Palvella Therapeutics (PI6) Risk Analysis

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay the pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Failure to allocate resources or capitalize on strategies in a successful manner will have an adverse impact on our business.

From time to time, we may publish interim, topline or preliminary data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary or topline data we previously published. For example, we reported topline data from our Phase 3 clinical trial of QTORIN rapamycin for the treatment of microcystic LM in the first quarter of 2026 and we reported topline data from our Phase 2 clinical trial of QTORIN rapamycin for the treatment of cutaneous VMs in the fourth quarter of 2025, but any such topline or preliminary data may change following further auditing. As a result, preliminary and topline data should be viewed with caution until the final data are available. If the interim, topline, or preliminary data that we report differs from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospects or financial condition may be harmed. In addition, the information we choose to publicly disclose regarding a particular clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

We were granted Breakthrough Therapy Designation by the FDA for QTORIN rapamycin for the treatment of microcystic LM and may seek such designation for QTORIN rapamycin for other indications, and for certain other product candidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the NDA. Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a Breakthrough Therapy Designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates is granted a breakthrough therapy designation, the FDA may later decide that the product candidate no longer meets the conditions for designation.

We were granted Fast Track Designation by the FDA for QTORIN rapamycin for the treatment of microcystic LM, the treatment of cutaneous VMs and the treatment of angiokeratomas and may seek such designation for QTORIN rapamycin for other indications, and for certain other product candidates. If a drug is intended for the treatment of a serious or life-threatening disease and preclinical or clinical data demonstrates the potential of the new drug to address unmet medical needs for such disease, the drug's sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot be assured that the FDA would decide to grant it. Even if we do receive Fast Track Designation, as we have for QTORIN rapamycin for the treatment of microcystic LM, the treatment of cutaneous VMs and the treatment of angiokeratomas, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development programs. Many drugs that have received Fast Track Designation have failed to obtain approval.

As we continue our development of our product candidates and initiate additional preclinical studies or clinical trials of these or future product candidates, if any, serious adverse events, unacceptable levels of toxicity, undesirable side effects or unexpected characteristics may emerge. Although we have designed QTORIN rapamycin for topical application and in a manner that we believe will not result in systemic absorption, systemic exposure to rapamycin, the active ingredient in our lead product candidate, at levels consistent with the approved oral dosage form, is known to result in significant adverse reactions, including peripheral edema, hypertriglyceridemia, hypertension, hypercholesterolemia, creatinine increases, abdominal pain, diarrhea, headache, fever, urinary tract infection, anemia, nausea, arthralgia, pain and thrombocytopenia. Investigators may attribute infectious diseases occurring during clinical trials of QTORIN rapamycin to suspected or possible immunosuppression, based on the systematic mechanism of action of rapamycin. Further, we have conducted and continue to conduct open-label studies of QTORIN rapamycin and, without a concurrent control arm, adverse events may be attributed to QTORIN rapamycin that may be a result of background disease or other external factors. Other APIs we select for our product candidates may have similar adverse event profiles. The emergence of any such serious adverse events, unacceptable levels of toxicity, undesirable side effects or unexpected characteristics could cause difficulty recruiting and retaining participants for our trials or we may abandon these product candidates, institute burdensome monitoring programs or limit their development to more narrow uses, less frequent dosing, lower potency levels or subpopulations in which the serious adverse events, unacceptable levels of toxicity, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk/benefit perspective. The FDA, an IRB, or equivalent foreign regulatory authorities, may also require that we suspend, discontinue, or limit our clinical trials based on safety information or that there is inadequate prospect of treatment benefit. Such findings could further result in regulatory authorities failing to provide marketing authorization for our product candidates. Many product candidates that initially showed promise in early-stage testing have later been found to cause side effects that prevented further development of the product candidate. Additionally, if one or more of our product candidates receive marketing approval, and we or others identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including: - regulatory authorities may suspend, withdraw or limit their approvals of such products;- regulatory authorities may require additional warnings, precautions, modification or limitations of use in the labeling;- we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;- we may be required to implement a REMS;- we may decide to recall or remove such products from the marketplace;- we may be required to conduct additional clinical trials as post-marketing requirements;- we could be sued and held liable for harm caused to patients; and - our reputation and physician or patient acceptance of our products may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, which could materially adversely affect our business, financial condition, results of operations and prospects.

