What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 105 added, 97 removed, 298 unchanged (40% of the section changed)

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Proteome and transcriptome lesional skin tap strip analyses showed significant ATI-2138-dependent reduction of multiple inflammatory pathways associated with ITK, including strong downregulation of Th2, Th17, and T cell receptor (“TCR”) pathways, along with the Th1 pathway and fibrosis-related markers.

We intend to further develop ATI-2138 in alopecia areata and are exploring the potential of ATI-2138 in additional indications that are relevant to the mechanism of action, including vitiligo.

We are exploring the potential of ATI-2138 in additional indications that are relevant to the mechanism of action, including lichen planus, scarring alopecias, and alopecia areata.

We plan to initiate a Phase 2 trial in the additional indication in the first half of 2026.

ATI-052, an Investigational, Novel Anti-TSLP and Anti-IL-4R Bispecific Antibody

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ATI-052 utilizes the same TSLP antigen-binding fragment (“Fab”) as bosakitug but is engineered to bind more tightly to the neonatal Fc receptor (“FcRn”), potentially extending its half-life.

In addition, the AQQ mutation in the Fc limits effector functionality, reducing off-target binding and potential toxicity.

ATI-052 has the potential to treat a variety of atopic, immunologic and respiratory diseases.

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Food and Drug Administration (“FDA”) in April 2025, and in June 2025, we initiated a Phase 1a/1b program.

The randomized, blinded, placebo-controlled Phase 1a portion is designed to evaluate the safety, tolerability, PK and PD of ATI-052 in healthy

volunteers receiving single ascending doses (“SAD”) and multiple ascending doses (“MAD”).

The Phase 1b proof-of-concept assessment in up to two undisclosed indications is expected to follow the Phase 1a SAD/MAD portion of the program.

We expect to announce top-line results from the Phase 1a SAD/MAD portion in early 2026, followed by the top-line results from the Phase 1b portion in the second half of 2026.

The randomized, blinded, placebo-controlled Phase 1a portion is designed to evaluate the safety, tolerability, PK and PD of ATI-052 in healthy volunteers receiving single ascending doses (“SAD”) and multiple ascending doses (“MAD”).

We expect to announce top-line results from the Phase 1a SAD/MAD portion in early 2026.

We plan to initiate Phase 1b proof-of-concept trials in asthma (subject to IND submission and clearance) and atopic dermatitis in the first half of 2026, with top-line results from both trials expected in the second half of 2026.

Next-Generation ITK Inhibitors

We are developing next-generation covalent ITK selective inhibitors with differentiated pharmacological properties and selectivity profiles.

These JAK3-sparing inhibitors have the potential to differentially modulate T cell biology across a broad range of disease indications with extended half-lives and best-in-class potential potency, ITK occupancy, and ITK activation.

We are progressing to lead candidate selection and expect to file an IND application for a next-generation ITK inhibitor in the second half of 2026.

Discovery and Preclinical Programs

We conduct small molecule drug discovery through KINect, our proprietary drug discovery platform.

We also engage in discovery efforts for novel, injectable, multi-specific antibodies.

Through our integrated discovery approach, we can progress product candidates from concept through lead optimization, employing robust screening cascades and protein characterization techniques to identify molecules with desired therapeutic properties.

Our KINect platform allows us to address challenges associated with difficult to drug kinases including selectivity and biochemical efficiency, through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approaches to inhibitor modalities, our expertise in structure-based drug design, and our custom kinase assays.

Our approach involves the following mechanisms:

(1) reversible and irreversible covalent inhibitors, (2) molecular glue/complex targeted inhibitors, (3) tissue specific inhibitors, and (4) targeted protein degraders.

These novel approaches are currently being utilized to prosecute additional validated, difficult to drug kinase targets with the goal of demonstrating broad target utility.

Our small molecule discovery efforts center on targeting kinases that play pivotal roles in various inflammatory and autoimmune pathways.

