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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-13 · 134 added, 133 removed, 149 unchanged (64% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read together with the condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Report.

The following discussion and analysis of financial condition and results of operations should be read together with the consolidated financial statements and the related notes and other financial information included elsewhere in this Report.

Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties.

As a result of many factors, such as those set forth in the sections of this Report captioned “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements”, actual results may differ materially from those anticipated in these forward-looking statements.

Unless the context otherwise requires, references to “we”, “us”, “our” and “the Company” refer to the business and operations of AEON Biopharma, Inc.

and its consolidated subsidiaries prior to the Merger (“Old AEON” or the “Predecessor”) and to AEON Biopharma, Inc.

(“AEON”) following the consummation of the Merger.

On December 12, 2022, Old AEON and Priveterra Acquisition Corp.

(“Priveterra”), a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more target businesses, entered into a Business Combination and Merger Agreement (the “Business Combination Agreement”).

On July 21, 2023, the parties consummated the transactions contemplated by the Business Combination Agreement (collectively referred to as the “Merger”).

In connection with the closing of the Merger (the “Closing”), Priveterra changed its name from Priveterra Acquisition Corp.

to AEON Biopharma, Inc.

Priveterra was deemed the accounting acquirer in the Merger based on an analysis of the criteria outlined in Accounting Standards Codification 805, Business Combinations.

Old AEON was deemed to be the predecessor entity based on an analysis of the criteria outlined in the Accounting Standards Codification 805, Business Combinations.

Accordingly, the historical financial statements of Old AEON became the historical financial statements of the combined company upon the consummation of the Merger.

As a result, the financial statements included in this report reflect (i) the historical operating results of Old AEON prior to the Merger;

and (ii) the combined results of the Company following the Closing.

The accompanying financial information includes a predecessor period, which includes the periods through July 21, 2023 concurrent with the Merger, and the successor period starting from July 22, 2023 through the date of this report.

A black-line between the Successor and Predecessor periods has been placed in the condensed consolidated financial statements and in the tables to the notes to the statements to highlight the lack of comparability between these two periods and differentiate the cut-off of these periods.

We are a clinical stage biopharmaceutical company focused on developing our botulinum toxin complex, prabotulinumtoxinA injection (“ABP-450”), for debilitating medical conditions, with an initial focus on the neurosciences market.

We plan to develop and seek regulatory approval of ABP-450 as a biosimilar product in the United States through submission of a Biologics License Application, or BLA, under Section 351(k) of the Public Health Service Act, or a Section 351(k) BLA, with the goal of addressing the estimated $3.0 billion global therapeutic botulinum toxin market , which is projected to grow to $4.4 billion in 2027, according to the Decision Resources Group Therapeutic Botulinum Toxin Market Analysis Global as of 2021 .

Unless the context otherwise requires, references to “we”, “us”, “our,” “AEON” and “the Company” refer to the business and operations of AEON Biopharma, Inc.

and its consolidated subsidiaries.

Company Overview

We are a clinical stage biopharmaceutical company focused on developing our botulinum toxin complex, prabotulinumtoxinA injection (“ABP-450”), for debilitating medical conditions.

We plan to develop and seek regulatory approval of ABP-450 as a biosimilar product in the United States through submission of a Biologics License Application, or BLA, under Section 351(k) of the Public Health Service Act, or a Section 351(k) BLA, with the goal of addressing the global therapeutic botulinum toxin market, which we estimate to be at least $3.3 billion based on Abbvie’s reported global revenues for its therapeutic Botox segment for the fiscal year ended 2024.

ABP-450 is the same botulinum toxin complex that is currently approved as a biosimilar in Mexico and India and, in the U.S.

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We held an initial meeting with the FDA in the third quarter of 2024 during which we aligned with the FDA on next steps to develop a Botox biosimilar.

We anticipate commencing comparative analytic studies in the fourth quarter of 2024 and preparing for a potential Biosimilar Biological Product Development (“BPD”) meeting with the FDA in 2025 to review the results from the studies.

We commenced analytical studies in the fourth quarter of 2024 to prepare for a potential Biosimilar Biological Product Development (“BPD”) Type 2a meeting with the FDA in the second half of 2025 to review the results from the studies.

Botulinum toxins have proven to be a highly versatile therapeutic biologic, with over 230 potential therapeutic uses documented in published scientific literature and twelve approved therapeutic indications in the United States.

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Topline data from the Phase 2 cervical dystonia study, released in September 2022, showed that ABP-450 met all primary endpoints and a number of other key secondary endpoints, supporting the further development of ABP-450 in reducing signs and symptoms associated with cervical dystonia.

We may commence a Phase 3 study in cervical dystonia pending availability of capital resources, the results of the comparative analytical studies and discussions with the FDA in a Biological Product Development meeting.

We have never been profitable from operations and, as of September 30, 2024, we had an accumulated deficit of $433.7 million.

We may commence a Phase 3 study in cervical dystonia pending the results of the comparative analytical studies and discussions with the FDA in a Biological Product Development meeting.

In December 2020, we initiated a preclinical gastroparesis study with 42 primates receiving multiple injections of ABP-450 across four dose ranges.

The objective of this preclinical study was to characterize the safety and toxicology prior to entering human studies.

We completed this preclinical study in January 2022.

Following the preclinical study, we submitted an IND to the FDA and received a letter in May 2022 confirming that the IND-opening Phase 2a clinical study may proceed.

We continue to evaluate various pathways to most efficiently advance this clinical development program .

Additionally, we have an ongoing preclinical study in rats designed to provide IND supporting safety and efficacy data.

