Executive Summary / Key Takeaways

• CDT Equity Inc. is executing a strategic pivot to a data-driven biotech development model, leveraging artificial intelligence and solid-form chemistry to identify, enhance, and license high-potential therapeutic assets, particularly those deprioritized by larger pharmaceutical companies.
• The company has significantly ramped up R&D investments, exemplified by partnerships with Sarborg for AI-powered disease mapping and Manoira for animal health applications, leading to new patent filings and a U.S. composition of matter patent for its lead asset, AZD1656.
• Despite strategic advancements and intellectual property gains, CDT Equity faces substantial liquidity challenges, with an accumulated deficit of $39.9 million as of June 30, 2025, and ongoing reliance on equity and debt financings to fund operations.
• The business model emphasizes capital efficiency and early-stage licensing exits, avoiding late-stage clinical trial costs, which positions it distinctly against large pharma competitors but necessitates continuous successful preclinical and early clinical development.
• Key factors for investors to monitor include the successful execution of its AI-driven pipeline development, resolution of ongoing legal disputes (e.g., AZD1656 patent ownership), and the company's ability to secure consistent, sufficient funding to sustain its operations and strategic initiatives.

The Biotech Disruptor: AI, Solid-Form Chemistry, and a Lean Model

CDT Equity Inc. is carving out a unique niche in the competitive biopharmaceutical landscape, positioning itself as a data-driven development company focused on unlocking the untapped value of clinical-stage compounds. Its core strategy revolves around leveraging artificial intelligence (AI), advanced solid-form chemistry, and efficient asset repositioning to accelerate the development of novel treatments. This lean, asset-agnostic model prioritizes speed, adaptability, and capital efficiency, aiming to avoid the substantial cost burden of late-stage clinical trials by focusing on high-leverage development strategies and early-stage licensing exits.

The broader biopharmaceutical industry is characterized by intense competition, high R&D costs, and stringent regulatory hurdles, favoring large, established players. However, emerging trends, such as the increasing adoption of AI in drug discovery and the growing demand for innovative treatments in specialized markets like autoimmune diseases (projected to reach $150 billion by 2030 in the U.S.) and animal health, create opportunities for agile innovators. CDT Equity seeks to capitalize on these trends by targeting compounds that have strong Phase I safety data but were deprioritized by larger pharmaceutical companies, offering a differentiated approach to drug development.

Evolution and Strategic Realignment

Originally founded in 2019 as Conduit Pharmaceuticals Inc., the company underwent a significant transformation, culminating in a merger transaction and public listing on The Nasdaq Capital Market in September 2023. This marked a new chapter, though it also introduced immediate challenges, including legal proceedings and Nasdaq compliance issues. The company's recent name change to CDT Equity Inc. in August 2025 reflects its evolved strategy as a data-driven biotech development company, signaling a broader focus on scientific innovation and strategic partnerships.

This evolution is critical for investors, as it underscores management's commitment to a more agile and technologically advanced model. The company's history of navigating these early operational and market challenges provides context for its current strategic responses and its emphasis on intellectual property and partnerships as foundational strengths.

Technological Moat: AI and Solid-Form Chemistry

At the heart of CDT Equity's investment thesis lies its technological differentiation. The company employs advanced co-crystallization and solid-form technologies developed at its Cambridge facilities. These technologies are designed to improve drug properties and, crucially, extend patent life by up to 20 years. This extension of patent exclusivity is a significant competitive advantage, providing a longer period of market protection for its therapeutic assets.

CDT Equity further enhances its capabilities through a strategic collaboration with Sarborg Limited, a related party, for algorithmic and cybernetic technology services. This partnership enables the application of proprietary AI-powered disease mapping algorithms to rapidly identify new therapeutic applications for existing compounds against a database of over 800 disease signatures. Sarborg's insights have already directly informed two new combination patent filings, strengthening CDT's intellectual property portfolio. The integration of Sarborg's AI aims to enhance efficiency, lower costs, and accelerate timelines by minimizing human intervention, ultimately optimizing the drug development cycle and giving CDT a competitive advantage in the sector. For investors, this translates into a potentially faster, more cost-effective path to developing and licensing assets, reducing the typical high-risk, long-timeline profile of traditional pharma R&D.

Pipeline Development and Strategic Alliances

CDT Equity's pipeline includes candidates targeting inflammatory and autoimmune disorders, idiopathic male infertility, oncology, dermatology, and animal health. A cornerstone of its asset portfolio is the licensing agreement with AstraZeneca (AZN), granting CDT rights to HK-4 Glucokinase activators AZD1656 and AZD5658, and myeloperoxidase inhibitor AZD5904. Leveraging AstraZeneca's initial Phase I safety data allows CDT to efficiently assess and repurpose these assets, a key aspect of its capital-efficient model.

A significant operational achievement was the U.S. patent approval for the composition of matter patent for AZD1656 in March 2025. This patent, covering a Glucokinase Activator targeting autoimmune diseases like Lupus and ANCA Vasculitis, secures up to 20 years of composition of matter patent protection in the U.S., complementing existing approvals in Japan and Australia. This "gold standard" intellectual property provides strong market exclusivity and robust protection against generic competition, enhancing the asset's value for future licensing deals.

Further expanding its reach, CDT entered a joint development agreement with Manoira Corporation, a related party, in June 2025. This partnership will evaluate AZD1656 and AZD5658 in animal health indications, exploring veterinary market opportunities. This cost-efficient collaboration is expected to generate cross-species insights that inform human clinical programs while opening potential new revenue streams in the high-growth veterinary market, all while retaining 100% ownership of data and intellectual property for human applications. The company also engages Charles River Laboratories (CRL) for preclinical testing, ensuring rigorous scientific development.

