What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-02-26 compared with 2025-02-27 · 157 added, 236 removed, 544 unchanged (42% of the section changed)

53 unchanged sentences

Short-term marketable securities

Accounts receivable, net

Prepaid expenses and other current assets

Accounts receivable, prepaid expenses and other current assets

Total current assets

16 unchanged sentences

Common stock, $ 0.00001 par value;

200,000,000 shares authorized at December 31, 2024 and December 31, 2023;

400,000,000 and 200,000,000 shares authorized at December 31, 2025 and December 31, 2024, respectively;

120,499,433 and 107,850,124 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively

Additional paid‑in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

19 unchanged sentences

Total other income

Loss before income taxes

Income tax benefit

Net loss per share, basic and diluted

13 unchanged sentences

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock under at-the-market sales agreement, net of offering costs of $ 826

Issuance of common stock under securities purchase agreement, net of offering costs of $ 5,087

Issuance of common stock purchase warrants

Unrealized gain on marketable securities

1 unchanged sentence

Balance at December 31, 2024

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock under securities purchase agreement, net of offering costs of $ 5,087

Issuance of common stock purchase warrants

Issuance of common stock in connection with vesting of restricted stock units

Exercise of common stock purchase warrants

Unrealized gain on marketable securities

11 unchanged sentences

In-process research and development expense

Deferred taxes

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other assets

Accounts receivable, prepaid expenses and other assets

Accounts payable

3 unchanged sentences

Cash flows from investing activities:

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 provided by (used in) investing activities

Cash flows from financing activities:

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

Net cash (used in) provided by financing activities

Net decrease in cash and cash equivalents

2 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

Fair value of warrants issued in connection with in-license agreement

8 unchanged sentences

and its wholly owned subsidiaries are referred to collectively as the “Company.”

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

The Company’s proprietary KINect drug discovery platform combined with its preclinical development capabilities allows the Company to identify and advance potential product candidates that it may develop independently or in collaboration with third parties.

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

The Company also provides contract research services to third parties enabled by its early-stage research and development expertise.

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

The Company’s proprietary KINect drug discovery platform coupled with its integrated discovery approach to small and large molecules enables the Company to identify and advance product candidates designed to have superior target affinity, specificity and potency.

The Company is seeking to identify and consummate transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its novel product candidates.

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.

6 unchanged sentences

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 the Company to continue to implement its long-term business strategy.

The Company's ability to raise additional capital may be adversely impacted by potentially worsening global economic conditions caused by a variety of factors including geopolitical tensions and inflationary pressures.

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

6 unchanged sentences

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”).

The consolidated financial statements of the Company include the

accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly owned subsidiaries.

The consolidated financial statements of the Company include the accounts of the operating parent company, Aclaris Therapeutics, Inc., and its wholly owned subsidiaries.

All intercompany transactions have been eliminated.

Based upon the Company’s revenue, the Company believes that gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the consolidated statement of operations.

Based upon the nature and size of the Company’s revenue, the Company believes that

gross profit does not provide a meaningful measure of profitability and, therefore, has not included a line item for gross profit on the consolidated statement of operations and comprehensive loss.

Reclassifications

4 unchanged sentences

Estimates are periodically reviewed in light of changes in circumstances, facts and experience.

As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require an update to its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

Actual results could differ from the Company’s estimates.

7 unchanged sentences

The Company only recognizes revenue when collection of the consideration it is entitled to under a contract with a customer is probable.

Contract Research Revenue

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

Contract research revenue is generally evidenced by contracts with clients which are on an agreed upon fixed-price, fee-for-service basis and are generally billed on a monthly basis in arrears for services rendered.

Revenue related to these contracts is generally recognized as the laboratory services are performed, based upon the rates specified in the contracts.

Under ASC Topic 606, the Company elected to apply the “right to invoice” practical expedient when recognizing contract research revenue and as such, recognizes revenue in the amount which it has the right to invoice.

ASC Topic 606 also provides an optional exemption, which the Company has elected to apply, from disclosing remaining performance obligations when revenue is recognized from the satisfaction of the performance obligation in accordance with the “right to invoice” practical expedient.

Licensing Revenue

1 unchanged sentence

Milestone and Royalty Payments – The Company considers any future potential milestones and sales-based royalties to be variable consideration.

The Company recognizes revenue from development, regulatory and

anniversary milestone payments as they are achieved.

The Company recognizes revenue from development, regulatory and anniversary milestone payments as they are achieved.

