Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended June 30, 2025.

The following discussion and analysis contain forward-looking statements within the meaning of the federal securities laws. You are urged to carefully review our description and examples of forward-looking statements included earlier in this Quarterly Report immediately prior to Part I, under the heading "Special Note Regarding Forward-Looking Statements." Forward-looking statements are subject to risk that could cause actual results to differ materially from those expressed in the forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in this Quarterly Report and our Annual Report on Form 10-K for the year ended June 30, 2025, as well as any of those made in our other reports filed with the SEC. You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date of this document. We do not intend, and undertake no obligation, to publish revised forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

Critical Accounting Policies and Estimates

Our significant accounting policies, which are described in the notes to our consolidated financial statements included in this report and in our Annual Report on Form 10-K for the year ended June 30, 2025, have not changed during the three months ended September 30, 2025. We believe that our accounting policies and estimates relating to the carrying value of inventory, revenue recognition, accrued expenses, purchase commitment liabilities, warrants and stock-based compensation are the most critical.

Our Business

We are a biopharmaceutical company developing first-in-class medicines based on molecules that modulate the activity of the melanocortin peptide receptor systems. Our product candidates are targeted, receptor-specific therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.

Melanocortin Receptor System. The melanocortin receptor ("MCR") system has effects on food intake, metabolism, sexual function, inflammation, and immune system responses. There are five melanocortin receptors, MC1R through MC5R. Modulation of these receptors, through use of receptor-specific agonists, which activate receptor function, or receptor-specific antagonists, which block receptor function, can have significant pharmacological effects.

Our prior commercial product, Vyleesi®, was approved by the U.S. Food and Drug Administration ("FDA") in June 2019 and was being marketed in the United States by AMAG Pharmaceuticals, Inc. ("AMAG") for the treatment of hypoactive sexual desire disorder ("HSDD") in premenopausal women pursuant to a license agreement between them for Vyleesi for North America, which was entered into on January 8, 2017 (the "AMAG License Agreement"). The AMAG License Agreement was terminated effective July 24, 2020, and we commenced marketing Vyleesi in North America. As disclosed in Note 6 to the Consolidated Financial Statements, effective December 19, 2023, Cosette acquired all rights to Vyleesi.

In August 2025, as disclosed in Note 5 to the Consolidated Financial Statements, we entered into a Research Collaboration, License and Patent Assignment Agreement with Boehringer-Ingelheim International GmbH ("Boehringer Ingelheim") to research, develop and commercialize first-in-class melanocortin receptor-targeted peptides we developed for the treatment of retinal diseases, including diabetic retinopathy.

Our new product development activities focus on obesity, including co-administration of bremelanotide with tirzepatide, a GLP-1 agonist for treatment of obesity, which has completed Phase 2 in the fourth quarter of calendar year 2024, with topline results expected in the first quarter of calendar year 2025 announced in March 2025, in which co-administration demonstrated an increased weight loss over tirzepatide alone; and secondarily on ocular indications, including PL9643, an ophthalmic peptide solution for dry eye disease ("DED"), which completed Phase 3 clinical trials and announced top line results from the first Phase 3 clinical trial in the first quarter of calendar year 2024; ulcerative colitis, including PL8177, an oral peptide formulation, which entered Phase 2 ulcerative colitis clinical trials in the third quarter of calendar year 2022 and announced topline results in March 2025, with one-third of patients dosed with PL8177 achieving clinical remission while the placebo group saw no clinical remission is expected to report topline results later this quarter. We are actively engaged in discussions with potential partners and licensees that have the financial and operational resources to progress our products for ocular conditions, including PL9643, through development, approval and commercialization.

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Pipeline Overview

The following chart illustrates the status of our drug development programs.

Our Strategy

Key elements of our business strategy include:

	·	Maintaining a team to create, develop and commercialize MCR products addressing unmet medical needs;
	·	Entering into strategic alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale, and distribution of product candidates that we are developing;
	·	Partially funding our product development programs with the cash flow generated from the sale of Vyleesi to Cosette, our agreement with Boehringer Ingelheim and existing license agreements, as well as any future research, collaboration, or license agreements; and
	·	Completing development and seeking regulatory approval of certain of our other product candidates.

Corporate Information

We were incorporated under the laws of the State of Delaware on November 21, 1986 and commenced operations in the biopharmaceutical area in 1996. Our corporate offices are located at 103 Carnegie Center Drive, Suite 300 Princeton, New Jersey 08852, and our telephone number is (609) 495-2200. We maintain an Internet site, where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and Section 16 of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained in it or connected to it are not incorporated into this Quarterly Report on Form 10-Q. The reference to our website is an inactive textual reference only.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (www.sec.gov).

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Results of Operations

As we continue to explore commercial opportunities and partners in both U.S. and international markets, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics. Although these factors have not had a material impact on our operations to date, future changes in trade regulations, tariff structures, or logistical constraints could influence the cost, availability, or timing of materials, services and other components associated with the development of our product candidates and manufacturing capabilities. We continue to monitor these developments closely to maintain operational efficiency and help mitigate potential future impacts.

Three Months Ended September 30, 2025, Compared to the Three Months Ended September 30, 2024:

Revenues - For the three months ended September 30, 2025, we recognized $8,847,550 in collaboration and license revenue compared to $0 for the three months ended September 30, 2024. The increase in collaboration and license revenue is related to the BI Agreement which consisted of an upfront payment, the achievement of a research milestone, and FTE related reimbursements.