Certain of the milestone payments payable by us in connection with the Amended Ligand Agreement are due upon events that will occur prior to our planned commercialization of our lead product candidate, QTORIN rapamycin. Accordingly, we may be required to make payments in an aggregate amount of up to $5.0 million prior to the time at which we are able to generate revenue, if any, from sales of QTORIN rapamycin for any indication, if approved. There can be no assurance that we will have the funds necessary to make such payments, or be able to raise such funds when needed, on terms acceptable to us, or at all. In order to make the required payments when due, we may be required to divert our capital resources by delaying, limiting, reducing or terminating our product development or future commercialization efforts, or we may have to grant rights to develop and market product candidates that we would otherwise develop and market ourselves. If we are required to raise funds but are unable to do so, or if we are unable to otherwise maintain sufficient liquidity to make our payment obligations if and when they become due, we may be in material breach of the Amended Ligand Agreement, and Ligand may seek legal action or remedies against us (including by seeking to terminate the Amended Ligand Agreement), which would harm our business, financial condition, results of operations and prospects. If we are able to raise funds, we may not be able to do so on terms that are favorable to us, and our existing stockholders may experience substantial dilution, we may agree to certain covenants limiting or restricting our ability to take specific actions, or we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates.

We currently have no products that are approved for commercial sale. We are developing our lead product candidate, QTORIN rapamycin, for the treatment of three serious, rare skin diseases. We completed our Phase 3 clinical trial evaluating QTORIN rapamycin in patients with microcystic LM and are planning for a potential NDA submission in the second half of 2026. We intend to commence a Phase 3 pivotal trial evaluating QTORIN rapamycin in patients with cutaneous VMs in the second half of 2026. We are working on preclinical development of QTORIN rapamycin for the treatment of clinically significant angiokeratomas and plan to initiate a clinical study in the second quarter of 2026. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the continued clinical evaluation of QTORIN rapamycin and the commercialization of this product candidate for the treatment of microcystic LM, if approved. Accordingly, the success of our business, including our ability to finance our company and generate any revenue in the future, will primarily depend on the successful development, regulatory approval and commercialization of QTORIN rapamycin. The clinical and commercial success of QTORIN rapamycin will depend on many factors, including the following: - the ability to raise any additional required capital on acceptable terms, or at all;- timely completion of our preclinical studies and clinical trials, which may be significantly slower or cost more than we currently anticipate and may depend substantially upon the performance of certain third-party contractors;- the ability to demonstrate the safety, efficacy and acceptable benefit-risk profile of QTORIN rapamycin to the satisfaction of the FDA and equivalent foreign regulatory authorities;- delays in developing and testing, or inability to develop and test, any clinical outcome assessments to the extent necessary for the FDA and equivalent foreign regulatory authorities to agree to their use as endpoints utilized in a clinical trial to support labeling claims;- the prevalence, duration and severity of potential side effects or other safety issues experienced with QTORIN rapamycin, if any, or experienced by competitors who are developing topical rapamycin (also known as sirolimus) products or who are targeting the same indications in the rare skin diseases space;- the timely receipt of necessary marketing approvals from the FDA and equivalent foreign regulatory authorities and, if granted, completion of any required post-marketing studies or trials and available funding to perform any such studies or trials;- the ability of any CMO, upon which we rely to manufacture clinical and commercial supplies of our product candidates or any future product candidates to remain in good standing with relevant regulatory authorities and to develop, validate and maintain commercially viable manufacturing processes that are compliant with cGMPs;- our ability to successfully develop a targeted rare disease commercial strategy and thereafter establish sales, marketing and distribution capabilities to launch and commercialize QTORIN rapamycin in the United States and internationally, if approved for marketing, reimbursement, sale and distribution in such countries and territories;- acceptance by physicians, payors and patients of the benefits, safety and efficacy of QTORIN rapamycin, if approved;- obtainment and maintenance of coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;- our ability to retain subjects who have enrolled in a clinical study but may be prone to withdraw due to the rigors of the clinical trial, lack of efficacy, side effects, personal issues or loss of interest;- the size of the potential markets for QTORIN rapamycin, if approved; and - our ability to establish and enforce intellectual property rights to QTORIN rapamycin, if any. Even if we complete clinical testing and receive approval from the FDA or applicable equivalent foreign regulatory authorities for QTORIN rapamycin, the FDA or equivalent foreign regulatory authorities may grant approval or other marketing authorization contingent on the performance of costly additional clinical trials, including post- market clinical trials, or impose restrictions on the product's distribution in the form of a REMS. The FDA or equivalent foreign regulatory authority may also approve QTORIN rapamycin, for a more limited indication or a narrower patient population than we originally requested. In addition, the FDA or equivalent foreign regulatory authorities may not approve QTORIN rapamycin with the labeling that we believe is necessary or desirable, or may approve it with labeling that includes warnings or precautions or limitations of use that may not be desirable for the successful commercialization of QTORIN rapamycin. The factors outlined above, many of which are beyond our control, could cause us to experience significant delays or affect our ability to obtain regulatory approvals or commercialize QTORIN rapamycin. If we are unable to obtain regulatory approval and successfully commercialize QTORIN rapamycin, our financial position will be materially adversely affected, and we may not be able to generate sufficient revenue to continue our business.