ABP-450 is injected into the stellate ganglion using ultrasound guidance to assess the effect on the sympathetic nervous pathway, which may inform us whether ABP-450 has the potential for utility across a broad portfolio of neuropsychiatric disorders, including post-traumatic stress disorder (PTSD).

We may initiate other preclinical studies from time to time to evaluate the potential safety and efficacy of ABP-450 in other disorders .

We license ABP-450 from Daewoong, a South Korean pharmaceutical manufacturer, and have exclusive development and distribution rights for therapeutic indications in the United States, Canada, the European Union, the United Kingdom, and certain other international territories.

Daewoong licenses the same 900 kDa botulinum toxin to Evolus for cosmetic indications, which Evolus markets and sells under the name Jeuveau in the United States and Nuceiva in Canada and the European Union.

Prior to licensing the botulinum toxin complex to Evolus, Daewoong conducted a broad preclinical development program for ABP-450 that was primarily focused on safety to support any clinical indication.

Subsequently, Evolus completed a comprehensive clinical development program of the same botulinum toxin complex and has received approval from regulatory authorities in the United States, the European Union and Canada to market and sell Jeuveau in the United States and Nuceiva in Canada and the European Union for the temporary improvement in the appearance of moderate to severe glabellar, or frown, lines in adults.

Over 2,100 adult subjects with moderate to severe glabellar lines at maximum frown participated in Evolus’ clinical development program, and each of Evolus’ Phase 3 clinical studies successfully met their respective primary safety and efficacy endpoints.

While none of these preclinical or clinical programs specifically contemplated any therapeutic use of ABP-450, given that the FDA’s regulatory requirements are generally the same for the cosmetic or therapeutic use of a toxin, we believe that the positive data derived from these preclinical and clinical studies will support the clinical development and anticipated future safety labeling of ABP-450 for migraine and cervical dystonia, in addition to other indications, at all contemplated dose ranges .

We plan to pursue approval of a BLA under Section 351(k) that exclusively contemplates therapeutic indications for ABP-450, which we believe could improve provider reimbursement for ABP-450, if approved.

Existing botulinum toxins, including Botox, are approved under a single BLA for both therapeutic and cosmetic indications.

As a result, other botulinum toxins are required to include the sales prices of both therapeutic and cosmetic botulinum toxin sales when calculating the average selling price, or ASP, that is used to determine the reimbursement amount physicians receive for therapeutic usage.

The inclusion of a lower cosmetic sales price in the calculation of ASP can cause physicians to lose money when treating patients with existing botulinum toxins and also creates a deterrent to providing payors and/or providers with rebates or other financial incentives.

If we are successful in obtaining a BLA under Section 351(k) for therapeutic indications of ABP-450, the ASP for ABP-450 would be calculated using only therapeutic sales, which we believe would facilitate consistent and favorable reimbursement to physicians when they choose to use ABP-450 for therapeutic treatments, as well as the ability to provide payors and/or providers with rebates and other financial incentives.

This pricing model would be unique to us within the current therapeutic neurotoxin market, and we believe it would allow physicians to provide treatment with ABP-450 at a more competitive or the same net price as the market leader after rebates and discounts .

We believe ABP-450 could have therapeutic applications in a broad range of debilitating medical conditions, and we intend to continue to leverage our product assessment screening process to identify additional indications for future development.

Our management team possesses significant and relevant experience in the botulinum toxin industry in both drug development and commercialization, and we believe they are highly qualified to successfully develop and commercialize ABP-450 to enhance the lives of patients that suffer from debilitating medical conditions .

We have never been profitable from operations and, as of March 31, 2025, we had an accumulated deficit of $422.5 million.

We have never generated revenue from ABP-450.

Losses from operations, excluding the impact of changes in fair value of the contingent consideration and write-off of IPR&D, were $4.0 million, $22.2 million, $29.6 million, $2.6 million and $11.7 million for the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

Consolidated net (loss) income were $(6.2) million, $39.9 million, $(60.7) million, $(27.7) million and $(297.7) million for the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

As of September 30, 2024, we had $0.5 million in cash and cash equivalents.

We have concluded that we do not have sufficient cash to fund our operations for 12 months from the date of our financial statements without additional financing, and as a result, there is substantial doubt about our ability to continue as a going concern.

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We expect to continue to incur significant expenses and increasing net operating losses for the foreseeable future as we seek regulatory approval, prepare for and, if approved, proceed to commercialization of ABP-450.

We utilize clinical research organizations (“CROs”), to carry out our clinical development and we do not yet have a sales organization.

We expect to incur significant expenses related to building our commercialization infrastructure, including marketing, sales and distribution functions, inventory build prior to commercial launch, training and deploying a specialty sales force and implementing a targeted marketing campaign.

Executive Overview

On March 24, 2025, the Company was notified by Marc Forth that he will be resigning as the Company’s President and Chief Executive Officer in order to pursue another opportunity, effective April 4, 2025.

Forth will remain a member of the Company’s board of directors (the “Board”), where he will continue to advise Company management and provide strategic guidance.

The Board named Jost Fischer, the current Chairman of the Board, to serve as Interim CEO following Mr.

Forth’s departure while the Board identifies Mr.

Forth’s successor.

On April 19, 2025, the Board appointed Robert Bancroft as the Company’s Principal Executive Officer, President, Chief Executive Officer and member of the Board, effective as of April 29, 2025.

Bancroft will report directly to the Board.

Liquidity and Capital Resources and Going Concern

As disclosed further below in the section titled “ Liquidity and Capital Resources ”, we have incurred operating losses and negative cash flows from operating activities since inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable.

As of September 30, 2024 (Successor), we had reported cash and cash equivalents of $0.5 million and an accumulated deficit of $433.7 million.

