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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-02-27 · 102 added, 125 removed, 261 unchanged (47% of the section changed)

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“Risk Factors,” and “Special Note Regarding Forward-Looking Statements.”

We are a clinical-stage biopharmaceutical company focused on developing novel small and large molecule product candidates for immuno-inflammatory diseases.

Our proprietary KINect drug discovery platform combined with our preclinical development capabilities allows us to identify and advance potential product candidates that we may develop independently or in collaboration with third parties.

In addition to identifying and developing our novel product candidates, we are pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our novel product candidates.

We also provide contract research services to third parties enabled by our early-stage research and development expertise.

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel small and large molecule product candidates for immuno-inflammatory diseases.

Our proprietary KINect drug discovery platform coupled with our integrated discovery approach to small and large molecules enables us to identify and advance product candidates designed to have superior target affinity, specificity and potency.

We are seeking to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our novel product candidates.

In addition, we provide contract research services to third parties enabled by our early-stage research and development expertise.

Financial Overview

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In addition, our product candidates, even if they are approved by regulatory agencies for marketing, may not achieve commercial success.

We may also not be successful in pursuing strategic alternatives, including identifying and consummating transactions with third-party partners, to further develop, obtain marketing approval for and/or commercialize our product candidates.

We may also not be successful in identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

Furthermore, we have incurred and expect to continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses.

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 and geopolitical conflicts, have led to economic uncertainty globally.

For example, macroeconomic events, including inflationary pressure, tariff policies, and geopolitical conflicts, 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 November 2024, we entered into an exclusive license agreement (the “Biosion Agreement”) with Biosion, Inc.

(“Biosion”) pursuant to which we received the exclusive rights to develop, manufacture and commercialize bosakitug

(ATI-045) and ATI-052 worldwide, excluding Mainland China, Macau, Hong Kong and Taiwan (“Greater China”).

In connection with the Biosion Agreement, we also entered into a collaboration agreement (the “CTTQ Agreement”) with Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.

(“Biosion”) pursuant to which we received the exclusive rights to develop, manufacture and commercialize bosakitug (ATI-045) and ATI-052 worldwide, excluding Mainland China, Macau, Hong Kong and Taiwan (“Greater China”).

connection with the Biosion Agreement, we also entered into a collaboration agreement (the “CTTQ Agreement”, and together with the Biosion Agreement, the “Biosion Agreements”) with Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.

(“CTTQ”), a licensee of bosakitug in Greater China.

As partial consideration for the rights and licenses under the Biosion Agreement and CTTQ Agreement, we agreed to, in the aggregate, (i) pay $30.0 million in upfront cash consideration, plus $4.5 million for the reimbursement of certain development costs, (ii) issue warrants (the “Warrants”) to purchase 14,281,985 shares of our common stock and (iii) pay $6.2 million for the reimbursement of certain development costs and drug product material as set forth in the Biosion Agreement.

We determined that the transaction was an acquisition of assets with no alternative future use and therefore expensed as incurred the fair value of the consideration given of $85.6 million as a component of in-process research and development expense during the year ended December 31, 2024.

We incurred $1.3 million in expenses related to this transaction which were expensed as incurred.

As partial consideration for the rights and licenses under the Biosion Agreements, we, in the aggregate, (i) paid $30.0 million in upfront cash consideration, plus $4.5 million for the reimbursement of certain development costs, (ii) issued warrants (the “Warrants”) to purchase 14,281,985 shares of our common stock and (iii) paid $6.2 million for the reimbursement of certain development costs and drug product material.

We made cash payments of $6.2 million and $34.5 million as set forth in the Biosion Agreements during the years ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, 3,000,000 Warrants remained unexercised.

In addition, we agreed to pay, in the aggregate, (i) up to $125 million upon the achievement of specified regulatory milestones commencing with product approval, (ii) up to $795 million upon the achievement of specified sales milestones, (iii) a tiered low-to-mid single digit royalty based upon a percentage of annual net sales, subject to specified reductions as set forth in the Biosion Agreement, and (iv) a portion of any sublicense consideration received from the grant of any sublicense or similar rights under any of the rights or licenses granted to us under the Biosion Agreement.

We will expense these payments in the period when either they are determined to be probable of occurring or when the payment is triggered.

The Warrants have an initial exercise price of $0.00001 per share, subject to adjustment as provided in the Warrants.

