Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the audited financial statements and notes thereto as of and for the year ended December 31, 2025 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in the Annual Report for a discussion of important factors that could cause our actual results to differ materially from those described in or implied by these forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company developing a novel disease-modifying approach targeting what we believe to be a key underlying cause of Alzheimer’s disease, or 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. Our scientific founders pioneered research on soluble amyloid-beta oligomers, or AβOs, which are globular assemblies of the amyloid-beta, or Aβ, peptide that are distinct from Aβ monomers and amyloid plaques. Based on decades of research and supporting evidence, AβOs have gained increasing scientific acceptance as a primary toxin involved in the initiation and propagation of AD pathology. We are currently focused on advancing a targeted immunotherapy drug candidate, sabirnetug, in our Phase 2 ALTITUDE-AD clinical trial. We plan to announce top-line results in late 2026. Top-line results are expected to include the difference compared to placebo after 18 months as measured by the Integrated Alzheimer’s Disease Rating Scale, or iADRS, our primary clinical efficacy endpoint, as well as key secondary endpoints, such as Clinical Dementia Rating – Sum of the Boxes, or CDR-SB, certain safety measures such as adverse event rates, including amyloid-related imaging abnormalities, or ARIA rates, and key biomarkers. ALTITUDE-AD is a randomized, double-blind, placebo-controlled, three-arm clinical trial designed to evaluate the clinical efficacy, safety and tolerability of sabirnetug with up to 180 participants per arm for a total of 542 participants with mild cognitive impairment or mild dementia due to AD. We plan to use iADRS at 18 months as the primary outcome measure. The active doses for ALTITUDE-AD are 35 mg/kg and 50 mg/kg, dosed intravenously every four weeks. These dose levels and frequency were selected based on extensive pharmacokinetic and pharmacodynamic modeling of our Phase 1 INTERCEPT-AD clinical trial of sabirnetug. Sabirnetug is a recombinant humanized immunoglobulin gamma 2, or IgG2, monoclonal antibody, or mAb, that was designed to selectively target AβOs. In July 2023, we announced top-line results from INTERCEPT-AD, which demonstrated that sabirnetug met the primary and secondary objectives of this clinical trial in 62 participants with early AD.
We announced the results of a Phase 1 clinical trial investigating a subcutaneous dosing option of sabirnetug in March 2025. This study in healthy volunteers enrolled 16 subjects who received four weekly subcutaneous doses of 1,200 mg of sabirnetug and 12 subjects who received a single intravenous dose of 2,800 mg of sabirnetug. The most frequently reported adverse events included injection site reactions (62.5%), all of which were mild (Grade 1) in severity and resolved. No other safety issues were identified. Additionally, subcutaneous administration of sabirnetug was shown to produce sufficient systemic exposure to support further development of this formulation as a more convenient administration option for patients.
In addition, we are investigating a blood-brain barrier-penetrating, Aβ oligomer-targeted Enhanced Brain Delivery ™ (EBD ™ ) therapy for the treatment of AD. In March 2026, we announced certain preclinical data from EBD candidates, including in vitro , in vivo and non-human primate study results, supporting the advancement of the EBD program: (1) EBD candidates achieved 14-40x higher brain levels in non-human primates compared to native antibodies 24 hours after dosing; (2) hematology data in non-human primates indicated low potential for anemia, including that, at 24 hours after subcutaneous dosing, EBD candidates demonstrated no observed change in red blood cell count, hematocrit, hemoglobin or reticulocyte count; and (3) favorable stability profile and enhanced brain delivery support a path to subcutaneous administration with low-volume devices. Following this robust preclinical data from both in vitro and in vivo studies, in June 2026 we announced the nomination of two EBD development candidates, ACU301 and ACU401. Based on these developments, an investigational new drug, or IND, application for the lead candidate is targeted for mid-2027. This stems from our July 2025 entry into a collaboration, option and license agreement with JCR Pharmaceuticals Co. Ltd., or JCR, to develop an Aβ oligomer-targeted EBD therapy for the treatment of AD. Under the terms of the agreement, during the year ended December 31, 2025, we made an upfront license payment to JCR and, in June 2026, we exercised our exclusive option to develop two EBD development candidates, which required an option exercise payment of $9.25 million that was
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paid to JCR in July 2026. JCR will also be eligible to receive future milestone payments of up to $40.0 million related to development, and up to $515.0 million related to sales, for a total of up to $555.0 million, as well as single-digit percentage royalties on sales of any products that emerge from the collaboration. The combination of sabirnetug or additional, novel, AβO-selective antibodies with JCR’s blood-brain barrier-penetrating technology, J-Brain Cargo ® , strengthens Acumen’s portfolio of AβO-targeted therapies. The partnership is designed to advance potential next-generation treatment options for people living with AD, by targeting the development of products with enhanced efficacy, safety and convenience.