As of March 31, 2025, we had reported cash and cash equivalents of $10.4 million and an accumulated deficit of $422.5 million.

As a result of these conditions, management has concluded that substantial doubt about our ability to continue as a going concern exists as conditions and events, considered in the aggregate, indicate that it is probable that we will be unable to meet our obligations as they become due within one year after the date that the financial statements included in this Report are issued.

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plans and secure sources of financing and ultimately attain profitable operations.

Description of the Merger, Forward Purchase Agreements and Convertible Note Subscription

At the effective time of the Merger (the “Effective Time”), each outstanding share of Old AEON common stock (on an as-converted basis after taking into effect the conversion of the outstanding warrants of Old AEON exercisable for shares of Old AEON preferred stock, the conversion of the shares of Old AEON preferred stock into Old AEON common stock in accordance with the governing documents of Old AEON as of the Effective Time, the conversion of the outstanding convertible notes of Old AEON into Old AEON common stock in accordance with the terms of such convertible notes and after giving effect to the issuance of Old AEON common stock in connection with the merger of ABP Sub, Inc.

with and into Old AEON) issued and outstanding immediately prior to the Effective Time converted into the right to receive approximately 2.328 shares of our Class A common stock, par value $0.0001 per share (“common stock”).

In addition, each share of Priveterra Class B common stock (“Founder Shares”), par value $0.0001 per share, issued and outstanding immediately prior to the Effective Time converted into one share of common stock (of which 3,450,000 Founder Shares are subject to certain vesting and forfeiture conditions).

Forward Purchase Agreements

In addition, Priveterra entered into separate Forward Purchase Agreements with each of ACM ARRT J LLC (“ACM”), and Polar Multi-Strategy Master Fund (“Polar”), on June 29, 2023, for an OTC Equity Prepaid Forward Transaction (each, a “Forward Purchase Agreement” and together, the “Forward Purchase Agreements”).

The Forward Purchase Agreements provided that each of Polar and ACM would separately be paid directly an aggregate cash amount (the “Prepayment Amount”), which was equal to an aggregate of $66.7 million based on the product of (i) 6,275,000 shares of Priveterra Class A common stock (the “Additional Shares”) and (ii) the redemption price per share of $10.63.

In satisfaction of the Prepayment Amount, on July 21, 2023, $66.7 million was obligated to be paid from the purchase of the Additional Shares by each of ACM and Polar pursuant to the terms of certain FPA Funding Amount PIPE Subscription Agreements between Priveterra and each of ACM and Polar.

On March 18, 2024, we entered into separate termination agreements with each of ACM and Polar terminating their respective Forward Purchase Agreements (each, an “FPA Termination Agreement” and together, the “FPA Termination Agreements”).

The FPA Termination Agreement with ACM provides that (i) ACM will retain 3,100,000 previously issued Additional Shares held by ACM pursuant to its respective Forward Purchase Agreement and subscription agreement (the “ACM Retained Shares”) and (ii) we will be subject to up to $1.5 million in liquidated damages, subject to certain conditions set forth in ACM’s respective FPA Termination Agreement.

The Termination Agreement with Polar provides that (i) Polar will retain 3,175,000 previously issued Additional Shares held by Polar pursuant to its respective Forward Purchase Agreement and subscription agreement (the “Polar Retained Shares”) and (ii) we will be subject to up to $1.5 million in liquidated damages, subject to certain conditions set forth in Polar’s respective FPA Termination Agreement.

The potential aggregate liquidated damages of up to $3.0 million was accrued as a liability in the first quarter of 2024.

However, since each FPA provider elected to remove its respective shares from the registration statement, the Company released the liability in the second quarter of 2024.

We did not have access to the Prepayment Amount at any time following the Closing and, pursuant to the FPA Termination Agreements, ACM and Polar will retain the Prepayment Amount in full.

The terminated access to the Prepayment Amount may adversely affect our liquidity and capital needs.

In connection with the negotiation of the Forward Purchase Agreements (and FPA Termination Agreements) and related subscription agreements, J.V.B.

Financial Group, LLC, acting through its Cohen & Company Capital Markets division (“CCM”),

provided certain consulting services, initially to Priveterra and subsequently to AEON, pursuant to an engagement letter, by and between AEON and CCM, dated July 27, 2023 and amended July 1, 2024 (the “CCM Engagement Letter”).

On July 5, 2024, pursuant to the CCM Engagement Letter, we issued 400,000 shares of our common stock to CCM.

Notice of Noncompliance

On February 3, 2025, the Company received a written notice of non-compliance (the “Notice”) from NYSE American stating that the Company is not in compliance with continued listing standards of Section 1003(a)(i) of the NYSE American Company Guide (the “Company Guide”), which requires stockholders’ equity of $2.0 million or more if the listed company has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years (the “Minimum Requirement”), as defined in Section 1003(a)(i) of the Company Guide.

Pursuant to the Notice, the Company reported a stockholders’ deficit of $32.1 million at September 30, 2024 and has had losses in the two most recent fiscal years ended December 31, 2023 based on the Company’s Annual Report on Form 10-K/A filed with the U.S.

Securities and Exchange Commission on May 14, 2024, and the Company is not currently eligible for any exemption from the stockholders’ equity requirement in Section 1003(a) of the Company Guide, and as such, NYSE American deems the Company below compliance with the Minimum Requirement.

The Company was required to submit a plan by March 5, 2025, advising of actions taken or will be taken to regain compliance with the continued listings standards of the Company Guide by August 3, 2026 (the “Plan”).

The Company submitted the Plan as required in the Notice.