The Company recognizes revenue from commercial milestones and royalty payments as the sales occur.

13 unchanged sentences

If any adjustment to fair value reflects a decline in the value of the investment, the Company considers available evidence to evaluate the extent to which the decline is “other than temporary” and reduces the investment to fair value through a charge to the statement of operations and comprehensive loss.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over the useful life of the asset.

Computer equipment is depreciated over three years .

Laboratory equipment is depreciated over three to five years .

Furniture and fixtures are depreciated over five years .

Leasehold improvements are depreciated over the shorter of the lease term or their useful life.

Expenditures for repairs and maintenance of assets are charged to expense as incurred.

Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets.

If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value.

An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount.

The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows.

Intangible Assets

Intangible assets include both definite-lived and indefinite-lived assets.

Definite-lived intangible assets consist of

a drug discovery platform the Company acquired through the acquisition of Confluence Life Sciences, Inc.

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

Definite-lived intangible assets are amortized over their estimated useful life based on the pattern over which the intangible assets are consumed or otherwise used up.

If that pattern cannot be reliably determined, the straight-line method of amortization is used.

Indefinite-lived intangible assets consisted of an in-process research and development (“IPR&D”) product candidate acquired through the acquisition of Confluence.

IPR&D assets are considered indefinite-lived until the completion or abandonment of the associated research and development efforts.

The cost of IPR&D is either amortized over its estimated useful life beginning when the underlying product candidate is approved and launched commercially, or expensed immediately if development of the product candidate is abandoned or otherwise impaired.

Definite-lived intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

Indefinite-lived intangible assets are tested for impairment at least annually, which the Company performs during the fourth quarter, or when indicators of an impairment are present.

The Company recognizes impairment losses when and to the extent that the estimated fair value of an intangible asset is less than its carrying value.

During the quarter ended December 31, 2023, the Company performed an impairment analysis on the IPR&D intangible asset due to the Company’s decision to discontinue further development of the product candidate in immuno-inflammatory diseases.

The Company’s impairment analysis resulted in a fair value of the IPR&D intangible asset which was less than the carrying value.

As a result, the Company recorded an impairment charge of $ 6.6 million, the full balance of the IPR&D intangible asset.

Discontinued Operations

14 unchanged sentences

The Company records 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.

acquisition of Confluence Life Sciences, Inc.

(now known as Aclaris Life Sciences, Inc.) (“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 judgment is involved in determining the appropriateness of these assumptions.

These assumptions are considered Level 3 inputs.

Revaluation of the contingent consideration liability can result from changes to one or more of these assumptions.

The Company evaluates the fair value estimate of the contingent

consideration liability on a quarterly basis with changes, if any, recorded as income or expense in the consolidated statement of operations.

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

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 the Company’s 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 the Company’s 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.

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

Research and Development Costs

8 unchanged sentences

This transaction has been accounted for as an asset acquisition in accordance with the Financial Accounting Standards Board (“FASB”) ASC 805-50, rather than a business combination.

Cash payments and issuances of equity instruments for IPR&D, as well as future payments, are initially treated as the acquisition of an asset but then immediately expensed as there is no future alternative use under the accounting guidance for the asset.

Cash payments and issuances of equity instruments for in-process research and development (“IPR&D”), as well as future payments, are initially treated as the acquisition of an asset but then immediately expensed as there is no future alternative use under the accounting guidance for the asset.

These payments are reflected as IPR&D expense on the Company’s consolidated statements of operations and comprehensive loss.

3 unchanged sentences

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

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

The Company has not issued awards that include market-based conditions.

The Company has issued stock options and restricted stock unit (“RSU”) awards with service-based vesting conditions.

For service-based awards, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period, which is typically four years .

For performance-based awards the Company recognizes 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, the Company evaluates 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.

8 unchanged sentences

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

The Company uses an expected dividend yield of zero based on the fact that the Company has never paid cash dividends and does not expect to pay cash dividends in the future.

The Company uses an expected

dividend yield of zero because the Company has never paid cash dividends and does not expect to pay cash dividends in the future.

The fair value of each RSU is measured using the closing price of the Company’s common stock on the date of grant.

13 unchanged sentences

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

Comprehensive loss is primarily comprised of net loss and unrealized gains (losses) on marketable securities.

Comprehensive loss is primarily composed of net loss and unrealized gains (losses) on marketable securities.

Net Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed using the sum of the weighted average number of common shares outstanding during the period, plus the weighted average number of potential shares of common stock from the assumed

exercise of stock options and the assumed vesting of RSUs, if dilutive.