We were incorporated in 1996 and were party to an exclusive license and research collaboration with Merck & Co., Inc., or Merck, in 2003. Although we acquired the exclusive rights to sabirnetug from Merck in 2011 following Merck’s strategic decision to focus its AD development efforts on a different product candidate, we did not recommence meaningful operations until we completed our first institutional fundraising in 2018. Since 2018, we have devoted substantially all of our efforts to organizing and staffing our company, business planning, raising capital, conducting discovery, research and development activities, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of our convertible preferred stock and common stock, the issuance of notes, entry into a term loan facility, grant revenue and, during our collaboration with Merck, certain payments received under our collaboration agreement.
In November 2023, we entered into a loan and security agreement, or the Loan Agreement, with K2 HealthVentures LLC, or, together with its affiliates, K2HV. The Loan Agreement provides us with a term loan facility in the aggregate principal amount of up to $50.0 million, of which we have borrowed $30.0 million in the first tranche and which was funded upon closing. The remaining $20.0 million is available for borrowing upon our request, subject to review by the lenders of certain information from us and discretionary approval by the lenders. The term loan facility matures on November 1, 2027 and can be extended to November 1, 2028, subject to our achievement of certain financing milestones. In accordance with the Loan Agreement, we issued to K2HV a warrant to purchase up to 730,769 shares of our common stock at an exercise price of $1.95 per share.
On March 13, 2026, we entered into a securities purchase agreement with certain institutional and accredited investors for a private placement, or the Private Placement, of 10,833,331 shares of our common stock, at an offering price of $3.30 per share. The Private Placement closed on March 16, 2026, for aggregate gross proceeds of approximately $35.7 million, before deducting offering costs of approximately $0.3 million. We intend to continue to use the net proceeds from the Private Placement to primarily support our EBD program, including ongoing preclinical development work to support the nomination of a lead clinical candidate molecule, and for working capital and other general corporate purposes.
During the six months ended June 30, 2026 and 2025, no shares of our common stock were issued under our at-the-market offering program, or the ATM. Since inception, we have issued 2,068,246 shares of our common stock under the ATM, for net proceeds of $7.9 million, or $3.84 per share.
We have incurred net losses and negative cash flows from operations since our inception. Our net losses were $53.5 million and $69.7 million for the six months ended June 30, 2026 and 2025, respectively. Approximately $44.3 million, or 83%, of the net loss for the six months ended June 30, 2026 was due to research and development spending. As of June 30, 2026, we had an accumulated deficit of $499.9 million and cash and cash equivalents and marketable securities of $110.2 million. We expect our expenses and operating losses will increase substantially for the foreseeable future as we continue clinical development activities for sabirnetug, advance our EBD program, seek to expand our product candidate portfolio through developing additional product candidates, and incur ongoing costs associated with operating as a public company. It is likely that we will seek third-party collaborators for the future commercialization of sabirnetug or any other product candidate that is approved for marketing. Should we seek to commercialize our products at our own expense, we would incur significant additional expenses for marketing, sales, manufacturing and distribution. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. In addition, global economic conditions may impact our ability to raise additional funds, and we may be impacted by disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, tariff policy and geopolitical tensions between the United States and foreign countries, rising inflation and supply disruptions, the ongoing conflicts between Russia and Ukraine, the recent
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military actions involving Iran, and the Israel-Hamas war and related sanctions, and otherwise. If these conditions persist and deepen, we could experience an inability to access additional capital, or our liquidity could otherwise be impacted. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs and/or future commercialization efforts. Our failure to raise capital or enter into such agreements as and when needed could have a material adverse effect on our business, results of operations and financial condition.
We evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. Based on our current operating plan, we expect that our current balance of cash and cash equivalents and marketable securities will fund our operations into early 2027, but we believe it will not be enough to fund our operations for at least 12 months from the date of issuance of our financial statements included in this Quarterly Report on Form 10-Q. Our cash forecast contains estimates and assumptions related to our ongoing clinical trial and other research and development expenses, and we cannot predict the amount or timing of all expenditures with certainty. Accordingly, we have concluded that substantial doubt exists about our ability to continue as a going concern. See “Liquidity, Capital Resources and Going Concern.”
Components of Results of Operations
Operating Expenses
Our operating expenses consist of research and development expenses and general and administrative expenses.
Research and Development Expenses
Research and development costs primarily consist of direct costs associated with consultants and materials, biologic shipping and storage, third-party contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, license agreements, salaries and other personnel-related expenses. Research and development costs are expensed as incurred. More specifically, these costs include:
• costs of funding research performed by third parties that conduct research and development and nonclinical and clinical activities on our behalf;
• costs of manufacturing drug supply and drug product;
• costs of conducting nonclinical studies and clinical trials of our product candidates;
• consulting and professional fees related to research and development activities, including noncash stock-based compensation to non-employees;
• payments made pursuant to our license agreements;
• costs related to compliance with clinical regulatory requirements; and
• employee-related expenses, including salaries, benefits and noncash stock-based compensation expenses for our research and development personnel.
We do not separately track expenses by program as we currently have only one clinical-stage product candidate, sabirnetug, and our pre-clinical EBD development candidates, all of which are focused on the research and development of treatments for AD. Further, we have historically relied primarily on consultants for research and development activities; our internal research and development personnel costs currently represent approximately 21% of our total research and development expenses. Our research and development expenses increased substantially since initiating the clinical trial program for sabirnetug in 2021. We expect that our research and development expenses will increase substantially in connection with our continued clinical development activities for sabirnetug and the advancement of our EBD program.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related expenses, including noncash stock-based compensation costs, as well as business insurance, management and business consultants and other related costs. General and administrative expenses also include professional fees for legal, consulting, accounting, auditing, tax and patent services, investor and public relations, board of directors’ expenses, information technology, franchise taxes, rent, travel expenses and subscriptions.
We expect that our general and administrative expenses will remain consistent for the foreseeable future and may increase as our organization and headcount required in the future grows to support continued research and development activities
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and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees incurred for outside consultants, attorneys and accountants, among other expenses. Additionally, we expect to continue to incur significant expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements, director and officer insurance costs, and investor and public relations costs.
Other Income (Expense)
Other income (expense) includes interest income, interest expense, change in fair value of embedded derivatives and other expense, net. Interest income consists of interest income earned, as well as amortization and accretion of premiums and discounts, related to our investments in marketable securities. Interest expense includes interest due under the Loan Agreement, as well as the amortization of the related debt discount. The change in fair value of embedded derivatives relates to the embedded derivatives that were bifurcated from the term loan, borrowed under the Loan Agreement, and accounted for as a derivative at fair value which is remeasured at each reporting period for the term of the loan. Other expense, net generally consists of fees incurred on our investments in marketable securities.
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended June 30, 2026 and 2025 (in thousands):
Three Months Ended June 30, Increase (Decrease)
2026 2025 $ %
Operating expenses
Research and development $ 27,809 $ 37,125 $ (9,316) (25) %
General and administrative 4,747 4,625 122 3 %
Total operating expenses 32,556 41,750 (9,194) (22) %
Loss from operations (32,556) (41,750) 9,194 (22) %
Other income (expense)
Interest income 1,111 2,015 (904) (45) %
Interest expense (1,094) (1,046) (48) 5 %
Change in fair value of embedded derivatives (160) (40) (120) *
Other expense, net (19) (129) 110 *
Total other (expense) income (162) 800 (962) (120) %
Net loss $ (32,718) $ (40,950) $ 8,232 (20) %
* Not meaningful
Research and Development Expenses
Research and development expenses were $27.8 million and $37.1 million for the three months ended June 30, 2026 and 2025, respectively. The $9.3 million decrease was primarily due to reductions of $15.2 million for manufacturing and materials costs and $3.3 million for CRO costs, which are both associated with our ALTITUDE-AD clinical trial. Additionally, we realized a decrease of $0.4 million for other research and development expenses. Partially offsetting the decreased expenses were increases of $9.3 million for license agreement expenses related to the option exercise payment owed to JCR for our exclusive option to license and develop two EBD development candidates and $0.3 million for other clinical trial expenses.
