Item 8. Financial Statements and Supplementary Data
Item 8. Financial Statements and Supplementary Data.
ACUMEN PHARMACEUTICALS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
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Balance Sheets as of December 31, 2024 and 2023
91
Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023
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Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024 and 2023
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Statements of Cash Flows for the years ended December 31, 2024 and 2023
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Notes to Financial Statements
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Acumen Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Acumen Pharmaceuticals, Inc. (the Company) as of December 31, 2024 and 2023, the related statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Philadelphia, Pennsylvania
March 27, 2025
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ACUMEN PHARMACEUTICALS, INC.
BALANCE SHEETS
(in thousands, except share and per share data)
December 31,
2024 2023
ASSETS
Current assets
Cash and cash equivalents $ 35,627 $ 66,886
Marketable securities, short-term 135,930 176,636
Prepaid expenses and other current assets 6,749 3,093
Total current assets 178,306 246,615
Marketable securities, long-term 59,968 62,553
Restricted cash 232 233
Other assets, long-term 486 724
Total assets $ 238,992 $ 310,125
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 5,648 $ 1,379
Accrued clinical trial expenses 15,344 4,387
Accrued expenses and other current liabilities 6,615 6,449
Finance lease liability — 756
Total current liabilities 27,607 12,971
Debt, long-term 29,419 29,897
Other liabilities, long-term 150 284
Total liabilities 57,176 43,152
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized and no shares issued and outstanding as of December 31, 2024 and 2023
— —
Common stock, $ 0.0001 par value; 300,000,000 shares authorized as of December 31, 2024 and 2023; 60,094,083 and 57,910,461 shares issued and outstanding as of December 31, 2024 and 2023, respectively
6 6
Additional paid-in capital 506,985 489,453
Accumulated deficit ( 325,127 ) ( 222,798 )
Accumulated other comprehensive income (loss) ( 48 ) 312
Total stockholders’ equity 181,816 266,973
Total liabilities and stockholders’ equity $ 238,992 $ 310,125
The accompanying notes are an integral part of these financial statements.
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ACUMEN PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
Year Ended December 31,
2024 2023
Operating expenses
Research and development $ 93,798 $ 42,318
General and administrative 20,219 18,820
Total operating expenses 114,017 61,138
Loss from operations ( 114,017 ) ( 61,138 )
Other income (expense)
Interest income 14,317 10,791
Interest expense ( 4,068 ) ( 581 )
Change in fair value of embedded derivatives 1,590 ( 1,360 )
Other expense, net ( 151 ) ( 83 )
Total other income 11,688 8,767
Net loss ( 102,329 ) ( 52,371 )
Other comprehensive gain (loss)
Unrealized gain (loss) on marketable securities ( 360 ) 1,063
Comprehensive loss $ ( 102,689 ) $ ( 51,308 )
Net loss per common share, basic and diluted $ ( 1.71 ) $ ( 1.08 )
Weighted-average shares outstanding, basic and diluted 60,013,277 48,609,383
The accompanying notes are an integral part of these financial statements.
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ACUMEN PHARMACEUTICALS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehensive Income (Loss) Total
Stockholders’
Equity
Shares Amount
Balance as of January 1, 2023 41,025,062 $ 4 $ 359,949 $ ( 170,427 ) $ ( 751 ) $ 188,775
Issuance of common stock for cash, net of issuance costs of $ 8,096
16,774,193 2 121,902 — — 121,904
Stock options exercised for cash 111,206 — 325 — — 325
Issuance of warrant with Term Loan — — 1,132 — — 1,132
Unrealized gain on marketable securities — — — — 1,063 1,063
Stock-based compensation — — 6,145 — — 6,145
Net loss — — — ( 52,371 ) — ( 52,371 )
Balance as of December 31, 2023 57,910,461 6 489,453 ( 222,798 ) 312 266,973
Issuance of common stock for cash, net of issuance costs of $ 87
2,068,246 — 7,938 — — 7,938
Issuance of common stock for restricted stock units, net of shares withheld for taxes 115,376 — ( 41 ) — — ( 41 )
Unrealized loss on marketable securities — — — — ( 360 ) ( 360 )
Stock-based compensation — — 9,635 — — 9,635
Net loss — — — ( 102,329 ) — ( 102,329 )
Balance as of December 31, 2024 60,094,083 $ 6 $ 506,985 $ ( 325,127 ) $ ( 48 ) $ 181,816
The accompanying notes are an integral part of these financial statements.
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ACUMEN PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2024 2023
Cash flows from operating activities
Net loss $ ( 102,329 ) $ ( 52,371 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 63 61
Stock-based compensation expense 9,635 6,145
Amortization of premiums and accretion of discounts on marketable securities, net ( 5,015 ) ( 3,121 )
Change in fair value of embedded derivatives ( 1,590 ) 1,360
Amortization of right-of-use asset 115 123
Non-cash research and development expense — 739
Realized gain on marketable securities ( 97 ) ( 11 )
Non-cash interest expense 1,118 145
Other non-cash expense 232 —
Changes in operating assets and liabilities:
Prepaid expenses and other current assets ( 3,656 ) ( 369 )
Other long-term assets 74 ( 70 )
Accounts payable 4,269 ( 261 )
Accrued clinical trial expenses 10,957 1,670
Accrued expenses and other liabilities 32 2,879
Finance lease liability ( 23 ) 17
Net cash used in operating activities ( 86,215 ) ( 43,064 )
Cash flows from investing activities
Purchases of marketable securities ( 170,731 ) ( 250,634 )
Proceeds from maturities and sales of marketable securities 218,774 78,981
Proceeds from sale of property and equipment — 3
Purchases of property and equipment ( 16 ) ( 21 )
Net cash provided by (used in) investing activities 48,027 ( 171,671 )
Cash flows from financing activities
Proceeds from issuance of common stock, net of issuance costs 7,938 121,904
Proceeds from Term Loan — 30,000
Payment for financing lease ( 739 ) —
Payments for financing costs — ( 476 )
Payments for deferred offering costs ( 230 ) —
Repurchase of common shares to pay employee withholding taxes ( 41 ) —
Proceeds from exercise of stock options — 325
Net cash provided by financing activities 6,928 151,753
Net change in cash and cash equivalents and restricted cash ( 31,260 ) ( 62,982 )
Cash and cash equivalents and restricted cash at the beginning of the period 67,119 130,101
Cash and cash equivalents and restricted cash at the end of the period $ 35,859 $ 67,119
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ACUMEN PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(in thousands)
Year Ended December 31,
2024 2023
Supplemental disclosure of cash flow information
Cash paid for income taxes $ — $ —
Cash paid for interest $ 2,973 $ 169
Supplemental disclosure of noncash financing activities
Right-of-use assets obtained in exchange for finance lease liabilities $ — $ 739
Right-of-use assets obtained in exchange for operating lease liabilities $ — $ 399
Issuance of warrant with Term Loan $ — $ 1,132
The accompanying notes are an integral part of these financial statements.