Since the Company was in a net loss position, basic and diluted net loss per share were the same for each of the periods presented.

3 unchanged sentences

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

● Level 1 — Quoted prices in active markets for identical assets or liabilities.

11 unchanged sentences

Operating segments are components of a company for which separate financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in assessing performance and deciding how to allocate resources.

The Company has 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.

The Company does not report asset information by segment because it is not regularly provided to the CODM, and all of the Company’s assets are held in the United States.

The Company considers its Chief Executive Officer to be its CODM.

Historically, the Company had concluded it operated as two reportable segments, therapeutics and contract research.

In December 2025, the Company reevaluated its operating segments and concluded it operates and reports as one reportable segment.

The Company’s conclusion is based on changes to the discrete financial reporting information regularly provided to the CODM for the purpose of making operating decisions, assessing financial performance, and allocating resources.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Such reclassifications had no effect on the previously reported results of operations or financial position.

The Company’s reportable segment focuses on identifying and developing innovative therapies to address significant unmet needs for immuno-inflammatory diseases.

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

As of December 31, 2025 and 2024, all of the Company’s assets were held in the United States.

Recently Issued Accounting Pronouncements

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

In December 2025, the 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.

The Company is 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):

Disaggregation of Income Statement Expenses.” This standard requires disclosure of additional information about specific expense categories in the notes to financial statements on an annual and interim basis.

Disaggregation of Income Statement Expenses.” This standard requires disclosure of additional information about specific expense categories in the notes to financial statements

on an annual and interim basis.

This ASU becomes effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027.

3 unchanged sentences

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.

The Company is 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.

The Company 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 the Company’s 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 the Company’s consolidated financial statements.

Fair Value of Financial Assets and Liabilities

12 unchanged sentences

Total liabilities

As of December 31, 2024 and 2023, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.

The Company’s marketable securities as of December 31, 2024 consisted of commercial paper and corporate debt, foreign government agency debt and U.S.

government and government agency debt securities, which were valued based upon Level 2 inputs.

The Company’s marketable securities as of December 31, 2023 consisted of commercial paper and corporate debt, asset-backed debt, foreign government agency debt and U.S.

government and government agency debt securities, which were valued based upon Level 2 inputs.

As of December 31, 2025 and 2024, the Company’s cash equivalents consisted of money market funds, which were valued based upon Level 1 inputs.

The Company’s marketable securities as of December 31, 2025 consisted of corporate debt securities and U.S.

government debt securities, which were all valued based upon Level 2 inputs.

The Company’s marketable securities as of December 31, 2024 consisted of commercial paper, corporate debt securities, foreign government agency debt securities, and U.S.

government and government agency debt securities, which were all valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relied on quoted prices for identical securities in markets that are not active.

1 unchanged sentence

During the years ended December 31, 2025 and 2024, there were no transfers into or out of Level 3.

The overall $ 2.5 million increase in the fair value of the contingent consideration liability during the year ended December 31, 2024 was primarily due to changes in estimated sales levels, changes to the probability of success for certain product candidates and the passage of time, offset by changes in market rates.

The overall $ 2.3 million increase in the fair value of the contingent consideration liability during the year ended December 31, 2025 was primarily due to changes to the probability of success for certain product candidates and the passage of time.

As of December 31, 2025 and 2024 the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:

3 unchanged sentences

Corporate debt securities (1)

Commercial paper

Foreign government agency debt securities

government and government agency debt securities (2)

government debt securities (2)

Total marketable securities

1 unchanged sentence

(2) Included in U.S.

government and government agency debt securities is $ 30.5 million with maturity dates between one and three years .

government debt securities is $ 15.2 million with maturity dates between one and three years .

December 31, 2024

3 unchanged sentences

Commercial paper

Asset-backed debt securities (2)

Foreign government agency debt securities

1 unchanged sentence

Total marketable securities

(1) Included in Corporate debt securities is $ 28.0 million with maturity dates between one and two years .

(2) Included in Asset-backed debt securities is $ 6.2 million with maturity dates between one and three years .

(3) Included in Foreign government agency debt securities is $ 4.7 million with a maturity date between one and two years .

(1) Included in Corporate debt securities is $ 59.8 million with maturity dates between one and three years .

(2) Included in U.S.

government and government agency debt securities is $ 23.9 million with maturity dates between one and two years .