On April 22, 2025, the Company received a notification (the “Acceptance Letter”) from NYSE American that the Plan was accepted.

In the Acceptance Letter, NYSE American granted the Company until August 3, 2026 (the “Plan Period”) to regain compliance with the continued listing standards.

During the Plan Period, the Company will be subject to periodic review by NYSE American on its progress with the goals and initiatives outlined in the Plan.

The Company intends to take all reasonable measures available to regain compliance with Sections 1003(a)(i), (ii) and (iii) of the Company Guide during the Plan Period.

If the Company does not regain compliance with NYSE American listing standards by August 3, 2026, or if the Company does not make sufficient progress consistent with the Plan during the Plan Period, then NYSE American may initiate delisting proceedings.

The Acceptance Letter has no immediate impact on the listing of the Company’s shares of Class A common stock, par value $0.0001 per share (the “Common Stock”), which will continue to be listed and traded on NYSE American during the Plan Period, subject to the Company’s compliance with the other listing requirements of NYSE American.

The Common Stock will continue to trade under the symbol “AEON”.

The Acceptance Letter does not affect the Company’s ongoing business operations or its reporting requirements with the Securities and Exchange Commission.

The Company intends to consider available options to resolve the non-compliance with the Minimum Requirement by August 3, 2026.

However, there can be no assurance that the Company will be able to regain compliance with the Minimum Requirement.

Convertible Note Subscription

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(i) one and three tenths (1.3) multiplied by (ii) the quotient of (a) the principal amount of each Convertible Note and all accrued and unpaid interest to be converted divided by (b) the volume weighted average trading per share price of common stock over the five (5) trading days prior to the Company’s receipt of Daewoong’s written notice of exercise of the Optional Conversion, provided that such per share price of common stock is at least $1.00 per share.

As a result of becoming a public company, we will need to engage additional resources and/or hire additional staff and implement processes and procedures to address public company regulatory requirements and customary practices.

We expect to incur additional annual expenses for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources and fees.

Public Offering

On January 6, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.

(“Aegis” or the “Underwriter”) pursuant to which the Company agreed to sell and issue, in an underwritten public offering (the “Offering”) 555,571 Common Units, each consisting of (i) one (1) share of Common Stock, (ii) one (1) Series A Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $45.00 (the “Series A Warrants”) and (iii) one (1) Series B Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $45.00 (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”).

Additionally, the Company granted Aegis a 45-day option to purchase additional shares of Common Stock and/or Warrants of (i) up to 15.0% of the number of shares of Common Stock sold in the offering, (ii) up to 15.0% of the number of Series A Warrants sold in the offering and (iii) up to 15.0% of the number of Series B Warrants sold in the offering.

The purchase price per additional share of Common Stock is equal to the public offering price of one Common Unit (less $0.01 allocated to each full Warrant), less the underwriting discount.

The purchase price per additional Warrant is $0.01.

On January 7, 2025, Aegis exercised its over-allotment option with respect to 83,334 Series A Warrants and 83,334 Series B Warrants.

The closing of the Offering occurred on January 7, 2025.

The Company received net proceeds of approximately $18.3 million from the Offering, after deducting the offering expenses payable by the Company, including the Underwriter’s fees and expenses.

The Company intends to use the net proceeds from the Offering for general corporate purposes, including working capital.

Components of Our Results of Operations

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Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A”) expenses, consist primarily of compensation for personnel, including stock-based compensation, management, finance, legal, and regulatory functions.

Selling, general and administrative (“SG&A”) expenses, consist primarily of compensation for personnel, including stock-based compensation, management, finance, legal, and regulatory functions.

Other SG&A expenses include travel expenses, market research and analysis, conferences and trade shows, professional services fees, including legal, audit and tax fees, insurance costs, general corporate expenses, and allocated facilities-related expenses.

We anticipate that our SG&A expenses will increase in the future to support our continued research and development (“R&D”), activities.

Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of the NYSE American and the SEC, insurance, and investor relations costs.

As we pivot to our biosimilar strategy, we anticipate that our SG&A expenses will decrease in the near-future to focus our resources to the research and development (“R&D”) activities.

Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of NYSE American and the SEC, insurance, and investor relations costs.

We expect to incur increased costs associated with establishing sales, marketing, and commercialization functions in advance of potential future regulatory approvals and commercialization of our product candidates.

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Research and Development Expenses

Our R&D expenses are primarily attributed to the development of ABP-450 for migraine, cervical dystonia and gastroparesis.

Our R&D expenses are primarily attributed to the development of ABP-450 as a biosimilar product in the United States through a Section 351(k) BLA, using AbbVie Inc.’s product Botox as a proposed reference product for all of the indications for which Botox is approved, other than the cosmetic uses for which we do not hold development or commercialization rights, which may include initiating a comparability study of ABP-450 in cervical dystonia.

Due to the stage of our development and our ability to use resources across all of our programs, most of our R&D costs are not recorded on a program-specific basis.

We expect our R&D expenses to continue to increase as we, subject to raising additional capital, develop and initiate a Phase 3 study of ABP-450 in cervical dystonia and commence a Phase 2 study of ABP-450 for gastroparesis .

R&D expenses associated with these studies will include third-party costs such as expenses incurred under agreements with CROs, the cost of consultants who assist with the development of ABP-450 on a program-specific basis, investigator grants, sponsored research, product costs in connection with acquiring ABP-450 from Daewoong for use in conducting preclinical and clinical studies, and other third-party expenses attributable to the development of our product candidates.

We expect our R&D expenses to increase as we, subject to raising additional capital, develop and seek regulatory approval of ABP-450 .