Our lead product candidate, QTORIN rapamycin, is in clinical development and the risk of failure is high. It is impossible to predict when or if any of our product candidates will prove effective and safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. Clinical trial failure may result from a multitude of factors including, but not limited to, flaws in trial design, carryover effect, dose selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety or efficacy, and failure in clinical trials can occur at any stage. For example, our Phase 2b clinical trial of QTORIN rapamycin in patients with Gorlin Syndrome and Phase 3 clinical trials of QTORIN rapamycin in patients with pachyonychia congenita failed to meet their respective primary endpoints. In the first quarter of 2026, we reported topline data from our Phase 3 clinical trial of QTORIN rapamycin for the treatment of microcystic LM, and are planning for a potential NDA submission to the FDA in the second half of 2026. We intend to commence a Phase 3 pivotal trial of QTORIN rapamycin for the treatment of cutaneous VMs in the second half of 2026 and a Phase 2 trial of QTORIN rapamycin for the treatment of clinically significant angiokeratomas in the second quarter of 2026. Additionally, we received written feedback from the FDA in the first quarter of 2026 on the proposed design of a Phase 2 study to evaluate QTORIN pitavastatin in subjects with DSAP, with trial initiation anticipated in the second half of 2026. Our other programs under evaluation for the treatment of other serious, rare skin diseases, vascular malformations and other genetic diseases are in early-stage preclinical development, or in the case of QTORIN pitavastatin, are in IND-enabling development. We may experience numerous unforeseen events that could delay or prevent our ability to receive marketing approval for our product candidates, including: - regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site, or may halt or suspend an ongoing trial;- clinical trials of our product candidates may fail to show safety, efficacy or an acceptable benefit-risk profile, produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional nonclinical studies or clinical trials or abandon drug development programs;- the design of any of our clinical trials may be flawed, and those flaws may not become apparent until such clinical trial is well advanced or completed;- regulators may not agree with our selection of novel endpoints or other key clinical trial design features, such as choice of control, used in our clinical evaluation of our product candidates; for example, the FDA has commented that a placebo-controlled trial or additional trials assessing different clinical endpoints may be required to assess the efficacy of QTORIN rapamycin for the treatment of microcystic LMs;- our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;- the number of subjects required for clinical trials of our product candidate may be larger than anticipated, enrollment in the clinical trials for our product candidates may be slower than we anticipate, we may have difficulty identifying and enrolling suitable participants given the small patient populations of the diseases we are targeting, or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;- our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials;- we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or prospective contract research organizations ("CROs") the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites and CROs; the cost of clinical trials of our product candidates may be greater than we anticipate, particularly if the FDA or other equivalent foreign regulatory authorities require post-marketing studies and/or a patient registry; and - the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that are currently contemplated, if we are unable to successfully complete clinical trials of our product candidates or other testing in a timely manner, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may incur unplanned costs, be delayed in seeking and obtaining regulatory approval, if we receive regulatory approval with labeling that includes warnings or precautions or limitations of use, or be subject to additional post-marketing testing requirements. If we experience any delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates may not be successful. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development process and jeopardize our ability to receive regulatory approval and commence product sales and generate revenues. Any of these occurrences could materially adversely affect our business, financial condition, results of operations and prospects.

