What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 70 added, 65 removed, 322 unchanged (30% of the section changed)

22 unchanged sentences

Bosakitug demonstrated a strong pharmacodynamic profile and was generally well-tolerated with no serious adverse events reported.

In June 2025, we initiated a Phase 2 trial to investigate the efficacy, safety, tolerability, pharmacokinetics (“PK”) and pharmacodynamics (“PD”) of bosakitug compared to placebo in 109 patients with moderate to severe atopic dermatitis.

In June 2025, we initiated a Phase 2 trial to evaluate the efficacy, safety, tolerability, pharmacokinetics (“PK”) and pharmacodynamics (“PD”) of bosakitug compared to placebo in 109 patients with moderate to severe atopic dermatitis.

The primary endpoint is percent change from baseline in EASI at week 24.

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We expect to announce top-line data in the fourth quarter of 2026.

Bosakitug is also currently being studied in severe asthma, chronic rhinosinusitis with nasal polyps and moderate to severe chronic obstructive pulmonary disease in China by Chia Tai Tianqing Pharmaceutical Group, Co., Ltd.

CTTQ licenses bosakitug from Biosion in Greater China.

Our clinical focus for bosakitug will remain on dermatological immuno-inflammatory indications and further global (excluding Greater China) development in respiratory indications will be dependent on entering into potential partnerships.

ATI-2138, an Investigational, Oral Covalent ITK/JAK3 Inhibitor

ATI-2138 is a highly potent and selective novel investigational dual inhibitor of interleukin-2-inducible T cell kinase (“ITK”) and Janus kinase 3 (“JAK3”) for the potential treatment of T cell-mediated autoimmune diseases.

The unique dual pharmacology of ATI-2138 regulates T cell development and function both upstream (ITK) and downstream (JAK3), inhibiting both TCR-mediated and cytokine-mediated activation of T cells, which may provide a more potent and complete anti-inflammatory response.

In July 2025, we announced positive top-line results from our open-label, single-arm Phase 2a trial of ATI-2138 in patients with moderate to severe atopic dermatitis.

The trial met the primary and key secondary safety, efficacy, and pharmacodynamic endpoints.

ATI-2138 demonstrated near complete and sustained inhibition and occupancy of ITK.

Proteome and transcriptome lesional skin tape strip analyses showed significant reductions of multiple inflammatory pathways associated with ITK, including strong downregulation of Th2, Th17, and TCR pathways, along with the Th1 pathway and fibrosis-related markers.

In April 2026, we announced plans to conduct a phased multi-part Phase 2b basket study of ATI-2138 in the three most common subtypes of lichen planus:

erosive mucosal, cutaneous and lichen planopilaris.

Lichen planus is an unaddressed chronic, inflammatory, CD8 cytotoxic T-cell-driven interface dermatitis.

We expect to initiate Part A (erosive mucosal;

cutaneous) of this trial in the second half of 2026 and intend to initiate Part B (lichen planopilaris) soon thereafter.

We are also exploring the potential of ATI-2138 in additional indications that are relevant to the dual pharmacology and mechanism of action, including other inflammatory disorders.

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

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The PK profile showed dose proportionality across the pharmacologic dose range with an estimated half-life of approximately 45 days (based on accumulation ratio at 240 mg weekly dosing).

PD results demonstrated robust

target engagement, including complete and sustained inhibition through at least week 20 (four months post last dose) of ex vivo TSLP stimulated CCL17 (TARC) and at least week 12 of ex vivo IL-4 stimulated CCL17 in the 480 mg MAD cohort.

PD results demonstrated robust target engagement, including complete and sustained inhibition through at least week 20 (four months post last dose) of ex vivo TSLP stimulated CCL17 (TARC) and at least week 12 of ex vivo IL-4 stimulated CCL17 in the 480 mg MAD cohort.

These combined PK and PD characteristics support the potential for dosing intervals of up to every three months.

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We initiated a Phase 1b proof-of-concept trial with ATI-052 in atopic dermatitis in January 2026 and a Phase 1b proof-of-concept trial in asthma in February 2026, with top-line data from both studies expected in the second half of 2026.

We plan to initiate a Phase 2b program for ATI-052 initially targeting asthma in the fourth quarter of 2026, with atopic dermatitis as a potential second indication.

We plan to initiate a Phase 2b program for ATI-052, commencing with a Phase 2b trial in asthma in the fourth quarter of 2026.

