ESSA Pharma (EPIX) Risk Factors

ESSA relies on both internal information technology systems and networks, and those of third-party vendors and contractors including, but not limited to, ESSA's CROs, collaborators, contractors or consultants, to acquire, transmit, store and otherwise process information in connection with its business activities. ESSA's ability to effectively manage its business depends on the security, reliability and adequacy of its and its third-party vendors' and collaborators' technology systems. Any incident, whether hostile or inadvertent, that adversely impacts the confidentiality, integrity or availability of its systems and/or data, including phishing, business email compromise, social engineering, ransomware or other malware, or any security breach, security incident or other destruction, loss, or unauthorized use or other processing of data maintained or otherwise processed by ESSA or on its behalf could result in a loss of intellectual property or misappropriation of trade secrets, disruptions to its business and operations, subject it to increased costs and require it to expend time and resources to address the matter, may subject it to claims, demands, and proceedings by private parties, regulatory investigations and other proceedings, and fines, penalties, and other liability and have a material adverse effect on ESSA's business. In addition, the loss, alteration or other damage to or other unavailability of preclinical data or clinical trial data from completed or ongoing clinical trials for ESSA's planned product candidates could result in delays in its development and regulatory approval efforts and significantly increase its costs to recover or reproduce the data. Any cyber-attack, security breach or incident, or other destruction, loss or unauthorized processing of data maintained or otherwise processed by ESSA or on its behalf, or the perception any such matter has occurred, could result in actual or alleged violations of applicable U.S. and international privacy, data protection, information security and other laws and regulations, harm ESSA's reputation and subject it to litigation and governmental investigations and proceedings by federal, state and local regulatory entities in the U.S. and by international regulatory entities, resulting in exposure to material civil and/or criminal proceedings and liability. In addition, ESSA may incur significant additional expense to implement further measures relating to privacy, data protection and information security, whether in response to an actual or perceived security breach or incident or otherwise. To date, ESSA has not experienced any material impact to its business, financial position or operations resulting from cyberattacks or other information security incidents; however, because of frequently changing attack techniques, along with the increased volume and sophistication of such attacks, ESSA's business, financial position or operations could be adversely impacted in the future. Moreover, the increasingly distributed nature of computing, including prevalent use of mobile devices to access confidential information and widespread use of cloud-based applications hosted in remote data centers, increases the risk of security breaches and incidents. These risks may be heightened due to the increasing number of ESSA's and its third-party vendors' and collaborators' personnel working remotely. As cyber threats continue to evolve, ESSA may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate information security vulnerabilities, threats and incidents. While ESSA has implemented layered security measures, its computer systems and the external systems and services used by its third-party CMOs and CROs and their vendors and contractors remain potentially vulnerable to these events and there can be no assurance that ESSA will be successful in preventing cyber-attacks or successfully mitigating their effects. ESSA's insurance policies may not be adequate to compensate ESSA for the potential loss arising from such incidents or security breaches. In addition, such insurance may not be available to ESSA in the future on economically reasonable terms, or at all. Further ESSA's insurance may not cover all claims made against ESSA and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention. While ESSA has invested in the protection of data and information technology, there can be no assurance that ESSA's efforts, or those of ESSA's third-party collaborators, if any, to implement adequate security and quality control measures for data processing would be sufficient to protect against data deterioration or loss in the event of a system malfunction, or to prevent data from being stolen or corrupted in the event of a security breach.

ESSA believes it was classified as a passive foreign investment company ("PFIC") for the taxable year ending September 30, 2024 and believes it may be classified as a PFIC for the current taxable year and in future taxable years. However, the determination as to whether ESSA is a PFIC for any taxable year is based on the application of complex U.S. federal income tax rules that are subject to differing interpretations. If ESSA is a PFIC for any taxable year during which a U.S. Holder (as defined under "United States Income Tax Considerations") holds the Common Shares, it would likely result in adverse U.S. federal income tax consequences for such U.S. Holder. U.S. Holders should carefully read "United States Income Tax Considerations-Passive Foreign Investment Company Rules" for more information and consult their own tax advisors regarding the consequences of ESSA being treated as a PFIC for U.S. federal income tax purposes, including the advisability of making a qualified electing fund ("QEF") election (including a protective election), which may mitigate certain possible adverse U.S. federal income tax consequences but may result in an inclusion in gross income without receipt of such income.