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ACUMEN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Acumen Pharmaceuticals, Inc. (“Acumen” or the “Company”) was incorporated in 1996 in the state of Delaware. Acumen is a clinical-stage biopharmaceutical company developing a novel disease-modifying approach to target what the Company believes to be a key underlying cause of Alzheimer’s disease (“AD”). Alzheimer’s disease is a progressive neurodegenerative disease of the brain that leads to loss of memory and cognitive functions and ultimately results in death. The Company’s scientific founders pioneered research on soluble amyloid-beta oligomers (“AßOs”), which are globular assemblies of the amyloid-beta (“Aß”) peptide that are distinct from Aß monomers and amyloid plaques. Based on decades of research and supporting evidence, AßOs have gained increasing scientific acceptance as a primary toxin involved in the initiation and propagation of AD pathology. The Company is currently focused on advancing a targeted immunotherapy drug candidate, sabirnetug, in its Phase 2 ALTITUDE-AD clinical trial following the results of INTERCEPT-AD, its Phase 1 clinical trial of sabirnetug in “early AD” patients (patients with mild cognitive impairment or mild dementia due to AD), which were first reported in July 2023. Sabirnetug is a recombinant humanized immunoglobulin gamma 2 monoclonal antibody that was designed to selectively target AßOs , has demonstrated functional and protective effects in in vitro assays, and has demonstrated in vivo safety and pharmacologic activity in multiple animal species, including transgenic mouse models for AD.
The Company is subject to the uncertainty of whether its intellectual property will develop into successful commercial products.
Liquidity and Capital Resources
The Company has incurred operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of December 31, 2024 and 2023, the Company had an accumulated deficit of $ 325.1 million and $ 222.8 million, respectively, and working capital of $ 150.7 million and $ 233.6 million, respectively. During 2023, the Company received cash from the Offering and borrowings with net proceeds of $ 29.5 million under a term loan facility (see Note 6. Debt ). Management believes that the Company has sufficient cash to continue operating activities for beyond 12 months from issuance of these financial statements.
Future capital requirements will depend upon many factors, including the timing and extent of spending on research and development and market acceptance of the Company’s products, if approved for commercial sale. The Company expects that it will need to obtain additional financing to complete clinical trials and launch and commercialize any product candidates for which it receives regulatory approval. Until such time, if ever, as the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that any such financing will be available on terms acceptable to the Company, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation of other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts.
The Company completed its INTERCEPT-AD clinical trial of sabirnetug in the second quarter of 2023. This trial enrolled 65 patients with early AD and 62 participants received at least one dose of study drug. INTERCEPT-AD was a U.S.-based, multi-center, randomized, double-blind, placebo-controlled clinical trial with overlapping single ascending dose and multiple ascending dose cohorts evaluating patients with early AD. In July 2023, the Company announced topline results from INTERCEPT-AD, which demonstrated that sabirnetug met the primary and secondary objectives of this clinical trial in 62 participants with early AD .
The Company announced the dosing of the first patient in its Phase 2 ALTITUDE-AD clinical trial in May 2024 and completed enrollment in March 2025.
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NOTE 2. BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made that are necessary to present fairly the Company’s financial position, and the results of its operations and its cash flows.
Reclassifications
The Company has made certain reclassifications to prior period amounts to conform to the current period presentation within the accompanying financial statements and notes to the financial statements. On the balance sheet, property and equipment, net, and right-of-use asset are presented within other assets, whereas they were previously presented as separate line items. Similarly, operating lease liability, short-term, and operating lease liability, long-term are now presented within accrued expenses and other current liabilities, and other liabilities, long-term, respectively, rather than as separate line items. Additionally, on the statement of cash flows, operating lease liability is presented within accrued expenses and other liabilities instead of as a separate line item.
Emerging Growth Company
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended, the Company meets the definition of an emerging growth company and has elected to use the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting periods. These estimates and assumptions are based on the Company’s historical experience, and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. The more significant estimates and assumptions by management include, among others: the valuation allowance of deferred tax assets resulting from net operating losses, the valuation of stock options, the valuation of the warrant to purchase common stock and the valuation of embedded derivatives within the Company’s debt, long-term.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. All of the Company’s cash equivalents have liquid markets and high credit ratings. The Company had $ 35.3 million and $ 66.2 million in cash equivalents as of December 31, 2024 and 2023, respectively.
Restricted cash primarily consists of deposited cash collateral for the Company’s credit card program.
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The following table provides a reconciliation of cash, cash equivalents and restricted cash from the balance sheets to the statements of cash flows (in thousands):
December 31,
2024 2023
Cash and cash equivalents $ 35,627 $ 66,886
Restricted cash 232 233
Total cash, cash equivalents and restricted cash $ 35,859 $ 67,119
Marketable Securities
The Company’s marketable securities portfolio consists primarily of investments in money market funds, U.S. treasury and agency securities and short-term highly liquid, high credit quality corporate debt securities. The Company considers its marketable securities to be available-for-sale. Available-for-sale securities are classified as cash equivalents, or as short-term or long-term marketable securities based on the maturity date at the time of purchase and their availability to meet current operating requirements. Available-for-sale securities that mature in three months or less from the date of purchase are classified as cash equivalents. Available-for-sale securities, excluding cash equivalents, that mature in one year or less are classified as short-term marketable securities and those that mature in more than one year are classified as long-term.
Securities that are classified as available-for-sale are measured at fair value; see “ Fair Value of Financial Instruments ” below. Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is accreted to maturity. Amortization of premiums and accretion of discounts are recorded along with interest income on investments in interest income, net in the statements of operations and comprehensive loss. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income. The cost of investments sold will be calculated using the specific-identification method.
