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Item 8. Financial Statements and Supplementary Data

2026-03-19 compared with 2025-03-19 · 604 added, 322 removed, 597 unchanged (61% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying 2024 financial statements of Alumis Inc.

and the 2023 consolidated financial statements of Alumis Inc.

and its subsidiaries (collectively referred to as the “Company”), which comprise the balance sheets as of December 31, 2024 and 2023, and the related statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has incurred negative operating cash flows and significant losses from operations since its inception that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have audited the accompanying consolidated balance sheets of Alumis Inc.

and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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Property and equipment, net

Intangible assets

Operating lease right-of-use assets, net

Other long-term assets

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Other assets, non-current

Liabilities and Stockholders’ Equity

Current liabilities:

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Research and development accrued expenses

Deferred revenue, current

Other accrued expenses and current liabilities

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Operating lease liabilities, non-current

Deferred revenue, non-current

Deferred tax liability

Share repurchase liability

Other liabilities, non-current

Total liabilities

Commitments and contingencies (Note 9)

Redeemable convertible preferred stock, $ 0.0001 par value;

zero and 89,016,578 shares authorized as of December 31, 2024 and 2023, respectively;

zero and 85,960,088 shares issued and outstanding as of December 31, 2024 and 2023, respectively;

aggregate liquidation preference of zero and $ 370,540 as of December 31, 2024 and 2023, respectively

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

50,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2024;

zero shares authorized, issued and outstanding as of December 31, 2023

50,000,000 shares authorized, zero shares issued and outstanding as of December 31, 2025 and December 31, 2024

Common stock, voting, $ 0.0001 par value;

492,815,092 and 125,000,000 voting shares authorized as of December 31, 2024 and 2023, respectively;

47,222,419 and 2,675,979 voting shares issued and outstanding as of December 31, 2024 and 2023, respectively

492,815,092 voting shares authorized as of December 31, 2025 and December 31, 2024;

99,084,365 and 47,222,419 voting shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively

Common stock, non-voting, $ 0.0001 par value;

7,184,908 and 85,960,088 non-voting shares authorized as of December 31, 2024 and 2023, respectively;

7,184,908 and zero non-voting shares issued and outstanding as of December 31, 2024 and 2023, respectively

7,184,908 non-voting shares authorized as of December 31, 2025 and December 31, 2024;

5,622,408 and 7,184,908 non-voting shares issued and outstanding as of December 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

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Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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(in thousands, except share and per share amounts)

License revenue

Collaboration revenue

Total revenue

Operating expenses:

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Other income (expense):

Gain on bargain purchase

Interest income

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Total other income (expense), net

Net loss before income taxes

Income tax benefit

Other comprehensive income (loss):

Unrealized gain (loss) on marketable securities, net

Net loss and other comprehensive loss

Total comprehensive loss

Net loss per share attributable to common stockholders, basic and diluted

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Balance as of December 31, 2023

Issuance of Series B-2 and B-2A redeemable convertible preferred stock in May 2023 for cash, net of derivative liability of $ 2,112 and offering costs of $ 208

Issuance of Series B-2 and B-2A redeemable convertible preferred stock in October 2023 for cash, net of offering costs of $ 13 , and settlement of derivative liability of $ 2,231

Issuance of common stock upon exercise of stock options and early exercise of stock options

Vesting of early exercised stock options

Vesting of restricted shares of common stock

Repurchase of unvested early exercised stock options

Stock-based compensation expense

Other comprehensive loss, net

Balance as of December 31, 2023

Issuance of Series C redeemable convertible preferred stock in March 2024 for cash, net of derivative liability of $ 8,913 and offering costs of $ 382

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Stock-based compensation expense

Other comprehensive income, net

Other comprehensive income (loss), net

Balance as of December 31, 2024

Issuance of common stock and equity awards in connection with the ACELYRIN merger

Issuance of common stock upon vesting of RSUs

Issuance of common stock under the 2024 ESPP

Issuance of common stock upon exercise of stock options and early exercise of stock options

Vesting of early exercised stock options

Vesting of restricted shares of common stock

Repurchase of unvested early exercised stock options

Stock-based compensation expense

Other comprehensive income (loss), net

Balance as of December 31, 2025

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

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Year Ended December 31,

(in thousands, except share amounts)

(in thousands)

Cash flows from operating activities

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Stock-based compensation

Change in fair value of derivative liability

Net accretion of discounts on marketable securities

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Loss on disposal of fixed assets

Write-off of deferred offering costs

Loss on abandonment of right-of-use assets

Change in fair value of derivative liability

Gain on bargain purchase in connection with the ACELYRIN Merger

Impairment of long-lived assets

Changes in operating assets and liabilities:

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Other prepaid expenses and other assets

Other assets, non-current

Accounts payable

Deferred revenue

Research and development accrued expenses

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Operating lease liabilities

Other liabilities, non-current

Deferred tax liability

Net cash used in operating activities

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Purchases of property and equipment

Net cash (used in) provided by investing activities

Cash, cash equivalents and restricted cash acquired in connection with the ACELYRIN Merger

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from issuance of redeemable convertible preferred stock and derivative liability, net of offering costs

Proceeds from issuance of redeemable convertible preferred stock and derivative liability, net of issuance costs

Proceeds from initial public offering, net of underwriter discounts and commissions and other offering costs

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Proceeds from issuance of common stock upon exercise of stock options

Payments of deferred offering costs

Repurchase of unvested common stock shares issued upon early exercised stock options

Repurchase of common stock shares issued upon early exercised restricted common stock

Proceeds from issuance of common stock under the 2024 ESPP

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

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Conversion of 168,489,871 shares of redeemable convertible preferred stock upon the closing of initial public offering

Settlement of derivative liability upon issuance of redeemable convertible preferred stock

Recognition of derivative liability upon issuance of redeemable convertible preferred stock

Equity consideration transferred in connection with the ACELYRIN Merger

Vesting of early exercised stock options and unvested restricted shares of common stock

Right-of-use assets obtained in exchange for operating lease liabilities

Property and equipment acquired through tenant improvement allowance

Purchases of property and equipment in other accrued expenses and current liabilities

Recognition of derivative liability upon issuance of redeemable convertible preferred stock

Settlement of derivative liability upon issuance of redeemable convertible preferred stock

Reconciliation of cash, cash equivalents and restricted cash:

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(the “Company”) is a clinical stage biopharmaceutical company focused on identifying, acquiring, and accelerating the development and commercialization of transformative medicines for autoimmune disorders.

The Company leverages its proprietary precision data analytics platform, biological insights, and a team of experts with deep experience in precision medicine drug discovery, development, and immunology, to create medicines that significantly improve the lives of patients by replacing broad immunosuppression with targeted therapies.

The Company leverages its proprietary precision data analytics platform, biological insights, and a team of experts with deep experience in precision medicine drug discovery, development, and immunology, in its mission to create medicines that significantly improve the lives of patients by replacing broad immunosuppression with targeted therapies.

The Company was founded on January 29, 2021, as a Delaware corporation under the name FL2021-001, Inc.

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Pharmaceuticals LLC was dissolved on March 14, 2024.

These subsidiaries did not have operations during the years ended December 31, 2024 and 2023.

These subsidiaries did not have operations during the year ended December 31, 2024.

As of December 31, 2025, the Company had two wholly owned subsidiaries, ACELYRIN, Inc.

(“ACELYRIN”), a Delaware corporation incorporated on July 27, 2020 and its wholly owned subsidiary, WH2, LLC.

Arrow Merger Sub, Inc.

(“Merger Sub”), the Company’s wholly owned subsidiary incorporated in January 2025, was merged with and into ACELYRIN in May 2025.

Reverse Stock Split

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The number of authorized shares and par value per share were not adjusted as a result of the Reverse Stock Split.

