Executive Summary / Key Takeaways

• Rafael Holdings (NYSE:RFL) is undergoing a significant transformation, pivoting from a diversified holding company with real estate assets to a biotechnology firm primarily focused on the development and potential commercialization of Trappsol® Cyclo™ for Niemann-Pick Disease Type C1 (NPC1), a rare and fatal genetic disorder.
• The company's strategic focus is underscored by the recent merger with Cyclo Therapeutics in March 2025, making Trappsol® Cyclo™ its lead candidate, which is currently in a pivotal Phase 3 clinical trial.
• Despite a consolidated net loss of $30.52 million for the fiscal year ended July 31, 2025, RFL maintains a strong cash position of approximately $52.80 million, expected to cover obligations for at least the next 12 months, bolstered by a recent $25 million rights offering.
• RFL operates in a highly competitive biopharmaceutical landscape, facing larger, well-resourced competitors, and its success hinges on the successful clinical development and regulatory approval of its lead drug candidate, as well as the effective integration of its acquired biotechnology assets.
• Geopolitical instability in Israel and internal control weaknesses at its newly acquired Cyclo subsidiary present notable operational and financial risks that warrant close investor attention.

A Strategic Pivot: From Diversified Holdings to Biotech Focus

Rafael Holdings, Inc. (NYSE:RFL) is charting a new course, strategically reorienting itself from a diversified holding company with historical real estate interests to a biotechnology firm with a sharpened focus on developing pharmaceuticals and medical devices. This evolution is driven by a commitment to addressing high unmet medical needs, particularly in rare diseases and oncology. The company's overarching strategy now centers on the advancement of its lead drug candidate, Trappsol® Cyclo™, for Niemann-Pick Disease Type C1 (NPC1), a rare, fatal, and progressive genetic disorder. This strategic shift is critical for investors to understand, as it defines RFL's future growth trajectory and risk profile within the dynamic biopharmaceutical industry.

The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary and novel products. RFL operates within this challenging environment, contending with established pharmaceutical giants and nimble biotechnology firms alike. Broad industry trends, such as the increasing demand for targeted therapies and the impact of healthcare reform measures like the Inflation Reduction Act of 2022 (IRA), shape the market landscape. The IRA, for instance, introduces drug price negotiation for Medicare and inflation-based rebates, which could significantly influence future drug pricing and revenue opportunities for RFL and its competitors. Similarly, an Executive Order signed in May 2025, aiming to align U.S. drug prices with lower international rates, could also materially affect future profitability if applied to RFL's products.

Technological Edge: Trappsol® Cyclo™ and Targeted Therapies

RFL's core technological differentiation lies in its lead candidate, Trappsol® Cyclo™ (hydroxypropyl beta cyclodextrin), designed to treat NPC1. This investigational new drug is administered intravenously to mobilize lysosomal cholesterol, directly impacting the root cause of NPC1 by facilitating cholesterol removal from late-stage endosomes and lysosomes. The tangible benefits of this technology, as observed in completed and ongoing studies, include indications of engagement on central and peripheral neurologic symptoms associated with NPC, alongside biochemical markers suggesting the potential to ameliorate systemic disease. Management believes that these observed neurological and systemic benefits may be confirmed in the ongoing Phase 3 placebo-controlled, pivotal study.

Beyond Trappsol® Cyclo™, RFL holds interests in other promising technologies. LipoMedix Pharmaceuticals Ltd. is developing Promitil, a patented prodrug of mitomycin-C (MMC) delivered in liposomes, aiming to overcome MMC's toxicity and provide targeted cancer therapy. Preclinical studies suggested Promitil could inhibit cancer cell growth in various animal models, appearing more efficacious and less toxic than MMC by a 3-fold factor. Rafael Medical Devices, LLC, focuses on orthopedic surgical instruments, with its VECTR System receiving FDA substantial equivalence determination in December 2024 for minimally invasive ligament or fascia release surgeries. This system, classified as a Class II device, aims to advance minimally invasive procedures, offering potential benefits in surgical precision and patient recovery. The "so what" for investors is that these technological differentiators, particularly in rare disease and targeted oncology, represent RFL's primary competitive moat, offering the potential for premium pricing and significant market share in underserved niches if regulatory approvals are secured.

