What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-06 · 155 added, 186 removed, 329 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

Current assets:

19 unchanged sentences

Preferred stock, $ 0.00001 par value;

10,000,000 shares authorized and no shares issued or outstanding at September 30, 2024 and December 31, 2023

10,000,000 shares authorized and no shares issued or outstanding at March 31, 2025 and December 31, 2024

Common stock, $ 0.00001 par value;

200,000,000 shares authorized at September 30, 2024 and December 31, 2023;

71,417,513 and 70,894,889 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

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

108,265,529 and 107,850,124 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid‑in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Contract research

13 unchanged sentences

Weighted average common shares outstanding, basic and diluted

Other comprehensive loss:

Other comprehensive income:

Unrealized gain (loss) on marketable securities, net of tax of $ 0

Total other comprehensive gain (loss)

Total other comprehensive income (loss)

Comprehensive loss

8 unchanged sentences

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

Unrealized loss on marketable securities

Stock-based compensation expense

Balance at March 31, 2024

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

Unrealized loss on marketable securities

Stock-based compensation expense

Balance at June 30, 2024

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

Unrealized gain on marketable securities

Stock-based compensation expense

Balance at September 30, 2024

Balance at March 31, 2025

Comprehensive

2 unchanged sentences

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

Unrealized gain on marketable securities

Stock-based compensation expense

Balance at March 31, 2023

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

Unrealized loss on marketable securities

Stock-based compensation expense

Balance at June 30, 2023

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

Unrealized loss on marketable securities

Stock-based compensation expense

Balance at September 30, 2023

Balance at March 31, 2024

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities :

11 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

Payment of deferred transaction consideration for in-licensed assets

Net cash provided by investing activities

Cash flows from financing activities:

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

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

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents at end of period

Supplemental disclosure of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

The accompanying notes are an integral part of these condensed consolidated financial statements.

6 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 drug 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 drug candidates that it may develop independently or in collaboration with third parties.

In addition to identifying and developing its novel drug 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 drug candidates.

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’s condensed 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.

As of September 30, 2024, the Company had cash, cash equivalents and marketable securities of $ 173.4 million and an accumulated deficit of $ 806.3 million.

As of March 31, 2025, the Company had cash, cash equivalents and marketable securities of $ 190.5 million and an accumulated deficit of $ 917.9 million.

Since inception, the Company has incurred net losses and negative cash flows from its operations.

There can be no assurance that profitable operations will ever be achieved, and, if achieved, will be sustained on a continuing basis.

In addition, development activities, including clinical and preclinical testing of the Company’s drug candidates, will require significant additional financing.

The future viability of the Company is dependent on its ability to successfully develop its drug candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations.

The Company will require additional capital to develop its drug candidates and to support its discovery efforts.

In addition, development activities, including clinical and preclinical testing of the Company’s product candidates, will require significant additional financing.

The future viability of the Company is dependent on its ability to successfully develop its product candidates and to generate revenue from identifying and consummating transactions with third-party partners to further develop, obtain marketing approval for and/or commercialize its development assets or to raise additional capital to finance its operations.

The Company will require additional capital to develop its product candidates and to support its discovery efforts.

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 drug candidates, it may need to substantially curtail planned operations.

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.

The Company’s failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.

4 unchanged sentences

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of September 30, 2024, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated statement of stockholders’ equity for the three and nine months ended September 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2024 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2024, the results of its operations and comprehensive loss for the three and nine months ended September 30, 2024 and 2023, its changes in stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and its cash flows for the nine months ended September 30, 2024 and 2023.

The accompanying condensed consolidated balance sheet as of March 31, 2025, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2025 and 2024, and the condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (“Annual Report”) and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2025, the results of its operations and comprehensive loss for the three months ended March 31, 2025 and 2024, its changes in stockholders’ equity for the three months ended March 31, 2025 and 2024 and its cash flows for the three months ended March 31, 2025 and 2024.

The condensed consolidated balance sheet data as of December 31, 2024 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”).

The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2024 and 2023 are unaudited.

The results for the three and nine months ended September 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period.

