Description of the Business and Liquidity	9 Months Ended
Sep. 30, 2024
Description of the Business and Liquidity
Description of the Business and Liquidity	1. Description of the Business and Liquidity We are a commercial-stage pharmaceutical company dedicated to the development of innovative therapeutics for the treatment of seizure disorders, including rare genetic epilepsies and status epilepticus (SE). On March 18, 2022, the U.S. Food and Drug Administration (FDA) approved our new drug application (NDA) for the use of ZTALMY® (ganaxolone) oral suspension CV for the treatment of seizures associated with Cyclin-dependent Kinase-like 5 (CDKL5) Deficiency Disorder (CDD) in patients two years of age and older. ZTALMY, our first FDA approved product, became available for commercial sale and shipment in the third quarter of 2022. On July 28, 2023, the European Commission (EC) granted marketing authorization for ZTALMY for the adjunctive treatment of epileptic seizures associated with CDD in patients two to 17 years of age. ZTALMY may be continued in patients 18 years of age and older. We have an exclusive collaboration agreement with Orion Corporation (Orion) for European commercialization of ganaxolone for ZTALMY. Orion has prepared for the expected commercial launches of ZTALMY in select European countries, and they have informed us that they will be considering the outcome of our strategic alternatives review we announced on October 24, 2024 before committing to launch timing and further launch preparations. On July 18, 2024, we announced that the China National Medical Products Administration has approved ganaxolone oral suspension for the treatment of epileptic seizures in patients two years of age and older with CDD. We have a collaboration agreement with Tenacia Biotechnology (Shanghai) Co., Ltd. (Tenacia) for the commercialization of ganaxolone in Mainland China, Hong Kong, Macau and Taiwan. On October 24, 2024, we announced top-line data from our Phase 3 trial in Tuberous Sclerosis Complex (TSC) (TrustTSC). TSC is a rare, multisystem genetic disorder caused by inherited mutations in the TSC1 gene or TSC2 gene. TSC is often characterized by non-cancerous tumors, skin abnormalities, and severe neurological manifestations including refractory seizures and neurodevelopmental delays. TSC is a leading cause of genetic epilepsy. The TrustTSC trial did not meet the primary endpoint of percent change in 28-day TSC-associated seizure frequency. As a result of the TrustTSC outcome, we discontinued further ganaxolone clinical development, other than activities required by the FDA and EMA specific to post-approval commitments of Ztalmy for CDD, and have taken additional steps to reduce costs, including an approximate 45% reduction in our workforce in the fourth quarter of 2024. We also commenced a process to explore strategic alternatives with the goal of maximizing value for our stockholders and engaged Barclays as an advisor to assist in our review of strategic alternatives. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions. In June 2024, we announced top-line results from our Phase 3 RAISE trial of intravenous (IV) ganaxolone for the treatment of Refractory Status Epilepticus (RSE). Status Epilepticus (SE) is a life-threatening condition characterized by continuous, prolonged seizures or rapidly recurring seizures without intervening recovery of consciousness. If SE is not treated urgently, permanent neuronal damage may occur, which contributes to high rates of morbidity and mortality. Patients with SE who do not respond to first-line benzodiazepine treatment are classified as having Established Status Epilepticus (ESE) and those who then progress to and subsequently fail at least one second-line antiepileptic drug (AED) are classified as having RSE. The top-line results from RAISE showed that the trial met its first co-primary endpoint, a statistically significant proportion of patients had status epilepticus cessation within 30 minutes of initiating IV ganaxolone compared to placebo, but failed to achieve statistical significance on its second co-primary endpoint, the proportion of patients not progressing to IV anesthesia for 36 hours following initiation of IV ganaxolone compared to placebo. We continue to analyze the full RAISE dataset and are scheduled to meet with the FDA by the end of 2024 to discuss a potential path forward for IV ganaxolone in RSE. We had been developing ganaxolone in formulations for two different routes of administration: IV and oral. The different formulations were intended to maximize potential therapeutic applications of ganaxolone for adult and pediatric patient populations, in both acute and chronic care. While the precise mechanism by which ganaxolone exerts its therapeutic effects in the treatment of seizures is unknown, its anticonvulsant effects are thought to result from positive allosteric modulation of the gamma-aminobutyric acid type A (GABA_A) receptor in the central nervous system. Ganaxolone is a synthetic analog of allopregnanolone, an endogenous neurosteroid, and targets both synaptic and extrasynaptic GABA_A. This unique receptor binding profile may contribute to the anticonvulsant, antidepressant and anxiolytic effects shown by neuroactive steroids in animal models, clinical trials or both. Liquidity Since inception, we have incurred negative cash flows from our operations, and other than for the three months ended September 30, 2022 due to a one-time net gain from the sale of our Priority Review Voucher (PRV), we have incurred net losses. We incurred a Net loss of $98.7 million for the nine months ended September 30, 2024. There is no assurance that profitable operations will be achieved in the future, and if achieved, could be sustained on a continuing basis. Our accumulated deficit as of September 30, 2024 was $670.6 million, and we expect to incur substantial losses in future periods. Management’s operating plan, which underlies the analysis of our ability to continue as a going concern, involves the estimation of the amount and timing of future cash inflows and outflows. Actual results could vary from the operating plan. We follow the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess our ability to continue as a going concern within one year after the date the financial statements are issued. We had Cash and cash equivalents of $42.2 million as of September 30, 2024. We believe that such amount is not sufficient to fund our operations for the one-year period after the date these financial statements are issued. As a result, there is substantial doubt about our ability to continue as a going concern through the one-year period from the date these financial statements are issued. Cost reduction activities were implemented in the second and fourth quarters of 2024, as further discussed in Note 13 and Note 14. As a result of the TrustTSC outcome announced in October 2024, we discontinued further ganaxolone clinical development, other than activities required by the FDA and EMA specific to post-approval commitments of Ztalmy for CDD, and have taken additional steps to reduce costs, including an approximate 45% reduction in our workforce in the fourth quarter of 2024. We also commenced a process to explore strategic alternatives with the goal of maximizing value for our stockholders and engaged Barclays as an advisor to assist in our review of strategic alternatives. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions.