For securities available-for-sale, Accounting Standards Update 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments eliminates the concept of other-than-temporary impairment and instead requires entities to determine if impairment is related to credit loss or non-credit loss. In making the assessment of whether a loss is from credit or other factors, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows is less than the amortized cost basis, a credit loss exists and an allowance is created, limited by the amount that the fair value is less than the amortized cost basis. Subsequent activity related to the credit loss component in the form of write-offs or recoveries is recognized as part of the allowance for credit losses on securities available-for-sale. The Company has made the accounting policy election to exclude accrued interest receivable on securities from the estimate of credit losses and will record a credit loss expense for accrued interest receivable in the period when a credit loss is recorded for the related securities.
Management determined that t he Company did not require an allowance for credit losses for available-for-sale securities as of December 31, 2024 or 2023, as the aggregate amount of any credit losses was immaterial. The Company did not have any related write-offs or recoveries for the years ended December 31, 2024 and 2023.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company maintains deposits in financial institutions in excess of government insured limits. Management believes that the Company is not exposed to significant credit risk as the Company’s cash and cash equivalents are held at financial institutions that management believes to be of high credit quality. The Company has not experienced any losses due to credit risk on such accounts during any of the periods presented.
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Fair Value of Financial Instruments
The Company’s financial assets and liabilities are accounted for in accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures , which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:
Level 1 — Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than Level 1 inputs that are either directly or indirectly observable, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the instrument’s anticipated life.
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There were no transfers made among the three levels in the fair value hierarchy for the years ended December 31, 2024 and 2023 .
The carrying values reported in the balance sheets for cash (excluding cash equivalents which are recorded at fair value on a recurring basis), restricted cash, accounts payable, accrued clinical trial expenses and accrued expenses are reasonable estimates of their fair values due to the short-term nature of these items.
The carrying amount of the Company’s long-term debt approximates fair value due to its variable market interest rate and management’s opinion that current rates and terms that would be available to the Company with the same maturity and security structure would be essentially equivalent to that of the Company’s long-term debt. Certain features of the term loan were determined to be an embedded derivative requiring separate measurement from the loan host instrument.
Property and Equipment
Property and equipment are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, including leasehold improvements and finance lease right-of-use assets that are amortized over the shorter of their estimated useful lives or the terms of the respective leases. The Company generally uses the following useful lives for its property and equipment categories: three years for computer-related assets and five years for furniture. See Note 5. Supplemental Financial Information.
Leases
The Company accounts for its leases under ASC 842, Leases . Under this guidance, arrangements meeting the definition of a lease are classified as operating or finance leases and are recorded in the balance sheet at the commencement date as both a right-of-use asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and right-of-use assets are amortized over the lease term, or, for finance leases, over the shorter of the lease term or the estimated useful life of the assets. For operating leases, interest on the lease liability and the amortization of the right-of-use asset results in straight-line rent expense over the lease term. For finance leases, the right-of-use asset is amortized on a straight-line basis and the amortization is presented as an operating expense separately from interest expense on the lease liability. Variable lease expenses are recorded when incurred and not included in the measurement of right-of-use assets and lease liabilities.
ASC 842 provides practical expedients for an entity’s ongoing accounting. In calculating right-of-use assets and lease liabilities, the Company has elected to combine lease and non-lease components for real estate leases, but has not elected to combine lease and non-lease components for computer equipment leases. Additionally, the Company has elected not to
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recognize a right-of-use asset or lease liability for leases with an initial term of 12 months or less. For short-term leases, the Company recognized lease payments on a straight-line basis over the lease term.
Computer Equipment Lease
In September 2023, the Company entered into an agreement with a vendor that included the lease of certain computer equipment for its Phase 2 clinical trial with an October 2023 lease commencement date. In January 2024, the Company paid $ 0.8 million for the computer equipment, which will be returned to the vendor at the completion of the vendor’s services under the agreement. Upon the lease inception, the Company recorded non-cash expense of $ 0.7 million in research and development expense in the statement of operations and comprehensive loss for the right-of-use assets related to the computer equipment lease as the equipment is being used for research and development and does not have an alternative future use.
Debt Discount and Debt Issuance Costs
The debt discount, which reduces the related debt balance in the balance sheets, is comprised of debt issuance costs, contractual fees due upon repayment of the debt, the issuance date fair value of warrants issued with the debt and the issuance date fair value of any derivatives that are bifurcated from the debt. Debt issuance costs include direct costs (e.g., legal costs and bank fees) incurred to issue non-revolving debt instruments. The debt discount is amortized to interest expense over the contractual term of the related debt using the effective interest method.
Embedded Derivatives
The Company evaluates embedded derivatives within debt to determine whether the embedded derivatives should be bifurcated from the host instrument and accounted for as a derivative at fair value that will be remeasured at each reporting period for the term of the loan, with changes in fair value recorded in the statements of operations and comprehensive loss. Management initially assesses the probability of the occurrence of trigger events for bifurcated embedded derivatives in determining fair value. The probability is reassessed at each reporting period during the term of a loan.
Common Stock Warrant
The Company assesses whether warrants issued require accounting as derivatives. The Company determined that its warrant to purchase common stock is not a liability within the scope of ASC 480, Distinguishing Liabilities from Equity , but met the requirements to be classified within stockholders’ equity, as the warrant is indexed to the Company’s own stock and met all of the conditions for equity classification in accordance with ASC 815, Derivatives and Hedging .
Research and Development Expenses
Research and development (“R&D”) expenses primarily consist of consultants and materials, biologic storage, salaries and other personnel-related expenses related to R&D activities and are expensed as incurred. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected on the balance sheets as prepaid or accrued expenses. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs.
Clinical trial costs are a significant component of R&D expenses and include costs associated with third-party contractors. The Company accrues and expenses costs for clinical trial activities performed by third parties based upon the work completed to date for each clinical trial in accordance with established agreements. The Company determines its costs through discussions with internal clinical stakeholders and outside service providers as to the progress or stage of completion of clinical trials or services and the contracted fee to be paid for such services. In the event advance payments are made to an outside service provider, the payments are recorded within prepaid expenses and other current assets in the balance sheets and subsequently recognized as R&D expense in the statements of operations and comprehensive loss when the associated services have been performed. As actual costs become known, the Company adjusts its estimates, liabilities and assets. Inputs used in the determination of estimates discussed above may vary from actual, which will result in adjustments to R&D expense in future periods.