Competitive Positioning in a Dynamic Market

CDT Equity operates in a highly competitive and rapidly changing environment. Compared to large pharmaceutical players like AbbVie (ABBV), Johnson & Johnson (JNJ), Pfizer (PFE), Novartis (NVS), and AstraZeneca, CDT is a significantly smaller, clinical-stage company. These large competitors boast vast, diversified portfolios, established global commercialization infrastructures, and robust, consistent revenue streams, leading to strong profitability margins and substantial cash flow generation. For example, large pharma typically exhibits gross profit margins well above 60% and positive net profit margins, in stark contrast to CDT's current TTM gross profit margin of 114.85% (likely reflecting accounting for licensed IP) and a net profit margin of -3.06%, alongside negative operating and free cash flows.

CDT's competitive advantage lies in its agility and specialized focus. While it cannot compete on scale or market reach with the industry giants, its AI-driven approach to identifying and repurposing deprioritized assets allows for a more targeted and potentially faster development cycle. The ability to extend patent life through solid-form chemistry provides a critical moat, offering exclusivity that can attract licensing partners. Furthermore, its diagnostic tool, with predictive modeling capabilities, can track and evaluate delisted patents, facilitating strategic entry into overlooked markets. This positions CDT as a nimble innovator, seeking to fill unmet needs and create value in niches that larger players might bypass.

However, CDT's competitive disadvantages are evident in its early-stage status and smaller scale. This translates to higher operational costs relative to its current output and a heavy reliance on external funding, making it more vulnerable to market fluctuations and financing challenges. The company's negative cash flow and accumulated deficit highlight the capital-intensive nature of its development stage, a stark contrast to the cash-generating power of its established rivals.

Financial Performance and Liquidity Challenges

CDT Equity's financial performance reflects its development-stage nature, characterized by significant investments in R&D and ongoing losses. For the three months ended June 30, 2025, research and development expenses surged to $1.86 million, a substantial increase of 7340% compared to $25,000 in the prior year period. Similarly, for the six months ended June 30, 2025, R&D expenses reached $2.78 million, up 1714% from $153,000 in the same period of 2024. These increases were primarily driven by substantial expenses related to the Sarborg Service Agreement, Sarborg Additional Agreement, and the Thesprogen Agreement, underscoring the company's intensified focus on technology and consulting engagements.

General and administrative expenses saw a slight decrease, falling by 1% to $3.09 million for the three months ended June 30, 2025, and by 3% to $5.79 million for the six months ended June 30, 2025. This was mainly due to a reduction in payroll and stock-based compensation, partially offset by increased legal, accounting, audit, and travel expenses. The company reported a net loss of $6.03 million for the second quarter of 2025, an increase of 12% year-over-year, and a net loss of $10.78 million for the first half of 2025, up 20.7% from the prior year.

As of June 30, 2025, CDT Equity held $3.3 million in cash and cash equivalents, a notable increase from $0.6 million at December 31, 2024. However, the company's accumulated deficit stood at $39.9 million. Management has explicitly stated that it does not have sufficient cash and other sources of liquidity to fund its current business plan, raising substantial doubt about its ability to continue as a going concern for at least the next 12 months.

To address these liquidity concerns, CDT Equity relies heavily on external funding. The company has historically accessed capital through convertible debt, private placements, and an At-the-Market (ATM) offering program. As of the filing date, approximately $8.0 million remains available under its $23.9 million ATM Sales Agreement, with the company expecting to raise this additional amount over the next 12 months. For the next 12 months, the company anticipates needing approximately $12.7 million for working capital, including $1.3 million for R&D, $7.2 million for G&A, and a $4.2 million convertible promissory note payable (if not converted). The ability to secure this funding is paramount for the company's continued operations and strategic execution.

Outlook and Key Risks

CDT Equity anticipates generating operating losses and negative operating cash flows in the future as it continues to advance its business plan. The company's forward-looking strategy centers on achieving an exit through third-party license deals following successful in vitro and in vivo pre-clinical trials. The AI integration through Sarborg is expected to enhance efficiency and accelerate timelines, while the Manoira partnership aims to open new revenue streams in the animal health market, complementing its human therapeutic pipeline. The Board is also evaluating a cryptocurrency treasury reserve strategy, viewing long-term exposure to digital assets as a potential strategic and financial benefit within a diversified capital management approach.

However, investors must consider several significant risks. The most pressing is the company's liquidity and the uncertainty surrounding its ability to secure additional funding on acceptable terms. Failure to do so could force delays or curtailment of operations and R&D activities. Clinical development inherently carries risks, including uncertainties in trial outcomes, competitor products, and regulatory approvals. Furthermore, the company faces ongoing legal proceedings, including a claim from St George Street Capital disputing CDT's sole ownership of the AZD 1656 co-crystal patent, which could incur significant legal costs and divert management's attention. While CDT has regained Nasdaq compliance, maintaining it remains an ongoing requirement.

Conclusion

CDT Equity Inc. is a biotech company in the midst of a transformative journey, leveraging cutting-edge AI and solid-form chemistry to efficiently develop and reposition therapeutic assets. Its strategic focus on early-stage licensing, coupled with significant intellectual property gains like the AZD1656 U.S. patent, presents a compelling narrative of value creation in a capital-efficient manner. The company's partnerships and technological differentiators position it as an agile player capable of addressing unmet medical needs and exploring new markets like animal health.

However, the investment thesis is underscored by substantial financial risk, primarily its ongoing liquidity challenges and reliance on external funding. While the strategic vision and technological foundation are strong, the ability to consistently secure capital and successfully navigate legal and clinical hurdles will be critical determinants of its long-term viability and ability to deliver on its promise. Investors should closely monitor funding progress, R&D milestones, and the resolution of legal disputes as key indicators of CDT Equity's trajectory.