20-F: Sol-Gel Technologies Reports Increased Revenue Amidst Going Concern Doubts

Sol-Gel Technologies' 2025 revenues surged to $19.4 million from licensing deals, yet the company faces recurring losses and substantial doubt about its ability to continue as a going concern.

Summary

• Net loss for the year ended December 31, 2025, was $6.1 million, an improvement from $10.6 million in 2024 and $27.2 million in 2023.
• Total revenues increased to $19.4 million in 2025, up from $11.6 million in 2024, primarily driven by milestone payments from Mayne Pharma and Searchlight Pharma agreements.
• Research and development expenses rose to $22.8 million in 2025 from $17.8 million in 2024, mainly due to increased API manufacturing costs for SGT-610 and advancement of its Phase 3 clinical trial.
• General and administrative expenses decreased by $1.6 million to $4.2 million in 2025, attributed to cost-saving measures.
• As of December 31, 2025, cash and cash equivalents, bank deposits, and marketable securities totaled $12.4 million.
• Management believes current liquidity will fund operating expenses and capital expenditure requirements into the first quarter of 2027, but acknowledges substantial doubt about the company's ability to continue as a going concern.
• SGT-610 (patidegib 2% gel), an investigational topical treatment for Gorlin syndrome, is currently in a Phase 3 clinical trial, with top-line results anticipated in the fourth quarter of 2026.
• SGT-610 has received Orphan Drug Designation from both the FDA and the European Commission, and Breakthrough Therapy designation from the FDA.
• The Phase 1b proof-of-concept study for SGT-210 (erlotinib) in Darier disease patients did not show efficacy, leading to a decision not to advance development for this indication; the company plans to pursue small feasibility studies in new indications.
• U.S. commercialization rights for Twyneo and Epsolay were sold to Mayne Pharma in April 2025 for an aggregate of $16 million, following the mutual termination of the previous agreement with Galderma.
• Twyneo and Epsolay have been licensed to Searchlight Pharma for Canada, Beimei Pharmaceutical Co. Ltd. for China, Hong Kong, Macau, Taiwan, and Israel, and other licensees for most European countries, South Africa, and South Korea.
• Health Canada issued a Notice of Compliance for Twyneo in December 2025 and for Epsolay in August 2025.
• Marketing approval for Twyneo in Israel was received in February 2026.
• A new agreement with Padagis was signed in August 2024 for a generic roflumilast cream, replacing a prior collaboration, and includes eight quarterly payments and low single-digit royalties for five years.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with caution due to the company's ongoing significant losses, accumulated deficit, and explicit statement of substantial doubt about its ability to continue as a going concern, despite some positive licensing revenues and pipeline progress.

Positives

• Total revenues significantly increased to $19.4 million in 2025, up from $11.6 million in 2024, driven by successful licensing agreements.
• The sale of U.S. rights for Twyneo and Epsolay to Mayne Pharma generated $16 million in two installments during 2025.
• Multiple international licensing agreements for Twyneo and Epsolay were secured in Canada, China, Hong Kong, Macau, Taiwan, Israel, most European countries, South Africa, and South Korea, expanding global reach.
• SGT-610, a key product candidate, holds Orphan Drug Designation from the FDA and EC, and Breakthrough Therapy designation from the FDA, highlighting its potential to address unmet medical needs.
• The Phase 3 clinical trial for SGT-610 in Gorlin syndrome is progressing, with top-line results expected in Q4 2026, offering a clear near-term milestone.
• Post-hoc analysis of previous SGT-610 Phase 3 data showed a statistically significant 48% decrease in new BCCs in a targeted patient subgroup, supporting the revised design of the current trial.
• Health Canada issued a Notice of Compliance for Twyneo in December 2025 and for Epsolay in August 2025, indicating regulatory progress in Canada.
• Marketing approval for Twyneo in Israel was received in February 2026, opening another commercial market.
• General and administrative expenses decreased by $1.6 million in 2025, reflecting successful cost-saving measures.
• Operating activities generated positive cash flow of $0.3 million in 2025, a significant improvement from negative cash flow of $13.9 million in 2024.