Research and Development - Research and development expenses were $2,525,766 for the three months ended September 30, 2025, compared to $5,743,754 for the three months ended September 30, 2024. The decrease was primarily related to a decrease in spending on our MCR programs.

Research and development expenses related to our MCR programs were $970,629 for the three months ended September 30, 2025, compared to $4,081,037 for the three months ended September 30, 2024. The decrease was primarily related to a decrease in spending on our MCR programs.

The amounts of project spending above exclude general research and development spending which was $1,554,137 for the three months ended September 30, 2025 compared to $1,662,718 for the three months ended September 30, 2024. The decrease is primarily attributable to a decrease in compensation-related expenses.

Cumulative spending from inception to September 30, 2025, was approximately $311,900,000 on our Vyleesi program and approximately $251,400,000 on all our other programs (which include PL3994, melanocortin receptor agonists, other discovery programs and terminated programs). Due to various risk factors described in our Annual Report on Form 10-K for the year ended June 30, 2025, under "Risk Factors," including the difficulty in currently estimating the costs and timing of future Phase 1 clinical trials and larger-scale Phase 2 and Phase 3 clinical trials for any product under development, we cannot predict with reasonable certainty when, if ever, a program will advance to the next stage of development or be successfully completed, or when, if ever, related net cash inflows will be generated.

Selling, General and Administrative - Selling, general and administrative expenses, which consist mainly of compensation and related costs, were $1,660,731 for the three months ended September 30, 2025, compared to $2,020,931 for the three months ended September 30, 2024. The decrease is a result of decreased compensation costs.

Other Income (Expense) -Total other income (expense), net was $16,481 for the three months ended September 30, 2025, compared to $(58,964) for the three months ended September 30, 2024. The increase was a result of foreign currency transaction losses incurred during the three months ended September 30, 2024 and a decrease interest expense offset by a decrease in investment income.

Liquidity and Capital Resources

Since inception, we have generally incurred net operating losses, primarily related to spending on our research and development programs. We have financed our net operating losses primarily through debt and equity financings and amounts received under collaborative and license agreements.

Our product candidates are at various stages of development and will require significant further research, development, and testing and some may never be successfully developed or commercialized. We may experience uncertainties, delays, difficulties, and expenses commonly experienced by early-stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:

	·	the development and testing of products in animals and humans;
	·	product approval or clearance;
	·	regulatory compliance;
	·	good manufacturing practices ("GMP") compliance;

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	·	intellectual property rights;
	·	product introduction;
	·	marketing, sales, and competition; and
	·	obtaining sufficient capital.

Failure to enter into or successfully perform under collaboration agreements and obtain timely regulatory approval for our product candidates and indications would impact our ability to generate revenues and could make it more difficult to attract investment capital for funding our operations. Any of these possibilities could materially and adversely affect our operations and require us to curtail or cease certain programs.

During the three months ended September 30, 2025, net cash used in operating activities was $1,619,382 compared to $7,016,213 for the three months ended September 30, 2024. The decrease was primarily related to license and produce revenue recognized during the three months ended September 30, 2025.

During the three months ended September 30, 2025, net cash provided by financing activities was $328,200 which consisted of proceeds from the exercise of warrants. During the three months ended September 30, 2024, net cash used in financing activities was $126,969, which consisted $99,482 for payment of withholding taxes related to restricted stock units and $27,487 for payment of finance lease obligations.

We have incurred cumulative negative cash flows from operations since our inception, and have expended substantial funds to advance our planned product development efforts. Continued operations are dependent upon our ability to complete equity or debt financing activities and to enter into additional licensing or collaboration arrangements. As of September 30, 2025, our cash and cash equivalents were $1,273,083, and our current liabilities were $8,218,261.

Current liabilities include short-term lease obligations in an aggregate amount of $132,446.

There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2025.

We intend to utilize existing capital resources for general corporate purposes and working capital requirements, including preclinical and clinical development of our MC1R and MC4R programs, and development of other portfolio products.

Based on the Company's available cash and cash equivalents as of September 30, 2025, of $1,273,083 approximately $5,400,000 in cash received during October 2025 in conjunction with the agreement with Boehringer Ingelheim, and approximately $16,900,000 in net proceeds from a public offering in November, 2025, we have concluded that the prior conditions and events raising substantial doubt about our ability to continue as a going concern no longer exist as of the date our consolidated financial statements are issued. Based on our current operating and development plans, we expect that our existing cash and cash equivalents as of the date of this filing will be sufficient to enable us to fund operations through the next twelve months following the issuance of the financial statements.

We will need additional funding to complete required clinical trials for our product candidates and development programs and, if those clinical trials are successful (which we cannot predict), to complete submission of required regulatory applications to the FDA. However, current economic conditions (including current economic uncertainty, high interest rates, rising inflation, tariffs, and the potential for local and/or global economic recession) may negatively impact our operations, including possible effects on our financial condition, ability to access the capital markets on attractive terms or at all, liquidity, operations, suppliers, industry, and workforce. We will continue to evaluate the impact that these events could have on the operations, financial position, and the results of operations and cash flows during fiscal year 2026 and beyond.