials for established pharmaceutical companies.
• The company's reliance on third parties for manufacturing and clinical trials is a common model for smaller biotech firms but introduces risks related to control and capacity compared to integrated pharmaceutical giants.

Management Changes

Corporate Governance

Legal Proceedings

• Not currently a party to or subject to any material legal proceedings.

Related Party Transactions

• **Rambam Research Agreement**: Outstanding balance of approximately $298,000 (as of December 31, 2025) for research funding, with an extension to pay until April 2026. Raphael Israel is required to pay Rambam a 6% royalty on net sales of any product candidate using jointly created IP.
• **Way of Life Cannabis Ltd. (Wolc) Agreement**: Raphael Israel agreed to issue 3% of its outstanding share capital to Wolc affiliates (100,500 shares issued in July 2022, 201,000 shares issued in June 2023) and pay a 15% royalty fee on net income royalties from sales of pharmaceutical drug products developed at Rambam in Israel.
• **Short-term loan from a related party**: A loan of NIS 150 thousand ($41 thousand) received on December 24, 2024, with an outstanding balance of NIS 107.1 thousand ($34 thousand) as of December 31, 2025, including accrued interest and penalties. The CEO and CFO are guarantees for the repayment.
• **CEO Service Agreement (Shlomo Pilo)**: Monthly fee of $20,000. Agreement extended until December 31, 2026. Warrants for 1,000,000 shares expired unexercised on December 31, 2025.
• **CFO Service Agreement (Guy Ofir)**: Monthly fee of $12,000. Agreement extended until December 31, 2026. Warrants for 1,000,000 shares expired unexercised on December 31, 2025.
• **CTO Service Agreement (Dr. Igal Louria Hayon)**: Monthly fee of $24,000 (reduced to $12,000 from January 1, 2026). Agreement extended until December 31, 2027. Warrants for 350,000 shares were exercised in November 2025. Also entitled to 15% of net royalty income from worldwide sales of COVID-19 cannabis-based medical indications.
• **Director Service Agreement (Ajay Kumar Dhadha)**: Granted 350,000 restricted shares and warrants for 250,000 shares on March 5, 2025. Service agreement extended until June 30, 2026, without salary.
• **Director Service Agreement (Yehuda Eliya)**: Granted warrants for 200,000 shares on March 10, 2025. Service agreement expired December 31, 2025, and warrants expired March 10, 2026.
• **Director Service Agreement (Zvi Laufer)**: Granted warrants for 300,000 shares on July 31, 2025. Service agreement expires July 31, 2026, and warrants expire July 31, 2027.

Stakeholder Impact

• **Shareholders**: Significant dilution risk from future capital raises. Lack of liquidity on OTCQB. Control by executive officers and large shareholders. Potential for loss of entire investment due to going concern doubts.
• **Employees/Consultants**: High dependence on a small number of officers and key consultants, particularly the CTO. Potential disruption if key personnel depart.
• **Customers/Patients**: Potential for new, natural, and potentially lower-cost treatment options for RA (RaphaWell) and future treatments for asthma and other autoimmune diseases. However, the long and uncertain regulatory pathway means these benefits are not guaranteed.
• **Creditors**: Risk due to the company's going concern doubts and limited cash on hand.
• **Suppliers/Partners (Rambam, Wolc)**: Continued collaboration is crucial for R&D and API supply, but payment delays to Rambam indicate potential strain.

Next Steps

• Further investigate mechanisms and refine Raphaels Formula through continued pre-clinical research to meet FDA standards.
• Progress towards clinical treatments for RA.
• Submit an Investigational New Drug (IND) application to the FDA and MOH for the RA product candidate.
• Conduct Phase 1 and Phase 2 clinical trials for the RA product candidate (Phase IIa expected to take 6 months, Phase IIb expected to take 18 months).
• Apply for European Medicines Agency (EMA) and other countries' governmental regulatory approvals for product candidates, especially if FDA approvals are not successful.
• Enter into royalty agreements with GMP-approved medical manufacturers and distributors upon obtaining FDA approvals.
• Continue pre-clinical studies for asthma product candidates, including a mouse model for lung inflammation.
• Identify and develop cannabinoid-based drug products for certain oncology indications after RA and asthma candidates.
• Negotiate an exclusive distribution agreement with Wolc in Israel for approved pharmaceutical drug products.
• Seek patent protection in the U.S. and/or internationally for the RA product candidate and other technologies.
• Raise substantial additional funding to support operations beyond Q3 2026, including $1 million for R&D and $1 million for capital expenditures over the next 12 months.
• Hire and train quality assurance professionals to inspect future candidate partners' facilities and production methods.

Key Dates

Recommendation

Despite promising early clinical results for its RA product and a provisional patent filing, Raphael Pharmaceutical Inc. faces severe financial distress, explicitly stating substantial doubt about its ability to continue as a going concern. The company has minimal cash reserves ($45k), a significant accumulated deficit ($10.17M), and requires substantial additional funding ($2M in next 12 months) which is not guaranteed. The illiquid trading market and reliance on third parties further compound these risks. The positive clinical developments are critically overshadowed by the immediate and existential financial instability, making the stock a high-risk "sell" for investors until a clear and sustainable funding path is established.

Keywords

Raphael Pharmaceutical, Cannabinoid, CBD oil, Rheumatoid Arthritis, RA treatment, RaphaWell, Autoimmune diseases, Asthma treatment, Clinical trials, Pharmaceutical R&D, SEC filing, 10-K, Biotechnology, Drug development, Going concern, Patent application, Israel operations, OTC Markets, Healthcare, FDA approval, EMA approval, Neutrophil-dominant autoimmune diseases, Psoriatic arthritis, Inflammatory bowel disease, Systemic lupus erythematosus, Gout