The Warrants are immediately exercisable, subject to any applicable overseas direct investment filing that may be required for the holders.

The Warrants will terminate when exercised in full.

We classified the Warrants within equity because they are indexed to our own stock.

We assigned an estimated fair value of $44.8 million to the Warrants, which was based on the fair value of our common stock on the date of issuance less the nominal exercise price of $0.00001 per share.

Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP

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 milestones 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 $1.9 million of non-cash royalty income during the year ended December 31, 2024.

We recognized $3.8 million and $1.9 million of non-cash royalty income during the years ended December 31, 2025 and 2024, respectively.

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 an upfront payment and certain 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 recognized $3.0 million and $15.0 million of licensing revenue during the years ended December 31, 2024 and 2023, respectively.

We may seek to monetize this asset.

We recognized $1.2 million and $3.0 million of licensing revenue during the years ended December 31, 2025 and 2024, respectively, 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

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

Under the license agreement, Lilly has paid us an upfront payment and regulatory and certain commercial milestone payments, and agreed to pay us anniversary payments and other commercial milestone payments upon the achievement of specified milestones as set forth in the agreement, and a low single-digit royalty calculated as a percentage of Lilly’s net sales of baricitinib for the treatment of alopecia areata.

Under the license agreement, Lilly has paid us upfront, anniversary, regulatory and commercial milestone payments.

In addition, Lilly has agreed to pay us other commercial milestone payments upon the achievement of specified milestones and additional anniversary payments as set forth in the agreement, as well as a low single-digit royalty calculated as a percentage of Lilly’s net sales of baricitinib for the treatment of alopecia areata.

We have separate contractual obligations under which we have agreed to pay to third parties an amount equal to any regulatory and commercial milestone payments we receive under the Lilly license agreement, as well as a portion of the upfront consideration and a portion of the royalties we may receive under the license agreement.

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 milestones associated with the license to Lilly (see “—Royalty Purchase Agreement with OCM IP Healthcare Portfolio LP” above).

We recognized $13.2 million and $12.7 million of licensing revenue during the years ended December 31, 2024 and 2023, respectively.

We recognized $4.8 million of licensing revenue during the year ended December 31, 2025, all of which was payable to third parties.

We recognized $13.2 million of licensing revenue during the year ended December 31, 2024, a portion of which was payable to third parties.

Asset Purchase Agreement with EPI Health, LLC

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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 were 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.

In September 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

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

Under the Confluence Agreement, we have agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.

In addition, we have agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product.

Under the Confluence Agreement, we agreed to pay the former Confluence equity holders aggregate remaining contingent consideration of up to $75.0 million based upon the achievement of specified regulatory and commercial milestones set forth in the Confluence Agreement.

In addition, we agreed to pay the former Confluence equity holders future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for that product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product.

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 (ATI-450) 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 mitogen-activated protein kinase-activated protein kinase 2 (“MK2”) inhibitor programs in immuno-inflammatory diseases in 2023.

We were also previously exploring the use of ATI-2231, our second MK2 inhibitor, as a potential treatment for oncology diseases, but decided to pursue this with zunsemetinib due to its more advanced clinical development package.

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.

For the year ended December 31, 2024, we incurred severance expenses of $2.7 million and made cash severance payments of $5.6 million to impacted employees.

In the year ended December 31, 2023, we recorded a restructuring charge of $3.1 million, representing one-time termination benefits for employees with retention periods less than the sixty-day minimum retention period.

During the year ended December 31, 2025, we made cash severance payments

of $0.2 million to impacted employees.

During the year ended December 31, 2024, we recognized severance expense of $2.7 million and made cash severance payments of $5.6 million to impacted employees.

Components of Our Results of Operations

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● the number of doses subjects receive;

● the duration of subject follow-up;

● the duration of treatment and subject follow-up;

● the results of our clinical trials.

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Revaluation of Contingent Consideration

Revaluation of contingent consideration consists of changes in the fair value of our contingent consideration liability between reporting dates.

Revaluation of contingent consideration consists of changes in the fair value of our contingent consideration liability between reporting dates, as described below.

In-process Research and Development

In-process research and development (“IPR&D”) consists of expenses related to in-licensed assets with no future alternative use and impairment charges recorded for IPR&D intangible assets.

In-process research and development (“IPR&D”) consists of expenses related to in-licensed assets with no future alternative use.