All references to shares, options to purchase common stock, share amounts, per share amounts, and related information contained in the audited consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

All references to shares, options to purchase common stock, share amounts, per share amounts, and related information contained in the consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

The shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

In addition, the conversion ratios for each series of the Company’s redeemable convertible preferred stock, which were automatically convertible into shares of common stock upon the closing of the Company’s initial public offering (“IPO”) of common stock, were proportionally adjusted.

IPO and Concurrent Private Placement

On June 27, 2024, the Company’s Registration Statement on Form S-1 for its IPO was declared effective, and on July 1, 2024, the Company completed its IPO, pursuant to which it issued and sold 13,125,000 shares of its common stock at $ 16.00 price per share to the public.

On July 1, 2024, the Company completed its IPO, pursuant to which it issued and sold 13,125,000 shares of its common stock at $ 16.00 price per share to the public.

Net proceeds from the IPO were $ 193.3 million, after deducting underwriting discounts and commissions and other offering costs totaling $ 16.7 million.

In connection with the IPO, an existing investor and a holder of more than 5 % of the Company’s capital stock, purchased an additional 2,500,000 shares of the Company’s common stock at the IPO price per share for total gross and net proceeds of $ 40.0 million in a private placement transaction (the “Concurrent Private Placement”).

The closing of the Concurrent Private Placement was contingent on the closing of the IPO.

The sale of such shares is not registered under the Securities Act of 1933, as amended (the “Securities Act”), and as such, the shares may not be offered or sold absent registration or an applicable exemption from registration.

The shares sold in connection with the Concurrent Private Placement are subject to existing resale registration rights and were subject to a 180-day lock-up agreement with the underwriters in the IPO that expired on December 24, 2024.

The Concurrent Private Placement closed on July 17, 2024.

On July 17, 2024, in connection with the IPO, an existing investor and a holder of more than 5 % of the Company’s capital stock, purchased an additional 2,500,000 shares of the Company’s common stock at the IPO price per share for total gross and net proceeds of $ 40.0 million in the Concurrent Private Placement.

Immediately prior to the closing of the IPO on July 1, 2024, all of the shares of the Company’s redeemable convertible preferred stock then outstanding converted into 28,855,656 shares of Class A common stock and 7,184,908 shares of Class B common stock at a 1 -for-4.675 conversion ratio (the “Preferred Stock Conversion”).

All outstanding Class A common stock shares and all outstanding Class B common stock shares were redesignated immediately thereafter into the same

All outstanding Class A common stock shares and all outstanding Class B common stock shares were redesignated immediately thereafter into the same number of shares of voting common stock and non-voting common stock, respectively.

Unless the context otherwise requires a different meaning, all references to “common stock” in these notes refers to the Company’s voting common

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

number of shares of voting common stock and non-voting common stock, respectively (the “Common Stock Reclassification”).

In connection with the closing of the Company’s IPO, the Company increased the authorized number of shares to 500,000,000 shares of common stock and 50,000,000 shares of preferred stock.

The authorized number of common stock shares includes voting common stock of 492,815,092 shares and non-voting common stock of 7,184,908 shares.

Unless the context otherwise requires a different meaning, all references to “common stock” in these notes refers to the Company’s voting common stock and non-voting common stock combined.

Liquidity and Going Concern

stock and non-voting common stock combined.

ACELYRIN Merger

On February 6, 2025, the Company entered into an Agreement and Plan of Merger, and, on April 20, 2025, the Company entered into an Amendment to Agreement and Plan of Merger (collectively the “Merger Agreement”) with ACELYRIN and Merger Sub, a Delaware corporation and a direct wholly owned subsidiary of the Company.

Under the terms of the Merger Agreement, Merger Sub merged with and into ACELYRIN, with ACELYRIN continuing as a direct wholly owned subsidiary of the Company (the “ACELYRIN Merger”).

The Merger Agreement was approved by the disinterested directors on the Company’s board of directors and the board of directors of ACELYRIN and was approved by the stockholders of each company on May 13, 2025.

On May 21, 2025, the Company completed the ACELYRIN Merger with ACELYRIN for a purchase consideration of approximately $ 238.1 million that included the issuance of 48,653,549 shares of the Company’s common stock and the fair value of replacement awards attributable to pre-combination services, to acquire net assets with a fair value of approximately $ 426.0 million.

See Note 3 for additional information.

Public Offering of Common Stock

On January 7, 2026, the Company entered into the Underwriting Agreement with the Underwriters, relating to the issuance and sale in a public offering of 17,650,000 shares of the Company’s common stock at a price of $ 17.00 per share.

In addition, the Company granted the Underwriters an option, exercisable for 30 days , to purchase up to 2,647,500 additional shares of common stock at the public offering price, less the underwriting discounts and commissions, which was exercised in full on January 8, 2026.

On January 9, 2026, the offering closed and the Company received net proceeds of $ 324.4 million, after deducting underwriting discounts and commissions.

The offering was made pursuant to a shelf registration statement on Form S-3 (File No.

333-288510) that was filed with the SEC on July 3, 2025 and declared effective by the SEC on August 19, 2025, and related prospectus and prospectus supplement thereunder.

The Company has incurred negative operating cash flows and significant losses from operations since its inception.

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As of December 31, 2025, the Company had an accumulated deficit of $ 901.9 million.

The Company has historically financed its operations primarily through issuance of common stock, redeemable convertible preferred stock and convertible promissory notes in private placements, and most recently, through its IPO and Concurrent Private Placement.

The Company has historically funded its operations primarily through the issuance of common stock, including in connection with the ACELYRIN Merger, its IPO and Concurrent Private Placement, the issuance of redeemable convertible preferred stock and convertible promissory notes in private placements, payments received under the Kaken Collaboration Agreement and, most recently, the public offering of common stock which closed on January 9, 2026.

The Company expects to continue to incur substantial losses for the foreseeable future, and its ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of any product candidates it may develop, and on the achievement of sufficient revenue to support its cost structure.

The Company may never achieve profitability and, unless and until it does, it will need to continue to raise additional capital.

The Company believes that, based on its current operating plan, its existing cash, cash equivalents and marketable securities of $ 288.3 million as of December 31, 2024, will not be sufficient to meet its operating and capital requirements for at least 12 months from the date of issuance of these consolidated financial statements and there is substantial doubt about the Company’s ability to continue as a going concern.

In February 2025, the Company entered into a Merger Agreement (as defined in Note 15) through an all-stock transaction that would improve the Company’s liquidity.

However, as of the date of the issuance of these consolidated financial statements, the Merger has not been completed and there can be no assurance that it will be consummated.

The Company believes that, based on its current operating plan, its existing cash, cash equivalents and marketable securities of $ 308.5 million as of December 31, 2025, as well as net proceeds of $ 324.4 million, after deducting underwriting discounts and commissions from the public offering of common stock, which closed on January 9, 2026, will be sufficient to meet its operating and capital requirements for at least 12 months from the date of issuance of these consolidated financial statements.

The Company will need to raise significant additional capital to fund ongoing research and development activities and maintain future operations.

The Company’s management plans to monitor expenses and may raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and licensing arrangements.

The Company’s ability to access capital when needed is not assured and, if capital is not available to the Company when, and in the amounts, needed, on the terms which are favorable, the Company could be required to delay, scale back, or abandon some or all of its planned development programs and other operations, which could materially harm the Company’s business, financial condition and results of operations.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

The Company’s management continuously monitors and, where necessary, may reduce its operating expenses in response to its clinical development progress and its ability and need to raise additional capital

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

through a combination of public and private equity, debt financings, strategic alliances and licensing arrangements.

For example, should any of the Company’s ongoing trials not meet its clinical development objectives, the Company may scale back or discontinue related activities and reallocate its working capital to extend its ability to meet its operating and capital requirements.

Summary of Significant Accounting Policies and Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Prior to their dissolution, the Company’s consolidated financial statements included the accounts of FronThera U.S.

The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with U.S.