We also expect to commence startup activities for a Phase 2b trial in atopic dermatitis and for a proof-of-concept trial in eosinophilic esophagitis.

Kinase Inhibitors

Modzatinib, an Investigational, Oral Covalent ITK/JAK3 Inhibitor

Modzatinib (ATI-2138) is a highly potent and selective novel investigational dual inhibitor of interleukin-2-inducible T cell kinase (“ITK”) and Janus kinase 3 (“JAK3”) for the potential treatment of T cell-mediated autoimmune diseases.

The unique dual pharmacology of modzatinib regulates T cell development and function both upstream (ITK) and downstream (JAK3), inhibiting both TCR-mediated and cytokine-mediated activation of T cells, which may provide a more potent and complete anti-inflammatory response.

In July 2025, we announced positive top-line results from our open-label, single-arm Phase 2a trial of modzatinib in patients with moderate to severe atopic dermatitis.

The trial met the primary and key secondary safety, efficacy, and pharmacodynamic endpoints.

Modzatinib demonstrated near complete and sustained inhibition and occupancy of ITK.

Proteome and transcriptome lesional skin tape strip analyses showed significant reductions of multiple inflammatory

pathways associated with ITK, including strong downregulation of Th2, Th17, and TCR pathways, along with the Th1 pathway and fibrosis-related markers.

In April 2026, we announced plans to conduct a phased multi-part Phase 2b basket study of modzatinib in the three most common subtypes of lichen planus:

erosive mucosal, cutaneous and lichen planopilaris.

Lichen planus is an unaddressed chronic, inflammatory, CD8 cytotoxic T-cell-driven interface dermatitis.

We expect to initiate Part A (erosive mucosal;

cutaneous) of this trial in the fourth quarter of 2026 and intend to initiate Part B (lichen planopilaris) soon thereafter.

We are also exploring the potential of modzatinib in additional indications that are relevant to the dual pharmacology and mechanism of action, including other inflammatory disorders.

ATI-9494, an Investigational, Oral Covalent ITK Inhibitor, and Other JAK-Sparing ITK Inhibitors

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

We expect to file an IND application for ATI-9494 in the second half of 2026.

We expect to file an IND application for ATI-9494 in the fourth quarter of 2026.

Discovery and Preclinical Programs

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Since our inception, we have incurred significant net losses.

Our net loss was $19.8 million for the three months ended March 31, 2026 and $64.9 million for the year ended December 31, 2025.

As of March 31, 2026, we had an accumulated deficit of $987.6 million.

Our net loss was $41.3 million for the six months ended June 30, 2026 and $64.9 million for the year ended December 31, 2025.

As of June 30, 2026, we had an accumulated deficit of $1.0 billion.

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

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As 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.

As of March 31, 2026, Warrants exercisable for 3,000,000 shares of our common stock remained unexercised.

As of June 30, 2026, Warrants exercisable for 3,000,000 shares of our common stock 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

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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 $0.9 million and $0.8 million of non-cash royalty income related to the OMERS agreement during the three months ended March 31, 2026 and 2025, respectively.

We recognized $1.0 million of non-cash royalty income related to the OMERS agreement for each of the three months ended June 30, 2026 and 2025, and $1.8 million for each of the six months ended June 30, 2026 and 2025.

License Agreement with Sun Pharmaceutical Industries, Inc.

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We may seek to monetize this asset.

We recognized $0.2 million of licensing revenue related to the Sun Pharma agreement during the three months ended March 31, 2026, a portion of which was payable to third parties.

We recognized $0.1 million and $0.3 million of licensing revenue related to the Sun Pharma agreement during the three and six months ended June 30, 2026, respectively, a portion of which was payable to third parties.

License Agreement with Pediatrix Therapeutics, Inc.

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

We recognized $1.3 million and $1.0 million of licensing revenue related to the Lilly agreement during the three months ended March 31, 2026 and 2025, respectively, all of which was payable to third parties.

We recognized $1.1 million and $1.3 million of licensing revenue related to the Lilly agreement during the three months ended June 30, 2026 and 2025, respectively, and $2.4 million and $2.3 million during the six months ended June 30, 2026 and 2025, respectively, all of which was payable to third parties.

Asset Purchase Agreement with EPI Health, LLC

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We may obtain unexpected results from our clinical trials or other development activities.

elect to discontinue, delay or modify the development, including clinical trials, of some product candidates or focus on others.

We may elect to discontinue, delay or modify the development, including clinical trials, of some product candidates or focus on others.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

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

Probability of success assumptions ranged between 21% and 40% at March 31, 2026.