Our discovery efforts to develop multi-specific antibodies are focused on generating antibodies with superior target affinity, specificity, and potency utilizing combinations of (a) two or more clinically validated targets with non-overlapping biology, (b) clinically validated targets with novel biology, and/or (c) synergistic target combinations in an effort to address shortcomings of multi-drug administration.

This complementary approach to our small molecule programs enables us to pursue optimal therapeutic modalities for each target and indication of interest.

For example, we are progressing several bispecific antibodies utilizing the bosakitug anti-TSLP binding region paired with binding fragments targeting other undisclosed cytokine signaling pathways.

We intend to evaluate both internal and external development options, including strategic partnerships, for these assets.

Other Investigational Product Candidates

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“Soft” JAK inhibitors are designed to be topically applied and active in the skin, but rapidly metabolized and inactivated when they enter the bloodstream, which may result in low systemic exposure.

In January 2024, we announced positive top-line results from our Phase 2b multicenter, randomized, double-blind, vehicle-controlled, parallel-group trial of lepzacitinib in patients with mild to severe atopic dermatitis.

The trial was designed to evaluate the efficacy, safety, tolerability and PK of multiple concentrations (0.5%, 1% and 2%) of twice daily (“BID”) treatment with lepzacitinib and a single concentration (2%) of once daily (“QD”) treatment with lepzacitinib.

The trial randomized 250 patients with mild, moderate or severe atopic dermatitis, including adults and children as young as 12 years old, across 30 clinical trial sites in the United States.

The trial met the primary efficacy endpoint, the percent change from baseline in EASI score at week 4, with statistical significance for patients treated with lepzacitinib 2% BID compared to patients treated with vehicle (69.7% versus 58.7% in the pooled vehicle group, p=0.035).

In addition, a PK analysis showed minimal levels of exposure to lepzacitinib.

The mean steady state trough drug levels at week 4 were 0.319 ng/mL, representing 0.7% of IC50 for JAK 1/3 inhibition in whole blood.

In total, 97% of lepzacitinib plasma samples from dosed patients had concentrations below 1/10th of the IC50, and six samples (from five lepzacitinib treated patients) of 764 samples analyzed had concentrations above 1/4 of the IC50.

No meaningful safety findings were observed and lepzacitinib was well tolerated.

We are currently seeking a global development and commercialization partner for this program (excluding Greater China).

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(“Pediatrix”) exclusive rights to develop and commercialize lepzacitinib in Greater China.

Zunsemetinib, an Investigational Oral MK2 Inhibitor

Zunsemetinib (ATI-450) is an investigational oral, novel, small molecule selective inhibitor of the mitogen-activated protein kinase-activated protein kinase 2 (“MK2”) signaling pathway for the potential treatment of metastatic breast cancer (“MBC”) and pancreatic ductal adenocarcinoma (“PDAC”).

We are supporting Washington University in St.

Louis in its investigator-initiated Phase 1b/2 trials of zunsemetinib in patients with MBC and PDAC.

We expect these trials to be primarily funded by grants awarded to Washington University.

Discovery Programs and KINect Drug Discovery Platform

We conduct small molecule drug discovery and preclinical development research through KINect, our proprietary drug discovery platform, which we acquired as part of our acquisition of Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.) (“Confluence”), in 2017.

Our KINect platform enables us to identify potential small molecule product candidates through a unique combination of our proprietary chemical library of kinase inhibitors, our novel approaches to inhibitor modalities, our expertise in structure-based drug design, and our custom kinase assays.

Our focus has been on difficult to drug kinase targets that exhibit some level of clinical, genetic and/or pharmacological disease validation.

Our approach involves the following mechanisms:

(1) reversible and irreversible covalent inhibitors, (2) molecular glue/complex targeted inhibitors and (3) targeted protein degraders.

approaches are currently being utilized to prosecute additional validated, difficult to drug kinase targets with the goal of demonstrating potential platform utility.

We are actively progressing several discovery programs focused on delivering the next wave of small and large molecule product candidates.

Our small molecule discovery efforts center on targeting kinases that play pivotal roles in various inflammatory, autoimmune, and oncology pathways.

For example, we are progressing to development candidate selection a second generation ITK selective inhibitor designed to eliminate crossover on JAK3 for autoimmune indications.