Description of the Business and Liquidity

9 Months Ended

Sep. 30, 2024

Description of the Business and Liquidity

Description of the Business and Liquidity

1. Description of the Business and Liquidity

We are a commercial-stage pharmaceutical company dedicated to the development of innovative therapeutics for the treatment of seizure disorders, including rare genetic epilepsies and status epilepticus (SE). On March 18, 2022, the U.S. Food and Drug Administration (FDA) approved our new drug application (NDA) for the use of ZTALMY® (ganaxolone) oral suspension CV for the treatment of seizures associated with Cyclin-dependent Kinase-like 5 (CDKL5) Deficiency Disorder (CDD) in patients two years of age and older. ZTALMY, our first FDA approved product, became available for commercial sale and shipment in the third quarter of 2022. On July 28, 2023, the European Commission (EC) granted marketing authorization for ZTALMY for the adjunctive treatment of epileptic seizures associated with CDD in patients two to 17 years of age. ZTALMY may be continued in patients 18 years of age and older. We have an exclusive collaboration agreement with Orion Corporation (Orion) for European commercialization of ganaxolone for ZTALMY. Orion has prepared for the expected commercial launches of ZTALMY in select European countries, and they have informed us that they will be considering the outcome of our strategic alternatives review we announced on October 24, 2024 before committing to launch timing and further launch preparations. On July 18, 2024, we announced that the China National Medical Products Administration has approved ganaxolone oral suspension for the treatment of epileptic seizures in patients two years of age and older with CDD. We have a collaboration agreement with Tenacia Biotechnology (Shanghai) Co., Ltd. (Tenacia) for the commercialization of ganaxolone in Mainland China, Hong Kong, Macau and Taiwan.