General and Administrative Expenses
General and administrative expenses were $4.7 million and $4.6 million for the three months ended June 30, 2026 and 2025, respectively. The $0.1 million increase was primarily due to increases in personnel costs of $0.2 million and legal fees of $0.1 million, partially offset by decreases for insurance expenses of $0.1 million and consulting expenses of $0.1 million.
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Other Income (Expense)
Other expense was $0.2 million for the three months ended June 30, 2026, as compared to other income of $0.8 million for the three months ended June 30, 2025 . T he $1.0 million decrease was primarily attributable to a $0.9 million decrease in interest income on our portfolio of marketable securities due primarily to a lower average investment balance during the three months ended June 30, 2026, with the utilization of cash from investment maturities supporting our ongoing operating cash needs. Additionally, for the three months ended June 30, 2026, there was $0.1 million of increased expense recognized with the change in fair value of our embedded derivative related to the Loan Agreement.
Comparison of the Six Months Ended June 30, 2026 and 2025
The following table summarizes our results of operations for the six months ended June 30, 2026 and 2025 (in thousands):
Six Months Ended June 30, Increase (Decrease)
2026 2025 $ %
Operating expenses
Research and development $ 44,293 $ 62,391 $ (18,098) (29) %
General and administrative 9,412 9,729 (317) (3) %
Total operating expenses 53,705 72,120 (18,415) (26) %
Loss from operations (53,705) (72,120) 18,415 (26) %
Other income (expense)
Interest income 2,175 4,486 (2,311) (52) %
Interest expense (2,163) (2,069) (94) 5 %
Change in fair value of embedded derivatives 300 150 150 *
Other expense, net (62) (193) 131 *
Total other income 250 2,374 (2,124) (89) %
Net loss $ (53,455) $ (69,746) $ 16,291 (23) %
* Not meaningful
Research and Development Expenses
Research and development expenses were $44.3 million and $62.4 million for the six months ended June 30, 2026 and 2025, respectively. The $18.1 million decrease was primarily due to reductions of $21.9 million for manufacturing and materials costs and $6.7 million for CRO costs, which are both associated with our ALTITUDE-AD clinical trial. Additionally, we realized decreases of $0.6 million for other research and development expenses and $0.3 million for research and development contractors and consultants. Partially offsetting the decreased expenses were increases of $9.3 million for license agreement expenses related to the option exercise payment owed to JCR for our exclusive option to license and develop two EBD development candidates, $1.4 million for other clinical trial expenses, $0.5 million for personnel-related costs and $0.2 million for shipping and storage costs.
General and Administrative Expenses
General and administrative expenses were $9.4 million and $9.7 million for the six months ended June 30, 2026 and 2025, respectively. The $0.3 million decrease was primarily due to reductions in consulting expenses of $0.2 million, insurance expenses of $0.2 million, audit and other accounting services expenses of $0.1 million, and $0.1 million for legal fees, partially offset by an increase in personnel costs of approximately $0.3 million.
Other Income (Expense)
Other income was $0.3 million and $2.4 million for the six months ended June 30, 2026 and 2025, respectively. The $2.1 million decrease was primarily attributable to a $2.3 million decrease in interest income on our portfolio of marketable securities due primarily to a lower average investment balance during the six months ended June 30, 2026 with the utilization of cash from investment maturities supporting our ongoing operating cash needs. This decrease was partially offset by increased income of $0.2 million associated with the change in fair value of our embedded derivatives related to the Loan Agreement.
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Liquidity, Capital Resources and Going Concern
We have incurred net losses since inception. We have not generated any revenue from product sales or any other sources other than grant revenue and have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any drug candidates for at least several years, if ever.
Our operations have been financed primarily by net proceeds from the sale and issuance of our common stock and convertible preferred stock, net proceeds from our initial and subsequent public offering, the Private Placement and from sales of shares of our common stock under our ATM, borrowings under the Loan Agreement, the issuance of notes, grant revenue and, during our collaboration with Merck, which was in place from 2003 to 2011, certain payments received under our collaboration agreement.