R&D expenses associated with these activities may include third-party costs such as expenses incurred under agreements with CROs, the cost of consultants who assist with the development of ABP-450 on a program-specific basis, investigator grants, sponsored research, product costs in connection with acquiring ABP-450 from Daewoong and Botox for use in conducting preclinical and clinical studies, and other third-party expenses attributable to the development of our product candidates.

R&D activities will be critical to achieving our business strategy.

As our pipeline programs enter the later stages of clinical development, we will generally incur greater development costs than those programs incurred in the earlier stages of clinical development, primarily due to the increased size and duration of later- stage clinical studies.

We expect our R&D expenses to be significant over the next several years as we advance the clinical development of ABP-450 and prepare to seek regulatory approval.

The biosimilar pathway will require greater costs in the beginning stages in order to design, execute and complete the primary structural analysis.

Any clinical studies, such as a comparability

study for cervical dystonia, will generally incur greater development costs than those programs incurred in the earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical studies.

We expect our R&D expenses to be significant over the next years as we pursue the development of ABP-450 as a biosimilar and seek regulatory approval using Botox as the reference product.

As a result, we are unable to determine the duration and completion costs of our programs or when and to what extent we will generate revenue from commercialization and sale of any of our product candidates.

Our R&D activities may be subject to change from time to time as we evaluate our priorities and available resources.

Acquired in-Process Research and Development

The Company records costs incurred in obtaining technology licenses to research and development expense as acquired in-process research and development (“IPR&D”) if the technology licensed has not reached technological feasibility and has no alternative future use.

The acquired IPR&D recorded at the Closing was written off to the Successor’s consolidated statement of operations for the period ended September 30, 2023.

Change in Fair Value of Contingent Consideration

The Company determined that the Contingent Consideration Shares would be classified as a liability on the Successor’s condensed consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the Successor’s condensed consolidated statements of operations and comprehensive (loss) income.

Other Loss, Net

Other loss, net primarily consists of gains and losses resulting from the remeasurement of the fair value of our convertible notes, forward purchase agreements, warrant liabilities, each described below, at each balance sheet date.

Change in fair value of convertible notes – The Company elected the fair value option to account for its convertible notes, with the subsequent changes in fair value recorded in the condensed consolidated statement of operations and comprehensive (loss) income.

The Company determined that the Contingent Consideration would be classified as a liability on the consolidated balance sheets and remeasured at each reporting period with changes to fair value recorded to the consolidated statements of operations and comprehensive income (loss).

Other Income (Loss), Net

Other Income (loss), net primarily consists of gains and losses resulting from the remeasurement of the fair value of our convertible notes, warrant liabilities, forward purchase agreements, and loss on issuance of warrants, each described below, at each balance sheet date.

Change in fair value of convertible notes – The Company elected the fair value option to account for its convertible notes, with the subsequent changes in fair value recorded in the consolidated statement of operations and comprehensive income (loss).

Change in fair value of warrants - Changes in the estimated fair value of our warrant liabilities are recognized as a non-cash gain or loss on the consolidated statements of operations and comprehensive income (loss).

Loss on embedded forward purchase agreement and make whole derivative - the Company has determined that each of its forward purchase agreements entered in connection with the Merger is a freestanding hybrid financial instrument comprising a subscription receivable and embedded features, which were bifurcated and accounted for separately as derivative instruments.

The Company recorded the derivatives as liabilities and measured them at fair value with the initial value of the derivative recorded as a loss “on the line” in the Successor’s opening accumulated deficit.

On the line describes those transactions triggered by the consummation of the Merger that are not recognized in the consolidated financial statements of the Predecessor or the Successor as they are not directly attributable to either period but instead were contingent on the Merger.

Subsequent changes in the bifurcated derivatives are recorded in the Successor’s condensed consolidated statements of operations and comprehensive (loss) income.

Change in fair value of warrants - Changes in the estimated fair value of our warrant liabilities are recognized as a non-cash gain or loss on the Successor’s condensed consolidated statements of operations and comprehensive (loss) income.

Our tax provision is comprised of federal and state income taxes.

We currently record a full valuation allowance against our net deferred tax assets.

We have provided for the tax effects of uncertain tax positions in our tax provision.

The Company recorded the derivatives as liabilities and measured them at fair value.

Subsequent changes in the bifurcated derivatives are recorded in the consolidated statements of operations and comprehensive income (loss).

Upon termination of the forward purchase agreements in the first quarter of fiscal 2024, the Company recorded a charge to the consolidated statement of operations of $20.3 million to reverse the related subscription receivable and derivative liability on the accompanying consolidated balance sheet.

Loss on issuance of warrants – the Company’s issued Warrants in the first quarter of 2025 had grant date fair values of $94.0 million on January 7, 2025 and was recorded as a liability as of grant date.

Proceeds were allocated to the warrant liability based on the fair value as of grant date of the warrants of $94.0 million.

As the fair value of the warrants issued were greater than the proceeds received, the Company recognized a loss on issuance of warrants of $75.6 million.

