10-K: Raphael Pharmaceuticals Inc. Files 10-K, Cites Ongoing Losses and Need for Additional Funding

Raphael Pharmaceuticals Inc. reports its annual results on Form 10-K, highlighting continued operating losses and the necessity for substantial additional funding to advance its pharmaceutical drug product candidates.

Summary

• Raphael Pharmaceuticals Inc., a pharmaceutical drug research and development company, filed its annual report on Form 10-K.
• The company focuses on cannabinoid-based therapies, particularly for rheumatoid arthritis (RA) and asthma.
• Raphael has completed a proof-of-concept clinical study for its RA product candidate, showing promising results.
• The company is also developing a novel treatment for asthma, leveraging studies conducted at Rambam Health Care Campus.
• The company incurred net losses of approximately $1.47 million in 2024 and $1.38 million in 2023.
• As of December 31, 2024, the company's cash and cash equivalents were approximately $0.02 million, with an accumulated deficit of $8.89 million.
• The company states that its current cash will only be sufficient to fund operations through the second quarter of 2025.
• The company plans to seek additional funding through debt or equity financing.
• The company relies on third parties for manufacturing and commercialization of its product candidates.
• The company has entered into a research agreement with Rambam for the development of cannabinoid-based treatments.
• The company has entered into a service agreement with Way of Life Cannabis Ltd. for the supply of CBD oil.
• The company does not currently hold any patents and relies on know-how and trade secrets.
• The company is subject to extensive governmental regulations, including those from the FDA and EMA.
• The company's headquarters and significant operations are located in Israel, which may pose risks due to political, economic, and military instability.
• The company's executive officer, directors and certain stockholders who are beneficial owners of 5% or more of the outstanding Common Stock possess the majority of the voting power, and through this ownership, have the ability to control the Company and our corporate actions.

Sentiment

Score: 3

Explanation: The document presents a concerning financial situation with increasing losses and a need for significant funding, offset by some positive clinical trial results. The overall sentiment is negative due to the financial risks.

Positives

• The company completed a clinical study for its RA product candidate, showing potential benefits for symptom management.
• The company is developing a novel treatment for asthma, leveraging studies conducted at Rambam Health Care Campus.
• The company has built an experienced team of senior executives and scientists.
• The company intends to leverage the knowledge of its team in order to complete the clinical trials needed to receive approvals of our product candidates from applicable regulatory authorities.

Negatives

• The company incurred net losses of approximately $1.47 million in 2024 and $1.38 million in 2023.
• As of December 31, 2024, the company's cash and cash equivalents were approximately $0.02 million, with an accumulated deficit of $8.89 million.
• The company states that its current cash will only be sufficient to fund operations through the second quarter of 2025.
• The company expects to need substantial additional funding to complete the development of its product candidates.
• The company does not currently hold any patents.
• The company's Common Stock is not currently traded on any national securities exchange and is traded on the over-the-counter market with quotations published on the OTC Markets Group, Inc.'s OTCQB tier Venture Market, or OTCQB, under the symbol RAPH.

Risks

• The company has a limited operating history and has incurred significant operating losses since its inception.
• The company has not generated revenue from any product candidate and may never be profitable.
• The company expects that it will need to raise substantial additional funding before it can expect to complete the development of its RA product candidate or any other product candidate.
• The lack of an active trading market could adversely impact the company's ability to raise working capital and adversely impact its ability to continue operations.
• The company is heavily dependent on the success of its product candidates, which are in various stages of pre-clinical development.
• The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable.
• The company holds no patents on its products, and its business employs proprietary technology (know-how) and information may be difficult to protect and/or infringe on the intellectual property rights of third parties.
• The company relies on third parties to conduct its preclinical and, in the future, clinical studies and perform other tasks for it.
• The company will rely on third parties to grow and provide it with its active pharmaceutical ingredient, or API, and formulations.
• The company's executive officer, directors and certain stockholders who are beneficial owners of 5% or more of its outstanding Common Stock possess the majority of its voting power, and through this ownership, have the ability to control the Company and our corporate actions.
• The company's headquarters and other significant operations are located in Israel, and, therefore, its results may be adversely affected by political, economic and military instability in Israel.

Future Outlook

The company expects to continue to incur significant losses and will require significant additional financing in the near future to fund its operations. The company anticipates needing approximately $500 thousand for research and development activities and $700 thousand for capital expenditures over the next 12 months.

Management Comments

• Management expects that the Company will continue to generate losses from the development, clinical development and regulatory activities of its product, which will result in negative cash flow from operating activity.
• Management has 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.

Industry Context

The pharmaceutical industry is characterized by rapidly advancing technologies and intense competition. The company faces potential competition from major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.

Comparison to Industry Standards

• The document mentions competitors with greater financial, technical, and marketing resources.
• It also acknowledges competition from academic institutions and research organizations.
• The document highlights the high cost of RA treatments, with annual drug costs ranging from $15,860 to $102,706 for various medications.
• The document mentions a multicenter randomized control trial on the use of medical cannabidiol in Danish patients with RA and Ankylosing Spondylitis, indicating growing interest in cannabis-based treatments for rheumatic conditions.

Related Party Transactions

• The company has entered into service agreements with its Chief Executive Officer, Chief Financial Officer, and Chief Technology Officer, who are also members of the Board.
• The company has entered into service agreements with its non-employee directors.

Stakeholder Impact

• Shareholders face the risk of dilution and potential loss of investment if the company is unable to secure additional funding.
• Employees and consultants face uncertainty regarding the company's ability to continue operations and fulfill its obligations.
• Patients may benefit from the development of new cannabinoid-based therapies, but the company's financial situation raises concerns about its ability to bring these products to market.

Next Steps

• The company intends to submit an IND application to the FDA and MOH.
• The company plans to seek additional funding through debt or equity financing.
• The company will continue to investigate and refine the formula through continued pre-clinical research.

Key Dates

Keywords

pharmaceuticals, cannabinoids, rheumatoid arthritis, asthma, clinical trials, FDA, research and development, CBD, funding, losses