The Company’s consolidated financial statements include the accounts of its subsidiaries, and all intercompany transactions were eliminated.

The Company’s consolidated financial statements as of and for the year ended December 31, 2025, include the accounts of its subsidiaries ACELYRIN and WH2, LLC after the closing of the ACELYRIN Merger, and the accounts of Merger Sub from its incorporation in January 2025 until the ACELYRIN Merger.

WH2, LLC has not had any operations or any balances since the closing of the ACELYRIN Merger.

The Company’s consolidated financial statements as of and for the year ended December 31, 2024, included the accounts of FronThera U.S.

Holdings, Inc.

and FronThera U.S.

Pharmaceuticals LLC, two wholly owned subsidiaries, and all intercompany transactions were eliminated.

Pharmaceuticals LLC, two wholly owned subsidiaries, prior to their dissolution.

Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S.

GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

GAAP as found in the ASC and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Use of Estimates

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GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

On an ongoing basis, the Company evaluates estimates and assumptions, including but not limited to those related to accruals for research and development expenses and accruals, stock-based compensation expense, the fair value of common stock and the fair value of the derivative liability.

On an ongoing basis, the Company evaluates estimates and assumptions, including but not limited to those related to research and development expenses, valuation of acquired IPR&D intangible assets, revenue recognition, and stock-based compensation expense.

Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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The Company operates and manages its business as one reportable and operating segment, which is the business of researching and developing medicines for autoimmune disorders.

The chief executive officer, who is the chief operating decision maker (“CODM”), reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance (see Note 14).

All of the Company’s long-lived assets are located in the United States.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, investments in marketable securities and restricted cash.

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents, investments in marketable securities, accounts receivable and restricted cash.

The Company maintains bank deposits in federally insured financial institutions and certain of these deposits exceed federally insured limits.

To date, the Company has not experienced any losses on its deposits of cash and periodically evaluates the creditworthiness of the financial institutions at which its bank deposits are maintained.

The Company may also invest in money market funds, U.S.

treasuries, commercial paper, corporate bonds, supranational debt securities and agency bonds, which can be subject to certain credit risks.

The Company mitigates the risks by investing in high-grade instruments, limiting its exposure to any one issuer and monitoring the ongoing creditworthiness of the financial institutions and issuers.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also invests in money market funds, U.S.

Treasury obligations, commercial paper, corporate debt obligations, supranational debt obligations, government development bank obligations and Federal agency obligations, which can be subject to certain credit risks.

The Company mitigates the risks by limiting its exposure to any one issuer and monitoring the ongoing creditworthiness of the financial institutions and issuers.

The Company has not experienced any loss of principal on its financial instruments.

The Company considers a customer to be significant when revenues from that customer represent 10% or more of total revenues.

All of the Company’s revenues are currently earned under its license and collaboration agreement with Kaken.

As a result, the Company is subject to customer concentration risk.

To date, the Company has not incurred any credit losses in connection with the Kaken Collaboration Agreement.

Risks and Uncertainties

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the Company’s ability to advance the development of its proprietary precision data analytics platform, timing and ability to advance its product candidates through preclinical and clinical development;

costs and timelines associated

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

with the manufacturing of clinical supplies;

costs and timelines associated with the manufacturing of clinical supplies;

regulatory approval, market acceptance of, and reimbursement for, any product candidates the Company may develop;

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and its ability to attract and retain employees necessary to support its growth.

The Company’s business and results of operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges and uncertainty in the markets, including severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks and uncertainty about economic and geopolitical stability (for example, related to the ongoing conflicts in Ukraine and Israel and the surrounding areas).

These worldwide economic conditions may continue into 2025 and may negatively impact the Company’s business, financial position and results of operations.

The Company’s business and results of operations may be affected by worldwide economic conditions, which may continue to be impacted by global macroeconomic challenges and uncertainty in the markets, including international trade policies and tariffs, severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks and uncertainty about economic and geopolitical stability (for example, related to the evolving U.S.

tariff landscape).

These worldwide economic conditions have continued throughout 2025 and may negatively impact the Company’s business, financial position and results of operations.

Business Acquisitions, Including Intangible Assets, Goodwill and Contingent Consideration

The Company accounts for business combinations, as defined in ASC Topic 805, Business Combinations , using the acquisition method of accounting, which generally requires that assets acquired, including IPR&D intangible assets, and liabilities assumed, be recorded at fair value on the consolidated balance sheet as of the acquisition date.

The excess of the fair value of the purchase consideration over the fair value of net assets acquired, if any, is recorded as goodwill on the consolidated balance sheet.

The excess of the fair value of net assets acquired over the fair value of the purchase consideration, if any, represents negative goodwill, or a gain on bargain purchase, which is recognized in the consolidated statement of operations as of the date of the acquisition.

Calculating the fair value of assets acquired and liabilities assumed requires the Company to make significant estimates and assumptions.

As a result, the Company may record adjustments to the fair values within the measurement period, which may be up to one year from the acquisition date, with the corresponding offset to goodwill or a gain on bargain purchase.

Transaction costs associated with business combinations are expensed as they are incurred.

Intangible assets related to IPR&D projects acquired are considered to be indefinite-lived until abandonment or completion of the associated R&D efforts, which generally occurs when regulatory approval is obtained.

Goodwill and indefinite-lived intangible assets are not amortized and, instead, are tested for impairment annually, in the fourth quarter, or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired as

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

required by ASC 350 Intangibles - Goodwill and Other .

Such events and circumstances may include a significant change in the Company’s business climate, economic and industry trends, legal factors, negative operating performance indicators, significant competition or changes in strategy.

The Company performs testing of indefinite-lived intangible assets, other than goodwill, at the asset group level using a discounted cash flow model.

If the carrying value exceeds the fair value, an impairment loss is recorded for that excess.

The Company would also be required to reduce the carrying amounts of the related assets on its consolidated balance sheet.

Determining the fair value of an indefinite-lived intangible asset group requires the application of judgment and involves the use of significant estimates and assumptions, including projections of future cash flows, which include estimated revenues, costs and probabilities of achieving technical and regulatory milestones, and discount rates, among other factors.

The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain.

Actual future results may differ from the estimates.

Development costs incurred after an acquisition are expensed as they are incurred.

Intangible assets with finite useful lives, which include completed IPR&D projects, are amortized over their estimated useful lives, primarily on a straight-line basis, and are also periodically reviewed for changes in facts or circumstances that may result in an impairment or in a reduction to the estimated useful life of the asset.

In determining the initial fair value of an intangible asset, or when quantitative analysis is required to determine any impairment, the Company usually uses an income approach that discounts expected future cash flows to present value using a discount rate that is based on the estimated weighted-average cost of capital for comparable companies and represents the rate that market participants would use to value the intangible asset.

These cash flow models require the use of Level 3 fair value measurements and inputs, including estimated revenues, costs and probabilities of technical and regulatory milestones, among other factors.

If the Company is required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events, then the estimated fair value of contingent consideration liabilities is recognized in the consolidated balance sheet as of the date of the acquisition.

Each reporting period thereafter, the Company revalues these obligations and records increases or decreases in their fair value on the consolidated statements of operations until such time that the payment is made or obligations expire.

See Note 3 for additional information.

Collaboration Arrangements and Revenue Recognition

The Company earns revenue from collaboration agreements that allow collaborators to develop, manufacture and commercialize product candidates.

Arrangements with collaborators may include intellectual property licenses, research and development services, manufacturing services for clinical and commercial supply and participation in joint steering committees.

At the inception of an agreement, the Company evaluates if an agreement is a collaborative arrangement within the scope of ASC 808, Collaborative Arrangements (“ASC 808”).

For collaborative arrangements that fall within the scope of ASC 808, the Company first determines which elements of the collaboration are deemed to be a performance obligation with a customer within the scope of ASC 606.