Property and Equipment, Net

Property and equipment, net consisted of the following:

(In thousands)

Computer equipment

Lab equipment

Furniture and fixtures

Leasehold improvements

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

Depreciation expense was $ 0.7 million and $ 0.8 million for the years ended December 31, 2024 and 2023, respectively.

government and government agency debt securities is $ 30.5 million with maturity dates between one and three years .

Accrued Expenses

5 unchanged sentences

Licensing expenses

Restructuring expenses (Note 15)

Other expenses

4 unchanged sentences

There were no shares of preferred stock outstanding as of December 31, 2025 and 2024.

As of December 31, 2024 and 2023, the Company’s Charter authorized the Company to issue 200,000,000 shares of $ 0.00001 par value common stock.

On June 5, 2025, at the 2025 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the Charter to increase the authorized number of shares of common stock from 200,000,000 shares to 400,000,000 shares.

On June 5, 2025, the Company filed a Certificate of Amendment to the Charter with the Secretary of State of the State of Delaware, which became effective upon filing.

As of December 31, 2025 and 2024, the Company’s Charter authorized the Company to issue 400,000,000 and 200,000,000 shares of $ 0.00001 par value common stock, respectively.

There were 120,499,433 and 107,850,124 shares of common stock issued and outstanding as of December 31, 2025 and 2024, respectively.

2 unchanged sentences

No dividends have been declared through December 31, 2025.

The Company issued warrants to Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.

In November 2024, the Company issued warrants to Biosion and Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.

(“CTTQ”) to purchase, in the aggregate, 14,281,985 shares of the Company’s common stock (the “Warrants”).

4 unchanged sentences

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

At-The-Market Facility

In April 2023, the Company sold 3.4 million shares of its 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.

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

In December 2025, Biosion exercised 11,281,985 Warrants.

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

Private Placement

2 unchanged sentences

Stock-Based Awards

2025 Equity Incentive Plan

In April 2025, the Company’s board of directors adopted the 2025 Equity Incentive Plan (the “2025 Plan”), and in June 2025, the Company’s stockholders approved the 2025 Plan.

Upon the 2025 Plan becoming effective, no further grants can be made under the Company’s 2015 Equity Incentive Plan (the “2015 Plan”).

The 2025 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, cash-based awards, and other stock-based awards.

The number of shares initially reserved for issuance under the 2025 Plan was 25,532,993 shares of common stock, which includes (i) 9,000,000 new shares of common stock, (ii) 3,957,232 shares of common stock that remained available for future grant under the 2015 Plan upon adoption of the 2025 Plan and (iii) up to 12,575,761 shares of common stock underlying outstanding awards under the 2015 Plan and the former 2012 Equity Compensation Plan, which may become available for issuance under the 2025 Plan if and as such awards expire, are otherwise terminated, settled in cash, or repurchased by the Company.

The shares of common stock underlying any awards that expire, or are otherwise terminated, settled in cash or repurchased by the Company under the 2025 Plan will be added back to the shares of common stock available for issuance under the 2025 Plan.

As of December 31, 2025, 12,442,759 shares remained available for grant under the 2025 Plan.

The Company had 1,007,910 stock options and 320,840 RSUs outstanding as of December 31, 2025 under the 2025 Plan.

2024 Inducement Plan

2 unchanged sentences

The only employees eligible to receive grants of awards under the 2024 Inducement Plan are individuals who satisfy the standards for inducement grants under Nasdaq rules, generally including individuals who were not previously an employee or director of the Company.

Under the terms of the 2024 Inducement Plan, the Company may grant up to 2,000,000 shares of common stock pursuant to nonqualified stock options, stock appreciation rights, restricted stock awards, RSUs, and other stock awards.

The shares of common stock underlying any awards that expire, or are otherwise terminated, settled in cash or repurchased by the Company under the 2024 Inducement Plan will be added back to the shares of common stock available for issuance under the 2024 Inducement Plan.

1 unchanged sentence

The Company had 1,172,000 stock options and 302,500 RSUs outstanding as of December 31, 2025 under the 2024 Inducement Plan.

2015 Equity Incentive Plan

In September 2015, the Company’s board of directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”), and the Company’s stockholders approved the 2015 Plan.

The 2015 Plan became effective in connection with the Company’s initial public offering in October 2015.

Beginning at the time the 2015 Plan became effective, no further grants may be made under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”).

The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, RSU awards, performance stock awards, cash-based awards and other stock-based awards.

The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock.