The Hatch-Waxman Amendments added Section 505(b)(2) to the U.S. Federal Food, Drug, and Cosmetic Act, or FDCA. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving an NDA, to permit the applicant to rely, in part, upon published literature and/or the FDA's previous findings of safety and efficacy for an approved product. The FDA also requires companies to perform additional clinical trials or measurements to support any deviation from the previously approved product and to justify that it is scientifically appropriate to rely on the applicable published literature or referenced product, referred to as bridging. The FDA may then approve the new product candidate for all or some of the indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant, if such approval is supported by study data. The labeling, however, may be required to include all or some of the limitations, contraindications, warnings or precautions or restrictions on use included in the reference product's labeling, including a boxed warning, or may require additional limitations, contraindications, warnings or precautions or restrictions on use. We currently plan to pursue marketing approval for QTORIN rapamycin for several indications and QTORIN pitavastatin for one indication in the United States through Section 505(b)(2) NDAs and will be completing bridging analyses comparing our QTORIN programs to the approved oral rapamycin product, a previously approved organ rejection prophylactic, prior to NDA submission. If the FDA disagrees with our conclusions regarding the appropriateness of our reliance on the FDA's prior findings of safety and efficacy for the approved oral rapamycin product or on published literature, or if we are not otherwise able to bridge to the listed drug or published literature to demonstrate that our reliance is scientifically appropriate, we could be required to conduct additional nonclinical toxicology, clinical safety or efficacy trials, or other studies to support our NDA, which could lead to unanticipated costs and delays or to the termination of our development programs. For example, while we plan to bridge QTORIN rapamycin and the approved oral rapamycin product based on cross-study comparison between pharmacokinetic data from the prescribing information for the approved product, the FDA recommends that bridging to support an NDA for the treatment of microcystic LM be done in a relative bioavailability study comparing the pharmacokinetics of a topical product applied under maximal use conditions and the approved oral drug. The planned cross-study analysis allows for comparison of systemic pharmacokinetic parameters, key criteria for assessing the applicability of safety findings from the listed drug, which are a result of systemic exposure from the oral formulation. If the FDA does not agree with our pharmacokinetic approach, we may need to conduct a relative bioavailability study, which compares direct assessment of pharmacokinetics of both products administered under similar conditions. For example, FDA may request different specific criteria for comparisons that cannot be evaluated based on limitations in the pharmacokinetic data available in the prescribing information of the approved drug. If we are unable to obtain approval for our product candidates through the Section 505(b)(2) NDA process, we may be required to pursue the more expensive and time consuming Section 505(b)(1) approval process, which consists of full reports of investigations of safety and effectiveness conducted by or for the applicant. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway for FDA approval, we cannot assure you that our product candidates will receive the requisite approvals for commercialization.

Our approach of targeting rare skin diseases and vascular malformations presents risks related to the clinical development, regulatory approval and commercialization of our product candidates, including the following: - we may have difficulty establishing safety and efficacy in these types of patient populations given there is less known about the natural history of the disease;- we expect to face challenges with respect to patient enrollment in our clinical trials, as described above;- small sample sizes in our clinical trials suggest that we face the risk of substantial variability in the results of our trials, and so the outcome of nonclinical testing and early clinical trials is less likely to be predictive of the success of later-stage clinical trials;- following approval of our product candidates, if any, pricing and level of reimbursement may not be sufficient to offset costs of development, manufacturing, marketing, and commercialization; and - market size is a significant variable in disease indications classified as rare. Our projections of both the number of people who have these diseases and malformations, as well as the subset of people with these diseases or malformations who have the potential to benefit from treatment with product candidates we may develop, are based on estimates. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient advocacy groups or market research. These estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. The number of patients in the United States, Europe and elsewhere may turn out to be lower than expected, and patients may not be amenable to treatment with our product candidates we may develop or may become increasingly difficult to identify or gain access to. Accordingly, even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications. Adverse developments with respect to any of the foregoing could result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of operations, and prospects.