In addition to our small molecule discovery efforts, we maintain capabilities in biologics discovery to complement our therapeutic portfolio.

Through our integrated discovery platform, we can progress biologics candidates from concept through lead optimization, employing robust screening cascades and protein characterization techniques to identify molecules with desired therapeutic properties.

This complementary approach to our small molecule programs enables us to pursue optimal therapeutic modalities for each target and indication of interest.

For example, we are conducting pre-clinical research to develop next-generation bispecific antibodies utilizing the bosakitug anti-TSLP binding region paired with binding fragments targeting other undisclosed cytokine signaling pathways.

We intend to evaluate both internal and external development options, including strategic partnerships, for these assets.

Financial Overview

Since our inception, we have incurred significant net losses.

Our net loss was 30.5 million for the six months ended June 30, 2025 and $132.1 million for the year ended December 31, 2024.

As of June 30, 2025, we had an accumulated deficit of $933.4 million.

Our net loss was $45.1 million for the nine months ended September 30, 2025 and $132.1 million for the year ended December 31, 2024.

As of September 30, 2025, we had an accumulated deficit of $948.0 million.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical and clinical development.

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As a result, we will need substantial additional funding to support our continuing operations.

We have historically financed our operations primarily with sales of equity securities and incurring indebtedness in the form of loans from commercial lenders.

We have historically financed our operations primarily with sales of equity securities and non-dilutive financing.

In the near term, we expect to finance our operations through these and other capital sources, including potential partnerships with other companies or other strategic transactions.

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Unfavorable conditions in the economy both in the United States and abroad may negatively affect the growth of our business and our results of operations.

For example, macroeconomic events, including inflationary pressure, tariff policies and geopolitical conflicts, have led to economic uncertainty globally.

For example, macroeconomic events, including inflationary pressure, tariff policies, geopolitical conflicts, and the current shutdown of the U.S.

federal government, have led to economic uncertainty globally.

The effect of macroeconomic conditions may not be fully reflected in our results of operations until future periods.

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In July 2024, we entered into a royalty purchase agreement with OCM IP Healthcare Portfolio LP, an investment vehicle for Ontario Municipal Employees Retirement System (“OMERS”).

Under the royalty purchase agreement, we sold to OMERS a portion of the future royalty payments and the remaining anniversary payments associated with our existing license to Eli Lilly and Company (“Lilly”), relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata (see “—License Agreement with Eli Lilly and Company”).

Under the royalty purchase agreement, we

sold to OMERS a portion of the future royalty payments and the remaining anniversary payments associated with our existing license to Eli Lilly and Company (“Lilly”), relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata (see “—License Agreement with Eli Lilly and Company”).

Under the terms of the royalty purchase agreement, we received an upfront payment of $26.5 million.

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The royalty payments and milestones we sold to OMERS represent our entire financial interest in the Lilly license agreement after taking into account our other contractual third-party obligations.

We recognized $1.0 million and $1.8 million of non-cash royalty income during the three and six months ended June 30, 2025, respectively.

We recognized $0.7 million and $2.5 million of non-cash royalty income during the three and nine months ended September 30, 2025, respectively.

We recognized $0.9 million of non-cash royalty income during each of the three and nine months ended September 30, 2024.

License Agreement with Sun Pharmaceutical Industries, Inc.

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The patents relate to the use of deuruxolitinib, Sun Pharma’s JAK inhibitor, or other isotopic forms of ruxolitinib, to treat alopecia areata or androgenetic alopecia.

Under the license agreement, Sun Pharma has paid us upfront and regulatory payments, and has agreed to pay us other regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a mid single-digit tiered royalty calculated as a percentage of Sun Pharma’s net sales.

Under the license agreement, Sun Pharma has paid us upfront, regulatory and commercial milestone payments, and has agreed to pay us other regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a mid single-digit tiered royalty calculated as a percentage of Sun Pharma’s net sales.

We have separate contractual obligations under which we have agreed to pay to third parties a portion of the consideration we may receive under the license agreement.