Interest Income

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Non-cash Royalty Income

In July 2024, we entered into the royalty purchase agreement with OMERS pursuant to which we sold a portion of our royalties due to us under the license agreement with Lilly and received upfront proceeds of $26.5 million.

We evaluated the royalty purchase agreement under Accounting Standards Codification (“ASC”) 470 – Debt and concluded that the upfront payment should be accounted for as deferred income because the criteria for debt classification were not met.

We apply the “units-of-revenue” method of recognizing income in the consolidated statements of operations and comprehensive loss and such amounts are included in non-cash royalty income.

Non-cash royalty income includes income related to the proceeds from the sale of future royalties to OMERS, recognized under the “units-of-revenue” method.

Critical Accounting Estimates

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We record a contingent consideration liability related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs, including the achievement of regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments.

Significant judgement is involved in determining the appropriateness of these assumptions.

Significant judgment is involved in determining the appropriateness of these assumptions.

These assumptions are considered Level 3 inputs.

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These assumptions are highly dependent on the outcome and timing of the development of certain of our product candidates.

We evaluate the fair value estimate of our contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in our consolidated statement of operations.

We evaluate the fair value estimate of our contingent consideration liability on a quarterly basis with changes, if any, recorded as income or expense in our consolidated statement of operations and comprehensive loss.

Any such changes could have a material impact on our financial results.

The fair value of contingent consideration is estimated using a probability-weighted expected payment model for regulatory milestone payments and a Monte Carlo simulation model for commercial milestone and royalty payments and then applying a risk-adjusted discount rate to calculate the present value of the potential payments.

Significant assumptions used in our estimates include the probability of achieving regulatory milestones and commencing commercialization, which are based on an asset’s current stage of development and a review of existing clinical data.

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 December 31, 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.

The discount rate ranged between 7.4% and 8.7% depending on the year of each potential payment.

During the year ended December 31, 2024, we adjusted estimated sales and the probability of success for certain product candidates.

These changes, as well as the passage of time, partially offset by higher discount rates resulting from higher risk-free rates and changes in credit spreads, resulted in an overall increase of $2.5 million during the year ended December 31, 2024.

As of December 31, 2025, the discount rate ranged between 6.7% and 8.7% depending on the year of each potential payment.

During the year ended December 31, 2025, we adjusted the probability of success for certain product candidates.

This change and the passage of time resulted in an overall increase of $2.3 million in contingent consideration liability during the year ended December 31, 2025.

Stock-Based Compensation

We measure the compensation expense of stock-based awards granted to employees and directors using the grant date fair value of the award.

We have issued stock options and restricted stock unit (“RSU”) awards with service-based vesting conditions, as well as with performance-based vesting conditions.

We have not issued awards that include market-based conditions.

We have issued stock options and restricted stock unit (“RSU”) awards with service-based vesting conditions.

For service-based awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period.

For performance-based awards, we recognize stock-based compensation expense on a straight-line basis over the requisite service period beginning in the period that it becomes probable the performance conditions will occur.

At each balance sheet date, we evaluate whether any performance conditions related to a performance-based award have changed.

The effect of any change in performance conditions would be recognized as a cumulative catch-up adjustment in the period such change occurs, and any remaining unrecognized compensation expense would be recognized on a straight-line basis over the remaining requisite service period.

The impact of forfeitures is recognized in the period in which they occur.

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The expected term of our stock options has been determined using the “simplified” method for awards that qualify as “plain vanilla” options.

The expected term of stock options we granted to non-employees is equal to the contractual term of the option award.

The expected term of stock

options granted to non-employees is equal to the contractual term of the option award.

The risk-free interest rate is determined by reference to the U.S.

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Total other income

Loss before income taxes

Income tax benefit

Contract Research

Contract research revenue was $2.5 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively, and was comprised of fees earned from the provision of laboratory services to our clients.

The decrease was driven by lower overall hours billed, which was offset by a higher average billing rate.

Licensing revenue was $16.2 million and $28.2 million for the years ended December 31, 2024 and 2023, respectively.

The decrease was primarily driven by the upfront payment received under the Sun Pharma agreement during the year ended December 31, 2023, partially offset by the achievement of higher milestones under license agreements during the year ended December 31, 2024.

The decrease in contract research revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024 was due to lower overall hours billed for laboratory services.