For elements of collaboration arrangements that are accounted for pursuant to ASC 808 and are not subject to the guidance in ASC 606, the Company applies the revenue recognition model under ASC 606 or other guidance, as deemed appropriate.

Under ASC 606, the Company recognizes revenue in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services when its collaborator, or customer, obtains control of promised goods or services.

The Company follows a five-step approach:

(i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) the customer obtains control of the product or service.

The Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation.

Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources and (ii) are separately identifiable from other promises in the contract.

Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the requirements of a performance obligation.

The Company determines the transaction price based on the amount of consideration the Company is entitled to receive in exchange for the transfer of control of a product or a service to the customer.

Consideration may be fixed, variable, or a combination of both.

Payments to the Company under these arrangements typically include one or more of the following:

non-refundable upfront payments, reimbursement for research services, payments for clinical supplies, research, development or regulatory milestone payments, profit-sharing arrangements, and royalty and commercial sales milestone payments.

Variable consideration, such as performance-based milestones, are included in the total consideration if the Company expects to receive such consideration and if it is probable that the inclusion of the variable consideration will not result in a significant reversal in the cumulative amount of revenue recognized under the arrangement.

The Company accounts for cost reimbursements included in the transaction price using the expected value method.

The Company excludes sales-based royalty and milestone payments from the total consideration it expects to receive until the underlying sales occur because the license to its intellectual property is deemed to be the predominant item to which the royalties or milestones relate as it is the primary driver of value in the collaboration arrangements.

The Company then allocates the transaction price to each distinct performance obligation based on the relative standalone selling price.

Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, probabilities of technical and regulatory success, and the expected level of effort for research and development services.

The Company recognizes revenue associated with each performance obligation as the control over the promised goods or services transfer to its collaborators which occurs either at a point in time or over time.

If control transfers over time, revenue is recognized by using a method of measuring progress that best depicts the transfer of goods or services.

The Company evaluates the measure of progress and related inputs each reporting period and any resulting adjustments to revenue are recorded on a cumulative catch-up basis.

Consideration allocated to options that include material rights is deferred until the options are exercised or expire.

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional.

Consideration received that does not meet the requirements to satisfy ASC 606 revenue recognition criteria is recorded as deferred revenue in the consolidated balance sheets, classified as either current (less than 12 months) or non-current (more than 12 months) deferred revenue based on the Company’s best estimate of when such revenue will be recognized.

See Note 7 for additional information.

Cash and Cash Equivalents

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Restricted Cash

Restricted cash represents security deposits in the form of letters of credit issued in connection with the Company’s leases (see Note 7).

Restricted cash represents security deposits in the form of letters of credit issued in connection with the Company’s leases (see Note 6 for additional information).

Marketable Securities

Marketable securities may consist of money market funds, U.S.

treasuries, commercial paper, corporate bonds, supranational debt securities and agency bonds with original maturities of more than three months at the time of purchase.

As the Company’s entire investment portfolio is considered available for use in current operations, the Company classifies all marketable securities as available-for-sale and as current assets, even though the stated maturity may be more than one year from the current balance sheet date.

Marketable securities are carried at fair value, with change in fair value reported as unrealized gains or losses in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity (deficit) in the consolidated balance sheets.

Marketable securities are carried at fair value, with the change in fair value reported as unrealized gains or losses in accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity (deficit) in the consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity, which is included in interest income in the consolidated statements of operations and comprehensive loss.

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The carrying amounts of prepaid expenses, other current assets, accounts payable, accrued expenses and other liabilities approximate fair value due to their short-term maturities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

instruments, such as money market funds, marketable securities and derivative liabilities are measured at fair value at each reporting date (see Note 3).

Financial instruments, such as money market funds, marketable securities and derivative liabilities are measured at fair value at each reporting date (see Note 4 for additional information).

Recoverable Value-Added Tax

The Company conducts clinical trials in several European and Asian countries that can result in value-added tax (“VAT”) assessments based on the transfer of products across borders including production, packaging and distribution of clinical materials.

VAT is a national tax that is levied at each stage of production and can vary by jurisdiction.

When a company is not VAT-registered in a country, VAT is due when goods enter a country and is not considered reclaimable.

When the Company becomes VAT-registered and establishes a pattern of VAT recoverability from taxing authorities in a certain country, the Company will record aggregate balances recoverable in other prepaid expenses and current assets in the consolidated balance sheets.

The Company reviews these balances on a regular basis and records valuation allowances on the amounts that are not expected to be recovered.

Deferred Offering Costs

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In the event the financing or the offering is terminated or delayed, deferred offering costs are expensed immediately as a charge to general and administrative expenses in the consolidated statements of operations and comprehensive loss.

As of December 31, 2024 and 2023, the Company had no deferred offering costs in its consolidated balance sheets.

As of December 31, 2025 and 2024, the Company had $ 0.4 million and zero deferred offering costs, respectively, in other assets, non-current in its consolidated balance sheets.

Property and Equipment, Net

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Upon sale or retirement of assets, the costs and related accumulated depreciation are removed from the consolidated balance sheets and the resulting gain or loss is reflected within operating expenses in the consolidated statements of operations and comprehensive loss.

Asset Acquisitions and Acquired In-Process Research and Development Expenses

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the asset or group of assets, which includes transaction costs.

Asset Acquisitions and Acquired IPR&D Assets

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cost to acquire the asset or group of assets, which includes transaction costs.

The Company determines if the acquisition should be accounted for as an asset acquisition after considering whether substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of assets and whether the Company acquired a substantive process capable of significantly contributing to the Company’s ability to create outputs.

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The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that a lessee would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rent expense for operating leases is recognized on a straight-line basis over the lease term.

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As of December 31, 2025 and 2024, the Company had no finance leases.

Impairment of Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, and ROU assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

Impairment of Definite-Lived Long-Lived Assets

The Company regularly reviews the carrying value and estimated lives of all of its definite-lived long-lived assets, including property and equipment, and right-of-use assets to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future undiscounted net cash flows expected to be generated by the asset or asset group.

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Derivative Liability

The Company may issue financial instruments, such as promissory notes, which include embedded derivatives, such as call options.

The Company may issue financial instruments, such as promissory notes, that include embedded derivatives, such as call options.

Derivatives are accounted for under ASC 815, Derivatives and Hedging .

The Company performs analysis of derivatives embedded in the financial instruments, and if any requires bifurcation, accounts for these at fair value at the issuance date.

In May 2024, the Company issued Series C redeemable convertible preferred stock shares, which included embedded derivatives that required bifurcation (see Note 3).

The Company performs analysis of derivatives embedded in the financial instruments, and if any require bifurcation, accounts for these at fair value at the issuance date.

A derivative liability is accounted for separately from the financial instrument at fair value on the issuance date and is remeasured each reporting period.

The changes in the fair value of the derivative liability are included in change in fair value of derivative liability in the consolidated statements of operations and comprehensive loss.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In March 2024, in connection with the Company’s redeemable convertible preferred stock financings, the Company issued options to purchase additional shares of redeemable convertible preferred stock at a specified price, which were accounted for as derivative liabilities.

Changes in fair value of these derivative liabilities were included in the other income (loss) in the consolidated statement of operations and comprehensive loss for each reporting period until the derivatives were settled in May 2024 (see Note 4).

Redeemable Convertible Preferred Stock

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The Company did not adjust the carrying values of the redeemable convertible preferred stock to the liquidation preferences of such stock, because it was uncertain whether or when a deemed liquidation event would occur that would obligate the Company to pay the liquidation preferences to holders of redeemable convertible preferred stock.

Subsequent adjustments to the carrying values to the liquidation preferences would be made only when it became probable that such a deemed liquidation event would occur (see Note 8).

Subsequent adjustments to the carrying values to the liquidation preferences would be made only when it became probable that such a deemed liquidation event would occur.