The number of shares of common stock that may be issued under the 2015 Plan automatically increased on January 1 of each year which ended on January 1, 2025, in an amount equal to the lesser of (i) 4.0 % of the shares of the Company’s common stock outstanding on December 31 of the preceding calendar year or (ii) an amount determined by the Company’s board of directors.

The shares of common stock underlying any awards that expire, are otherwise terminated, settled in cash or repurchased by the Company under the 2015 Plan and the 2012 Plan will be added back to the shares of common stock available for issuance under the 2015 Plan.

As of December 31, 2024, 4,820,283 shares remained available for grant under the 2015 Plan.

As of January 1, 2025, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 4,314,004 shares.

The Company had 5,548,563 stock options and 2,096,151 RSUs outstanding as of December 31, 2024 under the 2015 Plan.

2017 Inducement Plan

3 unchanged sentences

All shares of common stock that were eligible for issuance under the 2017 Inducement Plan after October 1, 2018, including any shares underlying any awards that expire or are otherwise terminated, reacquired to satisfy tax withholding obligations, settled in cash or repurchased by the Company in the future that would have been eligible for re-issuance under the 2017 Inducement Plan, were retired.

2012 Equity Compensation Plan

In August 2012, the Company’s board of directors adopted the 2012 Plan and the Company’s stockholders approved the 2012 Plan.

2015 Equity Incentive Plan

In September 2015, the Company’s board of directors adopted the 2015 Plan, and the Company’s stockholders approved the 2015 Plan.

The 2015 Plan became effective in connection with the Company’s initial public offering in October 2015.

Upon the 2025 Plan becoming effective, no further grants can be made under the 2015 Plan.

The Company had 218,404 stock options outstanding as of December 31, 2024 under the 2012 Plan.

The Company had 8,764,489 stock options and 2,179,891 RSUs outstanding as of December 31, 2025 under the 2015 Plan.

Stock Option Valuation

11 unchanged sentences

Forfeited and cancelled

( 2,143,800 )

Outstanding as of December 31, 2024

Forfeited and cancelled

( 2,143,800 )

Outstanding as of December 31, 2025

6 unchanged sentences

Outstanding as of December 31, 2023

( 1,473,327 )

Forfeited and cancelled

4 unchanged sentences

Stock-Based Compensation

Stock-based compensation expense included in total costs and expenses on the consolidated statement of operations included the following:

Stock-based compensation expense included in total costs and expenses on the consolidated statement of operations and comprehensive loss included the following:

(In thousands)

3 unchanged sentences

Total stock-based compensation expense

As of December 31, 2024, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 10.0 million and $ 7.6 million, respectively, which is expected to be recognized over weighted average periods of 2.3 years and 1.9 years, respectively.

As of December 31, 2025, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 11.1 million and $ 6.1 million, respectively, which is expected to be recognized over weighted average

periods of 2.5 years and 2.3 years, respectively.

Net Loss per Share

5 unchanged sentences

Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same.

For the year ended December 31, 2024, the basic and diluted weighted-average shares outstanding

included the Warrants, as there were no outstanding contingencies associated with the vesting or exercisability of the Warrants.

For the years ended December 31, 2025 and 2024, the basic and diluted weighted average shares outstanding included the shares of common stock issuable upon exercise of the outstanding Warrants, as there were no outstanding contingencies associated with the vesting or exercisability of the Warrants.

The following table presents potential shares of common stock excluded from the calculation of diluted net loss per share for the years ended December 31, 2025 and 2024.

All share amounts presented in the table below represent the total number outstanding as of December 31 of each year.

All share amounts presented in the table below represent the total number outstanding as of December 31, 2025 and 2024.

Options to purchase common stock

Restricted stock unit awards

Restricted stock units

Total potential shares of common stock

The Company has operating leases for office space and laboratory facilities.

The components of lease expense were as follows:

(In thousands)

Operating lease expense

Rent expense was $ 0.8 million and $ 0.9 million for the years ended December 31, 2025 and 2024, respectively, which was recognized on a straight-line basis over the term of the lease.

1 unchanged sentence

Agreements for Office and Laboratory Space

The Company had a sublease agreement pursuant to which it subleased 33,019 square feet of office space for its headquarters in Wayne, Pennsylvania, which expired on October 31, 2023.

In May 2023, the Company entered into a new lease agreement pursuant to which it leases 11,564 square feet of office space for its headquarters in Wayne, Pennsylvania.

The lease commenced on November 1, 2023 and has a term that runs through February 2029.

