Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion and other parts of this Annual Report on Form 10-K contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included elsewhere in this Annual Report on Form 10-K.
Overview
We are a clinical stage biotechnology company discovering and developing allogeneic gamma delta T cell therapies for autoimmune diseases and cancer. We are advancing a pipeline of “off-the-shelf” gamma delta T cells, engineered with chimeric antigen receptors (CARs), to facilitate durable activity in patients.
Our approach to activate, engineer and manufacture allogeneic gamma delta T cell product candidates derived from the peripheral blood cells of unrelated donors allows us to generate new product candidates in a rapid and cost-efficient manner. Our allogeneic "off-the-shelf" manufacturing process is designed to allow product from unrelated donors to be stored and sold on demand to treat patients without inducing a graft versus host immune response. This is in contrast to products based on alpha beta T cells, which either must be manufactured for each patient from his or her own T cells, or require significant gene editing to manufacture if the T cells are derived from donors that are unrelated to the patient.
Our lead product candidate, prula-cel, a first-in-class allogeneic gamma delta T cell therapy expressing a CAR targeting CD20, is being developed for the potential treatment of autoimmune diseases. We are also pursuing ADI-212, a next-generation gene-edited and armored clinical candidate designed to target prostate-specific membrane antigen (PSMA). ADI-212 is engineered to express a novel CAR binder designed to support enhanced tolerability and tumor-specific recognition. It integrates membrane-tethered IL-12 armoring and CRISPR/Cas9 mediated disruption of subunit 12 of the mediator complex (MED12) to enhance potency in solid tumors and to deliver multiple anti-tumor mechanisms of action to the tumor microenvironment. We aim to submit a new regulatory submission, such as an Investigational New Drug (IND) application or equivalent every 12-18 months.
Prula-cel
In December 2023, the U.S. Food and Drug Administration (FDA) cleared our IND application for prula-cel in lupus nephritis (LN). In August 2024, we expanded our prula-cel autoimmune clinical development program to include systemic lupus erythematosus (SLE), systemic sclerosis (SSc) and anti-neutrophil cytoplasmic autoantibody associated vasculitis (AAV). In September 2024, we activated sites for our Phase 1 clinical trial of prula-cel in autoimmune diseases and opened enrollment for patients with LN. In October 2024, we received clearance for our IND amendment to evaluate prula-cel in idiopathic inflammatory myopathies (IIM) and stiff person syndrome (SPS) as part of our Phase 1 clinical trial in autoimmune diseases. We believe the favorable safety profile, cellular kinetics and B cell depletion in peripheral blood and secondary lymphoid tissue demonstrated with prula-cel clinical experience to date is favorable for development in autoimmune diseases. We believe the potential market opportunity for prula-cel in B cell mediated autoimmune diseases is substantial based on the prevalence in the U.S., EU5, China and Japan of greater than 1.7 million patients with autoimmune diseases where CAR-T cell therapy has demonstrated clinical proof-of-concept, including SLE (which includes LN), SSc, IIM and SPS. In June 2024, the FDA granted Fast Track Designation to prula-cel for the potential treatment of relapsed/refractory class III or class IV LN. In February 2025, the FDA granted Fast Track Designation to prula-cel for the potential treatment of adult patients with refractory SLE with extrarenal involvement and for SSc. In April 2025, we expanded enrollment to include patients with SLE for our Phase 1 clinical trial evaluating prula-cel in autoimmune diseases and in July 2025, we reported that the first SSc patient has been dosed in the second cohort of the Phase 1 clinical trial. In October 2025, we announced positive preliminary results from seven SLE and LN patients dosed in our ongoing Phase 1 trial of prula-cel in autoimmune diseases as of the August 31, 2025 data cut-off date. We plan to meet with the FDA in the second quarter of 2026 to inform potential pivotal trial design. Subject to regulatory clearance to proceed, we expect to initiate a potential pivotal study in LN or LN and SLE patients in the second half of 2026. In November 2025, we reached alignment with the FDA to allow LN and SLE patients to be dosed with prula-cel in the outpatient setting in ongoing and future clinical trials. Phase 1 enrollment is ongoing and we expect to provide a clinical update for this trial in LN, SLE and SSc patients in the first half of 2026, with a plan to provide an additional update in the second half of 2026. We also reported in October 2025 that the first patient was dosed in a Phase 1 clinical trial of prula-cel in patients with treatment-refractory rheumatoid arthritis (RA). The study will evaluate two conditioning regimens:
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cyclophosphamide alone and cyclophosphamide with fludarabine, to explore the potential to reduce the need for conditioning. The next clinical update on this trial is expected in the second half of 2026.