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Stock-based Compensation
The Company expenses stock-based compensation to employees, non-employees and board members over the requisite service period based on the estimated grant date fair value of the awards and actual forfeitures. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, which requires the use of a number of complex assumptions including expected volatility, risk-free interest rate, expected dividends, and the expected term of the option. The fair value of restricted stock units (“RSUs”) is the closing market price of the common stock on the date of the grant. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period. All stock-based compensation costs are recorded in research and development expense or general and administrative expense in the Statements of Operations and Comprehensive Loss based upon the respective employee’s or non-employee’s roles within the Company. Forfeitures are recorded as they occur. See Note 8. Stock-based Compensation.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, and net operating loss (“NOL”) carryforwards and R&D tax credit carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance to reduce its net deferred income tax assets to zero . In the event the Company were to determine that it would be able to realize some or all of its deferred income tax assets in the future, an adjustment to the deferred income tax asset valuation allowance would increase income in the period such determination was made.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company has not recorded any liabilities related to uncertain tax positions as of December 31, 2024 and 2023. The Company’s policy is to record interest and penalties, if any, as part of income tax benefit. No interest or penalties were recorded during the years ended December 31, 2024 and 2023.
Net Loss Per Share of Common Stock
Basic net loss per share of common stock is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as convertible debt, stock options, RSUs and warrants, which would result in the issuance of incremental shares of common stock. However, potential shares of common stock are excluded if their effect is anti-dilutive. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive. For the years ended December 31, 2024 and 2023, potential common shares consisted of stock options, RSUs, convertible debt and a warrant to purchase common stock.
Potentially dilutive securities not included in the calculation of diluted net loss per share of common stock as of the periods presented, because to do so would be anti-dilutive, were as follows:
December 31,
2024 2023
Shares issuable upon exercise of stock options 10,656,129 7,523,947
Shares issuable upon conversion election for Term Loan 988,142 988,142
Shares issuable upon exercise of warrant 730,769 730,769
Unvested RSUs 1,354,543 328,500
Total 13,729,583 9,571,358
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Segment Information
Operating segments are defined as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM is its chief executive officer. The Company has one operating segment focused on the research and development of sabirnetug for the treatment of patients with AD. See Note 10 – Segments.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard is intended to improve financing reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The standard is effective for fiscal years beginning after December 31, 2023, and interim periods within fiscal years beginning after December 15, 2024 and must be applied retrospectively to all prior periods presented in the financial statements. The Company adopted this guidance on January 1, 2024. The adoption of this guidance did not have a material impact on its financial statements and disclosures upon adoption; but it did require the Company to provide additional disclosures regarding segments.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard is intended to enhance the existing income tax disclosures to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The standard is effective for annual periods beginning after December 15, 2024. Upon adoption, the standard should be applied on a prospective basis, although retrospective application is permitted. Early adoption is also permitted. The Company is evaluating the potential impact of this adoption on the financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard is intended to require more detailed disclosures about specified categories of expenses, including employee compensation, depreciation and amortization, included in certain expense captions presented on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 31, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is evaluating the potential impact of this adoption on the financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options (Subtopic 470- 20): Induced Conversions of Convertible Debt Instruments. The standard is intended to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The standard is effective for annual periods beginning after December 15, 2025, and for interim periods within those annual reporting periods. Early adoption is permitted if ASU 2020-06 has been adopted. Upon adoption, the standard may be applied on a prospective or retrospective basis. The Company is evaluating the potential impact of this adoption on the financial statements and related disclosures.
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NOTE 3. MARKETABLE SECURITIES
The Company’s marketable securities consisted of the following (in thousands):
December 31, 2024
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
Available-for-sale securities, short-term
Corporate debt securities $ 118,813 $ 128 $ ( 8 ) $ 118,933
Government and agency - U.S. securities 16,962 35 — 16,997
Total available-for-sale securities, short-term 135,775 163 ( 8 ) 135,930
Available-for-sale securities, long-term
Corporate debt securities 60,171 — ( 203 ) 59,968
Total available-for-sale securities, long-term 60,171 — ( 203 ) 59,968
Total available-for-sale securities $ 195,946 $ 163 $ ( 211 ) $ 195,898
December 31, 2023
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair Value
Available-for-sale securities, short-term
Corporate debt securities $ 144,184 $ 97 $ ( 191 ) $ 144,090
Government and agency - U.S. securities 32,470 82 ( 6 ) 32,546
Total available-for-sale securities, short-term 176,654 179 ( 197 ) 176,636
Available-for-sale securities, long-term
Corporate debt securities 57,240 320 ( 15 ) 57,545
Government and agency - U.S. securities 4,985 23 — 5,008
Total available-for-sale securities, long-term 62,225 343 ( 15 ) 62,553
Total available-for-sale securities $ 238,879 $ 522 $ ( 212 ) $ 239,189
The following tables summarize the amount of unrealized losses, defined as the amount by which the amortized cost exceeds fair value, and the related fair value of available-for-sale marketable securities with unrealized losses, which have been segregated into two categories: those that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months (in thousands):
December 31, 2024
Less than 12 Months Greater than 12 Months Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Corporate debt securities $ 73,952 $ ( 211 ) $ 2,515 $ — $ 76,467 $ ( 211 )
Total $ 73,952 $ ( 211 ) $ 2,515 $ — $ 76,467 $ ( 211 )
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December 31, 2023
Less than 12 Months Greater than 12 Months Total
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Corporate debt securities $ 78,995 $ ( 152 ) $ 12,074 $ ( 54 ) $ 91,069 $ ( 206 )
Government and agency - U.S. securities 5,585 ( 6 ) — — 5,585 ( 6 )
Total $ 84,580 $ ( 158 ) $ 12,074 $ ( 54 ) $ 96,654 $ ( 212 )
As of December 31, 2024, the Company’s available-for-sale securities classified as short-term mature in one year or less and the Company’s available-for-sale securities classified as long-term mature within two years . As noted in the table above, although one of the Company’s available-for-sale marketable securities with a fair value of $ 2.5 million has been in an unrealized loss position for more than 12 months as of December 31, 2024, the loss is immaterial and the Company does not intend to sell any of its available-for-sale securities and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. No credit losses were recognized on the Company’s available-for-sale securities during the years ended December 31, 2024 and 2023. The Company recorded a realized gain of approximately $ 0.1 million during the year ended December 31, 2024 and recorded an immaterial realized gain during the year ended December 31, 2023.