In May 2023, the Company entered into a lease agreement pursuant to which it leases 11,564 square feet of office space for its headquarters in Wayne, Pennsylvania.

The lease commenced in November 2023 and has a term that runs through February 2029.

In February 2019, the Company entered into a sublease agreement for 20,433 square feet of office and laboratory space in St.

15 unchanged sentences

Operating cash flows from operating leases

Leased assets obtained in exchange for new operating lease liabilities

Weighted Average Remaining Lease Term (in years):

14 unchanged sentences

Loss before income taxes

A reconciliation of the U.S.

federal statutory income tax rate to the Company’s effective income tax rate is as follows:

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % U.S.

federal statutory income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

(In thousands, except percentages)

Year Ended December 31, 2025

Federal taxes at U.S.

statutory income tax rate

Research and development tax credits

Change in valuation allowance

Non-taxable or non-deductible items

Non-deductible royalty payments

Other non-deductible items

Effective income tax rate

A reconciliation of the provision for income taxes to the amount computed by applying the 21 % U.S.

federal statutory income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

Year Ended December 31, 2024

Federal statutory income tax rate

27 unchanged sentences

As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards of $ 568.2 million and $ 100.7 million, respectively, which will begin to expire in 2032.

As of December 31, 2024, the Company also had federal research and development tax credit carryforwards of $ 21.9 million which will begin to expire in 2032, and state research and development tax credit carryforwards of $ 0.1 million which will begin to expire in 2030.

Utilization of the NOLs and research and development tax credit carryforwards in the United States may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that may have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

As of December 31, 2025, the Company also had federal research and development tax credit carryforwards of $ 2.5 million which will begin to expire in 2045.

Utilization of the NOLs and research and development tax credit carryforwards in the United States are subject to annual limitations under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

The Company has completed an analysis under Section 382 for NOLs generated from July 13, 2012 through December 31, 2024.

Although the Company has experienced Section 382 ownership changes since 2012, the Company concluded that it should have sufficient ability to utilize NOLs accumulated during the periods tested.

The Company has not yet determined if a Section 382 ownership change has occurred after December 31, 2024.

In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of the Company’s control.

The Company completed an analysis under Section 382 for NOLs generated through December 31, 2024, and concluded that an ownership change occurred as of December 30, 2024.

As a result of this ownership change a component of the Company’s research and development credits and state NOL carryforwards will expire prior to utilization.

Accordingly, the Company has recorded an adjustment to write down its research and development credit and state NOL deferred tax assets in the amount of $ 21.9 million and $ 19.0 million, respectively.

The write down of these deferred tax assets resulted in a corresponding adjustment to the Company’s valuation allowance.

The Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of the Company’s control.

These future ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

2 unchanged sentences

The Company evaluates positive and negative evidence of its ability to realize deferred tax assets at each reporting period.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023, which related primarily to the increases in NOLs, capitalized research and development costs, and research and development tax credit carryforwards, were as follows:

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2025 and 2024, which related primarily to the increases in NOLs, capitalized research and development costs, and research and development tax credit carryforwards, offset by decreases to deferred tax assets associated with research and development tax credits and state NOL carryforwards due to the Section 382 ownership change described above, were as follows:

Year Ended December 31,

8 unchanged sentences

The Company’s tax years are still open under statute from 2022 to the present.

All open years may be examined to the extent that tax credit or NOLs are used in future periods.

All open years may be examined to the extent that tax credits or NOLs are used in future periods.

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

1 unchanged sentence

Related Party Transaction

Anand Mehra, a member of the Company’s board of directors, purchased 666,666 shares of the Company’s common stock at a price per share of $ 2.25 in connection with a private placement in November 2024.

In November 2024, Anand Mehra, a member of the Company’s board of directors, purchased 666,666 shares of the Company’s common stock at a price per share of $ 2.25 in connection with a private placement.

Agreements Related to Intellectual Property

Exclusive License Agreement – Biosion, Inc.

In November 2024, the Company entered into an exclusive license agreement (the “Biosion Agreement”) with Biosion, pursuant to which it 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, the Company also entered into a collaboration agreement (the “CTTQ Agreement”) with Biosion and CTTQ, a licensee of bosakitug in Greater China.

In partial consideration of the rights and licenses under the Biosion Agreement and CTTQ Agreement, the Company, 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 the Warrants, and (iii) pay $ 6.2 million for the reimbursement of certain development costs and drug product material as set forth in the Biosion Agreement.

The Company 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.