ADI-212
We are advancing ADI-212, a next-generation gene-edited and armored clinical candidate designed to target prostate-specific membrane antigen. ADI-212 is engineered to express a novel CAR binder designed to support enhanced tolerability and tumor-specific recognition. It integrates membrane-tethered IL-12 (mbIL-12) armoring and CRISPR/Cas9 mediated disruption of subunit 12 of the mediator complex (MED12) to enhance potency in solid tumors and deliver multiple anti-tumor mechanisms of action within the tumor microenvironment. We expect to submit a regulatory filing for ADI-212 for the treatment of metastatic castration-resistant prostate cancer (mCRPC) in the third quarter of 2026. Subject to regulatory clearance to proceed with a clinical trial, we expect to initiate patient enrollment in the fourth quarter of 2026. We believe the potential market opportunity for ADI-212 in mCRPC is significant based on the prevalence in the U.S., EU5, China and Japan of approximately 75,000 patients with second or third line advanced disease.
ADI-270
Due to the prioritization of prula-cel in autoimmune indications and ADI-212 in mCRPC, we have discontinued the development of ADI-270 and closed enrollment in the Phase 1 clinical trial in patients with metastatic/advanced clear renal cell carcinoma.
Recent Developments
Reverse Stock Split
On December 30, 2025, our 1-for-16 reverse stock split (Reverse Stock Split) was effective following approval by our stockholders at our special meeting in December 2025. As a result, every 16 shares of our issued common stock were combined into one share of our common stock. No fractional shares of our common stock were issued as a result of the Reverse Stock Split. Stockholders who would otherwise be entitled to receive fractional shares were automatically entitled to receive cash in lieu of such fractional share. The shares of our common stock retained a par value of $0.0001 per share. Trading of the common stock on the Nasdaq Capital Market commenced on a split-adjusted basis at market open on December 30, 2025, under the existing trading symbol “ACET.”
Financial Operations Overview
Revenue
We have no products approved for commercial sale and do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for our product candidates, which we expect will not be for at least several years, if ever.
Expenses
Research and Development
Research and development expenses, which consist primarily of costs incurred in connection with the development of our product candidates, are expensed as incurred. Research and development expenses consist primarily of:
• employee related costs, including salaries, benefits and stock-based compensation expenses for research and development employees;
• costs incurred under agreements with consultants, contract development and manufacturing organizations (CDMOs) and contract research organizations (CROs);
• lab materials, supplies and maintenance of equipment used for research and development activities; and
• allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support services.
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We allocate our external costs by product candidate. We do not allocate our internal costs by product candidate as a significant amount of internal research and development expenses are not tracked by product candidate, and we believe the allocation of such costs would be arbitrary and would not provide a meaningful assessment as we have used our employee and infrastructure resources across multiple product candidate research and development programs.
We are focusing substantially all of our resources on the development of our product candidates. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
• the scope, rate of progress and expense of clinical trials and other research and development activities;
• clinical trial results;
• uncertainties in clinical trial enrollment rate or design;
• significant and changing government regulation;
• the timing and receipt of any regulatory approvals;
• the FDA’s or other regulatory authority’s influence on clinical trial design;
• establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
• expenses incurred in connection with our license and collaboration agreements, including license payments, program expenses and milestone obligations payable by us;
• commercializing product candidates, if and when approved, whether alone or in collaboration with others;
• obtaining and maintaining patent and trade secret protection and regulatory exclusivity for product candidates;
• continued applicable safety profiles of the products following approval; and
• retention of key research and development personnel.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.
Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to other rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.
General and Administrative
General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock based compensation expenses, professional fees for legal, consulting, accounting and tax services,
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allocated overhead expenses, including rent, equipment, depreciation, information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.
We anticipate that our general and administrative expenses will increase for the foreseeable future due to expenses related to operating as a public company, including expenses related to personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable Nasdaq and SEC requirements, investor relations costs and director and officer insurance premiums.
Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents, restricted cash and short-term investments in treasury securities.
Interest Expense
Interest expense consists primarily of interest on finance lease liabilities.