Negatives

• The company has incurred significant net losses since its inception, with an accumulated deficit of $237.0 million as of December 31, 2025.
• Management has expressed substantial doubt about the company's ability to continue as a going concern, citing recurring losses and insufficient liquidity to fund operations beyond Q1 2027 without additional capital.
• The Phase 1b proof-of-concept study for SGT-210 in Darier disease did not demonstrate efficacy, leading to the discontinuation of development for this specific indication.
• The mutual termination of the exclusive five-year license agreement with Galderma for Twyneo and Epsolay in the U.S. indicates a change in commercial strategy for these approved products.
• The company's reliance on third-party partners for commercialization introduces risks related to control, compliance, and potential termination of agreements.
• Operations in Israel are subject to geopolitical risks, including ongoing conflicts, which could adversely affect business and supply chains.
• The company's status as a Passive Foreign Investment Company (PFIC) for 2025 could result in adverse U.S. federal income tax consequences for U.S. Holders of its shares or warrants.

Risks

• The company has incurred significant losses since inception and expects to continue incurring losses, potentially never achieving or maintaining profitability.
• Substantial additional funding is required to pursue business objectives, and current liquidity raises substantial doubt about the company's ability to continue as a going concern.
• All current product candidates are in development stage and have not yet obtained regulatory approval for sale in the United States or any other country.
• The business is highly dependent on market perception of the safety and quality of its products, and negative publicity could have a material adverse effect.
• A limited operating history in the dermatological prescription drug space makes it difficult to evaluate the success of the business and assess future viability.
• Approved products and product candidates, if approved, may fail to achieve the broad degree of physician adoption and market acceptance necessary for commercial success.
• Clinical drug development is a lengthy, expensive, and uncertain process, and results of earlier studies may not be predictive of future trial results, leading to delays or failure to obtain marketing approval.
• Difficulty enrolling patients in clinical trials or patient discontinuation could delay or prevent clinical trials for product candidates.
• The regulatory approval processes are lengthy, time-consuming, and inherently unpredictable, and failure to obtain approval would substantially harm the business.
• Adverse side effects or other safety risks associated with approved products or product candidates could delay or preclude approval or limit their commercial profile.
• There is a substantial risk of product liability claims in the business, which could adversely affect operations.
• Utilizing the FDA's Section 505(b)(2) pathway for product candidates subjects the company to the risk of patent infringement lawsuits, delaying or preventing review or approval.
• The company may not obtain or maintain the benefits associated with orphan drug designation, such as orphan drug exclusivity, or such exclusivity may not prevent the FDA from approving competing products.
• Failure to obtain fast track or breakthrough therapy designations, or rescission of such designations, could delay development or regulatory review.
• Approved products will remain subject to extensive ongoing regulatory requirements and continued review, with potential for sanctions for non-compliance.
• Disruptions of funding for the FDA, SEC, and other government agencies could hinder timely development or commercialization.
• Significant competition in the dermatology market from companies with substantially greater financial, technological, and marketing resources.
• Third-party payor coverage and adequate reimbursement may not be available for products, making profitable sales difficult.
• Healthcare reform measures in the United States and the EU may negatively impact the business through pricing controls, reimbursement restrictions, and increased regulatory burdens.
• Employees may engage in misconduct or improper activities, including noncompliance with regulatory standards, leading to significant liability and reputational harm.
• The illegal distribution and sale of counterfeit versions of products or stolen products could negatively impact reputation and financial condition.
• Reliance on commercialization partners for Twyneo and Epsolay, and for product candidates, subjects the company to risks related to control, compliance, and potential termination of agreements.
• Dependence on third-party manufacturers and suppliers for compounds and components increases the risk of insufficient quantities, unacceptable costs, or supply delays.
• Reliance on third parties and consultants for clinical trials carries risks of non-performance, missed deadlines, or compromised data quality.
• The complex manufacture of pharmaceutical products means manufacturers often encounter production difficulties, which could delay or stop development or commercialization.
• Future success is dependent on the ability to protect intellectual property and avoid infringing on the rights of others; patent protection is uncertain and costly to enforce.
• Inability to protect the confidentiality of trade secrets or know-how could allow competitors to use proprietary information.
• Legal proceedings or third-party claims of intellectual property infringement could require substantial time and money and prevent product development or commercialization.
• Operations in Israel are subject to political, economic, and military conditions, including ongoing conflicts, which could adversely affect business and supply chains.
• Exchange rate fluctuations between the U.S. dollar, New Israeli Shekel, and other foreign currencies may negatively affect future revenues.
• Negative labor conditions in Israel, such as strikes or work-stoppages, could disrupt operations.
• The obligation of personnel to perform military service in Israel could disrupt operations.
• Israeli government grants for research and development expenditures require meeting several conditions and may restrict the ability to manufacture products or transfer know-how outside of Israel.
• Enforcing a U.S. judgment against the company and its executive officers and directors, or asserting U.S. securities law claims in Israel, may be difficult.
• Israeli law and tax considerations may delay, prevent, or make difficult an acquisition of the company.
• The company may become subject to claims for remuneration or royalties for assigned service invention rights by employees.
• Government tax benefits currently received may be terminated or reduced in the future.
• Failure to maintain compliance with Nasdaq's continued listing requirements could result in delisting of shares.
• The controlling share ownership position of M. Arkin Dermatology limits the ability of other shareholders to elect directors and influence corporate actions.
• Future sales of ordinary shares, including from warrant exercises, could negatively affect the market price of ordinary shares and result in dilution.
• The company does not intend to pay dividends on its ordinary shares for at least the next several years.
• As a foreign private issuer, the company follows home country corporate governance practices instead of certain Nasdaq requirements, which may provide less protection to investors.
• The company may lose its foreign private issuer status, which would require compliance with the Exchange Act's domestic reporting regime and incur significant expenses.
• The company believes it was a passive foreign investment company (PFIC) for its 2025 taxable year, which could result in materially adverse U.S. federal income tax consequences to U.S. Holders.
• Information technology system failures, cyberattacks, or deficiencies in cybersecurity could disrupt operations and lead to significant liability.
• The limited nature of the company's disaster recovery and business continuity plan could result in substantial expenses in the event of a serious disaster.
• Failure to comply with laws regulating the protection of the environment and health and human safety could adversely affect the business.