Regulatory authorities in some jurisdictions, including the United States and other major markets, may designate drugs intended to treat conditions or diseases affecting relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is generally defined as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the European Union, the European Commission, following recommendation from the EMA's Committee for Orphan Medicinal Products, may grant orphan designation in respect of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating disease affecting not more than five in 10,000 persons in the European Union when the application is made. Additionally, orphan designation may be granted by the European Commission for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic disease when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biologic product. In each case, the sponsor must show that no satisfactory method of diagnosis, prevention or treatment of the condition in question has been authorized in the European Union or, if such method exists, the product will be of significant benefit to those affected by that condition. We have received Orphan Drug Designation for QTORIN rapamycin for the treatment of microcystic LM from the FDA and European Commission. If we request Orphan Drug Designation or the foreign equivalent for any of our other or future product candidates, there can be no assurances that the FDA or non-U.S. regulatory authorities will grant any of our product candidates such designation. Additionally, the designation of any of our product candidates as an orphan product does not mean that any regulatory agency will expedite regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant Orphan Drug Designation to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving exclusive marketing approval. Generally, if a product candidate with an Orphan Drug Designation receives the first marketing approval for the disease or condition for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or foreign regulatory authorities (as applicable) from approving another marketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another sponsor receives such approval before we do (regardless of our Orphan Drug Designation), we will be precluded from receiving marketing approval for our product for the applicable exclusivity period unless FDA concludes that our drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. The applicable exclusivity period is 7 years in the United States and 10 years in the European Union. The exclusivity period in the European Union can be reduced to six years if a product no longer meets the criteria for orphan designation or if the product is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition. Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product candidate from competition because different drugs can be approved for the same condition in the United States and the same drug may be approved for different conditions. Even after an orphan drug is approved, the FDA may subsequently approve another drug for the same disease if the FDA concludes that the latter drug is not the same drug or is clinically superior. In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan indication as an authorized orphan product if the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal product already authorized, is safer, more effective or otherwise clinically superior; if the holder of the marketing authorization for the original medicinal product consents to a second orphan medicinal product application; or if the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of orphan medicinal product. Our inability to obtain Orphan Drug Designation or the foreign equivalent for our product candidates, or to realize the benefits of such designation, could have an adverse effect on our business, financial condition, results of operations and prospects.

Identifying and qualifying a sufficient number of eligible subjects to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on our ability to recruit subjects to participate, as well as the completion of required follow-up periods. Patients may be unwilling to participate in our clinical trials because of negative publicity from adverse events related to the biotechnology or pharmaceutical fields, competitive clinical trials for similar patient populations, the existence of current treatments or for other reasons outside of our control. The timeline for recruiting subjects, conducting studies and obtaining regulatory approval of our product candidates may be delayed, which could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or termination of the clinical trials altogether. Importantly, the indications that we are currently targeting and may in the future target are serious, rare diseases and vascular malformations, which may limit the pool of subjects that may be enrolled in our ongoing or planned clinical trials. To the extent our clinical trials are limited to specific genotypes, the population of eligible trial participants is even further limited. Microcystic LMs affect an estimated greater than 30,000 diagnosed patients in the United States. Cutaneous VMs affect an estimated greater than 75,000 people in the United States. Clinically significant angiokeratomas and DSAP affect an estimated greater than 50,000 patients in the United States. Some of the other diseases we intend to target have similarly limited patient populations. We expect to rely in part on our relationships with patient advocacy groups to assist in identifying eligible patients, and any deterioration of those relationships could impede our ability to successfully enroll patients in our clinical trials. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible subjects to participate in these trials as required by the FDA or similar regulatory authorities outside of the United States. Subject enrollment and trial completion are affected by numerous factors, including the: - size and nature of the target population and the process for identifying subjects;- design of the trial protocol;- eligibility and exclusion criteria for the trial;- safety profile, to date, of the product candidate under study;- perceived risks and benefits of the product candidate under study;- availability of competing therapies and clinical trials for similar product candidates or targeting subjects meeting our trial eligibility criteria;- severity of the disease under investigation;- availability of genetic testing for potential patients;- proximity and availability of clinical trial sites for prospective subjects;- ability to obtain and maintain subject consent;- risk that enrolled subjects will drop out before completion of the trial;- patient referral practices of physicians; and - ability to monitor subjects adequately during and after treatment. If we have difficulty enrolling a sufficient number of subjects to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations and prospects.