Other Expense, Net
Other expense, net primarily consists of state franchise and capital taxes not related to income and losses on disposal of fixed assets.
Results of Operations
Comparison of the Years Ended December 31, 2025 and 2024
The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):
Twelve Months Ended December 31,
2025
2024
Change
% Change
Operating expenses
Research and development
$
99,127
$
99,323
$
(196
)
(0
%)
General and administrative
22,987
28,292
(5,305
)
(19
%)
Total operating expenses
122,114
127,615
(5,501
)
(4
%)
Loss from operations
(122,114
)
(127,615
)
(5,501
)
(4
%)
Interest income
5,777
10,714
(4,937
)
(46
%)
Interest expense
(36
)
(4
)
32
800
%
Other expense, net
(430
)
(217
)
213
98
%
Loss before income tax benefit
(116,803
)
(117,122
)
(319
)
(0
%)
Income tax provision
—
—
—
0
%
Net loss
$
(116,803
)
$
(117,122
)
$
(319
)
(0
%)
Research and Development
Twelve Months Ended December 31,
2025
2024
Payroll and personnel expenses(1)
$
37,564
$
42,693
Costs incurred under agreements with consultants, CDMOs, and CROs
27,832
22,269
Lab materials, supplies and maintenance of equipment
used for research and development activities
10,940
11,670
Other research and development expenses(2)
22,791
22,691
Total research and development expenses
$
99,127
$
99,323
(1) Employee related costs, including salaries, benefits, bonuses, and stock-based compensation expenses for research and development employees.
(2) Allocated facility-related costs, such as rent, utilities, insurance, repairs and maintenance, depreciation and amortization, information technology costs and general support services.
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Research and development expenses decreased by $0.2 million, or less than 1%, during the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in research and development expenses was primarily due to a $5.1 million decrease in payroll and personnel expenses related to lower headcount and a $0.7 million decrease in lab supplies and materials. This decrease was partially offset by a net $5.6 million increase in contracted research and development costs primarily related to CRO costs associated with autoimmune studies.
General and Administrative
General and administrative expenses decreased by $5.3 million, or 19%, during the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease in general and administrative expenses was primarily due to a decrease in payroll and personnel expenses primarily related to a decrease in stock-based compensation of $3.6 million, a decrease in recruiting and employee travel expenses of $0.3 million, decreases in rent, office related expenses and allocated facility expense of $1.5 million and a decrease of $0.2 million related to corporate insurance and property taxes. This decrease was partially offset by a $0.3 million increase in professional fees.
Interest Income
Interest income decreased by $4.9 million, or 46%, during the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to lower interest rates and lower cash balances for the period.
Other Expense, Net
Other expense, net increased by $0.2 million, or 98%, during the year ended December 31, 2025 compared to the year ended December 31, 2024. This was primarily due to a loss on disposal of assets related to furniture and equipment located in 1200 Bridge Parkway, due to expiration of lease in June 2025.
Income Tax Benefit
There was no income tax expense or benefit for the years ended December 31, 2025 and 2024.
Liquidity and Capital Resources
Sources of Liquidity
We have historically funded our operations primarily through a collaboration and licensing arrangement, public and private placements of equity securities and debt, and cash received in our merger with resTORbio, Inc.
In January 2024, we raised aggregate net proceeds of approximately $19.3 million through the JonesTrading ATM Program. In March 2024, we terminated the JonesTrading ATM Program and entered into the Jefferies ATM Program. As of December 31, 2025, no shares of common stock have been sold through the Jefferies ATM Program.
On January 22, 2024, we entered into an underwriting agreement (the Underwriting Agreement) with Jefferies LLC (Jefferies) and Guggenheim Securities, LLC, as representatives of the underwriters (the Underwriters), related to an underwritten public offering (the Offering) of 2,023,729 shares of our common stock, which included 332,813 shares sold and issued upon the exercise in full by the Underwriters of their option to purchase additional shares of common stock, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 527,833 shares of common stock. The shares of common stock were sold at a public offering price of $38.40 per share and the pre-funded warrants were sold at a public offering price of $38.3984 per pre-funded warrant, which represents the per share public offering price of each share of common stock minus the $0.0016 per share exercise price for each pre-funded warrant. The purchase price paid by the Underwriters to us was $36.096 per share and $36.0944 per pre-funded warrant, representing a discount to the Underwriters of 6.0%. We received net proceeds from the Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $91.7 million. We may receive nominal proceeds, if any, from the exercise of the pre-funded warrants.