Future Outlook

The company expects to incur significant expenses and operating losses for the foreseeable future as it continues to invest in research and development, seeks regulatory approval, and pursues commercialization of its product candidates. Current cash resources are projected to fund operations only into the first quarter of 2027, necessitating substantial additional financing. SGT-610 is believed to have the potential to generate annual net sales in excess of $600 million at peak, and the company is evaluating a feasibility study for high-frequency BCC, which could potentially exceed SGT-610's commercial potential.

Management Comments

• Management expects that the Company's cash and cash equivalents, deposits and marketable securities as of December 31, 2025 are not sufficient to support the Companys operations under its current operating plans for at least one year from the issuance date of these financial statements.
• We believe that our principal competitors include companies with marketed or development-stage therapies relevant to BCC and hedgehog pathway modulation, and established dermatology and oncology companies with significant resources.
• 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.

Industry Context

StockSavvy.ai notes that Sol-Gel Technologies operates in the highly competitive dermatology and biopharmaceutical sectors, facing larger, more resourced competitors. The company's strategy of developing treatments for orphan diseases like Gorlin syndrome (SGT-610) aligns with a trend of targeting niche markets with high unmet needs, potentially offering premium pricing and regulatory advantages like orphan drug exclusivity. The shift from direct U.S. commercialization to licensing partnerships for Twyneo and Epsolay reflects a common strategy for smaller biopharma companies to leverage established sales and distribution networks, while focusing internal resources on pipeline development. The failure of SGT-210 in Darier disease highlights the inherent risks and high attrition rates in drug development, even for promising platforms.

Comparison to Industry Standards

• SGT-610 for Gorlin syndrome: No approved pharmacotherapies currently exist, positioning SGT-610 as a potential first-in-class drug. Existing oral Hedgehog (HH) inhibitors (vismodegib, sonidegib) for advanced BCCs have poor long-term safety and tolerability, with 54% discontinuation rates in Gorlin syndrome patients in clinical trials, suggesting SGT-610's topical approach could offer a significant tolerability advantage over systemic competitors.
• Twyneo for acne vulgaris: Competes with established topical anti-acne drugs like Epiduo, Epiduo Forte, Differin, Aklief, and Winlevi, as well as generic and over-the-counter products. Twyneo's encapsulated fixed-dose combination of benzoyl peroxide and tretinoin aims to overcome stability issues and offer better tolerability than generic tretinoin gel 0.1% and Epiduo, which contains adapalene.
• Epsolay for subtype II rosacea: The first FDA-approved product containing benzoyl peroxide for this indication, designed to improve tolerability over traditional BPO use for rosacea. Competes with Soolantra, Metrogel, Oracea, Zilxi, and generic metronidazole.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not subject to any material legal proceedings.