Our proprietary QTORIN platform is novel and was developed over several years of research to overcome inherent challenges, including chemical stability, skin penetration and skin distribution, with topical delivery of mTOR inhibitors, such as rapamycin and other therapeutic agents. QTORIN is an anhydrous gel comprising excipients intentionally selected in a ratio designed to achieve drug stability at room temperature and enable cutaneous distribution of therapeutics levels of cargoes into the target cells in the basal layer of the epidermis and to the dermis. Our product candidate for the treatment of microcystic LMs, cutaneous VMs, and clinically significant angiokeratomas leverages QTORIN as a mechanism of delivery of a 3.9% concentration of rapamycin to treat the applicable disease. Our product candidate for the treatment of DSAP leverages QTORIN as a mechanism of delivery of pitavastatin. The QTORIN platform has generated two program candidates, QTORIN rapamycin for three indications to date and QTORIN pitavastatin for one indication to date, and clinical evidence to support these candidates is preliminary and limited at this time by their respective stages of development. QTORIN is the platform for our current clinical-stage product candidates and for other research-stage product candidates in our pipeline, and accordingly, our future success depends in significant part on the successful development of this novel technology. Negative results in the development of QTORIN rapamycin for the treatment of microcystic LMs, cutaneous VMs, or clinically significant angiokeratomas, or of QTORIN pitavastatin for the treatment of DSAP, may affect our ability to become the standard of care. In addition, negative results may impact our ability to obtain regulatory approval for other product candidates which we expect to develop based on our QTORIN platform, either at all or within anticipated timeframes because, although we may be targeting different indications, the underlying technology platform is the same for each product candidate and there may be commonalities in the manufacturing and development processes. Accordingly, a failure in any one QTORIN-based program may decrease confidence in our technology and affect our ability to conduct clinical programs for, and ultimately obtain regulatory approval for, other QTORIN-based product candidates. We have not yet succeeded and may not succeed in completing clinical development of or obtaining regulatory approval for any of our product candidates using our QTORIN platform. As a result, it is more difficult for us to predict whether the application of our QTORIN platform, or any similar or competitive platforms, will result in the development and marketing approval of any products. Any developmental problems we experience in the future related to our QTORIN platform or any of our research programs may cause significant delays or unanticipated costs or may prevent the development of a commercially viable product. Any of these factors may prevent us from completing our preclinical studies or clinical trials or commercializing any product candidates we may develop on a timely or profitable basis, if at all, which could materially adversely affect our business, financial condition, results of operations and prospects.

There are currently no FDA-approved therapies indicated for the treatment of microcystic LMs, cutaneous VMs, clinically significant angiokeratomas or DSAP. We have concentrated our current research and development efforts on developing effective therapies for these indications, in addition to other rare skin diseases, vascular malformations and rare genetic conditions in other disease areas, and our future success depends on the success of this approach. The clinical trial requirements of the FDA and other comparable regulatory agencies and the criteria these regulators use to determine the safety and efficacy of any product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential product. Given the nature of the skin diseases we are targeting, the design and execution of our clinical development program is subject to both known and unknown risks. As with QTORIN rapamycin for the treatment microcystic LMs or cutaneous VMs or clinically significant angiokeratomas, QTORIN pitavastatin for the treatment of DSAP, and any other indications or future product candidates that may require us to use new or novel endpoints or methodologies, the FDA or other regulatory authorities may not consider the endpoints of our clinical trials or the magnitude of treatment effect observed in our clinical trials to provide clinically meaningful results. Even if applicable regulatory authorities do not object to our proposed endpoints in an earlier-stage clinical trial, such regulatory authorities may require evaluation of additional or different clinical endpoints in later-stage clinical trials or may not accept the clinical endpoints evaluated in later-stage clinical trials. For example, while the primary endpoint in the Phase 3 clinical trial of QTORIN rapamycin for the treatment of microcystic LM employed a dynamic assessment that used a comparative rating scale, which was also assessed as one of several efficacy endpoints in the Phase 2 study in microcystic LM, the FDA has recommended that primary efficacy in the treatment of microcystic LM to be evaluated on a static multicomponent assessment scale but also recommended that we provide a rationale for selecting the comparative rating scale should we proceed with a comparative rating scale. If the FDA does not agree with our primary endpoint, the FDA may instead consider the Phase 3 clinical trial's key secondary endpoint, which is a static multicomponent assessment scale, as pivotal to assessing efficacy, if alpha-protected. Alternatively, the FDA may consider the study to not be adequate and well-controlled and could request additional clinical trials to assess a static multicomponent assessment scale as the primary endpoint. As a result, the design and conduct of our ongoing and future clinical trials of our product candidates may take longer, be more costly or be less definitive. Further, different results may be achieved depending upon the characteristics of the population enrolled in our studies and which analysis population is used to analyze results. As a result, there is no guarantee that our clinical trials will produce statistically significant results with respect to subject-reported outcomes, and there can be no guarantee that the characteristics of the population enrolled in our clinical trials does not adversely impact the results reported for such trials. Any delays in, or the denial of, approval of any of our product candidates resulting from our inability to establish effective trial designs for serious, rare skin diseases or vascular malformations could materially adversely affect our business, financial condition, results of operations and prospects.