The decrease in licensing revenue during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to larger milestone payments achieved under the license agreements with Sun Pharma and Lilly during the year ended December 31, 2024.

Cost and Expenses

Cost of Revenue

Cost of revenue was $2.8 million and $3.4 million for the years ended December 31, 2024 and 2023, respectively, and in each case related to providing laboratory services to our clients.

Changes in cost of revenue generally correlate to changes in contract research revenue.

Cost of revenue decreased during the year ended December 31, 2024 due to lower variable costs resulting from a decrease in hours billed, which was offset by an increase in termination benefits as a result of our restructuring that was announced in December 2023.

The decrease in cost of revenue during the year ended December 31, 2025 compared to the year ended December 31, 2024 was due to lower overall hours billed for laboratory services.

Research and Development

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Total research and development expenses

The decrease in expenses for ATI-2138 during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a decrease in clinical development expenses associated with a Phase 1 MAD trial which was completed in September 2023, as well as a decrease in preclinical development activities.

This decrease was partially offset by clinical development expenses associated with a Phase 2a trial that was initiated in August 2024.

Research and development expenses related to ATI-052 for the year ended December 31, 2024 primarily consisted of product candidate manufacturing costs and preclinical development activities.

Because we in-licensed ATI-052 in 2024, there were no related expenses for the year ended December 31, 2023.

The decrease in expenses for lepzacitinib during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower costs associated with preclinical development activities and costs associated with a Phase 2b clinical trial in subjects with atopic dermatitis, which was initiated in May 2022 and was completed in January 2024.

The decrease in expenses for zunsemetinib during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a decrease in costs associated with Phase 2 clinical development activities which were completed in 2023 as well as a decrease in product manufacturing costs.

The increase in expenses for bosakitug during the year ended December 31, 2025 compared to the year ended December 31, 2024 was due to the timing of the acquisition of the in-licensed asset, which occurred in November 2024.

The expenses consist 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-052 during the year ended December 31, 2025 compared to the year ended December 31, 2024 was due to the timing of the acquisition of the in-licensed asset, which occurred in November 2024.

The increase primarily consisted of preclinical development activities and clinical development expenses associated with a Phase 1a/1b program, partially offset by a decrease in product manufacturing costs.

The increase in expenses for ATI-2138 during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to an increase in clinical development expenses associated with a Phase 2a trial in atopic dermatitis.

The increase in expenses for ATI-9494 for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to an increase in product candidate manufacturing costs, preclinical development activities, and IND-enabling studies.

Discovery expenses consisted primarily of continued investment in our other JAK-sparing ITK inhibitors as we progress toward candidate selection.

Other research and development

The decrease in other research and development expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to clinical development expenses associated with former development assets.

Personnel and stock-based compensation

The decrease in personnel and stock-based compensation expenses during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower headcount, lower termination benefits and higher forfeiture credits as a result of our restructuring that was announced in December 2023.

The increase in personnel expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher headcount.

The increase in stock-based compensation expense during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher forfeiture credits during the year ended December 31, 2024.

General and Administrative

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Personnel and stock-based compensation

The aggregate decrease in personnel and stock-based compensation expenses during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to lower headcount and higher forfeiture credits.

The increase in personnel expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to higher headcount.

Professional and legal fees

The decrease in professional and legal fees, including accounting, investor relations and corporate communication costs, during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in accounting related expenses, which were partially offset by an increase in business development expenses.

Facility and support services

The decrease in facility and support services, including general office expenses, information technology costs and other expenses, during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by a decrease in rent expense and information technology expenses.

Bad debt expenses were related to our determination that amounts due to us as of December 31, 2023 pursuant to the asset purchase agreement with EPI Health are uncertain as a result of the bankruptcy filing by EPI Health in July 2023.

There was no bad debt expense during the year ended December 31, 2024.

The decrease in licensing expenses during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily driven by the upfront payment received under the Sun Pharma agreement during the year ended December 31, 2023, a portion of which was payable to third parties, partially offset by the achievement of higher milestones under license agreements during the year ended December 31, 2024.

The decrease in professional and legal fees during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to legal, accounting, and other professional expenses incurred in 2024 in connection with acquisition and license agreements, partially offset by an increase in investor relations costs incurred in 2025.

Other general and administrative

The decrease in other general and administrative expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to the sale of our bankruptcy claims against EPI Health and a decrease in insurance costs in 2025.