NOTE 4. FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities subject to fair value measurement on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
Fair value measurements as of December 31, 2024 using
Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs
(Level 3) Fair Value as of
December 31,
2024
Assets included in:
Cash and cash equivalents
Money market securities $ 35,268 $ — $ — $ 35,268
Marketable securities
Corporate debt securities — 178,901 — 178,901
Government and agency - U.S. — 16,997 — 16,997
Total fair value $ 35,268 $ 195,898 $ — $ 231,166
Liabilities included in:
Debt, long-term
Embedded derivative liabilities $ — $ — $ 970 $ 970
Total fair value $ — $ — $ 970 $ 970
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Fair value measurements as of December 31, 2023 using
Quoted Prices in
Active Markets
for Identical
Assets (Level 1) Significant Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs
(Level 3) Fair Value as of
December 31,
2023
Assets included in:
Cash and cash equivalents
Money market securities $ 66,207 $ — $ — $ 66,207
Marketable securities
Corporate debt securities — 201,635 — 201,635
Government and agency - U.S. — 37,554 — 37,554
Total fair value $ 66,207 $ 239,189 $ — $ 305,396
Liabilities included in:
Debt, long-term
Embedded derivative liabilities $ — $ — $ 2,560 $ 2,560
Total fair value $ — $ — $ 2,560 $ 2,560
The fair value of the Company’s money market funds is determined using quoted market prices in active markets for identical assets.
The fair value for the available-for-sale marketable securities is determined based on valuation models using inputs that are observable either directly or indirectly (Level 2 inputs), such as quoted prices for similar assets or liabilities, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments or debt, broker and dealer quotes, as well as other relevant economic measures.
The following table presents changes in Level 3 liabilities measured at fair value for the two-year period ended December 31, 2024 (in thousands):
Balance, January 1, 2023 $ —
Fair value of embedded derivatives at issuance of Term Loan 1,200
Change in fair value of embedded derivatives 1,360
Balance, December 31, 2023 2,560
Change in fair value of embedded derivatives ( 1,590 )
Balance, December 31, 2024 $ 970
During the years ended December 31, 2024 and 2023, the fair value of the embedded derivatives in the Term Loan has been estimated using the Monte Carlo model. A summary of the weighted-average significant unobservable inputs (Level 3 inputs) used in measuring the embedded derivatives in the Term Loan as of December 31, 2024 and 2023 and November 10, 2023 (inception) is as follows:
December 31, November 10,
2024 2023 2023
Conversion price $ 2.53 $ 2.53 $ 2.53
Expected term (in years) 3.7 4.7 4.9
Expected equity volatility 98.2 % 106.7 % 102.5 %
Risk-free interest rate 4.3 % 3.9 % 4.7 %
Discount for lack of marketability 12.5 % 11.5 % 9.5 %
Expected dividend yield 0 % 0 % 0 %
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NOTE 5. SUPPLEMENTAL FINANCIAL INFORMATION
Prepaid expenses and other assets as of December 31, 2024 and 2023 consisted of the following (in thousands):
December 31, 2024
Prepaid Expenses and Other Current Assets Other Long-Term Assets Total Prepaid Expenses and Other Assets
Research and development service agreements $ 4,841 $ 75 $ 4,916
Prepaid insurance 858 — 858
Other receivables 345 — 345
Dues and subscriptions 230 — 230
Prepaid raw materials 159 9 168
Interest receivable 53 — 53
Right-of-use asset — 266 266
Property and equipment, net (1) — 73 73
Other 263 63 326
Total $ 6,749 $ 486 $ 7,235
December 31, 2023
Prepaid Expenses and Other Current Assets Other Long-Term Assets Total Prepaid Expenses and Other Assets
Research and development service agreements $ 1,680 $ 169 $ 1,849
Prepaid insurance 807 — 807
Interest receivable 225 — 225
Dues and subscriptions 175 — 175
Prepaid raw materials 98 42 140
Right-of-use asset — 381 381
Property and equipment, net (1) — 122 122
Other 108 10 118
Total $ 3,093 $ 724 $ 3,817
(1) As of both December 31, 2024 and 2023, accumulated depreciation totaled approximately $ 0.1 million.
Accrued expenses and other liabilities as of December 31, 2024 and 2023 consisted of the following (in thousands):
December 31, 2024
Accrued Expenses and Other Current Liabilities Other Long-Term Liabilities Total Accrued Expenses and Other Liabilities
Compensation and other employee liabilities $ 4,207 $ — $ 4,207
Research and development 1,796 — 1,796
Interest 249 — 249
Operating lease liability 133 150 283
Other 230 — 230
Total $ 6,615 $ 150 $ 6,765
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December 31, 2023
Accrued Expenses and Other Current Liabilities Other Long-Term Liabilities Total Accrued Expenses and Other Liabilities
Compensation and other employee liabilities $ 3,692 $ — $ 3,692
Research and development 2,186 — 2,186
Interest 249 — 249
Operating lease liability 110 284 394
Other 212 — 212
Total $ 6,449 $ 284 $ 6,733
NOTE 6. DEBT
Term Loan
On November 10, 2023, the Company entered into a Loan and Security Agreement with K2 HealthVentures LLC (the “Loan Agreement”). The Loan Agreement provided the Company with a term loan facility (the “Term Loan”) in the aggregate principal amount of $ 50.0 million, of which the Company borrowed $ 30.0 million in the first tranche upon closing. The remaining $ 20.0 million is available for borrowing upon the Company’s request based on review of certain information and discretionary approval from the lenders. The principal amount of the Term Loan outstanding under the Loan Agreement bears interest per annum at the greater of (i) 9.65 % or (ii) the sum of the prime rate last quoted in The Wall Street Journal plus 1.15 % for such interest period. The Term Loan matures on November 1, 2027, and can be extended to November 1, 2028 if the Company achieves certain financing milestones. The Loan Agreement provides for a final payment fee of an additional $ 1.6 million (the “Final Payment”) due upon repayment of the Term Loan. As security for its obligations under the Loan Agreement, the Company granted the lenders a security interest in substantially all of the Company’s assets (other than intellectual property).