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

In November 2024, the Company entered into an exclusive license agreement (the “Biosion Agreement”) with

Biosion, pursuant to which it 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, the Company also entered into a collaboration agreement (the “CTTQ Agreement”, and together with the Biosion Agreement, the ‘Biosion Agreements”) with Biosion and CTTQ, a licensee of bosakitug in Greater China.

As partial consideration for the rights and licenses under the Biosion Agreements, the Company, 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 the Warrants, and (iii) paid $ 6.2 million for the reimbursement of certain development costs and drug product material.

The Company 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.

In addition, the Company 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 the Company under the Biosion Agreement.

The Company 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.

The Company classified the Warrants within equity because they are indexed to the Company’s own stock.

License Agreement – Sun Pharmaceutical Industries, Inc.

3 unchanged sentences

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

Under the license agreement, Sun Pharma has paid the Company upfront and regulatory payments, and has agreed to pay the Company 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 the Company upfront, regulatory and commercial milestone payments, and has agreed to pay the Company 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.

The Company has separate contractual obligations under which the Company has agreed to pay to third parties a portion of the consideration it may receive under the license agreement.

The Company recognized $ 3.0 million and $ 15.0 million of licensing revenue during the years ended December 31, 2024 and 2023, respectively.

The Company 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 – Pediatrix Therapeutics, Inc.

2 unchanged sentences

Pediatrix has paid the Company an upfront payment, and has agreed to pay the Company 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 consideration received from Pediatrix is payable to the former Confluence equity holders as described below under “—Agreement and Plan of Merger - Confluence.”

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 - Confluence.”

License Agreement – Eli Lilly and Company

2 unchanged sentences

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 the Company upfront, regulatory and certain commercial milestone payments, and agreed to pay the Company 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.

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

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

In addition, Lilly has agreed to pay the Company 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.

the license agreement.

In July 2024, the Company entered into a royalty purchase agreement with OCM IP Healthcare Portfolio LP, an investment vehicle for Ontario Municipal Employees Retirement System (“OMERS”), pursuant to which the Company sold to OMERS a portion of the Company’s future royalty payments and the remaining anniversary milestones associated with the license to Lilly (see Note 12).

During the years ended December 31, 2024 and 2023, the Company recognized licensing revenue under this agreement of $ 13.2 million and $ 12.7 million, respectively, from Lilly, a portion of which was payable to third parties.

As of December 31, 2024, we recorded a receivable of $ 8.6 million in other current assets, which represents licensing revenue due to third parties.

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

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

As of December 31, 2024, a receivable of $ 8.6 million was recognized in other current assets, which represents licensing revenue that was due to third parties.

Asset Purchase Agreement – EPI Health, LLC

3 unchanged sentences

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, the Company sold all of its right, title and interest in its bankruptcy claims against EPI Health and wrote off the remaining reserved balance as it was deemed uncollectible.

Agreement and Plan of Merger – Confluence

3 unchanged sentences

In addition to the payments described above, if the Company sells, licenses or transfers any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, the Company 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.

As of December 31, 2024 and December 31, 2023, the balance of the Company’s contingent consideration liability was $ 8.7 million and $ 6.2 million, respectively (see Note 3).

As of December 31, 2025 and 2024, the balance of the Company’s contingent consideration liability was $ 11.0 million and $ 8.7 million, respectively (see Note 3).

Sale of Future Royalties

In July 2024, the Company entered into a royalty purchase agreement with OMERS.

Under the royalty purchase agreement, the Company sold to OMERS a portion of the Company’s future royalty payments and the remaining anniversary milestones associated with the Company’s existing license to Lilly relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata.

Under the royalty purchase agreement, the Company sold to OMERS a portion of the Company’s future royalty payments and the remaining anniversary payments associated with the Company’s existing license to Lilly relating to OLUMIANT® (baricitinib) for the treatment of alopecia areata.

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

3 unchanged sentences

The Company recognizes non-cash royalty income under the “units-of-revenue” method in the consolidated statements of operations and comprehensive loss.

The Company initially recorded $ 0.7 million as a receivable for royalties earned in the second quarter of 2024 and recorded $ 25.8 million as deferred income related to the sale of future royalties.

For the year ended December 31, 2024, the Company recognized $ 1.9 million of non-cash royalty income.

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

As of December 31, 2025, the current and non-current portions of the remaining deferred income recognized under the units-of revenue method were $ 3.9 million and $ 16.2 million, respectively.