The decrease in licensing expenses during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to larger milestone payments achieved under the license agreements with Sun Pharma and Lilly during the year ended December 31, 2024, a portion of which was payable to third parties.

Revaluation of Contingent Consideration

The revaluation of contingent consideration loss during the year ended December 31, 2024 was primarily due to changes in estimated sales levels and changes to the probability of success for certain product candidates, compared to the revaluation of contingent consideration gain during the year ended December 31, 2023 which was primarily due to the removal of estimated sales levels of zunsemetinib following our decision to discontinue further development of our MK2 inhibitor programs in immuno-inflammatory diseases.

The revaluation of contingent consideration loss decreased during the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily due to changes in estimated sales levels for certain product candidates during the year ended December 31, 2024.

In-process Research and Development

In-process research and development expenses recorded during the year December 31, 2024 included the fair value of the consideration expensed in connection with the in-license of bosakitug and ATI-052, as well as transaction costs incurred as part of the transaction.

During the quarter ended December 31, 2023, we performed an impairment analysis on the IPR&D intangible asset acquired from Confluence due to our decision to discontinue further development of the product candidate for immuno-inflammatory diseases.

Our impairment analysis resulted in a fair value of the IPR&D intangible asset which was less than the carrying value and as a result, we recorded an impairment charge for the full balance of the IPR&D intangible asset during the year ended December 31, 2023.

Interest Income

Interest income decreased during the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to lower interest income on investment portfolio balances.

In-process research and development expenses recorded during the year ended December 31, 2024 included the fair value of the consideration expensed in connection with the in-license of bosakitug and ATI-052, as well as transaction costs incurred as part of the transaction.

Non-cash Royalty Income

Non-cash royalty income includes income related to the proceeds from the sale of future royalties to OMERS, recognized under the “units-of-revenue” method.

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.

Prior to our acquisition of Confluence, we did not generate any revenue.

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

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.

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We paid placement agent and other fees of $5.1 million in connection with the private placement.

At-the-Market Facility

In April 2023, we sold 3.4 million shares of our common stock for aggregate gross proceeds of $27.5 million, pursuant to a sales agreement with Leerink Partners LLC (formerly SVB Securities LLC) and Cantor Fitzgerald & Co., as sales agents, dated February 23, 2023.

We paid selling commissions of $0.8 million in connection with the sale.

Cash and cash equivalents were $20.0 million as of December 31, 2025 compared to $24.6 million as of December 31, 2024.

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Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Cash and cash equivalents ending balance

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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 year ended December 31, 2024 compared to the year ended December 31, 2023 primarily as a result of lower net losses after adjusting for non-cash items and proceeds from the royalty sale to OMERS.

The change was partially offset by an increase in cash used for accounts payable and accrued expenses, which was due to the timing of payments to vendors and severance payments as a result of our restructuring announced in December 2023.

The increase in non-cash adjustments to reconcile net loss to net cash used in operating activities was mainly the result of in-process research and development expenses recorded in connection with the in-license of bosakitug and ATI-052.

Net cash used in operating activities increased for the year ended December 31, 2025 compared to the year ended December 31, 2024 primarily as a result of higher net losses after adjusting for non-cash items and proceeds from the royalty sale to OMERS during 2024.

The change was partially offset by 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 year ended December 31, 2025.

The decrease in non-cash adjustments to reconcile net loss to net cash used in operating activities was mainly the result of in-process research and development expenses recorded in connection with the in-license of bosakitug and ATI-052 during the year ended December 31, 2024.

Investing Activities

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(In thousands)

Purchases of property and equipment, net

Purchases of property and equipment

Purchases of marketable securities

Proceeds from sales and maturities of marketable securities

Payments of deferred transaction consideration for in-licensed assets

Acquisition of in-licensed assets, including transaction costs

Net cash (used in) provided by investing activities

Net cash used in investing activities for the year ended December 31, 2024 was $69.8 million compared to net cash provided by investing activities during the year ended December 31, 2023 of $46.2 million.

The change was primarily

due to the consideration paid for the acquisition of in-licensed assets in connection with the Biosion Agreement and CTTQ Agreement and lower sales and maturities of marketable securities, partially offset by a reduction in purchases of marketable securities.