All redeemable convertible preferred stock outstanding was converted into common stock immediately prior to the closing of the IPO on July 1, 2024, and the Company had no outstanding redeemable convertible preferred stock outstanding as of December 31, 2025 and 2024.

Research and Development Expenses and Accruals

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The Company accrues these costs based on factors such as estimates of the work completed and in accordance with the third-party service agreements.

If the Company does not identify costs that have begun to be

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

incurred or if the Company underestimates or overestimates the level of services performed or the costs of these services, actual expenses could differ from the estimates.

If the Company does not identify costs that have begun to be incurred or if the Company underestimates or overestimates the level of services performed or the costs of these services, actual expenses could differ from the estimates.

To date, the Company has not experienced any material differences between accrued costs and actual costs incurred.

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If the actual timing of the performance of services or the level of effort varies from the original estimates, the Company will adjust the accrual accordingly.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Comprehensive Loss

Comprehensive loss represents all changes in stockholders’ deficit except those resulting from distributions to stockholders.

The Company’s other comprehensive income (loss) for the years ended December 31, 2025 and 2024 consisted of unrealized gain (loss) on marketable securities, net of taxes.

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

Amounts incurred are classified as general and administrative expenses in the consolidated statements of operations and comprehensive loss.

Stock-Based Compensation

The Company grants stock-based awards to employees, directors and non-employee consultants in the form of stock options to purchase shares of its common stock.

Stock-Based Compensation Expense

The Company accounts for stock-based compensation expense in accordance with ASC 718.

The Company grants stock-based awards to employees, directors and non-employee consultants in the form of stock options and RSUs to purchase shares of its common stock.

The Company measures stock options granted with service-based vesting based on the fair value of the award on the grant date using the Black-Scholes option-pricing model.

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Stock-based compensation expense for these awards is recognized on a straight-line basis over the requisite service period, which is the longer of the explicit service period of the service condition and the derived service period of the market condition, as determined for each separately vesting portion of the awards as if each award was, in substance, multiple awards.

The Company accounts for award forfeitures as they occur.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary or services costs are classified.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-based compensation expense related to stock purchase rights under the Company’s 2024 ESPP is measured based on grant date at fair value using the Black-Scholes option-pricing model.

The model requires management to make a number of assumptions, including common stock fair value, expected volatility, expected term, risk-free interest rate and expected dividend yield.

Stock-based compensation expense is recognized on a straight-line basis over the offering period

The Company accounts for award forfeitures as they occur and classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary or services costs are classified.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.

Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit.

Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the taxing authority.

Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.

Comprehensive Loss

Comprehensive loss represents all changes in stockholders’ deficit except those resulting from distributions to stockholders.

The Company’s other comprehensive income (loss) for the years ended December 31, 2024 and 2023 consisted of unrealized gain (loss) on marketable securities, net of taxes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based on the merits of the position.

The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit.

To date, there have been no interest or penalties incurred in relation to unrecognized tax benefits.

Net Loss Per Share Attributable to Common Stockholders

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Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period.

Potentially dilutive securities include common stock issued and outstanding, unvested restricted common stock, early exercised stock options, and redeemable convertible preferred stock issued and outstanding.

Potentially dilutive securities include stock options and RSUs issued and outstanding, early exercised stock options, and unvested restricted common stock.

As the Company has reported losses for all periods presented, all potentially dilutive securities are antidilutive and accordingly, basic net loss per share equals diluted net loss per share.

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From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date.

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and private companies, the Company will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

The Company qualifies as an “emerging growth company” as defined in the JOBS Act, and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and private companies, the Company will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.

The Company may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure s (“ASU 2023-07”).

This ASU requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted this standard in the consolidated financial statements for the year ended December 31, 2024.

The adoption of this standard did not impact the Company’s reportable segments and additional required disclosures have been included in Note 14.

In March 2024, the FASB issued ASU No.

2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements (“ASU 2024-02”).

ASU 2024-02 clarifies and simplifies references to certain concept statements within U.S.

GAAP and applies to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance.

ASU 2024-02 is effective for fiscal years beginning after December 15, 2024 for public entities and for fiscal years beginning after December 15, 2025 for all other entities, with early application permitted.

The Company adopted this standard in the consolidated financial statements for the year ended December 31, 2024.

The adoption of this standard did not have a material impact on its consolidated financial statements at the adoption date.

Recently Issued and Not Yet Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU No.

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ASU 2023-09 should be adopted prospectively with the option to be adopted retrospectively.

The Company is currently evaluating the impact of this standard on its disclosure in its consolidated financial statements.

The Company adopted this standard prospectively effective for the year ended December 31, 2025 and reflected the required annual income tax disclosures in the notes to its consolidated financial statements (see Note 15).

Recently Issued and Not Yet Adopted Accounting Pronouncements

In November 2024, the FASB issued ASU No.

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The requirements of ASU 2024-03 may be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements and disclosures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company is currently evaluating the impact of adopting ASU 2024-03 on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements (“ASU 2025-11”), which clarifies the form and content of interim financial statements, adds a comprehensive list of required interim disclosures, and provides a disclosure principle for condensed interim financial statements.

ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted and, on adoption, can be applied either prospectively or retrospectively to any or all periods presented in the financial statements.

The Company is currently evaluating the impact of the new standard on the Company's consolidated financial statements and related disclosures.

ACELYRIN Merger

The Company completed its acquisition of ACELYRIN on the Closing Date of May 21, 2025 and accounted for the transaction as an acquisition under ASC Topic 805, Business Combinations .

ACELYRIN was a late-stage biopharma company focused on identifying, acquiring, and accelerating the development and commercialization of transformative medicines.

ACELYRIN’s portfolio consisted of lonigutamab, a subcutaneously delivered, monoclonal antibody targeting IGF-1R for the potential treatment of Thyroid Eye Disease (“TED”).

The ACELYRIN Merger strengthened the Company’s balance sheet and its cash position and added the lonigutamab product candidate to the Company’s development portfolio as of the Closing Date.

As of the Closing Date, the Company (i) issued 48,653,549 shares of its common stock in exchange for ACELYRIN’s issued and outstanding common stock shares and paid cash for fractional shares, (ii) assumed ACELYRIN’s stock options with an exercise price of $ 18.00 or less outstanding and unexercised immediately prior to the Closing Date, which are exercisable into 4,712,186 shares of the Company’s common stock, (iii) assumed ACELYRIN’s RSUs outstanding and unvested immediately prior to the Closing Date, which were converted into 1,323,905 of the Company’s RSUs, and (iv) assumed ACELYRIN’s performance RSUs outstanding and unvested immediately prior to the Closing Date, which were converted into 146,963 of the Company’s RSUs subject only to a service vesting condition.

Outstanding shares, stock options, RSUs and performance RSUs were exchanged at the exchange ratio of 0.4814 shares of the Company’s common stock for each share of ACELYRIN common stock (the “Exchange Ratio”).

ACELYRIN’s outstanding and unexercised options with exercise prices more than $ 18.00 were cancelled.

Exercise prices for the assumed options were determined as the product of the original exercise prices multiplied by the reciprocal of the Exchange Ratio.

Converted ACELYRIN stock options and RSUs continue to vest in accordance with their original terms.

Performance RSUs were deemed to have 100 % satisfied their performance conditions and will vest in two equal installments on May 15 of calendar years 2026 and 2027, subject to the holder of the converted performance RSUs remaining in service with the Company or any of its subsidiaries on such date.

The purchase price consideration consists of the Company’s shares of common stock issued as of the Closing Date and the additional stock-based compensation related to the fair value of replacement awards attributable to pre-combination services, and is calculated as follows (in thousands, except share and per share amounts):

Implied shares of common stock issued to holders of ACELYRIN common stock

Closing price per share of common stock as of Closing Date

Consideration transferred for share exchange

Fair value of replacement awards attributable to pre-combination services

Total purchase price consideration

The ACELYRIN Merger was accounted for as a business combination with the Company being treated as the accounting

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net assets acquired were recognized at their fair value as of the Closing Date of the ACELYRIN Merger.