On October 24, 2024, we announced top-line data from our Phase 3 trial in Tuberous Sclerosis Complex (TSC) (TrustTSC). TSC is a rare, multisystem genetic disorder caused by inherited mutations in the TSC1 gene or TSC2 gene. TSC is often characterized by non-cancerous tumors, skin abnormalities, and severe neurological manifestations including refractory seizures and neurodevelopmental delays. TSC is a leading cause of genetic epilepsy. The TrustTSC trial did not meet the primary endpoint of percent change in 28-day TSC-associated seizure frequency. As a result of the TrustTSC outcome, we discontinued further ganaxolone clinical development, other than activities required by the FDA and EMA specific to post-approval commitments of Ztalmy for CDD, and have taken additional steps to reduce costs, including an approximate 45% reduction in our workforce in the fourth quarter of 2024. We also commenced a process to explore strategic alternatives with the goal of maximizing value for our stockholders and engaged Barclays as an advisor to assist in our review of strategic alternatives. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions.

In June 2024, we announced top-line results from our Phase 3 RAISE trial of intravenous (IV) ganaxolone for the treatment of Refractory Status Epilepticus (RSE). Status Epilepticus (SE) is a life-threatening condition characterized by continuous, prolonged seizures or rapidly recurring seizures without intervening recovery of consciousness. If SE is not treated urgently, permanent neuronal damage may occur, which contributes to high rates of morbidity and mortality. Patients with SE who do not respond to first-line benzodiazepine treatment are classified as having Established Status Epilepticus (ESE) and those who then progress to and subsequently fail at least one second-line antiepileptic drug (AED) are classified as having RSE. The top-line results from RAISE showed that the trial met its first co-primary endpoint, a statistically significant proportion of patients had status epilepticus cessation within 30 minutes of initiating IV ganaxolone compared to placebo, but failed to achieve statistical significance on its second co-primary endpoint, the proportion of patients not progressing to IV anesthesia for 36 hours following initiation of IV ganaxolone compared to placebo. We continue to analyze the full RAISE dataset and are scheduled to meet with the FDA by the end of 2024 to discuss a potential path forward for IV ganaxolone in RSE.

We had been developing ganaxolone in formulations for two different routes of administration: IV and oral. The different formulations were intended to maximize potential therapeutic applications of ganaxolone for adult and pediatric patient populations, in both acute and chronic care. While the precise mechanism by which ganaxolone exerts its therapeutic effects in the treatment of seizures is unknown, its anticonvulsant effects are thought to result from positive allosteric modulation of the gamma-aminobutyric acid type A (GABA_A) receptor in the central nervous system. Ganaxolone is a synthetic analog of allopregnanolone, an endogenous neurosteroid, and targets both synaptic and

extrasynaptic GABA_A. This unique receptor binding profile may contribute to the anticonvulsant, antidepressant and anxiolytic effects shown by neuroactive steroids in animal models, clinical trials or both.

Liquidity

Since inception, we have incurred negative cash flows from our operations, and other than for the three months ended September 30, 2022 due to a one-time net gain from the sale of our Priority Review Voucher (PRV), we have incurred net losses. We incurred a Net loss of $98.7 million for the nine months ended September 30, 2024. There is no assurance that profitable operations will be achieved in the future, and if achieved, could be sustained on a continuing basis. Our accumulated deficit as of September 30, 2024 was $670.6 million, and we expect to incur substantial losses in future periods.

Management’s operating plan, which underlies the analysis of our ability to continue as a going concern, involves the estimation of the amount and timing of future cash inflows and outflows. Actual results could vary from the operating plan. We follow the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess our ability to continue as a going concern within one year after the date the financial statements are issued. We had Cash and cash equivalents of $42.2 million as of September 30, 2024. We believe that such amount is not sufficient to fund our operations for the one-year period after the date these financial statements are issued. As a result, there is substantial doubt about our ability to continue as a going concern through the one-year period from the date these financial statements are issued. Cost reduction activities were implemented in the second and fourth quarters of 2024, as further discussed in Note 13 and Note 14. As a result of the TrustTSC outcome announced in October 2024, we discontinued further ganaxolone clinical development, other than activities required by the FDA and EMA specific to post-approval commitments of Ztalmy for CDD, and have taken additional steps to reduce costs, including an approximate 45% reduction in our workforce in the fourth quarter of 2024. We also commenced a process to explore strategic alternatives with the goal of maximizing value for our stockholders and engaged Barclays as an advisor to assist in our review of strategic alternatives. There can be no assurance that the exploration of strategic alternatives will result in any agreements or transactions, or as to the timing of any such agreements or transactions.