Net cash provided by (used in) investing activities

Net cash provided by investing activities for the year ended December 31, 2025 was $48.4 million compared to net cash used in investing activities during the year ended December 31, 2024 of $69.8 million.

The change was primarily due to higher purchases of marketable securities and the consideration paid in connection with the in-license of bosakitug and ATI-052 during the year ended December 31, 2024.

Financing Activities

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Proceeds from issuance of common stock under securities purchase agreement, net of issuance costs

Proceeds from issuance of common stock under the at-the-market sales agreement, net of issuance costs

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

Payments 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 provided by financing activities

The increase in net cash provided by financing activities for the year ended December 31, 2024 compared to December 31, 2023 was primarily due to proceeds from our private placement in November 2024, offset by proceeds from sales under our at-the-market sales agreement in 2023.

Net cash (used in) provided by financing activities

Net cash used in financing activities for the year ended December 31, 2025 was $5.9 million compared to net cash provided by financing activities during the year ended December 31, 2024 of $74.5 million.

The change was primarily due to proceeds from our private placement during the year ended December 31, 2024.

Funding Requirements

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We may not be able to generate revenue from these programs if, among other things, our clinical trials are not successful, the FDA does not approve our product candidates currently in clinical trials when we expect, or at all, or we are not able to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize our product candidates.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, research and development expenses, laboratory and related supplies, legal and other regulatory expenses, and administrative and overhead costs.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, research and development expenses, laboratory and related supplies, professional and legal expenses, and administrative and overhead costs.

Our future funding requirements will be heavily determined by the resources needed to support the development of our product candidates, without taking into account any potential business development activities.

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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 potential worsening global economic conditions caused by a variety of factors including geopolitical tensions and inflationary pressures.

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.

We may raise additional capital through the sale of equity or debt securities.

In such an event, our stockholders’ ownership will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a holder of our common stock.

In such an event, our stockholders’ ownership may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of a holder of our common stock.

Because of the numerous risks and uncertainties associated with research and development of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements.

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● the number and development requirements of the product candidates that we may pursue;

● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical trials for our product candidates;

● the scope, progress, results and costs of preclinical development, laboratory testing and conducting preclinical and clinical studies for our product candidates;

● the costs, timing, and outcome of regulatory review of our product candidates;

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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 December 31, 2025, the balance of our contingent consideration liability was $11.0 million.

Exclusive License Agreement with Biosion;

Collaboration Agreement with Biosion and CTTQ

Under the Biosion and CTTQ Agreements, we agreed to pay, in the aggregate, up to $920 million upon the achievement of specified regulatory and sales milestones.

In addition, we have agreed to pay future royalty payments calculated as a low-to-mid single digit percentage of annual net sales, subject to specified reductions, as set forth in the Biosion Agreement.

In addition to the payments described above, we have also agreed to pay a portion of any sublicense consideration received from the grant of any sublicense or similar rights under any of the rights or licenses granted to us under the Biosion Agreement.

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

R&D Obligations

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Segment Information

We have two reportable segments, therapeutics and contract research.

The therapeutics segment is focused on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases.

The contract research segment earns revenue from the provision of laboratory services.

We operate and report as one reportable segment, which focuses on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases.

The segment earns revenue through the licensing of our intellectual property and the provision of laboratory services.

Our chief operating decision maker, our Chief Executive Officer, manages our operations on a consolidated basis for the purpose of making operating decisions, assessing financial performance, and allocating resources.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

In December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2025-12, “Interim Reporting (Topic 270):

Narrow-Scope Improvements.” This standard clarifies interim disclosure requirements and the applicability of Topic 270.

The ASU becomes effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

We are currently assessing the impact of this ASU.

In November 2024, the FASB issued ASU No.

2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

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Improvements to Income Tax Disclosures.” This standard enhances disclosures related to income taxes, including the rate reconciliation and information on income taxes paid.

This ASU becomes effective for annual periods beginning after December 15, 2024.

We are currently assessing the impact of this ASU.

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” This standard requires disclosure of significant segment expenses and other segment items by reportable segment.

We adopted ASU No.

2023-07 effective December 31, 2024, on a retrospective basis, the impact of which is limited to additional segment expense disclosures in the notes to our consolidated financial statements.

2023-09 effective December 31, 2025, on a prospective basis, the impact of which is limited to additional income tax disclosures in the notes to our consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk

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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-K

Item 7. Management’s Discussion and Analysis