The financial data and other information disclosed in these notes related to the three months ended March 31, 2025 and 2024 are unaudited.

The results for the three months ended March 31, 2025 are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim periods, or any future year or period.

The unaudited interim financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the SEC.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024.

Basis of Presentation

2 unchanged sentences

All intercompany transactions have been eliminated.

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 condensed consolidated statement of operations.

Use of Estimates

2 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.

2 unchanged sentences

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024.

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2024 included in the Company’s Annual Report.

There have been no changes to the Company’s existing significant accounting policies from those disclosed in the Annual Report.

5 unchanged sentences

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 condensed consolidated statement of operations.

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.

Probability of success assumptions ranged between 17 % and 40 % at September 30, 2024.

Probability of success assumptions ranged between 17 % and 40 % at March 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.

13 unchanged sentences

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.

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

7 unchanged sentences

Discontinued Operations

As of September 30, 2024 and December 31, 2023, the Company had $ 2.2 million in discontinued operations reported as other current liabilities in the Company’s consolidated balance sheet, related to discontinued commercial products.

As of March 31, 2025 and December 31, 2024, the Company had $ 2.2 million in discontinued operations reported as other current liabilities in the Company’s condensed consolidated balance sheet, related to discontinued commercial products.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

This ASU becomes effective for annual periods beginning in 2024 and interim periods in 2025.

The Company is assessing the impact of this ASU and upon adoption expects that any impact would be limited to additional segment expense disclosures in the footnotes to the Company’s consolidated financial statements.

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.

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

The Company is currently assessing the impact of this ASU.

In December 2023, the FASB issued ASU No.

1 unchanged sentence

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 January 1, 2025.

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

The Company is currently assessing the impact of this ASU.

1 unchanged sentence

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

September 30, 2024

March 31, 2025

(In thousands)

9 unchanged sentences

Total liabilities

As of September 30, 2024 and December 31, 2023, 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 September 30, 2024 consisted of corporate debt, asset-backed debt, foreign government agency debt, and U.S.

government and government agency debt securities, which were all 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.

As of March 31, 2025 and December 31, 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 March 31, 2025 and 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 all valued based upon Level 2 inputs.

1 unchanged sentence

These quoted prices are obtained by the Company with the assistance of a third-party pricing service based on available trade, bid and other observable market data for identical securities.

During the three and nine months ended September 30, 2024 and 2023, there were no transfers into or out of Level 3.

The overall $ 3.8 million increase in the fair value of the contingent consideration liability during the nine months ended September 30, 2024 was primarily due to changes in estimated sales levels, changes to the probability of success for certain drug candidates, and the passage of time.

As of September 30, 2024 and December 31, 2023, the fair value of the Company’s available-for-sale marketable securities by type of security was as follows:

September 30, 2024

During the three months ended March 31, 2025 and 2024, there were no transfers into or out of Level 3.

The overall $ 0.3 million increase in the fair value of the contingent consideration liability during the three months ended March 31, 2025 was primarily due to the passage of time.

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

March 31, 2025

(In thousands)

1 unchanged sentence

Corporate debt securities (1)

Asset-backed debt securities

Commercial paper

Foreign government agency debt securities

1 unchanged sentence

Total marketable securities

(1) Included in Corporate debt securities is $ 40.5 million with maturity dates between one and two years .

(1) Included in Corporate debt securities is $ 49.6 million with maturity dates between one and three years .

(2) Included in U.S.

government and government agency debt securities is $ 5.1 million with maturity dates between one and two years .

government and government agency debt securities is $ 35.6 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 .

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

Property and Equipment, Net

Property and equipment, net consisted of the following:

September 30,

(In thousands)

6 unchanged sentences

Property and equipment, net

Depreciation expense was $ 0.2 million for each of the three months ended September 30, 2024 and 2023, and $ 0.6 million for each of the nine months ended September 30, 2024 and 2023.

Depreciation expense was $ 0.1 million and $ 0.2 million for the three months ended March 31, 2025 and 2024, respectively.