Global credit and financial markets have at times experienced extreme disruptions, characterized by increased market volatility, increased rates of inflation, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. Similarly, the current conflicts between Ukraine and Russia and in the Middle East, as well as recent failures in the global banking sector, have created volatility in the capital markets and are expected to have further global economic consequences. Limited liquidity, defaults, non-performance and other adverse developments affecting financial institutions or parties with which ESSA does business, or perceptions regarding these or similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, in March 2023, Silicon Valley Bank was closed and placed into receivership and, subsequently, additional financial institutions have been placed into receivership. There is no guarantee that the U.S. government or governments in other jurisdictions will intervene to provide access to uninsured funds in the future in the event of the failure of other financial institutions, or that the U.S. government or governments in other jurisdictions would do so in a timely fashion. If another such disruption in credit and financial markets and deterioration of confidence in economic conditions occurs, ESSA's business may be adversely affected. If the equity and credit markets were to deteriorate significantly in the future, including as a result of a resurgence of a pandemic, political unrest or war or further instability of the global banking sector, it may make any necessary equity or debt financing more difficult to complete, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on ESSA's growth strategy, financial performance and the market price of the Common Shares and could require it to delay or abandon development or commercialization plans. In addition, there is a risk that one or more of ESSA's current collaborators, service providers, manufacturers and other partners would not survive or be able to meet their commitments to ESSA under such circumstances, which could directly affect ESSA's ability to attain its operating goals on schedule and on budget.

ESSA is subject to a number of risks associated with its potential international business operations, sales and marketing activities that may increase liability, costs, lengthen sales cycles and require significant management attention. These risks include: - compliance with the laws of the United States, Canada, the European Union and other jurisdictions where ESSA may conduct business, including import and export legislation;- increased reliance on third parties to establish and maintain foreign operations;- the complexities and expenses of administering a business abroad;- complications in compliance with, and unexpected changes in, foreign regulatory requirements;- instability in economic or political conditions, including inflation, recession and actual or anticipated military conflicts, social upheaval or political uncertainty, including as a result of the conflicts between Russia and Ukraine and in the Middle East;- foreign currency fluctuations;- foreign exchange controls and cash repatriation restrictions;- tariffs and other trade barriers;- difficulties in collecting accounts receivable;- differing tax structures and related potential adverse tax consequences;- uncertainties of laws and enforcement relating to the protection of intellectual property or secured technology;- litigation in foreign court systems;- unauthorized copying or use of ESSA's intellectual property;- cultural and language differences;- difficulty in managing a geographically dispersed workforce in compliance with local laws and customs that vary from country to country; and - other factors, depending upon the country involved. There can be no assurance that the policies and procedures ESSA implements to address or mitigate these risks will be successful, that ESSA's personnel will comply with them or that ESSA will not experience these factors in the future or that they will not have a material adverse effect on ESSA's business, results of operations and financial condition. In addition, there is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations. The U.S. government has made and continues to make significant additional changes in U.S. trade policy and may continue to take future actions that could negatively impact U.S. trade. For example, legislation has been introduced in Congress to limit certain U.S. biotechnology companies from using equipment or services produced or provided by select Chinese biotechnology companies, and others in Congress have advocated for the use of existing executive branch authorities to limit those Chinese service providers' ability to engage in business in the U.S. ESSA cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, including countries which the U.S. government has identified as a foreign adversary that poses national security risks to the United States, and what products and services may be subject to such actions or what actions may be taken by the other countries in retaliation. If ESSA is unable to obtain or use services from existing or new service providers or become unable to export or sell its potential products to any of its customers or service providers, ESSA's business, liquidity, financial condition, and/or results of operations may be materially and adversely affected.

ESSA's business may expand internationally and as a result, a significant portion of its revenues, expenses, current assets and current liabilities may be preliminary denominated in foreign currencies, while its financial statements are expressed in U.S. dollars. A decrease in the value of such foreign currencies relative to the U.S. dollar could result in losses in revenues from currency exchange rate fluctuations. To date, ESSA has not hedged against risks associated with foreign exchange rate exposure. ESSA cannot be sure that any hedging techniques it may implement in the future will be successful or that its business, financial condition, and results of operations will not be materially adversely affected by exchange rate fluctuations.

The Company has decided to discontinue its preclinical development programs and related work during the pendency of its strategic options review discussed further herein. Prior to October 2024, the Company was conducting preclinical work on other emerging potential clinical applications for NTD inhibitors. Even if such work was continued, ESSA may not be able to continue to identify or develop, at all or in a timely manner, new products. Even if ESSA is successful in building its pipeline, the potential product candidates that it identifies may not be suitable for clinical development or commercialization. If ESSA does not successfully identify, develop and commercialize new products based upon its approach, it will not be able to diversify its portfolio which could result in harm to ESSA's financial position and impact the trading price of the Common Shares.