The Company recognized ACELYRIN Merger transaction costs of $ 14.7 million in general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2025.

The following table presents the final purchase price allocation of the fair value of the net assets acquired and liabilities assumed as of the Closing Date (in thousands):

Assets Acquired

Cash and cash equivalents

Restricted cash

Marketable securities

Research and development prepaid expenses

Prepaid credit voucher for clinical manufacturing

Other prepaid expenses and current assets

Restricted cash, non-current

Property and equipment

Intangible assets

Operating lease right-of-use assets

Other assets, non-current

Liabilities Assumed

Accounts payable

Research and development accrued expenses

Other accrued expenses and current liabilities

Operating lease liabilities, current

Operating lease liabilities, non-current

Deferred tax liability

Total liabilities

Fair value of net assets

Purchase consideration

Gain on bargain purchase

The acquisition method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the Closing Date.

Valuing certain components of the ACELYRIN Merger, primarily the acquired IPR&D intangible asset and a deferred tax liability required the Company to make significant estimates and assumptions.

The valuation of assets acquired and liabilities assumed was finalized during the three months ended December 31, 2025, which did not result in any measurement period adjustments.

Intangible assets represent the acquired IPR&D intangible asset related to the acquired lonigutamab product candidate in development as of the Closing Date.

The fair value of the acquired IPR&D intangible asset was calculated as $ 51.0 million using the multi-period excess earnings method, which is equal to the present value of the incremental after-tax cash flows attributable to that intangible asset, using a discount rate of 24.0 % based on the best estimate of a market participant's after-tax weighted average cost of capital.

Projected future cash flows were based on significant estimates, including estimated revenues, costs and probabilities of achieving technical and regulatory milestones, among other factors.

The acquired IPR&D intangible asset is an indefinite-lived intangible asset and is subject to an annual impairment test.

The Company performed a quantitative analysis for its annual impairment assessment of the acquired IPR&D intangible asset as of December 31, 2025.

The quantitative analysis utilized a discounted cash flow model with assumptions that are considered level 3 inputs and concluded that the acquired IPR&D intangible asset had a fair value in excess of its carrying value as of December 31, 2025, and therefore no impairment was identified.

The Company acquired a prepaid credit voucher for clinical manufacturing issued by one of ACELYRIN’s contract

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

manufacturers that will be applied towards payments of clinical product manufacturing invoices issued by the vendor.

The remaining balance of $ 11.4 million as of the Closing Date was not adjusted from its carrying amount as its fair value approximated its carrying value as of this date.

The Company acquired two operating leases and a sublease.

Refer to Note 9 for additional details.

The Company estimated the fair value of lease liabilities as the present value of the remaining lease payments, as if the acquired leases were new leases of the acquirer as of the Closing Date.

The Company measured the right-of-use asset at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.

As ACELYRIN entered into a sublease in February 2025, these sublease terms were considered at market terms.

As of the Closing Date, the fair value of operating lease liabilities, current, increased by $ 0.2 million and the fair value of operating lease liabilities, non-current, increased by $ 0.5 million.

As of the Closing Date, the fair value of operating lease right-of-use assets, net, decreased by $ 0.1 million.

Because the fair value of the identifiable assets acquired and liabilities assumed exceeded the fair value of the purchase consideration transferred, the Company recorded a gain on bargain purchase of $ 187.9 million as of the Closing Date.

Consequently, the Company reassessed the recognition and measurement of identifiable assets acquired and liabilities assumed in accordance with ASC 805-30-25-4 and concluded that all acquired assets and assumed liabilities were recognized and that the valuation procedures and resulting measures were appropriate.

Gain on bargain purchase primarily relates to the market value of ACELYRIN’s common stock trading below the carrying value of net assets and the Exchange Ratio being fixed at the time the Merger Agreement was signed and not adjusted for subsequent changes in the market price of the Company’s common stock.

Gain on bargain purchase is recognized as other income in the consolidated statements of operations and comprehensive loss.

The Company recognized a deferred tax liability of $ 10.7 million related to the acquired IPR&D intangible asset as of the Closing Date.

The Company also has additional severance related obligations under the Merger Agreement that are separate from the assets and liabilities acquired.

In accordance with the ACELYRIN severance plan, ACELYRIN employees terminated without cause within 12 months of the Closing Date are entitled to receive severance benefits, including acceleration of their outstanding equity awards and extension of their outstanding options exercise periods of up to 12 months post-termination.

The Company estimated total cash severance obligation, including related taxes, of $ 11.9 million, which it expects to pay within 12 months from the Closing Date based on agreed termination dates with employees.

Severance obligation is recorded to expense over the remaining employment period for notified employees.

The Company recognized $ 6.5 million as general and administrative expenses and $ 5.4 million as research and development expenses related to severance expenses for the year ended December 31, 2025.

As of December 31, 2025, the severance liability of $ 0.2 million is classified as other accrued expenses and current liabilities in the consolidated balance sheet.

The Company estimated stock-based compensation expense of $ 13.1 million related to the accelerated vesting and exercise term modification for severed employees, which was recognized in the year ended December 31, 2025.

The Company recognized stock-based compensation expense of $ 9.0 million as general and administrative expenses and $ 4.1 million as research and development expenses for the year ended December 31, 2025.

Following the Closing Date, the operating results of ACELYRIN have been included in the Company’s consolidated financial statements.

For the period from May 22, 2025 through December 31, 2025, there was no revenue attributable to ACELYRIN, and operating losses attributable to ACELYRIN for such period were $ 9.3 million.

The ACELYRIN Merger is intended to be a reorganization under Internal Revenue Code Section 368(a).

The Merger Agreement outlines the “plan of reorganization” within the meaning of the regulations issued under Internal Revenue Code Section 368(a) and the ACELYRIN Merger is intended to qualify as a tax-free reorganization for U.S.

federal and state income tax purposes.

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Unaudited Pro Forma Summary of Operations

The following table shows the unaudited pro forma summary of operations for the years ended December 31, 2025 and 2024, as if the ACELYRIN Merger had closed on January 1, 2024.

The pro forma financial information is provided for comparative purposes only and is not necessarily indicative of what actual results would have been had the acquisition occurred as of January 1, 2024, nor does it give effect to synergies or any cost savings, and it is not indicative of what such results would be for any future period:

Year Ended December 31,

Total revenue

The summary pro forma financial information includes the following adjustments:

● actual ACELYRIN Merger transaction costs of $ 14.7 million were excluded from the year ended December 31, 2025 pro forma results, and included in the year ended December 31, 2024 pro forma results, as if these costs were incurred during the 2024 period;

● incremental stock-based compensation expense related to the accelerated vesting and exercise term modification of $ 13.1 million was excluded from the years ended December 31, 2025 pro forma results, and included in the year ended December 31, 2024 pro forma results, as if this expense was incurred during the 2024 period;

● severance cash obligation expense for terminated ACELYRIN employees of $ 11.9 million was excluded from the year ended December 31, 2025 pro forma results, and included in the year ended December 31, 2024 pro forma results, as if this expense was incurred during the 2024 period;

● Gain on bargain purchase of $ 187.9 million was excluded from the year ended December 31, 2025 pro forma results, and included in the year ended December 31, 2024 pro forma results, as if such gain was recognized during the 2024 period.

Fair Value Measurements

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

Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The Company recognizes transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s financial instruments consist of Level 1, Level 2 and Level 3 financial instruments.

1 unchanged sentence

Level 1 financial instruments are comprised of money market funds and U.S.

Treasury obligations.

Level 2 financial instruments are comprised of U.S.

Usually, short term marketable securities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities.

Treasury obligations, corporate debt obligations, commercial paper, supranational debt obligations and government development bank obligations.

Short term marketable securities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities.

In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis.