Accrued Expenses

Accrued expenses consisted of the following:

September 30,

(In thousands)

1 unchanged sentence

Research and development expenses

Deferred transaction consideration

Licensing expenses

4 unchanged sentences

Preferred Stock

As of September 30, 2024 and December 31, 2023, the Company’s amended and restated certificate of incorporation (the “Charter”) authorized the Company to issue 10,000,000 shares of undesignated preferred stock.

There were no shares of preferred stock outstanding as of September 30, 2024 or December 31, 2023.

As of September 30, 2024 and December 31, 2023, the Company’s Charter authorized the Company to issue 200,000,000 shares of $ 0.00001 par value common stock.

There were 71,417,513 and 70,894,889 shares of common stock issued and outstanding as of September 30, 2024 and December 31, 2023, respectively.

As of March 31, 2025 and December 31, 2024, the Company’s amended and restated certificate of incorporation (the “Charter”) authorized the Company to issue 10,000,000 shares of undesignated preferred stock.

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

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

There were 108,265,529 and 107,850,124 shares of common stock issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to any preferential dividend rights of any series of preferred stock that may be outstanding.

No dividends have been declared through September 30, 2024.

Sales of Common Stock Pursuant to 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 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.

No dividends have been declared through March 31, 2025.

In November 2024, the Company issued warrants to Biosion, Inc.

(“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”).

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.

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.

Stock-Based Awards

2024 Inducement Plan

In November 2024, the Company’s board of directors adopted the 2024 Inducement Plan (the “2024 Inducement Plan”).

The 2024 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules.

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, restricted stock unit (“RSU”) awards, 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.

As of March 31, 2025, 939,000 shares remained available for grant under the 2024 Inducement Plan.

The Company had 825,000 stock options and 236,000 RSUs outstanding as of March 31, 2025 under the 2024 Inducement Plan.

2015 Equity Incentive Plan

2 unchanged sentences

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, restricted stock unit (“RSU”) awards, performance stock awards, cash-based awards, and other stock-based awards.

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 will automatically increase on January 1 of each year ending 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 31st 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 January 1, 2024, the number of shares of common stock that may be issued under the 2015 Plan was automatically increased by 2,835,795 shares.

As of September 30, 2024, 4,440,792 shares remained available for grant under the 2015 Plan.

The Company had 5,778,988 stock options and 3,071,776 RSUs outstanding as of September 30, 2024 under the 2015 Plan.

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 31st of the preceding calendar year or (ii) an amount determined by the Company’s board of directors.

On 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.

As of March 31, 2025, 4,010,941 shares remained available for grant under the 2015 Plan.

The Company had 9,163,298 stock options and 3,174,857 RSUs outstanding as of March 31, 2025 under the 2015 Plan.

2017 Inducement Plan

1 unchanged sentence

The 2017 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules.

The Company had 329,000 stock options outstanding as of September 30, 2024 under the 2017 Inducement Plan.

The Company had 343,500 stock options outstanding as of March 31, 2025 under the 2017 Inducement Plan.

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.

2 unchanged sentences

Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan.

The Company had 337,244 stock options outstanding as of September 30, 2024 under the 2012 Plan.

The Company had 218,404 stock options outstanding as of March 31, 2025 under the 2012 Plan.

Stock Option Valuation

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the nine months ended September 30, 2024 and 2023 were as follows:

Nine Months Ended

September 30,

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended

Risk-free interest rate

5 unchanged sentences

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2024:

The following table summarizes stock option activity for the three months ended March 31, 2025:

(In thousands, except share and per share data and years)

1 unchanged sentence

Forfeited and cancelled

( 1,913,375 )

Outstanding as of September 30, 2024

Options vested and expected to vest as of September 30, 2024

Options exercisable as of September 30, 2024

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2024 was $ 0.86 per share.

Outstanding as of March 31, 2025

Options vested and expected to vest as of March 31, 2025

Options exercisable as of March 31, 2025

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2025 was $ 1.78 per share.

