Executive Summary / Key Takeaways

• NLS Pharmaceutics ($NLSP) is undergoing a significant strategic transformation, pivoting from a clinical-stage biopharmaceutical company focused solely on rare CNS disorders to a diversified entity with a robust pipeline spanning neurodegenerative diseases and diabetes through its merger with Kadimastem.
• The company's core technological strength lies in its proprietary extended-release (ER) formulation of mazindol for CNS disorders and the Dual Orexin Receptor Agonist (DOXA) platform, which offers multi-modal mechanisms of action for enhanced therapeutic profiles.
• Despite historical financial challenges, including a "going concern" warning in 2024, recent equity financings totaling over $6 million and a $25 million equity facility agreement have strengthened the balance sheet and extended the cash runway, supporting the merger and ongoing clinical programs.
• The merger with Kadimastem, which recently received SEC effectiveness, is expected to create a combined entity named NewcelX, aiming to leverage Kadimastem's "off-the-shelf" allogeneic cell therapy platform for Type 1 diabetes and ALS, significantly broadening NLSP's market potential.
• Investors should monitor the successful integration of the merger, the advancement of the expanded pipeline, and the company's ability to achieve profitability and sustainable cash flow, especially given its current lack of revenue and historical operating losses.

A New Horizon for NLS Pharmaceutics: Innovation and Diversification

NLS Pharmaceutics Ltd. ($NLSP), established in 2015 and headquartered in Zurich, Switzerland, has historically positioned itself as a clinical-stage biopharmaceutical company dedicated to addressing unmet medical needs in rare and complex central nervous system (CNS) disorders. The company's foundational strategy has centered on developing innovative therapies for conditions such as narcolepsy, idiopathic hypersomnia, other rare sleep disorders, and Attention Deficit Hyperactivity Disorder (ADHD). This focus has shaped its early pipeline, which includes lead product candidates like Quilience for narcolepsy and Nolazol for ADHD.

The biopharmaceutical landscape for neurological disorders is substantial, with the global neurology therapeutics market valued at $97.1 billion in 2022 and projected to reach $147.8 billion by 2030, demonstrating a compound annual growth rate (CAGR) of 5.4%. This growing market provides a fertile ground for companies like NLS Pharmaceutics that specialize in niche and underserved patient populations. However, the sector is also characterized by intense competition from established players such as Jazz Pharmaceuticals , Axsome Therapeutics , and Harmony Biosciences , who possess greater scale, more mature product portfolios, and stronger financial positions.

Technological Edge: Proprietary Formulations and Multi-Modal Mechanisms

NLS Pharmaceutics' competitive differentiation is rooted in its innovative technological platforms. The company's most advanced product candidates, Quilience and Nolazol, incorporate a known molecule, mazindol, in a proprietary extended-release (ER) formulation. This approach aims to reduce clinical and regulatory risk, limit development costs, and accelerate time to market by leveraging mazindol's well-established safety record from its long history of clinical use. The ER formulation is designed to optimize drug exposure over a 24-hour period, which is particularly beneficial for disorders of the circadian rhythm and sleep-wake cycle.

Furthermore, Quilience and Nolazol utilize a dual mechanism of action, resulting in a unique pharmacological profile that targets multiple neuronal pathways. This multi-modal approach is believed to address the complex disruptions underlying CNS disorders more effectively, potentially leading to improved patient outcomes. Beyond its core CNS pipeline, NLS Pharmaceutics is advancing its Dual Orexin Receptor Agonist (DOXA) platform, with compounds like AEX-2 and AEX-41 showing promising preclinical data for sleep-wake disorders.

A significant expansion of NLSP's technological footprint comes from its iTOL-102 diabetes program. This program, co-developed with Kadimastem and iTolerance (ITOL), focuses on a Type 1 Diabetes Cell Therapy that holds the potential to circumvent the need for life-long immunosuppression drugs. This represents a substantial leap into regenerative medicine, offering a differentiated approach to diabetes care by integrating neuroscience, metabolism, and regenerative medicine. Additionally, positive results from Study KO-943 demonstrated that Mazindol reduces fentanyl-induced reward in animal models, positioning it as a non-opioid, multi-mechanism asset in addiction therapeutics and supporting potential expansion into high-value markets beyond ADHD and narcolepsy.

Financial Performance and Liquidity: A Path to Stability

Historically, NLS Pharmaceutics has operated without revenue, a common characteristic of clinical-stage biopharmaceutical companies. The company has consistently reported negative net income, with a net loss of -$1.98 million in 2024 and -$12.17 million in 2023.

Operating expenses have been substantial, with research and development (R&D) reaching $422,051 in 2024 and $5.91 million in 2023, while selling, general, and administrative (SG&A) expenses were $3.21 million in 2024 and $5.90 million in 2023. The company's EBITDA was -$1.83 million in 2024.

These financial trends led to an explanatory paragraph in Marcum LLP's audit report for the fiscal year ended December 31, 2024, expressing "substantial doubt about the Company’s ability to continue as a going concern." Furthermore, material weaknesses in internal control over financial reporting were identified, related to a lack of sufficient trained professionals and appropriate segregation of duties.

In response to these liquidity challenges, NLS Pharmaceutics has actively pursued financing. In March 2025, the company, in conjunction with Kadimastem, announced an equity financing of up to $3 million and a $25 million equity facility agreement. By June 2025, NLS Pharmaceutics completed the second and final $1 million closing of this $3 million equity financing, accumulating total proceeds of $3 million. Overall, the company has raised more than $6 million in aggregate since the proposed merger with Kadimastem was announced, specifically to support the transaction and the combined company's clinical trials post-merger. These financing events, coupled with the conversion of all outstanding liabilities into equity, have strengthened the balance sheet and extended the cash runway, providing crucial support for ongoing R&D and the merger execution.