We may seek to monetize this asset.

We recognized $1.5 million of licensing revenue during the three and nine months ended September 30, 2025, a portion of which was payable to third parties.

License Agreement with Pediatrix Therapeutics, Inc.

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Pediatrix has paid us an upfront payment, and has agreed to pay us development, regulatory and commercial milestone payments upon the achievement of specified milestones set forth in the agreement, and a tiered royalty ranging from a low-to-high single digit percentage of net sales of lepzacitinib by Pediatrix in Greater China.

A portion of the consideration received from Pediatrix is payable to the former Confluence equity holders as described below under the caption “—Agreement and Plan of Merger with Confluence.”

A portion of the consideration received from Pediatrix is payable to the former Confluence (as defined below) equity holders as described below under the caption “—Agreement and Plan of Merger with Confluence.”

License Agreement with Eli Lilly and Company

In August 2022, we entered into a non-exclusive patent license agreement with Lilly.

Under the license

agreement, we granted Lilly non-exclusive rights under certain patents and patent applications that we exclusively license from a third party.

Under the license agreement, we granted Lilly non-exclusive rights under certain patents and patent applications that we exclusively license from a third party.

The patents and patent applications relate to the use of baricitinib, Lilly’s JAK inhibitor, to treat alopecia areata.

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In July 2024, we entered into a royalty purchase agreement with OMERS pursuant to which we sold to OMERS a portion of our future royalty payments and the remaining anniversary payments associated with the license to Lilly (see “—Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP” above).

We recognized $1.3 million and $2.3 million of licensing revenue during the three and six months ended June 30, 2025, respectively, all of which was payable to third parties.

We recognized $2.1 million and $3.9 million of licensing revenue during the three and six months ended June 30, 2024, respectively, a portion of which was payable to third parties.

We recognized $1.3 million and $3.6 million of licensing revenue during the three and nine months ended September 30, 2025, respectively, all of which was payable to third parties.

We recognized $0.7 million and $4.6 million of licensing revenue during the three and nine months ended September 30, 2024, respectively, a portion of which was payable to third parties.

Asset Purchase Agreement with EPI Health

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The sale was approved by the bankruptcy court in September 2023.

As a result of the bankruptcy proceedings, all amounts that are due and outstanding by EPI Health have been fully reserved.

As a result of the bankruptcy proceedings, all amounts that were due and outstanding by EPI Health had been fully reserved.

During the three months ended September 30, 2025, we sold all of our right, title and interest in our bankruptcy claims against EPI Health and wrote off the remaining reserved balance as it was deemed uncollectible.

Agreement and Plan of Merger with Confluence

In 2017, we entered into an Agreement and Plan of Merger (the “Confluence Agreement”), with Confluence, Aclaris Life Sciences, Inc., our wholly owned subsidiary (“Merger Sub”), and Fortis Advisors LLC, as representative of the equity holders of Confluence.

In 2017, we entered into an Agreement and Plan of Merger (the “Confluence Agreement”), with Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.) (“Confluence”), Aclaris Life Sciences, Inc., our wholly owned subsidiary (“Merger Sub”), and Fortis Advisors LLC, as representative of the equity holders of Confluence.

Pursuant to the terms of the Confluence Agreement, Merger Sub merged with and into Confluence, with Confluence surviving as our wholly owned subsidiary.

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In addition to the payments described above, if we sell, license or transfer any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, we will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license, or transfer in specified circumstances.

Discontinued Programs

We were previously developing zunsemetinib as a potential treatment for various immuno-inflammatory diseases, including hidradenitis suppurativa, psoriatic arthritis, and rheumatoid arthritis.

Following the results of the Phase 2 trials for these programs, we discontinued further development of our MK2 inhibitor programs in immuno-inflammatory diseases in 2023.

Restructuring

In December 2023, our board of directors approved a reduction of our workforce by approximately 46%, which was completed as of December 31, 2024.

During the six months ended June 30, 2025, we made cash severance payments of $0.2 million to impacted employees.