The principal and interest of the Term Loan are to be repaid in equal monthly installments beginning on July 1, 2026 through the maturity of the Loan Agreement. The Loan Agreement allows prepayments of the entire Term Loan or a portion of the Term Loan of more than $ 5.0 million, provided that any partial prepayment will leave outstanding borrowings of at least $ 15.0 million.
The lenders can elect to convert up to $ 2.5 million of the Term Loan (the “Conversion Amount”) into common stock at a conversion price of $ 2.53 (the “Conversion Option”). If the lenders elect to convert the Conversion Amount upon the Next Qualified Financing, as defined in the Loan Agreement whereby the Company receives aggregate gross proceeds of at least $ 20.0 million, the conversion price will equal the lowest effective cash price per share of securities issued in such Qualified Financing (the “Share-Settled Redemption”). The Conversion Option and Share-Settled Redemption within the Loan Agreement are required to be bifurcated as a single compound embedded derivative (the “Embedded Derivatives”) at fair value, with subsequent changes in fair value recognized in the statements of operations and comprehensive loss.
In accordance with the Loan Agreement, the Company issued an equity-classified warrant to purchase 730,769 shares of common stock (the “Loan Warrant”), with an initial allocated fair value of $ 1.1 million. See additional discussion in Note 7. Stockholders’ Equity.
The initial recognition of the direct fees of $ 0.5 million, the Final Payment of $ 1.6 million, the fair value of the Embedded Derivatives of $ 1.2 million and the fair value of the Loan Warrant of $ 1.1 million for the Loan Agreement resulted in a discount of $ 4.4 million, which is being amortized to interest expense over the term of the Loan Agreement using the effective interest method.
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Outstanding debt consisted of the following (in thousands):
December 31,
2024 2023
Principal value of Term Loan, including final payment of $ 1,635
$ 31,635 $ 31,635
Fair value of bifurcated embedded derivatives 970 2,560
Unamortized debt discount ( 3,186 ) ( 4,298 )
Total debt, long-term $ 29,419 $ 29,897
The following table provides the components of interest expense (in thousands):
Year Ended December 31,
2024 2023
Interest expense based on the coupon interest rate of the outstanding debt $ 2,943 $ 418
Accretion of debt discount 1,112 145
Total interest expense related to debt $ 4,055 $ 563
For both the years ended December 31, 2024 and 2023, the effective interest rate for the Term Loan was 13.5 %.
As of December 31, 2024, the aggregate principal payments due for the Term Loan by year are as follows (in thousands):
Year ended December 31, 2026 $ 10,104
Year ended December 31, 2027 21,531
Total principal payment due for Term Loan $ 31,635
NOTE 7. STOCKHOLDERS’ EQUITY
Authorized Shares
As of December 31, 2024, the total number of shares of capital stock authorized to be issued per the Company’s Amended and Restated Certificate of Incorporation is 310,000,000 , with 10,000,000 shares designated as preferred stock with a par value of $ 0.0001 , and 300,000,000 shares designated as common stock, with a par value of $ 0.0001 (“Common Stock”). Each share of common stock issued and outstanding is entitled to one vote.
Public Offering
On July 21, 2023, the Company issued 16,774,193 shares of its Common Stock in a public offering (the “Offering”) at a price of $ 7.75 per share. The aggregate net proceeds from the Offering, after underwriting discounts and commissions and other offering expenses, were $ 121.9 million.
Shelf Registration and At-The-Market Equity Offering
On July 1, 2022, the Company filed a shelf registration statement on Form S-3 (the “2022 Registration Statement”). Pursuant to the 2022 Registration Statement, the Company may offer and sell securities having an aggregate public offering price of up to $ 200.0 million.
In connection with the filing of the 2022 Registration Statement, the Company also entered into a sales agreement (the “Sales Agreement”) with BofA Securities, Inc. (“BofA”) and Stifel, Nicolaus & Company, Incorporated (“Stifel”), as sales agents, pursuant to which the Company may issue and sell shares of its Common Stock for an aggregate offering price of up to $ 50.0 million under an at-the-market offering program (the “ATM”), which is included in the $ 200.0 million of securities that may be offered pursuant to the 2022 Registration Statement. On April 23, 2023, the Company entered into an amendment to the Sales Agreement (as amended, the “Amended Sales Agreement”) to add BTIG, LLC (“BTIG”) as a sales agent under the Amended Sales Agreement (BTIG, together with BofA and Stifel, the “Sales Agents”). Pursuant to the Amended Sales Agreement, the Company will pay the Sales Agents a commission rate of up to 3.0 % of the gross
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proceeds from the sale of any shares of Common Stock under the ATM. The Company is not obligated to make any sales of shares of its Common Stock under the ATM.
During the year ended December 31, 2024, the Company issued and sold 2,068,246 shares of Common Stock under the ATM for net proceeds of $ 7.9 million, or $ 3.84 per share. The Company did not sell any shares of Common Stock under the ATM during the year ended December 31, 2023. The Company has issued shares of Common Stock for aggregate gross proceeds of $ 12.2 million under the ATM since the program’s inception.
On March 27, 2024, the Company filed a shelf registration statement on Form S-3 (the “2024 Registration Statement”). Pursuant to the 2024 Registration Statement, the Company may offer and sell securities having an aggregate public offering price of up to $ 200.0 million.
Restricted Stock Units
During the year ended December 31, 2024, the Company issued 115,376 shares of Common Stock in settlement of fully vested RSUs.
Common Stock Warrant
On November 10, 2023, in accordance with the Loan Agreement, the Company issued the Loan Warrant to purchase 730,769 shares of Common Stock at an exercise price of $ 1.95 with a ten-year contractual term and an allocated fair value of $ 1.1 million. This warrant is outstanding as of December 31, 2024. In accordance with ASC 815, the Loan Warrant issued in 2023 did not meet the definition of a derivative and was classified in stockholders’ equity in the balance sheet.