Level 3 financial instruments include derivative liabilities issued in May 2023 and settled in October 2023 in connection with the closing of the second tranche of the Series B-2 and B-2A redeemable convertible preferred stock financing, and issued in March 2024 and settled in May 2024 in connection with the closing of the second tranche of the Series C redeemable convertible preferred stock financing.

The following tables represent the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis as of December 31, 2024 and 2023 (in thousands):

Fair Value Measurements as of December 31, 2024

Level 3 financial instruments include derivative liabilities issued in March 2024 and settled in May 2024 in connection with the closing of the second tranche of the Series C redeemable convertible preferred stock financing.

The following tables present the Company’s fair value hierarchy for financial assets measured at fair value on a recurring basis as of December 31, 2025 and 2024 (in thousands):

December 31, 2025

Cash equivalents

1 unchanged sentence

Marketable securities

Fair Value Measurements as of December 31, 2023

Treasury obligations

Corporate debt obligations

Commercial paper

Supranational debt obligations

Government development bank obligations

December 31, 2024

Cash equivalents

1 unchanged sentence

Marketable securities

The derivative liability issued in May 2023 in connection with the closing of the second tranche of the Series B-2 and B-2A redeemable convertible preferred stock financing was a freestanding financial instrument and represented the Company’s obligation to issue additional shares of Series B-2 and B-2A redeemable convertible preferred stock at a fixed price upon the approval by the Company’s board of directors.

Treasury obligations

In connection with the Series C redeemable convertible preferred stock financing in March 2024, the Company issued to investors two freestanding financial instruments:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Series C second tranche option liability and the put right option liability.

the Series C second tranche option liability and the put right option liability.

The Company estimated their fair value using a Black-Scholes option-pricing model weighted by the probability of occurring.

The Company used the intrinsic value calculation to estimate the fair value of the Series C second tranche option liability and the put right option liability upon settlement.

The following table provides a range of assumptions used in the valuation of the derivative liability for the years ended December 31, 2024 and 2023:

Significant estimates and assumptions impacting the derivative liability fair value included the probability of each option exercise, redeemable convertible preferred stock fair value, estimated stock volatility and the expected term.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a range of assumptions used in the valuation of the derivative liability for the year ended December 31, 2024:

Year Ended December 31,

1 unchanged sentence

55.1 % – 59.9 %

43.2 % – 83.2

Risk-free interest rate

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0.0 % – 100.0 %

30.0 % – 100.0

The following table provides a roll-forward of the fair value of the Company’s Level 3 financial instruments, the derivative liability, for the years ended December 31, 2024 and 2023 (in thousands):

The following table provides a roll-forward of the fair value of the Company’s Level 3 financial instruments, the derivative liability, for the year ended December 31, 2024 (in thousands):

Year Ended December 31,

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Fair value at end of period

The Company did not hold Level 3 financial instruments for the year ended December 31, 2025.

There were no transfers between Level 1, Level 2 or Level 3 categories for the years ended December 31, 2025 and 2024.

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Marketable securities, which are classified as available-for-sale, consisted of the following as of December 31, 2025 and 2024 (in thousands):

Fair Value as of

December 31, 2025

Amortized Cost

Short-term marketable securities:

Treasury obligations

Corporate debt obligations

Commercial paper

Supranational debt obligations

Government development bank obligations

Total short-term marketable securities

Fair Value as of

December 31, 2024

Amortized Cost

Short-term marketable securities:

Treasury obligations

Total short-term marketable securities

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The Company considered the current and expected future economic and market conditions and determined that its marketable securities were not significantly impacted.

For all marketable securities with a fair value less than its amortized cost basis, the Company determined the decline in fair value below amortized cost basis to be immaterial and non-credit related, and therefore no allowance for expected credit losses was recorded.

For the years ended December 31, 2024 and 2023, the Company did no t recognize any impairment losses on its marketable securities.

Balance Sheet Components

Restricted cash

Restricted cash includes cash held at financial institutions that is pledged as collateral for stand-by letters of credit of $ 1.3 million and $ 1.1 million related to lease commitments as of December 31, 2025 and 2024, respectively.

The cash will be restricted until the termination or modification of the related lease agreements.

Restricted cash is classified as restricted cash, non-current in the consolidated balance sheets as of December 31, 2025 and 2024.

Other Prepaid Expenses and Current Assets

Other prepaid expenses and current assets consisted of the following as of December 31, 2025 and 2024 (in thousands):

Prepaid insurance

Prepaid subscriptions

Interest receivable

Prepaid insurance

Tax receivable

Prepaid credit voucher for clinical manufacturing

Total other prepaid expenses and current assets

The prepaid credit voucher for clinical manufacturing was received by ACELYRIN in the third quarter of 2024 as part of an agreement to cancel certain services with a vendor under a manufacturing agreement related to the suspension of development of certain ACELYRIN programs.

The prepaid credit voucher for clinical manufacturing may be used to settle invoices for services and raw materials from this vendor related to the lonigutamab product candidate.

As of December 31, 2025, the prepaid credit voucher for clinical manufacturing included $ 0.7 million classified in other prepaid expenses and current assets and $ 5.5 million included in other assets, non-current.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment, net

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Depreciation and amortization expense was $ 3.5 million and $ 3.2 million for the years ended December 31, 2025 and 2024, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Accrued Expenses and Current Liabilities

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Accrued personnel and related expenses

Accrued professional services

Accrued professional services and other

Severance liability

Accrued other expenses

Total other accrued expenses and current liabilities

Kaken Collaboration Agreement

On March 25, 2025, (the “Effective Date”) the Company entered into the Kaken Collaboration Agreement.

Under the terms of the Collaboration Agreement, the Company granted to Kaken an exclusive right to develop, manufacture and commercialize envu, formerly known as ESK-001, for dermatology indications in Japan, with options to expand the license, subject to opt-in payments and certain cost-sharing obligations on the part of Kaken, to include rheumatological and gastrointestinal diseases.

Pursuant to the terms of the Collaboration Agreement, the Company is responsible for the global development of envu in the dermatology field, and Kaken is responsible for the clinical development, regulatory approvals and commercialization of envu in Japan in dermatology and other indications for which Kaken has exercised its option.

Kaken is required to use commercially reasonable efforts to conduct all subsequent development, manufacture, and commercialization activities.

The Collaboration Agreement further provides that the Company will retain rights to envu in all other indications and geographies.

In March 2025, Kaken made an upfront, non-refundable payment of $ 20.0 million to the Company.

In addition, Kaken will pay the Company an aggregate of $ 20.0 million towards global development costs for envu in the dermatology field through the end of 2026 and thereafter will pay a specified share of development costs applicable to the dermatology field, and for any field for which Kaken exercises its option, subject to Kaken's right to opt out of cost-sharing in certain

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

indications in specified circumstances.

In addition, Kaken would pay the Company up to an aggregate of $ 36.0 million upon the achievement of regulatory milestones and upon Kaken’s exercise of its field expansion options for the rheumatology and gastrointestinal fields.

In addition, the Company is entitled to receive aggregate payments of up to ¥ 15.5 billion upon the achievement of commercial milestones, plus tiered royalties at percentages ranging from the low double digits into the twenties on aggregate net sales of envu in Japan.

The Company evaluated the Collaboration Agreement and concluded it was within the scope of ASC 606.

As of the Effective Date, the Company identified four performance obligations:

(1) license to develop, manufacture and commercialize envu (the “License Obligation”), (2) development services that support the global development of envu (the “Development Services Obligation”), (3) the manufacture of the clinical supply in Japan (the “Manufacturing Services Obligation”) and (4) a material right related to the option for rheumatology disease (the “Material Right Obligation”).

The License Obligation was considered functional intellectual property and distinct from other promises under the contract, as Kaken can benefit from the license on its own or together with other readily available resources.

The Development Services Obligation and Manufacturing Services Obligation were considered distinct as Kaken could benefit from both of these separately with the license transferred by the Company at the inception of the agreement.