During the three and six months ended June 30, 2024, we recognized severance expense of $0.1 million and $2.6 million, respectively, and made cash severance payments of $4.5 million to impacted employees during the six months ended June 30, 2024.

During the nine months ended September 30, 2025, we made cash severance payments of $0.2 million to impacted employees.

During the three and nine months ended September 30, 2024, we recognized severance expense of $26 thousand and $2.6 million, respectively, and made cash severance payments of $5.2 million to impacted employees during the nine months ended September 30, 2024.

Components of Our Results of Operations

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Significant assumptions used in our estimates include the probability of achieving regulatory milestones and commencing commercialization (collectively referred to as “probability of success”), which are based on an asset’s current stage of development and a review of existing clinical data.

Probability of success assumptions ranged between 21% and 40% at June 30, 2025.

Probability of success assumptions ranged between 21% and 40% at September 30, 2025.

Additionally, estimated future sales levels and the risk-adjusted discount rate applied to the potential payments are also significant assumptions used in calculating the fair value.

As of June 30, 2025, the discount rate ranged between 6.3% and 7.9% depending on the year of each potential payment.

During the six months ended June 30, 2025, we recorded a charge to the contingent consideration liability of $1.8 million, which was primarily due to changes to the probability of success for certain product candidates and lower discount rates resulting from changes in credit spreads being applied to potential payments.

As of September 30, 2025, the discount rate ranged between 6.8% and 8.4% depending on the year of each potential payment.

During the nine months ended September 30, 2025, we recorded a charge to the contingent consideration liability of $1.9 million, which was primarily due to changes to the probability of success for certain product candidates and the passage of time.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2025 and 2024

Three Months Ended June 30,

Six Months Ended June 30,

Comparison of Three and Nine Months Ended September 30, 2025 and 2024

Three Months Ended September 30,

Nine Months Ended September 30,

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Contract research

The decrease in contract research revenue for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively, was driven by lower overall hours billed, which was partially offset by a higher average billing rate.

The decrease in licensing revenue during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was primarily driven by lower royalties earned following the sale of a portion of our OLUMIANT® royalty payments to OMERS in July 2024.

The decrease in contract research revenue for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively, was driven by lower overall hours billed for laboratory services.

The decrease during the nine-month period was partially offset by a higher average billing rate.

The decrease in licensing revenue during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to a larger milestone achieved under the Sun Pharma license agreement during the three months ended September 30, 2024.

The decrease in licensing revenue during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to a larger milestone achieved under the Sun Pharma license agreement and higher licensing revenue earned under the Lilly license agreement during the nine months ended September 30, 2024.

We sold a portion of the royalties we may receive under the Lilly license agreement to OMERS in July 2024.

Costs and Expenses

Cost of Revenue

The decrease in cost of revenue for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was driven by lower overall hours billed for laboratory services.

The decrease in cost of revenue for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was driven by lower overall hours billed for laboratory services.

Research and Development

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Nine Months Ended

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Total research and development expenses

The expenses incurred for bosakitug during the three and six months ended June 30, 2025 consisted primarily of product candidate manufacturing costs and clinical development expenses associated with a Phase 2 trial in atopic dermatitis.

The increase in expenses for ATI-2138 during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was primarily due to preclinical development activities and clinical development expenses associated with a Phase 2a trial in atopic dermatitis.

Research and development expenses related to ATI-052 for the three and six months ended June 30, 2025 primarily consisted of product candidate manufacturing costs, preclinical development activities, and clinical development expenses associated with a Phase 1a/1b program.

The expenses for lepzacitinib during the three and six months ended June 30, 2024 were primarily preclinical development activities and clinical development expenses associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which was completed in January 2024.

The decrease in expenses for zunsemetinib during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was primarily due to a decrease in costs associated with Phase 2 clinical development activities.

The expenses incurred for bosakitug during the three and nine months ended September 30, 2025 consisted primarily of product candidate manufacturing costs and clinical development expenses associated with a Phase 2 trial in atopic dermatitis.