Results of Operations

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Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

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Research and development

Acquired in-process research and development

Change in fair value of contingent consideration

Total operating costs and expenses

(Loss) income from operations

Other (loss) income:

Loss from operations

Other income (loss):

Change in fair value of convertible notes

Change in fair value of warrants

Income (loss) on embedded forward purchase agreements and derivative liabilities, net

Loss on issuance of warrants

Loss on embedded forward purchase agreements and derivative liabilities, net

Other income, net

Total other loss, net

(Loss) income before taxes

Net (loss) income

Basic net (loss) income per share

Diluted net (loss) income per share

Weighted average shares of common stock outstanding used to compute basic net (loss) income per share

Weighted average shares of common stock outstanding used to compute diluted net (loss) income per share

Comparison of the three and nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor), July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor)

Total other income (loss), net

Income (loss) before taxes

Net income (loss)

Basic and diluted net income (loss) per share

Weighted average shares of common stock outstanding used to compute basic and diluted net income (loss) per share

Comparison of the three months ended March 31, 2025 and March 31, 2024

Operating Expenses

Selling, General and Administrative (SG&A) Expenses

SG&A expenses were $3.0 million for the three months ended September 30, 2024 (Successor), a decrease of $3.3 million, or 52%, compared to $1.1 million and $5.3 million for the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

The decrease in S&GA expenses was primarily attributable to a decrease of $1.8 million in legal expenses and professional fees related to the Merger in the prior year and a decrease of $1.3 million related to stock-based compensation expense related to the accelerated vesting and replacement award accounting in the prior year.

SG&A expenses were $11.0 million for the nine months ended September 30, 2024 (Successor), a decrease of $4.1 million, or 27%, compared to $9.8 million and $5.3 million for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

The decrease in SG&A expenses was primarily attributable to a decrease of $3.4 million in legal expenses and professional fees related to the Merger in the prior year and a decrease of $1.0 million related to stock-based compensation expense related to the accelerated vesting and replacement award accounting in the prior year, offset by an increase of $0.5 million related to public company insurance for director and officers in the current year.

SG&A expenses were $3.1 million for the three months ended March 31, 2025, resulting in a decrease of $1.5 million, or 33%, compared to $4.6 million during the three months ended March 31, 2024.

The decrease in SG&A expenses was primarily attributable to a decrease of $1.2 million in legal expenses and professional fees related to the Company’s registration statement filings in the prior year and a decrease of $0.2 million related to headcount reduction to preserve cash.

Research and Development (R&D) Expenses

R&D expenses were $1.0 million for the three months ended September 30, 2024 (Successor), a decrease of $7.0 million, or 88%, compared to $1.6 million and $6.4 million during the periods from July 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

R&D expenses were $0.8 million for the three months ended March 31, 2025, a decrease of $4.9 million, or 86%, compared to $5.7 million for the three months ended March 31, 2024.

The decrease was primarily attributable to a $4.6 million decrease in R&D expenses due to wind down of Phase 2 clinical trials related to chronic and episodic migraine and cervical dystonia and a decrease of $0.3 million related to headcount reduction to preserve cash.

R&D expenses were $11.1 million for the nine months ended September 30, 2024 (Successor), a decrease of $15.0 million, or 57%, compared to $19.8 million and $6.4 million during the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor), respectively.

The decrease was primarily attributable to a $15.1 million decrease in R&D expenses due to wind down of Phase 2 clinical trials related to chronic and episodic migraine and cervical dystonia.

Change in Fair Value of Contingent Consideration (Successor)

The Company recognized a gain of $0, $97.5 million and $75.9 million related to the change in the fair value of the contingent consideration for the three and nine months ended September 30, 2024 (Successor) and period from July 22, 2023 to September 30, 2023 (Successor), respectively, related to certain contingent provisions, restrictions and forfeiture provisions for Founder Shares and certain Participating Stockholders shares, which was primarily attributable to the change in probabilities of meeting milestones and fluctuations in stock price of the Company.

See Note 6 Fair Value Measurements to the condensed consolidated financial statements for further discussion.

Other Loss, Net

Other loss, net was $2.2 million for the three months ended September 30, 2024 (Successor), which is mainly attributable to loss on fair value of convertible notes of $1.9 million due to changes in stock price and conversion probabilities of the Daewoong convertible notes, and loss on fair value of warrants of $0.4 million due to changes in stock price, volatility and risk-free rate;

compared to loss of $25.0 million for the period from July 1, 2023 to July 21, 2023 (Predecessor), which is mainly attributed to change in fair value of Predecessor convertible notes of $13.2 million and loss on settlement of derivates of $11.8 million;

and loss of $14.0 million for the period from July 22, 2023 to September 30, 2023 (Successor), which is mainly attributable to a loss of $15.8 million related to changes in fair value of forward purchase agreements and derivative liabilities, offset by a gain of $1.6 million related to changes in fair value of warrants.

Other loss, net was a loss of $35.4 million for the nine months ended September 30, 2024 (Successor), which is mainly attributable to a loss of $19.9 million on forward purchase agreements and derivative liabilities (Successor), mainly related to the termination of the forward purchase agreements of $20 million;

loss of $15.4 million for change in fair value of warrants (Successor), mainly due to the decrease in the Company’s stock price and a decrease in the number of warrants outstanding due to the cashless warrant exercises and redemption of public warrants in the first half of fiscal year 2024;

compared to loss of $31.0 million for the period from January 1, 2023 to July 21, 2023 (Predecessor), which is mainly attributed to change in fair value of Predecessor convertible notes of $19.4 million and loss on settlement of derivates of $11.8 million;

Change in Fair Value of Contingent Consideration

The Company recognized a gain of $3.5 million, compared to a loss of $63.8 million, related to the change in the fair value of the contingent consideration for the three months ended March 31, 2025 and March 31, 2024, respectively, related to certain contingent provisions, restrictions and forfeiture provisions for Founder Shares and certain Participating Stockholders shares, which was primarily attributable to the change in probabilities of meeting milestones and fluctuations in stock price of the Company, which was a

decrease from $38.88 as of December 31, 2024 to $0.58 as of March 31, 2025, and an increase from $518.40 as of December 31, 2023 to $835.20 as of March 31, 2024, respectively.

Loss on Issuance of Warrants

The Company’s issued Warrants in the first quarter of 2025 had grant date fair values of $94.0 million on January 7, 2025 and was recorded as a liability as of grant date.