The Black-Scholes option-pricing model was used to estimate the fair value of the warrant on November 10, 2023 with the following weighted average assumptions:
Risk-free interest rate 4.6 %
Contractual term (in years) 10
Expected volatility 98.4 %
Expected dividend yield 0 %
NOTE 8. STOCK-BASED COMPENSATION
2021 Equity Incentive Plan
The 2021 Equity Incentive Plan (the “2021 Plan”), which provides for the grant of incentive stock options to employees, and the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants, became effective on June 30, 2021. The 2021 Plan is a successor to the Company’s Amended and Restated Stock Performance Plan that was adopted by the Company’s board of directors (“Board”) and stockholders on April 8, 2013 (as amended from time to time, most recently on November 20, 2020, the “2013 Plan”). Following the effectiveness of the 2021 Plan, no further grants may be made under the 2013 Plan; however, any outstanding equity awards granted under the 2013 Plan continue to be governed by the 2013 Plan. As of December 31, 2024, there were 3,193,082 options outstanding under the 2013 Plan.
The number of shares of Common Stock reserved for issuance under the 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to 5 % of the total number of shares of Common Stock outstanding on December 31 of the fiscal year before the date of each automatic increase, or a lesser number of shares determined by the Board prior to the applicable January 1. On January 1, 2024, the number of shares of Common Stock reserved for issuance under the 2021 Plan automatically increased by 2,895,523 shares.
The maximum number of shares of Common Stock that may be issued upon the exercise of incentive stock options under the 2021 Plan is 12,000,000 . As of December 31, 2024, 14,668,721 shares were authorized for issuance under the 2021 Plan and 2,296,652 shares remained available for issuance under the 2021 Plan.
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The Company recorded stock-based compensation expense related to stock options and RSUs in the following expense categories of the statements of operations and comprehensive loss for the periods shown (in thousands):
Year Ended December 31,
2024 2023
General and administrative $ 6,113 $ 4,288
Research and development 3,522 1,857
Total stock-based compensation $ 9,635 $ 6,145
Stock Options
The Black-Scholes option-pricing model was used to estimate the fair value of stock options granted during the years ended December 31, 2024 and 2023 with the following weighted average assumptions:
Year Ended December 31,
2024 2023
Risk-free interest rate 3.8 % – 5.1 %
3.5 % – 4.7 %
Expected term (in years) 0.9 – 6.1
5.5 – 6.1
Expected volatility 92 % - 103 %
90 % - 98 %
Expected dividend yield 0 % 0 %
The weighted average grant date fair value of options granted during the years ended December 31, 2024 and 2023 was $ 2.85 per share and $ 4.38 per share, respectively.
Stock options granted after December 31, 2017 generally vest monthly over a range of 12 to 48 months or vest monthly over a total of 48 months following a one-year cliff and all have a ten-year contractual term. Stock options granted to consultants during the year ended December 31, 2024 vest quarterly over a one-year period, provided the consultants continue to perform services as dictated by their respective consulting agreements with the Company. During the years ended December 31, 2024 and 2023, the Company also issued option awards to members of its Board that vest in full on the first anniversary of the grant date. Stock options granted prior to December 31, 2017 were either fully vested upon grant or generally vested monthly over a range of three to 24 months and have a ten-year term. The Company became publicly traded in July 2021 and lacks sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility using a weighted average blend of historical volatility of a publicly traded set of peer companies, as well as its own historical volatility. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined using the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The following table reflects summarized stock option activity:
Stock Options Weighted Average
Exercise Price Weighted Average
Remaining
Contractual Life
(in years) Aggregate Intrinsic
Value (in thousands)
Outstanding as of December 31, 2023 7,523,947 $ 4.01
Granted 3,385,650 $ 3.60
Forfeited ( 163,218 ) $ 5.76
Expired ( 90,250 ) $ 7.27
Outstanding as of December 31, 2024 10,656,129 $ 3.83 7.4 $ 2,042
Vested and exercisable as of December 31, 2024 6,173,546 $ 3.51 6.5 $ 2,015
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No options were exercised during the year ended December 31, 2024. The intrinsic value of stock options exercised during the year ended December 31, 2023 was approximately $ 0.5 million. As of December 31, 2024, total unrecognized compensation cost related to unvested stock option awards granted was approximately $ 13.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.5 years.
Restricted Stock Units
RSU awards granted to employees during the years ended December 31, 2024 and 2023 vest in equal annual installments on the first three anniversaries of the grant date.
Number of Shares Weighted Average Grant Date Fair Value
Unvested as of December 31, 2023 328,500 $ 6.11
Granted 1,204,640 $ 4.15
Vested ( 129,198 ) $ 5.86
Forfeited ( 49,399 ) $ 4.38
Unvested as of December 31, 2024 1,354,543 $ 4.46
As of December 31, 2024, total unrecognized compensation cost related to unvested RSUs was approximately $ 3.9 million, which the Company expects to recognize over a weighted-average period of approximately 1.9 years.
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”), which permits employees to purchase shares of Common Stock, became effective on June 30, 2021. The number of shares of Common Stock reserved for issuance automatically increases on January 1 of each calendar year through January 1, 2031, by the lesser of (1) 1 % of the total number of shares of Common Stock outstanding on the last day of the fiscal year before the date of the automatic increase, and (2) 800,000 shares; provided, however, that before the date of any such increase, the Board may determine that such increase will be less than the amount set forth in clauses (1) and (2). On January 1, 2024, the number of shares of Common Stock reserved for issuance under the ESPP automatically increased by 579,105 shares. As of December 31, 2024, there were a total of 1,769,088 shares authorized for issuance and there have been no purchases of shares under the ESPP.
NOTE 9. INCOME TAXES
The Company has not recorded any tax provision or benefit for federal income taxes for the years ended December 31, 2024 and 2023. Current income taxes are based upon the year’s income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes. Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income, and NOL and R&D tax credit carryforwards.