On March 27, 2024, we filed a shelf registration statement on Form S-3, or the 2024 Registration Statement. Pursuant to the 2024 Registration Statement, we may offer and sell securities having an aggregate public offering price of up to $200.0 million. On November 13, 2025, we filed a prospectus supplement to the 2024 Registration Statement with respect to our ATM, designating up to $50.0 million of the $200.0 million of securities that may be offered pursuant to the 2024 Registration Statement for issuance under the ATM.
We have a sales agreement, or, as amended, the Sales Agreement, with BofA Securities, Inc., Stifel, Nicolaus & Company, Incorporated and BTIG, LLC as sales agents, pursuant to which we may issue and sell shares of our common stock for an aggregate offering price of up to $50.0 million under the ATM, which is included in the $200.0 million of securities that were registered for sale pursuant to a registration statement on Form S-3 filed in 2022. Pursuant to the Sales Agreement, we will pay the sales agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of our common stock. We are not obligated to make any sales of shares of our common stock under the ATM.
During the six months ended June 30, 2026 and 2025, no shares of common stock were issued under our ATM. We have issued shares of common stock for aggregate gross proceeds of $12.2 million under the ATM since the program’s inception.
On March 13, 2026, we entered into a Private Placement of 10,833,331 shares of our common stock, at an offering price of $3.30 per share. The Private Placement closed on March 16, 2026, for aggregate gross proceeds of approximately $35.7 million, before deducting offering costs of approximately $0.3 million. We intend to use the net proceeds from the Private Placement to primarily support our EBD program, including ongoing preclinical development work to support the nomination of a lead clinical candidate molecule, and for working capital and other general corporate purposes.
As of June 30, 2026, we had cash and cash equivalents and marketable securities totaling $110.2 million. Our available-for-sale marketable securities mature in less than one year. We could exhaust our available capital resources sooner than we expect, including if we decide to initiate other clinical trials or programs. We evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. Based on our current operating plan, we do not expect the current balance of our cash and cash equivalents and marketable securities will be sufficient to fund our operations for at least 12 months from the date of issuance of our unaudited condensed financial statements included in this Quarterly Report on Form 10-Q. The current balance of our cash and cash equivalents and marketable securities is expected to fund our operations into early 2027. Accordingly, management has concluded that substantial doubt exists regarding our ability to continue as a going concern.
We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, nonclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are generally cancellable by us after giving a certain amount of notice. Payments due upon cancellation consist only of payments for services provided and expenses incurred up to the date of cancellation.
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Cash Flows
The following table summarizes our sources and uses of cash (in thousands):
Six Months Ended June 30,
2026 2025
Net cash used in operating activities $ (42,203) $ (65,953)
Net cash provided by investing activities 12,193 67,172
Net cash provided by (used in) financing activities 35,464 (36)
Net change in cash and cash equivalents and restricted cash $ 5,454 $ 1,183
Operating Activities
The decrease in net cash used in operations of $23.8 million to $42.2 million for the six months ended June 30, 2026, from $66.0 million for the six months ended June 30, 2025, is primarily attributable to a decrease in net loss for the six months ended June 30, 2026 of $16.3 million, an increase in noncash adjustments of $0.4 million and working capital changes of $7.1 million. Significant noncash items consisted of a decrease in noncash income for amortization and accretion on marketable securities of $0.5 million and the change in fair value of embedded derivatives of $0.2 million. Working capital changes contributed $7.1 million to the reduction in cash used in operations, including a decrease in cash used for accounts payable of $16.4 million, which was partially offset by an increase in cash used for accrued expenses and other liabilities of $7.5 million, a decrease in cash provided by prepaid expenses and other current assets of $1.6 million and an increase in cash used for accrued clinical trial expenses of $0.1 million.
Investing Activities
Net cash provided by investing activities decreased by $55.0 million to $12.2 million for the six months ended June 30, 2026 from $67.2 million for the six months ended June 30, 2025. This decrease was primarily due to a decrease in proceeds from maturities and sales of marketable securities of $52.3 million and an increase in purchases of marketable securities of $2.8 million, partially offset by a $0.1 million decrease in purchases of property and equipment.