Probability of success assumptions ranged between 21% and 40% at June 30, 2026.

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

As of March 31, 2026, the discount rate ranged between 7.5% and 9.3% depending on the year of each potential payment.

There was no change in the fair value of the contingent consideration liability during the three months ended March 31, 2026 due to offsetting impacts of the passage of time and changes in market rates.

As of June 30, 2026, the discount rate ranged between 7.5% and 9.5% depending on the year of each potential payment.

During the six months ended June 30, 2026, we recorded a charge to the contingent consideration liability of $0.3 million, which was primarily due to changes in estimated sales levels and the passage of time, partially offset by changes to market rates.

Results of Operations

Comparison of Three Months Ended March 31, 2026 and 2025

Three Months Ended March 31,

Comparison of Three and Six Months Ended June 30, 2026 and 2025

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Contract research

The increase in contract research revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was driven by higher overall hours billed, which was partially offset by a lower average billing rate.

The increase in licensing revenue during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

The decrease in contract research revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was driven by lower overall hours billed, which was partially offset by a higher average billing rate.

The increase in licensing revenue during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

Costs and Expenses

Cost of Revenue

The decrease in cost of revenue for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was driven by a decrease in personnel related costs.

The decrease in cost of revenue for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was driven by a decrease in personnel-related costs.

Research and Development

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Three Months Ended

Six Months Ended

(In thousands)

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Total research and development expenses

The decrease in expenses for bosakitug for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to lower product candidate manufacturing costs, partially offset by an increase in clinical development expenses associated with a Phase 2 trial in atopic dermatitis.

The increase in expenses for ATI-052 for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to an increase in clinical development expenses associated with a Phase 1a program, as well as Phase 1b programs in atopic dermatitis and asthma.

The decrease in expenses for ATI-2138 during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to a decrease in preclinical development expenses associated with toxicity

studies and clinical development expenses associated with a Phase 2a trial in atopic dermatitis, which was completed in July 2025.

The increase in expenses for ATI-9494 during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to an increase in product candidate manufacturing costs to support IND enabling studies.

The increase in discovery expenses during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to increased investment in JAK-sparing ITK inhibitors as we progress toward candidate selection.

The increase in expenses for bosakitug for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to an increase in clinical development expenses associated with a Phase 2 trial in atopic dermatitis, partially offset by lower product candidate manufacturing costs.

The increase in expenses for ATI-052 for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to an increase in product candidate manufacturing costs and clinical development expenses associated with a Phase 1a program, as well as Phase 1b programs in atopic dermatitis and asthma, partially offset by a decrease in preclinical development expenses associated with toxicity studies.

The decrease in expenses for modzatinib during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to a decrease in preclinical development expenses associated

with toxicity studies and clinical development expenses associated with a Phase 2a trial in atopic dermatitis, which was completed in July 2025, partially offset by an increase in product candidate manufacturing costs.

The increase in expenses for ATI-9494 during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to an increase in product candidate manufacturing costs and preclinical development expenses associated with toxicity studies to support IND enabling studies.

The increase in discovery expenses during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to increased investment in JAK-sparing ITK inhibitors.

Other research and development

The increase in other research and development expenses during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to consulting costs associated with our clinical programs during the three months ended March 31, 2026.

The increase in personnel expenses during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher headcount.

The increase in other research and development expenses during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to an increase in consulting costs associated with our clinical programs.

Personnel and stock-based compensation

The increase in personnel expenses during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to higher headcount.

The decrease in stock-based compensation expense during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was due to the full amortization of awards granted in prior periods.

General and Administrative

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Three Months Ended

Six Months Ended

(In thousands)

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Total general and administrative expenses

The increase in personnel expenses during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher headcount.

The increase in personnel expenses during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to higher headcount.

Professional and legal fees

The increase in professional and legal fees during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher compliance and business development-related expenses during the three months ended March 31, 2026.

The increase in licensing expense during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

The increase in professional and legal fees during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily due to higher compliance and business development-related expenses during the three and six months ended June 30, 2026.

The increase in licensing expense during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due to higher royalties earned under the Lilly and Sun Pharma license agreements.

Revaluation of Contingent Consideration

The revaluation of contingent consideration loss decreased during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 mainly due to changes in estimated sales levels and market rates during the three months ended March 31, 2026, which offset an increase to the liability due to the passage of time.

This resulted in no change to the contingent consideration liability during the three months ended March 31, 2026.