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A reconciliation of the expected tax computed at the U.S. statutory federal income tax rate to the total benefit for income taxes for the years ended December 31, 2024 and 2023 is as follows:
Year Ended December 31,
2024 2023
Statutory federal income tax rate 21.0 % 21.0 %
State tax, net of federal benefit 3.1 2.5
Non-deductible stock compensation ( 0.5 ) ( 0.4 )
Rate change 0.4 ( 0.1 )
Other ( 1.9 ) ( 0.5 )
Change in valuation allowance ( 22.1 ) ( 22.5 )
Income tax provision — % — %
Significant components of the Company’s deferred tax assets as of December 31, 2024 and 2023 were as follows (in thousands):
December 31,
2024 2023
Deferred tax assets:
Net operating loss $ 20,906 $ 16,555
Capitalized R&D 29,548 13,328
Stock compensation 3,171 1,849
R&D credit 1,215 1,350
Intangible assets 443 441
Accruals and other temporary differences 1,395 575
Gross deferred tax assets 56,678 34,098
Valuation allowance ( 56,405 ) ( 33,661 )
Total deferred tax assets 273 437
Deferred tax liabilities:
Embedded debt derivative liabilities ( 208 ) ( 274 )
Other ( 65 ) ( 163 )
Total deferred tax liabilities ( 273 ) ( 437 )
Net deferred tax assets $ — $ —
In assessing the realizability of deferred tax assets as of December 31, 2024 and 2023, management considered whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible or the net operating loss (“NOL”) carryforwards and R&D tax credit carryforwards will be used. The Company has determined that it is not more likely than not that its deferred tax assets will be realized. Accordingly, a valuation allowance for the full amount of the net deferred tax assets has been recorded as of December 31, 2024 and 2023. The change in the valuation allowance as of December 31, 2024 from December 31, 2023 is due to the pretax loss incurred for the year ended December 31, 2024.
As of December 31, 2024, the Company had approximately $ 91.0 million of NOL carryforwards available for federal tax purposes. As a result of the Tax Act of 2017, for U.S. income tax purposes, NOLs generated prior to December 31, 2017 can still be carried forward for up to 20 years, but NOLs generated after December 31, 2017 carryforward indefinitely, but are limited to 80% utilization against taxable income. Of the total federal NOLs of $ 91.0 million, $ 6.5 million will begin to expire on December 31, 2028 and $ 84.5 million will not expire.
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As of December 31, 2024, the Company also had approximately $ 28.6 million of state NOL carryforwards. The state NOLs begin to expire on December 31, 2028.
As of December 31, 2024, the Company had approximately $ 1.2 million of R&D credit carryforwards available for federal tax purposes, which begin to expire on December 31, 2025.
Utilization of the NOL and R&D credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders. The Company has not completed a formal analysis of the potential impact of Section 382 on its deferred tax assets as of December 31, 2024. Until this analysis has been completed, the Company has not adjusted any of its deferred tax assets, including NOLs or R&D credits. The Company will reassess the amount of NOLs and credits subject to limitation under Section 382 when a study is complete. Due to the existence of the valuation allowance, future changes in the deferred tax assets related to these tax attributes will not impact the Company’s effective tax rate.
The Company is subject to U.S. federal and various state taxes. Generally, the tax years remain open for examination by the federal statute under a three-year statute of limitation; however, states generally keep their statutes open for four years. However, the Company’s tax years from 2004 and after are subject to examination by the United States and state taxing authorities due to the carry forward of unused NOLs and R&D credits.
NOTE 10. SEGMENT REPORTING
The Company manages its operations as a single segment. The CODM assesses performance and allocates resources for its clinical-stage biopharmaceutical segment based on net loss, which is reported on the statement of operations and comprehensive loss as net loss. The CODM is regularly provided with actual, budgeted and forecasted expense information to make decisions on resource allocation and assess performance of the business and monitor budget versus actual results using loss from operations. Substantially all long-lived assets are located in the U.S. The measure of segment assets is reported on the balance sheet as total assets.
The following table presents selected financial information about the Company’s single operating segment for the years ended December 31, 2024 and 2023 (in thousands):
Year Ended December 31,
2024 2023
Operating expenses
Research and development
External costs (1) $ 71,188 $ 25,405
Internally-managed costs (2) 19,062 15,025
General and administrative (3) 14,069 14,506
Other segment expenses (4) 9,698 6,202
Other income, net ( 11,688 ) ( 8,767 )
Segment net loss $ 102,329 $ 52,371
(1) Includes a $ 0.7 million non-cash charge for the year ended December 31, 2023.
(2) Includes Acumen-managed research, consultants and contractors, as well as internal personnel and operating expenses, and excludes stock-based compensation expense and depreciation.
(3) Excludes stock-based compensation expense and depreciation.
(4) Other segment expenses include stock-based compensation expense and depreciation.
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NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.
In November 2023, the Company entered into a Non-exclusive Collaboration and License Agreement (the “Halozyme License Agreement”) with Halozyme, Inc. (“Halozyme”). Under the terms of the Halozyme License Agreement, Halozyme granted the Company a non-exclusive license to Halozyme’s drug delivery technology for the development of a subcutaneous formulation of sabirnetug (such combination, the “Halozyme Product”). In January 2024, the Company paid a seven-figure upfront license payment for the Halozyme Product, which was included in accrued expenses and other current liabilities as of December 31, 2023. The Company is required to make milestone payments upon the achievement of certain development and commercialization events with respect to the Halozyme Product, as well as milestone payments based on achievement of certain net sales levels of the Halozyme Product. The Company will also make single-digit royalty payments based on worldwide net sales of the Halozyme Product. The upfront license payment and milestones are recorded as in-process research and development expense when incurred.
In November 2022, the Company entered into a License Agreement (“Lonza License Agreement”) with Lonza Sales AG (“Lonza”). Under the terms of the Lonza License Agreement, Lonza granted the Company a worldwide non-exclusive license to use Lonza’s glutamine synthetase gene expression system to manufacture and commercialize sabirnetug (the “Lonza Product”). Under the terms of the Lonza License Agreement, in consideration of the licenses and consents granted to the Company, the Company paid an upfront fee of 1.0 million Swiss Francs. The Company is also required to pay certain royalties upon commercialization and annual payments on a country-by-country basis in respect of the manufacturing and sale of the Lonza Product, which include (i) a royalty of less than 1 % on net sales where Lonza manufactures the Lonza Product, (ii) an annual royalty payment in Swiss Francs in the low six-digits and a royalty of less than 1 % on net sales where the Company manufactures the Lonza Product and (iii) an annual payment in Swiss Francs in the mid six-digits per sublicense and a royalty on net sales in the low single digits where a third party manufactures the Lonza Product. These payment obligations expire ten years from the first commercial sales of the Lonza Product in such country of sale.
NOTE 12. SUBSEQUENT EVENTS
In January 2025, the Company issued 446,756 shares of its Common Stock in settlement of fully vested RSUs.
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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.