The increase in expenses for ATI-2138 during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to preclinical development expenses associated with toxicity studies, which was partially offset by a decrease in clinical development expenses associated with a Phase 2a trial in atopic dermatitis.

The increase in expenses for ATI-2138 during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to an increase in preclinical development expenses and clinical development expenses associated with a Phase 2a trial in atopic dermatitis.

Research and development expenses related to ATI-052 for the three and nine months ended September 30, 2025 primarily consisted of product candidate manufacturing costs, preclinical development activities, and clinical development expenses associated with a Phase 1a/1b program.

Discovery expenses increased during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 primarily due to increased investment in our discovery-stage programs as we progressed our next generation ITK selective inhibitors toward candidate selection.

Other research and development

The decrease in other research and development expenses during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was primarily due to clinical development expenses associated with former development assets.

Personnel and stock-based compensation

The increase in personnel expenses during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was primarily due to higher headcount.

The decrease in personnel expenses during the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was primarily due to termination benefits associated with our December 2023 reduction in force recognized during the six months ended June 30, 2024.

The increase in stock-

based compensation expense during the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due to higher forfeiture credits during the six months ended June 30, 2024.

The increase in personnel expenses during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to higher headcount.

The increase in stock-based compensation expense during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was due to higher forfeiture credits during the nine months ended September 30, 2024.

General and Administrative

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Six Months Ended

Nine Months Ended

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Personnel and stock-based compensation

The increase in personnel expenses during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 was primarily due to higher headcount.

The increase in stock-based compensation expense during the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024 was due to higher forfeiture credits during the three and six months ended June 30, 2024.

The increase in personnel expenses during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was primarily due to higher headcount.

Professional and legal fees

The decrease in professional and legal fees during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was primarily due to business development expenses incurred in the prior year in connection with the royalty purchase agreement with OMERS.

Other general and administrative

The decrease in other general and administrative expenses during the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024 was primarily due to the sale of our bankruptcy claims against EPI Health.

Revaluation of Contingent Consideration

The revaluation of contingent consideration loss increased during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 mainly due to changes to the probability of success for certain product candidates and lower discount rates resulting from changes in credit spreads being applied to potential payments during the three months ended June 30, 2025.

The revaluation of contingent consideration loss decreased during the six months ended June 30, 2025 compared to the six months ended June 30, 2024 mainly due to changes in estimated sales levels and changes to the probability of success for certain product candidates during the six months ended June 30, 2024.

The revaluation of contingent consideration loss decreased during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 mainly due to higher discount rates resulting from changes in credit spreads being applied to potential payments during the three months ended September 30, 2025.

The revaluation of contingent consideration loss decreased during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 mainly due to changes in estimated sales levels and changes to the probability of success for certain product candidates during the nine months ended September 30, 2024.

Non-cash Royalty Income

Non-cash royalty income includes income related to the proceeds from the sale of a portion of our OLUMIANT® royalty payments to OMERS.

Non-cash royalty income includes income related to the proceeds from the sale of a portion of our OLUMIANT® royalty payments to OMERS in July 2024.

Liquidity and Capital Resources

Since our inception, we have incurred net losses and negative cash flows from our operations.

We have financed our operations over the last several years primarily through sales of our equity securities and incurring indebtedness in the form of loans from commercial lenders.

We may engage in additional debt and equity financing transactions in order to raise funds.

We have financed our operations over the last several years primarily through sales of our equity securities and non-dilutive financing.

We may engage in additional equity and other financing transactions in order to raise funds.

We may receive royalties and milestone payments under third-party licensing and acquisition agreements.

In addition, to the extent we are able to consummate transactions with potential third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates, we may receive upfront payments, milestone payments or royalties from such arrangements that would increase our liquidity.

As of June 30, 2025, we had cash, cash equivalents and marketable securities of $180.9 million.

As of September 30, 2025, we had cash, cash equivalents and marketable securities of $167.2 million.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view towards liquidity and capital preservation.

We currently have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity, other than our contingent obligations under the Confluence Agreement, Biosion Agreement and CTTQ Agreement, which are summarized above under “Overview—Acquisition and License Agreements, ” and our lease obligations.