As of December 31, 2024, the company reported cash and cash equivalents of $1.67 million, an improvement from $897,680 in 2023.

Strategic Evolution: The Kadimastem Merger and Pipeline Expansion

The most significant strategic development for NLS Pharmaceutics is its proposed merger with Kadimastem Ltd., an advanced clinical-stage cell therapy company. On September 10, 2025, the U.S. Securities and Exchange Commission (SEC) declared effective the registration statement on Form F-4 related to this merger. This merger is anticipated to create a combined Nasdaq-listed entity named NewcelX, focusing on advanced therapies for neurodegenerative diseases and diabetes.

This strategic integration is expected to bring together NLS's CNS disorder pipeline and Kadimastem's cell therapy expertise, creating a diversified pipeline that reduces single-program risk. Post-merger plans include initiating a Phase IIa trial for AstroRx in ALS and a Phase I study for IsletRx in Type 1 diabetes, alongside the preclinical development of AEX-2/AEX-41 for narcolepsy and neurodegeneration. This expansion into cell therapy and diabetes treatment represents a transformative pivot, significantly broadening NLSP's addressable market and potential revenue streams beyond its traditional CNS focus.

Concurrently with the merger progress, NLS Pharmaceutics also underwent an auditor change. On September 17, 2025, Marcum LLP resigned as the company's independent registered public accounting firm, effective immediately, due to CBIZ CPAs P.C.'s acquisition of Marcum's attestation business. NLS Pharmaceutics subsequently engaged CBIZ as its new independent registered public accounting firm for the fiscal year ending December 31, 2025. Marcum's report for 2024 contained no adverse opinion or disclaimer, except for the going concern explanatory paragraph.

Competitive Positioning and Market Dynamics

NLS Pharmaceutics operates in a highly competitive biopharmaceutical market. While its focus on rare CNS disorders provides a niche, it faces formidable rivals. Companies like Jazz Pharmaceuticals (JAZZ), with its established presence in narcolepsy treatments, demonstrate consistent revenue growth and improved profitability margins due to a mature product portfolio. Axsome Therapeutics (AXSM), also targeting CNS disorders, shows trends of rapid revenue growth from recent product launches. Harmony Biosciences (HRMY) specializes in rare neurological disorders and exhibits strong revenue growth from its lead products.

Compared to these larger, more established players, NLS Pharmaceutics, with a market capitalization of $8.84 million, is a smaller entity. Its strengths lie in its R&D innovation and agility, particularly in developing novel mechanisms of action for underserved indications. For instance, its proprietary ER formulation and dual mechanism of action for Quilience and Nolazol could offer differentiated benefits in efficacy or tolerability for specific patient populations. The expansion into Type 1 diabetes cell therapy through the Kadimastem merger further diversifies its competitive strategy, potentially allowing it to capture emerging opportunities faster than larger, more entrenched competitors.

However, NLSP consistently lags its peers in financial performance, particularly in profitability and cash flow generation, given its developmental stage and lack of commercialized products. Its current ratio of 2.69 in 2025, while indicating some short-term liquidity, must be viewed in the context of its ongoing cash burn. The high R&D costs relative to its non-existent revenue streams highlight the significant investment required to bring therapies to market. The company's smaller scale also presents vulnerabilities, potentially leading to higher operational costs and supply chain dependencies compared to rivals with greater resources.

Risks and Outlook

The investment thesis for NLS Pharmaceutics is accompanied by significant risks. The "going concern" warning from its former auditor underscores the fundamental challenge of achieving financial sustainability without commercialized products. The material weaknesses in internal control over financial reporting also highlight operational risks that need diligent attention. The success of the Kadimastem merger and the subsequent integration of their respective pipelines are critical. Any delays in regulatory approvals, clinical trial setbacks, or challenges in securing further funding could severely impact the company's trajectory.

Despite these risks, the outlook for NLS Pharmaceutics is marked by a transformative strategic shift. The merger with Kadimastem broadens its therapeutic scope and introduces a promising cell therapy platform for diabetes and neurodegenerative diseases. The continued progress in its existing CNS pipeline, including the potential for Mazindol in addiction therapeutics, further diversifies its long-term growth avenues. The recent equity financings provide a much-needed capital injection, extending its cash runway and supporting its ambitious development plans. The company's commitment to building a strong, well-balanced pipeline and maximizing shareholder value through innovation and strategic collaborations remains central to its forward strategy.

Conclusion

NLS Pharmaceutics stands at a pivotal juncture, transitioning from a focused CNS biopharmaceutical developer to a more diversified entity through its strategic merger with Kadimastem. This transformation, underpinned by its innovative proprietary technologies in both CNS disorders and emerging cell therapies for diabetes, offers a compelling, albeit high-risk, investment narrative. While the company has confronted significant financial hurdles, including a "going concern" warning, recent capital raises and the strategic pivot through the merger demonstrate a proactive approach to securing its future. The ability to successfully integrate the new assets, advance its expanded pipeline through clinical trials, and ultimately achieve commercialization will be paramount. Investors should carefully weigh the substantial growth potential offered by its broadened therapeutic focus and technological differentiators against the inherent risks of a clinical-stage biotech, particularly its ongoing need for capital and the complexities of bringing novel therapies to market in a highly competitive environment.