Financing Activities
Net cash provided by financing activities during the six months ended June 30, 2026 increased to $35.5 million from net cash used in financing activities of less than $0.1 million during the six months ended June 30, 2025. Cash provided by financing activities during the six months ended June 30, 2026 was primarily due to net proceeds of $35.4 million from the issuance of common stock in connection with the Private Placement and an increase of $0.1 million from the exercise of stock options, which were partially offset by an increase of $0.1 million paid for employee withholding taxes resulting from the repurchase of common shares following the vesting of RSUs.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, conduct clinical trials and seek marketing approval for our current and any of our future product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company. It is likely that we will seek third-party collaborators for the future commercialization of sabirnetug or any other product candidate that is approved for marketing. Should we seek to commercialize our products at our own expense, we would incur significant additional expenses for marketing, sales, manufacturing and distribution, which costs we may seek to offset through entry into collaboration agreements with third parties. As a result, we expect that we will need to obtain substantial additional funding in connection with our future operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
Based on our current operating plan, we believe there is substantial doubt about our ability to continue as a going concern for at least 12 months following the date of issuance of our unaudited condensed financial statements included in this Quarterly Report on Form 10-Q. We could exhaust our available capital resources sooner than we expect, including if we decide to initiate other clinical trials or programs. In addition, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected
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because of circumstances beyond our control. We may need to raise additional funds sooner than anticipated if we choose to expand more rapidly than we presently anticipate.
The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to:
• the progress, costs, timing and results of ALTITUDE-AD and other potential clinical trials of sabirnetug, including for potential additional indications that we may pursue beyond AD;
• the requirements of the U.S. Food and Drug Administration, or the FDA, and European Medicines Agency, or EMA, and comparable foreign regulatory authorities, for clinical trials and nonclinical studies and other work, for review and approval of sabirnetug for AD;
• the outcome, costs and timing of seeking and obtaining FDA, EMA and any other regulatory approvals;
• our progress and success in investigating EBD therapy for AD;
• the number and characteristics of product candidates that we pursue;
• our ability to obtain sufficient quantities of our product candidates from our third-party manufacturers;
• our need to expand our research and development activities;
• the costs associated with securing and establishing commercialization capabilities if we were to elect to commercialize one or more products on our own;
• the economics and other terms, timing of and success of any collaboration, licensing or other arrangements into which we may enter for the commercialization of our products;
• the costs and other terms, timing and success, of acquiring, in-licensing or investing in businesses, product candidates and technologies;
• our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
• our need and ability to retain management and hire scientific and clinical personnel;
• the effect of competing drugs and product candidates and other market developments; and
• our need to implement additional internal systems and infrastructure, including financial and reporting systems.
Additional funding may not be available to us on acceptable terms or at all. Any such funding may result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. We also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us. Any funds we raise may not be sufficient to enable us to continue to implement our long-term business strategy. Further, our ability to raise additional capital may be adversely impacted by global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide, as well as tariff policy and geopolitical tensions between the United States and foreign countries. Additionally, escalation in interest rates may lead financial institutions to become more selective with capital deployment and to tighten lending practices. If we are unable to raise sufficient additional capital on a timely basis, we could be forced to curtail our planned operations and the pursuit of our business strategy, which would have a material adverse effect on the value of our common stock.
Critical Accounting Policies, Significant Judgments and Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles, or U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses incurred during the reporting periods. Our estimates and assumptions are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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A description of our significant accounting policies is included in our Annual Report on Form 10-K. Please read the unaudited condensed financial statements and notes included in this Quarterly Report on Form 10-Q in conjunction with our audited financial statements and accompanying notes in our Annual Report on Form 10-K.
Our critical accounting policies that require significant judgments and estimates are more fully described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies, Significant Judgments and Use of Estimates” in our Annual Report and in Note 2 to our audited financial statements contained in our Annual Report. There have been no significant changes to our critical accounting policies that require significant judgments and estimates from those disclosed in our Annual Report.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We 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.
In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
• an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;
• reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements;
• exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and
• an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on financial statements.
We may take advantage of these provisions until we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i) December 31, 2026, (ii) the last day of the fiscal year in which we have more than $1.235 billion in total annual gross revenues, (iii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th or (iv) the date on which we have issued more than $1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting requirements in this Quarterly Report on Form 10-Q and our other filings with the SEC. Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests.
We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable to a smaller reporting company.
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