Cash and cash equivalents were $25.4 million as of June 30, 2025 compared to $24.6 million as of December 31, 2024.

We also had $155.5 million in short- and long-term marketable securities as of June 30, 2025 compared to $179.3 million as of December 31, 2024.

Cash and cash equivalents were $25.3 million as of September 30, 2025 compared to $24.6 million as of December 31, 2024.

We also had $142.0 million in short- and long-term marketable securities as of September 30, 2025 compared to $179.3 million as of December 31, 2024.

The sources and uses of cash that contributed to the change in cash and cash equivalents were:

Six Months Ended

Nine Months Ended

September 30,

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Cash flow related to operating activities was the result of:

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Nine Months Ended

September 30,

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Non-cash adjustments to reconcile net loss to net cash used in operating activities

Change in accounts receivable

Change in prepaid expenses and other assets

Change in accounts receivable, prepaid expenses and other assets

Change in accounts payable and accrued expenses

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Net cash used in operating activities

Net cash used in operating activities decreased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily as a result of a decrease in cash used for accounts payable and accrued expenses, after adjusting for the receipt and corresponding payment of a third-party milestone during the six months ended June 30, 2025.

Net cash used in operating activities increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily as a result of proceeds from the royalty sale to OMERS and lower net losses after adjusting for non-cash items during the nine months ended September 30, 2024.

This increase was partially offset by a decrease in cash used for accounts payable and accrued expenses, which was due to the timing of payments to vendors and severance payments in connection with the reduction in our workforce.

Investing Activities

Cash flow related to investing activities was the result of:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Purchases of property and equipment

Purchases of property and equipment, net

Purchases of marketable securities

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Net cash provided by investing activities

The increase in net cash provided by investing activities for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 resulted primarily from lower purchases of marketable securities and higher proceeds from sales and maturities of marketable securities during the six months ended June 30, 2025.

The increase in net cash provided by investing activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 resulted primarily from lower purchases of marketable securities and higher proceeds from sales and maturities of marketable securities during the nine months ended September 30, 2025.

Financing Activities

Cash flow related to financing activities was the result of:

Six Months Ended

Nine Months Ended

September 30,

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Payment of deferred transaction consideration for in-licensed assets

Payments of employee withholding taxes related to restricted stock unit award vesting

Proceeds from exercise of employee stock options and the issuance of stock

Net cash used in financing activities

Net cash used in financing activities increased for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 due to higher payments of employee withholding taxes related to restricted stock unit award vesting.

Net cash used in financing activities increased for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to the payment of deferred transaction consideration in connection with the Biosion Agreement during the nine months ended September 30, 2025.

Funding Requirements

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Additional funds may not be available on a timely basis, on commercially acceptable terms, or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy.

Our ability to raise additional capital may be adversely impacted by potentially worsening global economic conditions caused by a

variety of factors including geopolitical tensions, tariff policies and inflationary pressures.

Our ability to raise additional capital may be adversely impacted by potentially worsening global economic conditions caused by a variety of factors including geopolitical tensions, tariff policies, inflationary pressures, and the current shutdown of the U.S.

federal government.

If we are unable to raise sufficient additional capital or generate revenue from transactions with potential third-party partners for the development and/or commercialization of our product candidates, we may need to substantially curtail our planned operations.

13 unchanged sentences

Louis, Missouri under a sublease agreement which has a term through May 2029.

Our aggregate remaining lease payment obligation for these two spaces was $2.9 million as of June 30, 2025.

Our aggregate remaining lease payment obligation for these two spaces was $2.7 million as of September 30, 2025.

Agreement and Plan of Merger with Confluence

We have agreed to certain payment obligations in accordance with and subject to the terms of the Confluence Agreement (see “Overview—Acquisition and License Agreements—Agreement and Plan of Merger with Confluence”).

As of June 30, 2025, the balance of our contingent consideration liability was $10.5 million.

As of September 30, 2025, the balance of our contingent consideration liability was $10.6 million.

Exclusive License Agreement with Biosion;

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis