Executive Summary / Key Takeaways

• Salarius Pharmaceuticals is at a critical inflection point, with its future hinging on the successful completion of a proposed merger with Decoy Therapeutics Inc. and a concurrent minimum $6.0 million financing.
• The company faces immediate financial distress, with cash and cash equivalents of $1.80 million as of March 31, 2025, projected to fund operations only into the later part of the second quarter of 2025, raising substantial doubt about its ability to continue as a going concern without the merger and financing.
• SLRX is also grappling with Nasdaq listing non-compliance issues related to minimum stockholders' equity and minimum bid price, having received delisting notices and appealed, with its plan to regain compliance tied directly to the merger's consummation.
• The strategic focus has shifted dramatically from advancing its legacy epigenetic and protein degradation pipeline (seclidemstat and SP-3164) to the potential of Decoy's peptide conjugate therapeutics pipeline, assuming the merger closes.
• The investment thesis is dominated by the binary outcome of the merger: success could provide a new pipeline and funding runway, while failure would likely lead to dissolution and liquidation, resulting in a significant loss for stockholders.

A Strategic Pivot Under Pressure: Salarius Pharmaceuticals' Defining Moment

Salarius Pharmaceuticals, Inc. has historically positioned itself as a clinical-stage biopharmaceutical company dedicated to developing treatments for cancers driven by dysregulated gene expression. Its initial focus centered on protein inhibition, spearheaded by its lead candidate, seclidemstat (SP-2577), an oral reversible LSD1 inhibitor. Licensed from the University of Utah Research Foundation in 2011, seclidemstat was advanced into Phase 1/2 clinical trials for various sarcomas and hematologic cancers, supported in part by a significant grant from the Cancer Prevention and Research Institute of Texas (CPRIT). Management highlighted seclidemstat's differentiated dual mechanism of action, inhibiting both the enzymatic and scaffolding properties of LSD1, which preclinical research suggested could provide anti-cancer activity where other LSD1 inhibitors did not, particularly in FET-rearranged sarcomas.

Expanding its technological footprint, Salarius entered the targeted protein degradation (TPD) space in January 2022 with the acquisition of SP-3164 from DeuteRx, LLC. This asset, described as a differentiated molecular glue derived from avadomide, was intended to offer potential for increased efficacy and improved safety over its precursor. The acquisition was structured with backloaded milestones, allowing Salarius to focus resources on advancing SP-3164 towards an IND submission, which was anticipated in the first half of 2023 based on prior guidance. Management viewed the TPD field as a multi-billion dollar market attracting significant investment from large pharmaceutical players like Bristol-Myers Squibb (BMY), Merck (MRK), and Gilead (GILD), validating the strategic move despite competition from both large companies and smaller, agile players like Syndax Pharmaceuticals (SNDX) also operating in the epigenetic/TPD space. While Salarius's niche focus and technological differentiation were seen as potential competitive advantages, its smaller scale and higher relative R&D costs posed inherent challenges compared to larger, more financially robust competitors.

However, the narrative for Salarius has fundamentally shifted. Facing persistent operating losses and a dwindling cash position, the company initiated a comprehensive review of strategic alternatives in August 2023 to maximize stockholder value. This process culminated in the announcement on January 10, 2025, of a definitive Merger Agreement with Decoy Therapeutics Inc. This proposed stock-for-stock transaction represents a dramatic pivot, with Decoy stockholders expected to own approximately 85.9% of the combined entity on an as-converted basis (prior to the dilutive effects of a required financing). The strategic rationale for this merger is clear: it provides Salarius with a potential path forward and a new pipeline focused on Decoy's novel peptide conjugate therapeutics for respiratory viruses and cancer, effectively sidelining the sponsored clinical development of Salarius's legacy assets like seclidemstat.

Financial Realities and The Merger's Lifeline

The urgency of this strategic pivot is underscored by Salarius's precarious financial state. As of March 31, 2025, the company held cash and cash equivalents of just $1.80 million, a decrease from $2.43 million at the end of 2024. Working capital stood at a mere $0.03 million. The net loss for the first quarter of 2025 was $1.71 million, comparable to $1.72 million in the same period of 2024. Cash used in operating activities totaled $1.18 million for the quarter, a slight decrease from $1.35 million a year prior, primarily due to cost-savings measures, including a significant reduction in personnel and the curtailment of sponsored clinical trials for seclidemstat. The company now intends to rely on data from the investigator-initiated trial at MD Anderson Cancer Center for seclidemstat before deciding on future steps for that program, reflecting the constrained financial environment.

Despite some cash inflows from financing activities, including $0.55 million net cash provided by financing in Q1 2025 (driven by sales under its ATM and ELOC programs, offset by debt repayments), the company explicitly states that its existing cash is only sufficient to fund operations into the later part of the second quarter of 2025. This limited runway raises substantial doubt about Salarius's ability to continue as a going concern without securing additional capital. The company has curtailed expenses and is operating with only two remaining full-time employees and consultants.

The proposed merger with Decoy Therapeutics is contingent upon several critical conditions, most notably the successful completion of a Qualified Financing transaction raising aggregate minimum gross proceeds of $6.0 million. Without this financing and the merger, Salarius's management believes it will not be able to source adequate liquidity to fund operations and will likely need to pursue a dissolution and liquidation of the company, an outcome that would likely result in stockholders losing all or a significant portion of their investment.

Nasdaq Compliance: An Intertwined Challenge

Adding another layer of complexity and urgency, Salarius is facing significant challenges maintaining its listing on The Nasdaq Capital Market. On March 26, 2025, the company received a notice of non-compliance with Nasdaq's Equity Standard, requiring a minimum of $2.5 million in stockholders' equity. This was followed by a second notice on April 23, 2025, indicating non-compliance with the Minimum Bid Price Requirement, as the stock's closing bid price had been below $1.00 for 30 consecutive business days.

Crucially, due to having effected a 1-for-8 reverse stock split in June 2024, Salarius is not eligible for the standard compliance period for the minimum bid price rule. Furthermore, Nasdaq indicated that the bid price non-compliance serves as an additional reason for delisting and that they would not entertain a separate compliance plan for the Equity Standard. Consequently, unless the company appealed by April 30, 2025, its securities were scheduled for delisting on May 2, 2025. Salarius has appealed this determination to a Nasdaq Hearings Panel, which has stayed the delisting process pending the panel's decision.

The company's plan to regain compliance with both the Minimum Bid Price Requirement and the Equity Standard is explicitly tied to the planned merger transaction with Decoy Therapeutics. This underscores the binary nature of the current situation: the successful completion of the merger, including the required financing, is essential not only for the company's financial viability but also for its ability to potentially remain listed on Nasdaq. There are no assurances that the Hearings Panel will issue a favorable decision or that the securities will ultimately remain listed. Delisting would severely harm the liquidity of Salarius common stock and its ability to raise capital or complete strategic transactions, potentially forcing it to trade on less recognized over-the-counter markets.

Outlook: A Binary Bet on the Combined Future

The outlook for Salarius Pharmaceuticals is currently dominated by the potential outcome of the proposed merger with Decoy Therapeutics. Management's focus is squarely on completing this transaction and the associated Qualified Financing. If successful, the combined company would shift its strategic direction to advance Decoy's pipeline of peptide conjugate therapeutics, offering investors exposure to a new area of cancer and potentially respiratory virus treatment. The historical competitive landscape relevant to Salarius's legacy LSD1 and TPD programs would become less central, replaced by the competitive dynamics within the peptide conjugate space.

However, the path forward is fraught with risk. The failure to close the merger due to inability to secure the minimum $6.0 million financing, failure to satisfy other closing conditions, or an unfavorable decision from the Nasdaq Hearings Panel would likely force Salarius to cease operations and liquidate. Even if the merger agreement is terminated under certain circumstances, Salarius may be required to pay Decoy a $300,000 termination fee, adding to its financial burden. The significant fees and expenses already incurred related to the merger are payable regardless of whether the transaction closes.

Management's prior guidance from 2021 and 2022, which focused on interim data readouts for seclidemstat and advancing SP-3164 towards the clinic, is now largely superseded by the urgent need to complete the merger. The current outlook is less about the incremental progress of legacy assets and more about the potential for a transformative transaction to provide a new lease on life and a different pipeline.

Conclusion

Salarius Pharmaceuticals stands at a critical crossroads. The company's financial resources are severely limited, raising substantial doubt about its ability to continue operations beyond the near term without external intervention. The proposed merger with Decoy Therapeutics, contingent on a crucial financing round and the resolution of Nasdaq listing issues, represents the primary, if not sole, viable path forward. While the merger offers the potential for a new pipeline and renewed strategic focus, its completion is uncertain and subject to significant risks. For investors, the investment thesis in SLRX has become largely a binary wager on the successful consummation of the Decoy merger. The outcome of the Qualified Financing and the Nasdaq appeal will be paramount in determining the company's future, offering either a potential pivot towards a new therapeutic area or the likelihood of dissolution.