Proceeds were allocated to the warrant liability based on the fair value as of grant date of the warrants of $94.0 million.

As the fair value of the warrants issued were greater than the proceeds received, the Company recognized a loss on issuance of warrants of $75.6 million.

Other Income, Net

The Company recognized income of $86.7 million, compared to a loss of $20.9 million in the prior year, related to the change in the fair value of warrants.

Liquidity and Capital Resources

Our primary sources of capital have been debt financing (Predecessor) and equity financing (Successor).

Our primary sources of capital have been debt and equity financing.

We have experienced recurring losses from operations and have a net capital deficiency and negative cash flows from operations since our inception.

As of September 30, 2024 (Successor), we had reported cash and cash equivalents of $0.5 million and an accumulated deficit of $433.7 million.

On May 3, 2024, we announced preliminary top-line results from its planned interim analysis of the Phase 2 trial with ABP-450 in the preventative treatment of chronic migraine, which did not meet the primary or secondary endpoints.

As of March 31, 2025, we had reported cash and cash equivalents of $10.4 million and an accumulated deficit of $422.5 million.

On May 3, 2024, we announced preliminary top-line results from a planned interim analysis of the Phase 2 trial with ABP-450 in the preventative treatment of chronic migraine, which did not meet the primary or secondary endpoints.

We originally intended to pursue submission of an Original BLA seeking one or more potential therapeutic indications for ABP-450.

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On July 9, 2024, we announced a strategic reprioritization to pursue a 351(k) biosimilar regulatory pathway for ABP-450, using AbbVie Inc.’s product Botox as a proposed reference product for all of the indications for which Botox is approved, other than the cosmetic uses.

We are continuing to evaluate other cash preservation measures and will review all strategic options.

Prior to the Merger, Priveterra had entered into separate Forward Purchase Agreements with each of ACM and Polar.

The Forward Purchase Agreements provided that each of Polar and ACM would separately be paid directly the Prepayment Amount, which was equal to an aggregate of $66.7 million based on the product of (i) 6,275,000 Additional Shares and (ii) the redemption price per share of $10.63.

On March 18, 2024, we entered into separate FPA Termination Agreements with each of ACM and Polar terminating their respective Forward Purchase Agreements.

The FPA Termination Agreement with ACM provides that (i) ACM will retain 3,100,000 previously issued Additional Shares held by ACM pursuant to its respective Forward Purchase Agreement and subscription agreement and (ii) we will be subject to up to $1.5 million in liquidated damages, subject to certain conditions set forth in ACM’s respective FPA Termination Agreement.

The Termination Agreement with Polar provides that (i) Polar will retain 3,175,000 previously issued Additional Shares held by Polar pursuant to its respective Forward Purchase Agreement and subscription agreement and (ii) we will be subject to up to $1.5 million in liquidated damages, subject to certain conditions set forth in Polar’s respective FPA Termination Agreement.

We did not have access to the Prepayment Amount at any time following the Closing and, pursuant to the FPA Termination Agreements, ACM and Polar will retain the Prepayment Amount in full.

The potential aggregate liquidated damages of up to $3.0 million was accrued as a liability in the first quarter of 2024.

However, since each FPA provider elected to remove its respective shares from the registration statement, the Company released the liability in the second quarter of 2024.

The terminated access to the Prepayment Amount may adversely affect our liquidity and capital needs.

On March 19, 2024, we entered into the Subscription Agreement with Daewoong relating to our sale and issuance of Convertible Notes in the principal amount of up to $15.0 million, which are convertible into shares of common stock, subject to certain conditions and limitations set forth in each Convertible Note.

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We will use the net proceeds from each Convertible Note to support the late-stage clinical development of ABP-450 and for general working capital purposes.

Pursuant to the terms of the Subscription Agreement, on March 24, 2024, we issued and sold to Daewoong one Convertible Note in the principal amount of $5.0 million.

The Subscription Agreement further provides that we will issue and sell to Daewoong a second Convertible Note in the

principal amount of $10.0 million no later than thirty (30) days following our compliance with certain conditions set forth in the Subscription Agreement, including our execution of an amendment to the License Agreement with Daewoong.

Pursuant to the terms of the Subscription Agreement, on March 24, 2024, the Company issued and sold to Daewoong one Convertible Note in the principal amount of $5.0 million, and on April 12, 2024, the Company issued and sold to Daewoong one Convertible Note in the principal amount of $10.0 million.

On March 19, 2024, we entered into the License Agreement Amendment with Daewoong, which amends the License Agreement.

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We held an initial meeting with the FDA in the third quarter of 2024 during which we aligned with the FDA on next steps to develop a Botox biosimilar.

However, the commencement of studies, preparation for the potential BPD meeting and any further development of ABP-450 would require additional funding in the form of equity financings or debt.

There can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of such financing will be commercially acceptable.

There can be no assurance that such efforts will be successful or that, in the event that they are successful, the terms and conditions of

such financing will be commercially acceptable.

Furthermore, the use of equity as a source of financing would dilute existing shareholders.

On January 6, 2025, we entered into an underwriting agreement with Aegis pursuant to which we agreed to sell and issue, in an underwritten public offering (the “Offering”) 555,571 Common Units, each consisting of (i) one (1) share of Common Stock, (ii) one (1) Series A Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $45.00 (the “Series A Warrants”) and (iii) one (1) Series B Registered Common Warrant to purchase one (1) share of Common Stock per warrant at an exercise price of $45.00 (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”).

The purchase price per additional share of Common Stock is equal to the public offering price of one Common Unit (less $0.01 allocated to each full Warrant), less the underwriting discount.