Restricted Stock Units

The following table summarizes RSU activity for the nine months ended September 30, 2024:

The following table summarizes RSU activity for the three months ended March 31, 2025:

(In thousands, except share and per share data)

1 unchanged sentence

Forfeited and cancelled

Outstanding as of September 30, 2024

Outstanding as of March 31, 2025

Stock-Based Compensation

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

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

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

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Total stock-based compensation expense

As of September 30, 2024, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 11.5 million and $ 9.3 million, respectively, which is expected to be recognized over weighted average periods of 2.1 years and 1.9 years, respectively.

As of March 31, 2025, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 14.9 million and $ 9.7 million, respectively, which is expected to be recognized over weighted average periods of 2.9 years and 2.5 years, respectively.

Net Loss per Share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except for share and per share data)

3 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.

The following table presents potential shares of common stock excluded from the calculation of diluted net loss per share for the nine months ended September 30, 2024 and 2023.

All share amounts presented in the table below represent the total number outstanding as of September 30, 2024 and 2023.

September 30,

For the three months ended March 31, 2025, 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.

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

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

Three Months Ended

Options to purchase common stock

Restricted stock unit awards

Restricted stock units

Total potential shares of common stock

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.

4 unchanged sentences

Supplemental balance sheet information related to operating leases is as follows:

September 30,

(In thousands)

4 unchanged sentences

Total operating lease liabilities

Amortization expense related to operating lease right-of-use assets and accretion of operating lease liabilities totaled $ 0.1 million and $ 0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $ 0.4 million and $ 0.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Amortization expense related to operating lease right-of-use assets and accretion of operating lease liabilities totaled $ 0.1 million for each of the three months ended March 31, 2025 and 2024.

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.

As partial consideration for 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.

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.

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 an upfront payment, and has agreed to pay the Company 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 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.

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.

Upon execution of the agreement, the Company received an upfront payment of $ 15.0 million from Sun Pharma, a portion of which was payable to third parties.

We recognized $ 3.0 million of licensing revenue during each of the three and nine months ended September 30, 2024.

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 the caption “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 an upfront payment, and 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.

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 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.

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 11).

The Company recognized $ 0.7 million and $ 8.3 million of licensing revenue during the three months ended September 30, 2024 and 2023, respectively, and $ 4.6 million and $ 10.7 million during the nine months ended September 30, 2024 and 2023, respectively.

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

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 payments associated with the license to Lilly (see Note 11).

The Company recognized $ 1.0 million of licensing revenue during the three months ended March 31, 2025, all of which was payable to third parties.

The Company recognized $ 1.7 million of licensing revenue during the three months ended March 31, 2024, a portion of which was payable to third parties.

Asset Purchase Agreement – EPI Health, LLC

1 unchanged sentence

In July 2023, EPI Health filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

Through the bankruptcy process, EPI Health and its parent company, Novan, Inc., sold the RHOFADE assets to a third party, which excluded the Company’s asset

purchase agreement with EPI Health and the outstanding amounts due.

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

Through the bankruptcy process, EPI Health and its parent company, Novan, Inc., sold the RHOFADE assets to a third party, which excluded the Company’s asset purchase agreement with EPI Health and the outstanding amounts due.

The sale was approved by the bankruptcy court in

September 2023.

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

1 unchanged sentence

In August 2017, the Company entered into an Agreement and Plan of Merger, pursuant to which it acquired Confluence (the “Confluence Agreement”).

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

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

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

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

In addition to the payments described above, if 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 September 30, 2024 and December 31, 2023, the balance of the Company’s contingent consideration liability was $ 10.0 million and $ 6.2 million, respectively (see Note 3).

As of March 31, 2025 and December 31, 2024, the balance of the Company’s contingent consideration liability was $ 9.0 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 terms of the royalty purchase agreement, the Company received an upfront payment of $ 26.5 million and is eligible to receive up to an additional $ 5.0 million based on the achievement of certain sales milestones for OLUMIANT in 2024.

In exchange for these payments, OMERS acquired a portion of the royalty payable by Lilly to the Company for worldwide net sales of OLUMIANT for the treatment of alopecia areata from April 1, 2024 through the remainder of the royalty term under the Company’s license agreement with Lilly, and 100 % of the remaining anniversary milestone payments payable by Lilly to the Company under the license agreement.

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.