The Company's activities depend, in part, on its ability to (i) obtain and maintain patents, trade secret protection and operate without infringing the intellectual proprietary rights of third parties, (ii) successfully defend these patents (including patents owned by or licensed to the Company) against third-party challenges and (iii) successfully enforce these patents against third-party competitors. There is no assurance that the Company will be granted such patents or proprietary technology or that such granted patents or proprietary technology will not be circumvented through the adoption of a competitive, though non-infringing, process or product. Failure to protect the Company's existing and future intellectual property rights could seriously harm its business and prospects and may result in the loss of its ability to exclude others from using the Company's technology or its own right to use the technologies. If the Company does not adequately ensure the right to use certain technologies, it may have to pay others for the right to use their intellectual property, pay damages for infringement or misappropriation or be enjoined from using such intellectual property. The Company's patents do not guarantee the right to use the technologies if other parties own intellectual property rights that are necessary in order to use such technologies. The Company's patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. The Company's and the Company's licensors' patents and patent applications, if issued, may be challenged, invalidated or circumvented by third parties. U.S. patents and patent applications may also be subject to interference proceedings, re-examination proceedings, derivation proceedings, post-grant review or inter partes review in the United States Patent and Trademark Office ("USPTO"), challenging the Company's or the Company's licensors' patent rights. Foreign patents may be subject also to opposition or comparable proceedings in the corresponding foreign patent office. For example, in patent litigation in the United States and in some other jurisdictions, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness, written description, indefiniteness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld material information from the USPTO or the applicable foreign counterpart, or made a misleading statement, during prosecution. A litigant or third party could challenge the Company's patents on this basis even if the Company believes that it conducted its patent prosecution in accordance with the duty of candor and in good faith. The outcome following such a challenge is unpredictable. In addition, it is possible that the Company or its licensors do not perfect ownership of all patents, patent applications or other intellectual property. This possibility includes the risk that the Company or its licensors does not identify all inventors, or identifies incorrect inventors, or that third parties pursue an ownership interest in the Company's patents, which may lead to claims disputing inventorship or ownership of ESSA's patents, patent applications or other intellectual property by former employees or other third parties. If ESSA fails in prosecuting or defending any such claims, in addition to paying monetary damages, ESSA may lose valuable intellectual property rights or personnel or sustain damages. ESSA may lose exclusive rights to their intellectual property rights and ESSA could be required to obtain a license from such third-party to use ESSA's technology or products, if any. Such a license may not be available on commercially reasonable terms or at all. Even if ESSA is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management. If a defendant were to prevail on a legal assertion of invalidity, sole or joint ownership, and/or unenforceability, the Company would lose at least part, or perhaps all, of the patent protection on a product candidate. Even if a defendant does not prevail on a legal assertion of invalidity and/or unenforceability, the Company's patent claims may be construed in a manner that would limit its ability to enforce such claims against the defendant and others. The cost of defending such a challenge, and any resulting loss of patent protection, could have a material adverse impact on one or more of the Company's product candidates and its business. Certain of ESSA's current or former employees, contractors or consultants, including senior management, were previously employed, or continue to be employed, at universities or other public institutions, or at other biotechnology or pharmaceutical companies, including ESSA's competitors or potential competitors. Some of these employees may have executed proprietary rights, nondisclosure and noncompetition agreements, in connection with such previous employment. ESSA may be subject to claims that ESSA, or these employees, have used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such employee's former employer. In addition, there is a risk that improved versions of ESSA's own planned product developed by third parties will be granted patent protection and compete with ESSA's planned product. For example, any patents ESSA obtains may not be sufficiently broad to prevent others from utilizing its technologies or from developing competing products and technologies. Third parties may attempt to circumvent ESSA's patents by means of alternative designs and processes or may independently develop similar products, duplicate any of ESSA's planned products not under patent protection, or design around the inventions ESSA claims in any of its existing patents, existing patent applications or future patents or patent applications. The actual protection afforded by a patent varies on a product-by-product basis, from country to country and depends upon many factors, including the type of patent, the scope of ESSA's coverage, the availability of regulatory related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patents. It is impossible to anticipate the breadth or degree of protection that patents will afford products developed by ESSA or their underlying technology. In any case, there can be no assurance that: - any rights under U.S., Canadian, or foreign patents owned by