Retirement Savings Plan

The Company has a defined contribution savings plan under Section 401(k) of the Internal Revenue Code.

This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis.

Company contributions to the plan may be made at the discretion

of the Company’s board of directors.

The Company has elected to match employee contributions to the 401(k) Plan up to 4 % of the employee’s earnings, subject to certain limitations.

Company contributions under the 401(k) Plan were $ 0.4 million and $ 0.7 million for the years ended December 31, 2024 and 2023, respectively.

Restructuring Charges

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

This action was taken in order to streamline operations, reduce costs and preserve capital.

The Company expensed the cost of cash severance payments, other benefits and annual bonus payments for certain terminated employees with retention periods more than the sixty-day minimum retention period over their respective service terms.

During the year ended December 31, 2025, the Company made cash severance payments of $ 0.2 million to impacted employees.

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

Of the $ 2.7 million of expenses incurred during the year ended December 31, 2024, $ 1.5 million, $ 1.0 million and $ 0.2 million were recorded in research and development expense, general and administrative expense and cost of revenue, respectively, in the consolidated statement of operations and comprehensive loss.

During the year ended December 31, 2023, the Company recorded a restructuring charge of $ 3.1 million which represents a one-time termination benefit for impacted employees with retention periods less than the minimum retention period, which was triggered immediately upon either terminating or giving notice to the impacted employees.

Of the $ 3.1 million of expenses incurred during the year ended December 31, 2023, $ 2.2 million, $ 0.9 million and $ 19 thousand were recorded in research and development expense , general and administrative expense and cost of revenue , respectively, in the consolidated statement of operations and comprehensive loss .

Segment Information

The Company has 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 and earns revenue through licensing of the Company’s intellectual property.

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

All intersegment revenue has been eliminated in the Company’s consolidated statement of operations.

All customers and revenue pertaining to the Company’s segments are based in the United States and all assets are held in the United States.

The Company does not report asset information by segment because it is not regularly provided to the Company’s chief executive officer, who is the Company’s CODM.

Since inception, the Company has incurred net losses and has an accumulated deficit of $ 902.9 million as of December 31, 2024.

As such, the CODM uses segment loss from operations for each segment in assessing segment performance by comparing the results of each segment to forecast.

All intercompany activity is eliminated in the intersegment elimination column in the tables below.

A reconciliation of operating loss to total consolidated loss before income taxes, for the years ended December 31, 2024 and 2023 is as follows:

(In thousands)

Year Ended December 31, 2024

Revenue from external customers

Intercompany revenue

Cost of revenue

Total Research and development project spend

Other research and development expense (1)

Total research and development

General and administrative

Revaluation of contingent consideration

In-process research and development

Segment operating loss

Non-segment general and administrative

Loss before income taxes

The Company operates and reports 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 the Company’s intellectual property and the provision of laboratory services.

All customers and revenue pertaining to the reportable segment are based in the United States.

When evaluating the Company’s financial performance, the CODM regularly reviews consolidated segment loss, total expense, and direct expenses by project.

The CODM allocates resources based on the Company’s available cash resources and forecasted expenditures on a consolidated basis.

Segment asset information regularly provided to the CODM is consistent with that reported on the consolidated balance sheet with particular emphasis on the Company’s available liquidity, including its cash, cash equivalents and marketable securities balances.

The following table presents the significant segment expenses and other segment items regularly reviewed by the CODM for the years ended December 31, 2025 and 2024:

(In thousands)

Year Ended December 31, 2023

Revenue from external customers

Intercompany revenue

Contract research

Licensing revenue

Total revenue

Cost of revenue

Total Research and development project spend

Other research and development expense (1)

Research and development:

Total research and development project expenses

Other research and development (2)

Total research and development

3 unchanged sentences

Segment operating loss

Non-segment general and administrative

Loss before income taxes

(1) Other segment items for the Therapeutics segment consist primarily of the following research and development expenses;

stock-based compensation, depreciation and amortization, regulatory.

Segment loss before income taxes

(1) Research and development expenses primarily consist of direct costs incurred to specific programs, including costs to conduct clinical trials and to manufacture clinical drug supply.

(2) Other research and development expenses primarily consist of indirect costs incurred in support of overall research and development activities and non-specific programs, including activities that benefit multiple programs, as well as stock-based compensation.

(3) General and administrative expenses consist principally of salaries and related costs, including stock-based compensation, for personnel in executive, administrative, finance and legal functions, as well as facility-related costs, professional fees, business development costs, insurance costs, and travel expenses.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data