In exchange, OMERS acquired a portion of the royalty payable by Lilly to the Company for worldwide net sales of OLUMIANT for the treatment of alopecia areata from April 1, 2024 through the remainder of the royalty term under the Company’s license agreement with Lilly, and 100 % of the remaining anniversary milestone payments payable by Lilly to the Company under the license agreement.

The Company evaluated the arrangement and concluded that the proceeds from the sale of future royalties should be recorded as deferred income on the condensed consolidated balance sheet, as the criteria for debt classification were not met in accordance with ASC Topic 470.

1 unchanged sentence

The Company recognizes non-cash royalty income under the “units-of-revenue” method in the condensed 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 each of the three and nine months ended September 30, 2024, the Company recognized $ 0.9 million of non-cash royalty income.

As of September 30, 2024, the current and non-current portions of the remaining deferred income recognized under the units-of-revenue method were $ 3.8 million and $ 21.2 million, respectively.

The Company did no t record a federal or state income tax benefit for losses incurred during the three and nine months ended September 30, 2024 and 2023.

For the three months ended March 31, 2025, the Company recognized $ 0.8 million of non-cash royalty income.

As of March 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 $ 19.2 million, respectively.

As of December 31, 2024, the current and non-current portions of the remaining deferred income recognized under the units-of revenue method were $ 3.9 million and $ 20.0 million, respectively.

The Company did no t record a federal or state income tax benefit for losses incurred during the three months ended March 31, 2025 and 2024.

The Company concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in recording a full valuation allowance during those periods.

Restructuring Charges

In December 2023, the Company’s board of directors approved a reduction of the Company’s workforce by approximately 46 %, which was substantially completed as of June 30, 2024.

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

As a result, the Company terminated certain employees (“terminated employees”) and gave notice to additional employees (“noticed employees”) who were asked to provide transition services through termination dates ranging between one to thirteen months from the date notice was given.

The terminated employees were entitled to receive cash severance payments and other benefits.

The noticed employees are entitled to receive cash severance payments and other benefits, which are contingent upon providing additional services to the Company.

During the three and nine months ended September 30, 2024, the Company recognized severance expense of $ 26 thousand and $ 2.6 million, respectively.

During the nine months ended September 30, 2024, the Company made cash severance payments of $ 5.2 million to impacted employees.

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.

During the three months ended March 31, 2025, the

Company made cash severance payments of $ 0.2 million to impacted employees.

During the three months ended March 31, 2024, the Company recognized severance expense of $ 2.5 million and made cash severance payments of $ 3.0 million to impacted employees.

Segment Information

2 unchanged sentences

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.

Corporate and other includes general and administrative expenses as well as eliminations of intercompany transactions.

The Company does not report balance sheet information by segment since it is not reviewed by the chief operating decision maker, and all of the Company’s tangible assets are held in the United States.

The Company’s results of operations by segment for the three and nine months ended September 30, 2024 and 2023 are summarized in the tables below:

(In thousands)

Three Months Ended September 30, 2024

Revenue from external customers

Intercompany revenue

Cost of revenue

Research and development

General and administrative

Revaluation of contingent consideration

Restructuring expense

Loss from operations

(In thousands)

Three Months Ended September 30, 2023

Revenue from external customers

Intercompany revenue

Cost of revenue

Research and development

General and administrative

Revaluation of contingent consideration

Loss from operations

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

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 chief operating decision maker (“CODM”).

Since inception, the Company has incurred net losses and has an accumulated deficit of $ 917.9 million as of March 31, 2025.

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 three months ended March 31, 2025 and 2024 is as follows:

(In thousands)

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Revenue from external customers

2 unchanged sentences

Research and development:

Total Research and development project spend

Other research and development expense (1)

Total research and development

General and administrative

Revaluation of contingent consideration

Restructuring expense

Loss from operations

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, and regulatory.

(In thousands)

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Revenue from external customers

2 unchanged sentences

Research and development:

Total Research and development project spend

Other research and development expense (1)

Total research and development

General and administrative

Revaluation of contingent consideration

Loss from operations

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, and regulatory.

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 1. Financial Statements