On October 7, 2025, we entered into an underwriting agreement related to an underwritten registered direct offering (the 2025 Offering) of 4,375,062 shares (the 2025 Shares) of Common Stock, and, in lieu of Common Stock to an investor, pre-funded warrants (the 2025 Pre-Funded Warrants) to purchase 625,000 shares of Common Stock (the 2025 Warrant Shares). The 2025 Shares were sold at a price of $16.00 per share and the 2025 Pre-Funded Warrants were sold at a price of $15.9984 per underlying share, which represents the per share offering price of each share of common stock minus the $0.0016 per share exercise price for each pre-funded warrant. The purchase price paid by the Underwriters to us was $15.04 per 2025 Share and $15.03856 per 2025 Pre-Funded Warrant, representing a discount to the Underwriters of 6.0%. We received net proceeds from the 2025 Offering, after deducting the underwriting discount and commissions and other estimated offering expenses, of approximately $74.8 million. We may receive nominal proceeds, if any, from the exercise of the 2025 Pre-Funded Warrants.
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As of December 31, 2025, we had cash, cash equivalents and short-term investments of $158.5 million and restricted cash of $2.9 million. We expect that our cash, cash equivalents and short-term investments will be sufficient to fund our forecasted operating expenses, capital expenditure requirements and debt service payments for at least the next twelve months from the issuance of the consolidated financial statements included in this Annual Report on Form 10-K.
Loan Agreement
On April 28, 2020, we entered into a Loan and Security Agreement (the Loan Agreement) with Banc of California (formerly known as Pacific Western Bank) to finance leasehold improvements for our facilities in Redwood City, CA and other purposes permitted under the Loan Agreement. On October 21, 2021, we amended the Loan Agreement (as amended, the 2021 Loan Amendment) under which Banc of California will provide one or more Term Loans (as defined in the 2021 Loan Amendment), as well as certain Non-Formula Ancillary Services which shall not exceed $5.5 million in the aggregate. Non-Formula Ancillary Services are defined as automated clearinghouse transactions, corporate credit card services, letters of credit, or other treasury management services. Per the terms of the Loan Agreement, the aggregate sum of the outstanding Term Loans and Non-Formula Ancillary Services shall at no time exceed $15.0 million, which each Term Loan to be in an amount of not less than $1.0 million. Pursuant to the 2021 Loan Amendment, the interest rate for the Term Loans shall be set at an annual rate equal to the greater of (i) 0.25% above the Prime Rate then in effect and (ii) 4.25%.
On December 2, 2022, we further amended the Loan Agreement (the 2022 Loan Amendment). The 2022 Loan Amendment extended the drawdown period for any Term Loan by one year, which expired on April 19, 2024. Furthermore, the 2022 Loan Amendment extended the final maturity date of any Term Loan by one year from October 19, 2025 to October 19, 2026, and the maturity date of non-formula ancillary services to November 30, 2023.
On May 30, 2023, we entered into the 2023 Loan Amendment. Pursuant to the 2023 Loan Amendment, we must maintain the lesser of (i) $35.0 million or (ii) all of our combined balances in demand deposit accounts, money market accounts, and/or insured cash sweep accounts with Banc of California. If our total cash and investments drop to less than $35.0 million, the 2023 Loan Amendment permits us to maintain cash and/or investments in one or more accounts outside of Banc of California up to a total of $2.5 million.
In April 2024, the Term Loan availability under our Loan Agreement expired. The Non-Formula Ancillary Services, which shall not exceed $5.5 million in the aggregate, remained available. On November 27, 2024, we executed a payoff letter (the Payoff Letter) with Banc of California to repay in full all outstanding indebtedness and terminate all commitments and obligations, subject to certain exceptions, under the Loan Agreement. Under the Payoff Letter, we agreed to pay Banc of California approximately $10,000 in administrative fees and establish cash collateral accounts and execute pledge and security agreements to secure ancillary services provided by Banc of California. We paid the $10,000 administrative fees in December 2024. As of December 31, 2025, we have $2.9 million of restricted cash held in cash collateral accounts. No termination penalty was paid in connection with the Payoff Letter.
Future Funding Requirements
We have incurred losses since inception and have incurred losses of $116.8 million and $117.1 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $614.7 million.