Historical Evolution and Strategic Realignment

Rafael Holdings' journey began in 2017, initially as a biotechnology company with diverse interests, including real estate. Early milestones included the FDA's Fast Track designation for Trappsol® Cyclo™ in January 2017 and the commencement of its U.S. Phase I study. The company's Class B common stock began trading on the NYSE American in March 2018, moving to the New York Stock Exchange in November 2019. A significant setback occurred in October 2021 when Cornerstone Pharmaceuticals, Inc. reported negative Phase 3 results for Devimistat, leading to a substantial impairment of RFL's investments in the entity. This event prompted a strategic re-evaluation, resulting in the curtailment of early-stage research at Barer Institute Inc. in November 2022 to focus resources on more promising opportunities.

The period of 2024-2025 has been transformative. In January 2024, RFL acquired a controlling interest in Day Three Labs, Inc., a company focused on increasing the bioavailability of compounds for third-party manufacturers. This was followed by the restructuring of Cornerstone Pharmaceuticals in March 2024, making it a 67% owned consolidated subsidiary. The most pivotal event was the merger with Cyclo Therapeutics (CYTH) in March 2025, solidifying Trappsol® Cyclo™ as RFL's primary development focus. These strategic moves highlight RFL's commitment to building a focused biotechnology portfolio, shedding non-core assets, and concentrating on high-potential drug candidates.

Financial Performance and Liquidity: A Biotech Transition in Progress

Rafael Holdings' financial performance for the fiscal year ended July 31, 2025, reflects its ongoing transition and significant investments in its biotechnology pipeline. The company reported a consolidated net loss of $30.52 million, an improvement from the $34.41 million net loss in the prior year. This reduction in net loss is primarily due to a substantial decrease in the loss from operations, which improved from $(102.03) million in 2024 to $(29.16) million in 2025. This operational improvement was largely driven by the absence of the massive in-process research and development (IPRD) expense of $89.86 million recognized in 2024 related to the Cornerstone acquisition.

The Healthcare segment, now central to RFL's strategy, saw product revenue increase to $515 thousand in 2025 from $0 in 2024, primarily due to the consolidation of Cyclo's operations post-merger in March 2025. However, this growth came with increased expenses; general and administrative costs in the Healthcare segment rose by $3.60 million due to Cyclo's consolidation and an additional $0.60 million in legal and professional fees related to the merger. Research and development expenses also saw a significant increase, primarily from the consolidation of Cyclo's R&D expenses, amounting to $8.40 million. The Infusion Technology segment, comprising Day Three Labs, experienced a 74% decrease in revenue to $93 thousand and recorded a $3.10 million goodwill impairment charge in 2025 due to operational reductions. The Real Estate segment, now a minor part of the business, generated $309 thousand in rental revenue but shifted to an operating loss of $(50) thousand in 2025, primarily due to increased accounting, legal, and building operating expenses.

From a liquidity perspective, RFL ended July 31, 2025, with a robust cash and cash equivalents balance of approximately $52.80 million, a significant increase from $2.67 million in the prior year. This strong cash position is expected to be sufficient to meet obligations for at least the next 12 months. Cash provided by investing activities totaled $44.03 million in 2025, largely from $80.70 million in proceeds from sales and maturities of available-for-sale securities and $2.50 million from hedge funds, partially offset by investments in convertible notes and the net cash used in the Cyclo Merger. Financing activities provided $24.83 million, primarily from the net proceeds of a $25 million rights offering, which was backstopped by Executive Chairman Howard S. Jonas and related parties. This successful capital raise underscores investor confidence in the company's strategic direction, particularly its focus on Trappsol® Cyclo™.

Competitive Landscape and Market Positioning

Rafael Holdings operates in highly competitive segments, facing formidable adversaries across its biotechnology and medical device ventures. In the NPC1 treatment space, RFL's Trappsol® Cyclo™ competes with products from well-established players like Actelion (a Johnson & Johnson (JNJ) subsidiary), Zevra Therapeutics, Inc. (ZVRA), Mandos Health, Azafaros, and IntraBio. Notably, two competitors received FDA approval for NPC treatments in September 2024, with both products becoming commercially available in the U.S. in 2025. This highlights the intense competitive pressure and the critical need for Trappsol® Cyclo™ to demonstrate strong clinical superiority and secure regulatory approval to carve out market share. Many of these competitors possess significantly greater financial resources, R&D expertise, and established marketing channels, which could allow them to bring products to market more rapidly and establish dominant positions.