Related Party Transactions

• On January 27, 2023, the company entered into a subscription agreement with M. Arkin Dermatology Ltd. (controlling shareholder) to purchase 200,000 unregistered ordinary shares and unregistered warrants to purchase up to 200,000 ordinary shares at an exercise price of $58.50 per share. This private placement closed in April 2023.
• Mr. Moshe Arkin, the Executive Chairman of the Board and interim Chief Executive Officer, is the sole beneficial owner of M. Arkin Dermatology Ltd., which beneficially owned approximately 65% of the voting power of outstanding ordinary shares as of March 18, 2026.
• A registration rights agreement with Arkin Dermatology, which expired on February 5, 2023, was renewed on March 30, 2023, on substantially the same terms.
• Mr. Moshe Arkin serves as interim CEO without compensation for this specific role as of January 1, 2025.
• Mr. Itai Arkin, a director, is the son of Mr. Moshe Arkin.

Stakeholder Impact

• Shareholders face potential dilution from future capital raises and warrant exercises, and the risk of delisting from Nasdaq if compliance requirements are not met. Their influence on corporate actions is limited due to the controlling shareholder. U.S. Holders may also face adverse U.S. federal income tax consequences if the company is classified as a PFIC.
• Employees are impacted by cost-saving measures, as evidenced by a decrease in payroll and share-based compensation in general and administrative expenses. Operations may be disrupted by military service obligations in Israel. The compensation policy aims to ensure retention and motivation.
• Customers and patients may benefit from the potential development of new treatments for severe skin conditions, such as SGT-610 for Gorlin syndrome and new indications for SGT-210. The availability of Twyneo and Epsolay is expanding through new licensing partners in various global regions.
• Partners and licensees, such as Mayne Pharma, Searchlight Pharma, and Beimei Pharmaceutical Co. Ltd., are crucial for the commercialization of Twyneo and Epsolay. The company's reliance on these third parties for manufacturing and clinical trials introduces risks related to control, compliance, and potential agreement terminations.
• Creditors may face increased risk due to the company's recurring losses and the explicit 'going concern' warning, which raises concerns about the company's ability to satisfy its existing and foreseeable obligations.

Next Steps

• Complete the Phase III clinical study of SGT-610.
• Report top-line results from the SGT-610 Phase 3 study in the fourth quarter of 2026.
• Continue the development of SGT-210 and research and development of other future product candidates.
• Seek regulatory approvals for any product candidate that successfully completes clinical development.
• Establish commercial manufacturing capabilities through one or more contract manufacturing organizations to commercialize approved products.
• Maintain, expand, and protect the intellectual property portfolio.
• Seek new drug candidates and expand the disease portfolio.
• Add clinical, scientific, operational, financial, and management information systems and personnel.
• Evaluate the initiation of a feasibility study for SGT-610 for high-frequency BCC.
• Pursue small feasibility studies for SGT-210 in new indications with significant unmet medical need.
• Seek additional third-party partners for the commercialization of Twyneo and Epsolay in additional territories.
• Reassess and renew cGMP certification for other products as they reach relevant stages of development.
• Finalize reauthorization of the prescription drug user fee program by Congress by the end of September 2027.
• CMS will negotiate drug prices for Part B drugs starting for payment year 2028.

Key Dates

Recommendation

While Sol-Gel Technologies has demonstrated progress in licensing its approved products and advancing its SGT-610 pipeline with significant potential, the company's recurring losses and explicit 'going concern' warning present substantial financial risk. The need for significant additional funding in the near future, coupled with the inherent uncertainties of clinical development and commercialization, suggests a 'hold' recommendation. Investors should monitor the SGT-610 Phase 3 results and the company's ability to secure further financing.

Keywords

Dermatology, Biopharmaceutical, Acne Vulgaris, Rosacea, Gorlin Syndrome, Basal Cell Carcinoma, SGT-610, Patidegib, SGT-210, Erlotinib, Twyneo, Epsolay, SEC Filing, 20-F, Clinical Trials, Orphan Drug, Breakthrough Therapy, Licensing, Pharmaceutical, Israel, Nasdaq, Financial Results, Going Concern, Intellectual Property