As of December 31, 2025, we had cash, cash equivalents, and short-term investments of $158.5 million. We believe that our cash, cash equivalents and short-term investments will be sufficient for us to fund our operations for at least twelve months from the issuance date of our consolidated financial statements for the year ended December 31, 2025 included elsewhere in this Annual Report on Form 10-K. We have based these estimates on assumptions that may prove to be wrong, and we could deplete our available capital resources sooner than we expect. Because of the risks and uncertainties associated with research, development, and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.
All of our revenue to date has been generated from the Regeneron Agreement, which is a collaboration and license agreement. We do not expect to generate any significant product revenue until we obtain regulatory approval of and commercialize any of our product candidates or enter into additional collaborative agreements with third parties, and we do not know when, or if, either will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates and begin to commercialize any approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
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We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. We may seek to raise capital through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including:
• the scope, timing, rate of progress and costs of our drug discovery efforts, preclinical development activities, laboratory testing and clinical trials for our product candidates;
• the timing, number and scope of clinical programs we decide to pursue;
• the cost, timing and outcome of preparing for and undergoing regulatory review of our product candidates;
• the scope and costs of development and commercial manufacturing activities;
• the cost and timing associated with commercializing our product candidates, if they receive marketing approval;
• the extent to which we acquire or in-license other product candidates and technologies;
• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
• our ability to establish and maintain collaborations on favorable terms, if at all;
• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our product candidates and, ultimately, the sale of our products, following FDA approval;
• our implementation of operational, financial and management systems;
• the impact of potential health emergencies on United States and global economic conditions that may impact our ability to access capital on terms anticipated, or at all; and
• the post-merger costs associated with being a public company.
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. Adequate funding may not be available to us on acceptable terms or at all.
Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to other rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition.
See the section of this Annual Report on Form 10-K entitled “ Risk Factors ” for additional risks associated with our substantial capital requirements.
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Summary Statement of Cash Flows
The following table sets forth the primary sources and uses of our cash and cash equivalents for each of the periods presented below (in thousands):
Twelve Months Ended December 31,
2025
2024
Net cash provided by (used in):
Operating activities
$
(95,246
)
$
(92,378
)
Investing activities
2,393
(119,242
)
Financing activities
75,245
111,307
Net decrease in cash, cash equivalents and restricted cash
$
(17,608
)
$
(100,313
)
Cash Flows from Operating Activities
Net cash used in operating activities was $94.6 million for the year ended December 31, 2025. Cash used in operating activities consisted of net loss offset by non-cash adjustments of $20.1 million and a net increase in operating assets and liabilities of $1.5 million. Non-cash items primarily included stock-based compensation expense of $14.3 million, depreciation and amortization of $6.4 million and non-cash lease expense of $3.4 million. The net increase in assets and liabilities was primarily due to an increase of $1.9 million in accrued and other current and non-current liabilities, an increase of $1.7 million in prepaid expenses and other current assets, an increase in accounts payable of $1.0 million and an increase of $0.3 million in other non-current assets. The increase was partially offset by a decrease of $3.4 million in operating lease liability.
Net cash used in operating activities was $92.4 million for the year ended December 31, 2024. Cash used in operating activities consisted of net loss offset by non-cash adjustments of $30.3 million and a net decrease in operating assets and liabilities of $5.5 million. Non-cash items primarily included stock-based compensation expense of $22.2 million, depreciation and amortization of $6.5 million and non-cash lease expense of $3.2 million. The net decrease in assets and liabilities was primarily due to a decrease of $3.7 million in operating lease liability, a decrease of $2.0 million in accrued expenses and other current and non-current liabilities, and a decrease of $1.3 million in prepaid expenses and other current assets. The decrease was partially offset by an increase in accounts payable of $1.1 million and an increase in other non-current assets of $0.4 million.
Cash Flows from Investing Activities
Net cash provided by investing activities was $2.4 million for the year ended December 31, 2025, which consisted of $145.0 million related to maturities of short-term treasury securities, net of $140.9 million of purchases of short-term treasury securities and $1.7 million of purchases of lab equipment for our GMP cell processing suite at 1000 Bridge Parkway.
Net cash used in investing activities was $119.2 million for the year ended December 31, 2024, which consisted of $129.1 million of purchases of short-term treasury securities and $1.1 million of purchases of lab equipment for our GMP cell processing suite at 1000 Bridge Parkway. We received $11.0 million related to the maturities of short-term treasury securities.