In cancer metabolism, Cornerstone Pharmaceuticals faces competition from large pharmaceutical companies such as AstraZeneca (AZN), Eli Lilly (LLY), Roche (RHHBY), GlaxoSmithKline (GSK), Merck (MRK), Novartis (NVS), and Pfizer (PFE), as well as various biotechnology firms. These companies often have extensive pipelines and the ability to invest heavily in R&D and commercialization. Similarly, LipoMedix's Promitil competes with other liposome and nanomedicine products, non-liposomal chemotherapies, biological therapies, and immunotherapies in oncology. In the medical device sector, Rafael Medical Devices' VECTR System enters a market with existing players and continuous innovation.

RFL's overall market positioning is that of a specialized innovator. Its strength lies in its focused approach to developing novel therapies for rare diseases and metabolic cancers, where its proprietary technologies could offer distinct advantages. However, its smaller scale and reliance on clinical trial success for market entry represent significant vulnerabilities against larger, more diversified competitors. The company's customer base for its legacy cyclodextrin products is concentrated, with one major customer accounting for 25% of total revenues in 2025, increasing its financial exposure. RFL's strategic response involves leveraging its intellectual property and seeking opportunistic investments to expand its portfolio, aiming to differentiate through targeted efficacy and potentially superior safety profiles.

Outlook and Key Risks

The immediate outlook for Rafael Holdings is largely tied to the progress and ultimate success of the Phase 3 TransportNPC™ clinical trial for Trappsol® Cyclo™. The independent Data Monitoring Committee (DMC) recommended continuing the study for the full 96 weeks in June 2025, following a review of 48-week safety and efficacy data. This is a positive indicator, but the path to regulatory approval and commercialization remains lengthy and uncertain. If approved, RFL will need to raise substantial capital for manufacturing, distribution, and commercialization. The company's ability to secure a Rare Pediatric Disease Priority Review Voucher (PRV) for Trappsol® Cyclo™ is also a key consideration, though the program began to sunset in December 2024, and its future applicability is uncertain, especially after September 30, 2026.

Several risks could materially impact RFL's investment thesis. The inherent uncertainties of preclinical and clinical drug development, including potential delays, negative trial results, or difficulties in patient enrollment, could prevent regulatory approval or commercialization. Dependence on third-party manufacturers for Trappsol® Cyclo™ production introduces risks related to quality control and supply chain disruptions. The loss of key management personnel, particularly within the Cyclo team, could also adversely affect development efforts.

Geopolitical instability in Israel, where some personnel and operations are located, poses a significant risk, potentially disrupting operations, increasing costs, and impacting hiring and retention due to reserve-duty mobilizations. The company also faces cybersecurity risks, as evidenced by a 2021 incident involving a related party's email hack. Furthermore, the company identified a material weakness in internal controls over financial reporting at Cyclo post-merger, specifically concerning accruals and expense recognition, which is currently undergoing remediation. Howard S. Jonas, the Executive Chairman, controls approximately 51% of the voting power, which limits the influence of other stockholders. While the company has a strong cash position, it does not anticipate paying dividends until achieving sustainable profitability and maintaining minimum cash reserves.

Conclusion

Rafael Holdings is at a pivotal juncture, transforming into a focused biotechnology entity with the potential to address critical unmet medical needs in rare diseases and oncology. The successful advancement of Trappsol® Cyclo™ through its Phase 3 clinical trial and subsequent commercialization represents the cornerstone of its investment thesis. The company's strategic acquisitions and divestitures reflect a clear intent to streamline its operations and concentrate resources on its most promising assets. While RFL possesses innovative technologies and a solid cash reserve, the inherent risks of drug development, intense competition from well-capitalized rivals, and operational challenges such as geopolitical instability and internal control remediation, demand careful consideration from investors. The long-term value proposition for RFL will ultimately be determined by its ability to translate its technological differentiators into approved, commercially successful therapies, effectively competing in a challenging market while prudently managing its financial and operational risks.