the Company or other patents that third parties license to the Company will not be curtailed;- the Company was the first inventor of inventions covered by its issued patents or pending applications or that the Company was the first to file patent applications for such inventions;- the Company's pending patent applications will be issued with the breadth of claim coverage sought by the Company, or be issued at all;- the Company's competitors will not independently develop or patent technologies that are substantially equivalent or superior to the Company's technologies;- third parties will not attempt to circumvent ESSA's patents by means of alternative designs and processes or that third parties will not also independently develop similar products, duplicate any of ESSA's products not under patent protection, or design around the inventions ESSA claims in any of the Company's existing patents or existing patent applications;- any of the Company's trade secrets will not be learned independently by its competitors; or - the steps the Company takes to protect its intellectual property will be adequate. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not sought in certain foreign countries. Further, countries ESSA may sell to may not protect its intellectual property to the same extent as the laws of the United States, Canada or Europe, and may lack rules and procedures required for defending ESSA's patents. There is a risk that any patents issued relating to ESSA's products or any patents licensed to ESSA may be successfully challenged or that the practice of its products might infringe the patents of third parties. Disputes may arise as to the rights to know-how and inventions among ESSA's employees and consultants who use intellectual property owned by others for the work performed for the Company. The scope and validity of patents which may be obtained by third parties, the extent to which ESSA may wish or need to obtain patent licenses and the cost and availability of such licenses are currently unknown. If such licenses are obtained, it is likely they would be royalty bearing, which could reduce ESSA's income. In certain instances, ESSA may elect not to seek patent protection but instead rely on the protection of the Company's technology through confidentiality agreements or trade secrets. There can be no assurance that these agreements will not be breached, that the Company will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships. The value of ESSA's assets could also be reduced to the extent that third parties are able to obtain patent protection with respect to aspects of ESSA's technology or products or that confidential measures ESSA has in place to protect the Company's proprietary technology are breached or become unenforceable. However, third parties may independently develop or obtain similar technology and such third parties may be able to market competing products and obtain regulatory approval through a showing of equivalency to one of ESSA's planned products which has obtained regulatory approval, without being required to undertake the same lengthy and expensive clinical studies that ESSA would have already completed. The cost of enforcing the Company's patent rights or defending rights against infringement charges by other patent holders may be significant and could limit operations. Litigation may also be necessary to enforce patents issued or licensed to ESSA or to determine the scope and validity of a third party's proprietary rights. ESSA could incur substantial costs if the Company is required to defend itself in patent suits brought by third parties, if ESSA participates in patent suits brought against or initiated by ESSA's corporate collaborators or if ESSA initiates such suits. The Company may not have the necessary resources to participate in or defend any such activities or litigation. Even if ESSA did have the resources to vigorously pursue its interests in litigation, because of the complexity of the subject matter, it is impossible to predict whether ESSA would prevail in any such action. Any claims of patent infringement asserted by third parties may: - divert the time and attention of the Company's technical personnel and management;- require the Company to cease or modify its use of the technology and/or develop non-infringing technology; or - require the Company to enter into royalty or licensing agreements. If third parties successfully assert their intellectual property rights against ESSA, ESSA might be barred from using certain aspects of its intellectual property portfolio. Prohibitions against using certain technologies could be imposed by a court or by a settlement agreement between the Company and a plaintiff. In addition, if ESSA is unsuccessful in defending against allegations that it has infringed, misappropriated or otherwise violated patent or other intellectual property rights of others, the Company may be forced to pay substantial damage awards to a plaintiff. If litigation leads to an outcome unfavorable to the Company or in order to avoid or settle potential claims, the Company may choose or be required to seek a license from a third-party and be required to pay license fees or royalties or both, which could be substantial. It is possible that the necessary license will not be available to the Company on commercially acceptable terms, or at all. These licenses may not be available on acceptable terms, or at all. Even if the Company or any future collaborators were able to obtain a license, the rights may be nonexclusive, which could result in the Company's competitors gaining access to the same intellectual property. Further, the Company could be found liable for significant monetary damages as a result of claims of intellectual property infringement. An adverse outcome in litigation, or interference or derivation proceeding to determine priority or other proceeding in a court or patent or selling office could subject ESSA to significant liabilities, require disputed rights to be licensed from third parties or require ESSA to cease using certain technology or products, any of which may have a material adverse effect on the Company's business, financial condition and results of operations.