The purchase price per additional Warrant is $0.01.

On January 7, 2025, Aegis exercised its over-allotment option with respect to 83,334 Series A Warrants and 83,334 Series B Warrants.

The Offering closed on January 7, 2025, and the Company received net proceeds of approximately $18.3 million from the Offering, after deducting the offering expenses payable by the Company, including the Underwriter’s fees and expenses.

As of the date of this Report, we expect to have sufficient cash to fund our operating plan into the fourth quarter of 2025.

We are actively attempting to secure additional capital to fund our operations.

We will actively attempt to secure additional capital to fund our operations.

However, we cannot assure you that we will be able to raise additional capital on commercially reasonable terms or at all.

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We may receive additional capital from the cash exercise of the Private Placement Warrants.

However, the exercise price of our Private Placement Warrants is $11.50 per warrant and the last reported sales price of our common stock on November 11, 2024 was

However, the exercise price of our Private Placement Warrants is $828.00 per warrant and the last reported sales price of our common stock on May 7, 2025 was $0.48.

The likelihood that holders of the Private Placement Warrants will exercise their Private Placement Warrants, and therefore the likelihood of any amount of cash proceeds that we may receive, is dependent upon the trading price of our common stock after effectiveness of the registration statement related thereto registering the issuance of common stock underlying the Private Placement Warrants.

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We will have broad discretion over the use of any proceeds from the exercise of such securities.

Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of the Private Placement Warrants when planning for our operational funding needs.

Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds

from the exercise of the Private Placement Warrants when planning for our operational funding needs.

The Private Placement Warrants may be exercised on a cashless basis at any time and we will not receive any proceeds from such exercise, even if the Private Placement Warrants are in-the-money.

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Net Cash Used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2024 (Successor) was $19.7 million, consisting primarily of a net income of $39.9 million (Successor) and non-cash charges of $(57.0) million, consisting primarily of $4.9 million non-cash expense related to stock-based compensation for our executives and directors (Successor), $0.2 million related to the change in fair value of the convertible notes (Successor), $15.4 million related to change in fair value of warrants (Successor), $19.9 million related to loss on forward purchase agreement and derivative liabilities (Successor) and $(97.5) million related to change in fair value of contingent consideration (Successor).

Net cash used in operating activities for the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) were $21.7 million and $15.1 million, respectively, consisting primarily of net losses of $60.7 million and $297.7 million, respectively, and non-cash items of $34.4 million and $288.4 million, respectively, consisting of $3.2 million non-cash expense related to stock-based compensation for our executives and directors (Predecessor), $19.4 million related to the change in fair value of the convertible notes (Predecessor) and $11.8 million related to loss on forward purchase agreement and derivative liabilities (Successor);

and consisting of $2.2 million non-cash expense related to stock-based compensation for our executives and directors (Successor), $348.0 million related to write-off of acquired IPR&D, $(1.6) million related to change in fair value of warrants (Successor), $15.8 million related to loss on forward purchase agreement and derivative liabilities (Successor) and $(75.9) million related to change in fair value of contingent consideration (Successor).

Net cash used in operating activities for the three months ended March 31, 2025 was $7.9 million, consisting primarily of a net income of $9.1 million and non-cash charges of $(11.2) million, consisting primarily of $(86.7) million related to change in fair value of warrants and $(3.5) million related to change in fair value of contingent consideration, offset by $75.6 million loss on issuance of warrants, $1.7 million non-cash expenses related to stock-based compensation for our executives and directors and $1.6 million related to the change in fair value of the convertible notes.

Net cash used in operating activities for the three months ended March 31, 2024 was $8.6 million, consisting primarily of a net loss of $118.0 million and non-cash charges of $109.3 million, consisting primarily of $0.1 million related to the change in fair value of the convertible notes, $20.9 million related to change in fair value of warrants, $22.9 million related to loss on forward purchase agreement and derivative liabilities, $63.8 million related to change in fair value of contingent consideration and a $1.6 million non-cash expense related to stock-based compensation for our executives and directors.

Cash Flows from Investing Activities

There was no cash used in investing activities for the nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor).

Net cash used in investing activities for the three months ended March 31, 2025 and March 31, 2024 were a de minimus amount and zero, respectively, related to the purchase of property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2024 (Successor) and the periods from January 1, 2023 to July 21, 2023 (Predecessor) and July 22, 2023 to September 30, 2023 (Successor) were $15.1 million, $14.0 million and $0, respectively, primarily related to the issuance of convertible notes.

Net cash provided by financing activities for the three months ended March 31, 2025 and March 31, 2024 were $18.3 million and $5.0 million, respectively, related to the public offering and convertible notes, respectively.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”).

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities, revenue and expenses at the date of the financial statements as well as the expenses incurred during the reporting period.

expenses incurred during the reporting period.

Generally, we base our estimates on historical experience and on various other assumptions in accordance with United States GAAP that we believe to be reasonable under the circumstances.

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On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience.

As of September 30, 2024, there have been no changes to our critical accounting policies from those reported on our Annual Report Form 10-K.

As of March 31, 2025, there have been no changes to our critical accounting policies from those reported on our Annual Report Form 10-K.

Smaller Reporting Company

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For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved.

In particular, in this Report, we have provided only two years of audited financial statements and unaudited financial statements and have not included all of the executive compensation- related information that would be required if we were not an emerging growth company.

In particular, in this Report, we have provided only two years of unaudited financial statements and have not included all of the executive compensation- related information that would be required if we were not an emerging growth company.

Section 102(b)(2) of the JOBS Act allows us to delay adoption of the new or revised accounting standards until those standards apply to non-public business entities.

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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