Cash Flows from Financing Activities
Net cash provided by financing activities was $75.2 million for the year ended December 31, 2025, which included approximately $75.2 million in net proceeds from the issuance of our common stock and pre-funded warrants in the 2025 Offering and $0.3 million in net proceeds from the issuance of common stock in connection with our employee stock purchase plan. This was partially offset by $0.1 million cash paid for taxes withheld on the net share settlement of equity awards and $0.2 million cash paid for the principal payment on finance leases.
Net cash provided by financing activities was $111.3 million for the year ended December 31, 2024, which included approximately $91.7 million in net proceeds from the issuance of our common stock and pre-funded warrants in the Offering and approximately $19.3 million in net proceeds from the issuance of our common stock under the JonesTrading ATM Program.
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting practices (GAAP). The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
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liabilities, revenues and expenses, and disclosure of contingent assets and liabilities in our consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results. While our significant accounting policies are more fully described in the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies to be the most critical in understanding the judgments and estimates we use in preparing our consolidated financial statements:
Accrued CDMO, CRO, and Research and Development Expenses
We have entered into various agreements with CDMOs and CROs. Our research and development accruals are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued and other current liabilities on the consolidated balance sheet. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments made to CDMOs and CROs under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets on the consolidated balance sheets until the services are rendered. To date, our estimated accruals have not differed materially from the actual costs.
Stock-Based Compensation
We use a fair value-based method to account for all stock-based compensation arrangements with employees and non-employees, including stock options and restricted stock awards. Our determination of the fair value of stock options on the date of grant utilizes the Black-Scholes option pricing model. The fair value of the option granted is recognized on a straight-line basis over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period, which usually is the vesting period. For awards that have a performance condition, we recognize compensation expense based on its assessment of the probability that the performance condition will be achieved, using an accelerated attribution model, over the explicit or implicit service period. We account for forfeitures as they occur. In determining fair value of the stock options granted, we use the Black–Scholes option-pricing model, which requires the input of subjective assumptions, including but not limited to, expected term, volatility and risk-free interest rates. Changes in these assumptions can materially affect the estimate of the fair value of stock-based compensation:
Smaller Reporting Company
We are a “smaller reporting company” as defined in the Exchange Act. As a smaller reporting company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not smaller reporting companies. These provisions include (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act of 2002, as amended; (ii) scaled executive compensation disclosures; and (iii) the option to provide only two years of audited financial statements, instead of three years.
We will continue to be a smaller reporting company for as long as we continue to have (i) less than $250 million in market value of our shares held by non-affiliates as of the last business day of our second fiscal quarter or (ii) less than $100 million of annual revenues in our most recent fiscal year completed before the last business day of our second fiscal quarter and a market value of our shares held by non-affiliates of less than $700 million as of the last business day of our second fiscal quarter.
We may choose to take advantage of some but not all of these exemptions. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock. We have elected to avail ourselves of the exemption for the delayed adoption of certain accounting standards and, therefore, are not subject to the same new or revised accounting standards as other public companies that are not smaller reporting companies.
Recently Issued and Adopted Accounting Pronouncements
See the section entitled “ Summary of Significant Accounting Policies ” in Note 2 to our financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk.
Interest Rate Risk
As of December 31, 2025, we had cash, cash equivalents and short-term investments of $158.5 million, which consisted of cash and funds invested in treasury securities and money market funds. Interest income is sensitive to general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material impact on our cash and cash equivalents, financial position, or results of operations.
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Foreign Currency Exchange Risk
Our headquarters are located in the United States, where a majority of our general and administrative expenses and research and development costs are incurred in U.S. Dollars. As we grow our business, our results of operations and cash flows may be subject to fluctuations due to foreign currency exchange rates. To date, we do not believe foreign currency exchange rate fluctuations have had a significant impact on our results of operations for any periods presented herein.
Inflation Risk
Our assets are primarily monetary, consisting of cash, cash equivalents, restricted cash and short-term investments in treasury securities. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. Inflation generally affects us by increasing our cost of labor, clinical trial and manufacturing costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2025 and 2024.
Item 8. Financial Statemen ts and Supplementary Data.
All financial statements and supplementary data required to be filed hereunder are filed as listed under Item 15(a) of this Annual Report on Form 10-K and are incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.
None.