The revaluation of contingent consideration loss decreased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 mainly due to changes to the probability of success for certain product candidates and lower discount rates being applied to potential payments during the three and six months ended June 30, 2025.

Interest Income

Interest income decreased during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 due to a lower average investment balance and lower interest rates during the three months ended March 31, 2026.

Interest income decreased during the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 due to a lower average investment balance and lower interest rates during the three and six months ended June 30, 2026.

Non-cash Royalty Income

Non-cash royalty income was consistent during the three months ended March 31, 2026 and March 31, 2025 and includes income related to the proceeds from the sale of a portion of our OLUMIANT® royalty payments to OMERS in July 2024.

Non-cash royalty income was consistent during the three and six months ended June 30, 2026 and June 30, 2025 and 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

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

As of March 31, 2026, we had cash, cash equivalents and marketable securities of $190.8 million.

As of June 30, 2026, we had cash, cash equivalents and marketable securities of $170.6 million.

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

Subsequent to June 30, 2026, we raised aggregate gross proceeds of $40.2 million through our at-the-market facility.

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

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Sales of Common Stock Pursuant to At-The-Market Facility

In March 2026, we sold an aggregate of 18.4 million shares of our common stock for gross proceeds of $59.8 million, pursuant to an amended and restated sales agreement with Leerink Partners LLC and Cantor Fitzgerald & Co., as sales agents, dated February 27, 2025.

sales agents, dated February 27, 2025.

We paid selling commissions and other fees of $1.8 million in connection with the sales.

Cash and cash equivalents were $28.7 million as of March 31, 2026 compared to $20.0 million as of December 31, 2025.

We also had $162.1 million in short- and long-term marketable securities as of March 31, 2026 compared to $131.4 million as of December 31, 2025.

Cash and cash equivalents were $19.2 million as of June 30, 2026 compared to $20.0 million as of December 31, 2025.

We also had $151.5 million in short- and long-term marketable securities as of June 30, 2026 compared to $131.4 million as of December 31, 2025.

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

Three Months Ended

Six Months Ended

(In thousands)

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Cash flow related to operating activities was the result of:

Three Months Ended

Six Months Ended

(In thousands)

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Net cash used in operating activities

Net cash used in operating activities increased for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily as a result of higher net losses after adjusting for non-cash items during the three months ended March 31, 2026.

This increase was partially offset by a net 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 three months ended March 31, 2025.

Net cash used in operating activities increased for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 primarily as a result of higher net losses after adjusting for non-cash items during the six months ended June 30, 2026, as well as an increase in cash used for accounts payable and accrued expenses, after adjusting for the receipt and corresponding payment of a third-party milestone during the six months ended June 30, 2025.

Investing Activities

Cash flow related to investing activities was the result of:

Three Months Ended

Six Months Ended

(In thousands)

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Net cash (used in) provided by investing activities

The change in net cash used in investing activities for the three months ended March 31, 2026 compared to the net cash provided by investing activities for the three months ended March 31, 2025 resulted primarily from greater purchases of marketable securities and lower proceeds from sales and maturities of marketable securities during the three months ended March 31, 2026.

The change in net cash used in investing activities for the six months ended June 30, 2026 compared to the net cash provided by investing activities for the six months ended June 30, 2025 resulted primarily from greater purchases of

marketable securities and lower proceeds from sales and maturities of marketable securities during the six months ended June 30, 2026.

Financing Activities

Cash flow related to financing activities was the result of:

Three Months Ended

Six Months Ended

(In thousands)

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Net cash provided by (used in) financing activities

The change in net cash provided by financing activities for the three months ended March 31, 2026 compared to net cash used in financing activities for the three months ended March 31, 2025 was primarily due to proceeds from sales under our at-the-market sales agreement in March 2026.

The change in net cash provided by financing activities for the six months ended June 30, 2026 compared to net cash used in financing activities for the six months ended June 30, 2025 was primarily due to proceeds from sales under our at-the-market sales agreement in March 2026.

Funding Requirements

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

Our aggregate remaining lease payment obligation for these two spaces was $2.3 million as of March 31, 2026.

Our aggregate remaining lease payment obligation for these two spaces was $2.1 million as of June 30, 2026.

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 March 31, 2026, the balance of our contingent consideration liability was $11.0 million.

As of June 30, 2026, the balance of our contingent consideration liability was $11.3 million.

Exclusive License Agreement with Biosion;

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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-Q

Item 2. Management’s Discussion and Analysis