The option in the rheumatology field contained a material right because its exercise does not require payment of a fee that is commensurate with the value of the additional license.

No material right was assigned to the gastrointestinal field since its estimated fair value did not exceed the exercise price of the option.

The transaction price includes the upfront license fee of $ 20.0 million, the global development cost reimbursement of $ 20.0 million in the dermatology field through the end of 2026, the estimated global development cost reimbursement in the dermatology field after 2026 of $ 1.5 million and an immaterial amount of variable consideration related to the Manufacturing Services Obligation.

The Company determined that any variable consideration related to development and regulatory milestones was deemed to be fully constrained at inception and therefore excluded from the initial transaction price due to the high degree of uncertainty and risk associated with these potential payments, and the Company could not assert that it was probable that a significant reversal in the amount of cumulative revenue recognized would not occur.

The Company developed the estimated standalone selling prices for the License Obligation and Material Right Obligation primarily based on the probability-weighted value of expected future revenues associated with each underlying license.

In developing such estimates, the Company applied judgment in determining the forecasted revenue, taking into consideration the applicable market conditions, the probability of success, and the time needed to develop each indication for which the license relates.

The Company developed the estimated standalone selling price for the development services and clinical supply primarily based on the resources to be committed to perform the service.

At inception of the contract, the Company allocated $ 17.4 million to the License Obligation, $ 20.8 million to the Development Services Obligation, $ 3.3 million to the Material Right Obligation and an immaterial amount to the Manufacturing Services Obligation.

The License Obligation was satisfied in March 2025 upon transfer of the license to Kaken.

For the Development Services Obligation, the Company recognizes revenue over time as Kaken consumes the benefit of such services as they are being performed.

The Company measures proportional performance over time for the Development Services Obligation by using an input method based on cost incurred relative to the total estimated cost of the obligation on a quarterly basis.

The Company re-evaluates the transaction price as uncertain events are resolved or other changes in circumstances occur as of the end of each reporting period.

The Company recognized revenue of $ 17.4 million for the year ended December 31, 2025 related to the License Obligation and $ 6.7 million for the year ended December 31, 2025 related to the Development Services Obligation and Manufacturing Services Obligation.

As of December 31, 2025, collaboration revenue receivable was less than $ 0.1 million, deferred revenue, current was $ 1.5 million and deferred revenue, non-current was $ 2.6 million.

The aggregate estimated amount of transaction price that was unsatisfied as of December 31, 2025 was $ 17.6 million, of which, $ 14.3 million related to the Development Services Obligation that is expected to be recognized through 2028 as the Company performs its services towards the global development of envu in the dermatology field.

The remaining $ 3.3 million estimated amount of transaction price that was unsatisfied as of December 31, 2025 related to the Material Right Obligation and is deferred until the option is exercised or expires.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Tenet Medicines Purchase Agreement

In January 2024, ACELYRIN entered into an asset purchase agreement (“Purchase Agreement”) with Tenet Medicines, Inc.

In consideration for the assets and other rights Tenet received under the Purchase Agreement, ACELYRIN is entitled to receive development, regulatory and commercial milestone payments of up to $ 157.5 million in the aggregate based on the achievement of specified milestones, royalties on worldwide net sales, and payments on sublicense income.

On December 31, 2025, Climb Bio, Inc.

(“Climb Bio”), the parent company of Tenet, filed a complaint in Delaware Superior Court seeking a declaratory judgment that budoprutug is not a “Product” under the Purchase Agreement, and therefore Climb Bio does not owe milestone or royalty payments to the Company under the Purchase Agreement.

In January 2026, the Company issued a notice of material breach to Climb Bio for failing to timely pay a $ 3.0 million development milestone.

The Company disputes Climb Bio’s interpretation and intends to seek recovery of the $ 3.0 million development milestone, as well as any other future milestone or royalty payments, through litigation.

The matter remains pending.

Related Party Transactions

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For the years ended December 31, 2025 and 2024, the Company recognized $ 1.1 million and $ 0.9 million as research and development expenses under the service agreement, respectively.

Accrued expenses under the service agreement were zero and $ 2 thousand as of December 31, 2024 and 2023, respectively.

Accrued expenses under the service agreement were zero as of December 31, 2025 and 2024.

Commitments and Contingent Liabilities

Operating Leases

In 2021, the Company entered into a lease agreement for 14,000 square feet of office space in South San Francisco, California, which commenced in August 2021 and had a contractual termination date of September 2024.

In September 2023, the Company abandoned this right-of-use asset as it had moved to its new office space described below;

the Company recognized a loss on this abandonment in the amount of $ 0.6 million.

In January 2022, the Company entered into a lease agreement for 12,000 square feet of office and laboratory space in South San Francisco, California, which commenced in July 2022 and had a contractual termination date of July 2029.

This lease contained an early termination option, allowing the Company to terminate this lease before the expiry of the lease term.

The Company concluded the lease term for accounting purposes ended in August 2023.

In April 2023, the lease was modified, and the contractual lease termination was changed to October 2023.

The accounting impact of the modification was not material.

In August 2022, the Company entered into a lease agreement for 55,000 square feet of office and laboratory space in South San Francisco, California, which commenced in January 2023 and has a contractual termination date in August 2033.

The Company constructed leasehold improvements in the space, which were concluded to be lessee assets.

The lessor provided the Company a tenant improvement allowance of $ 17.2 million, of which $ 0.5 million and $ 16.7 million were received and were accounted for as a reduction to lease payments for the years ended December 31, 2022 and 2023, respectively.

At the commencement date, future lease payments totaled $ 37.9 million, including $ 54.6 million in gross fixed payments less $ 16.7 million in lease incentives received during the first year of the lease.

The lease liability at lease commencement was calculated to be $ 14.1 million, which is equal to the present value of the future lease payments, discounted at the incremental borrowing rate of 11.4 %.

Following the commencement date, the Company measured its lease liability and right-of-use asset in accordance with ASC 842-20-35-3.

In accordance with this guidance, future lease payments increased as the $ 16.7 million incentive was received, and future gross fixed payments were no longer offset by these incentives.

Leasehold improvements were reflected in property and equipment, net in the consolidated balance sheets as of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024 and 2023.

The lease agreement also includes a renewal option allowing the Company to extend this lease for an additional three years at the prevailing rental rate, which the Company was not reasonably certain to exercise.

The lease agreement includes a renewal option allowing the Company to extend this lease for an additional three years at the prevailing rental rate, which the Company was not reasonably certain to exercise.

In December 2024, the Company entered into a lease agreement for approximately 22,000 square feet of additional office space in South San Francisco, California.

The lease has a contractual termination date of December 2026, with the right to extend the lease for an additional two years subject to certain conditions.

The Company determined that, for accounting purposes, the commencement date of the lease is in January 2025 and the lease term ends in December 2026, as it not reasonably certain that the lease will be extended.

Therefore, the Company will recognize the right-of-use asset and the lease liability on the commencement date in January 2025.

Total undiscounted lease payments over the lease term will be approximately $ 1.9 million.

The Company maintains letters of credit representing security deposits on its leases in the amount of $ 1.1 million as of December 31, 2024 and 2023.

The letters of credit were reflected in restricted cash, non-current in the consolidated balance sheets as of December 31, 2024 and in restricted cash, current and non-current in the consolidated balance sheets as of December 31, 2023.

The Company determined that, for accounting purposes, the commencement date of the lease is in January 2025 and the lease term ends in December 2026, as it was not reasonably certain that the lease would be extended.

As of the commencement date, future lease payments totaled $ 1.9 million and the lease liability was calculated to be $ 1.8 million, which is equal to the present value of the future lease payments, discounted at an incremental borrowing rate of 7.9 %.

Upon the closing of the ACELYRIN Merger, the Company became the successor to ACELYRIN’s rights under ACELYRIN’s lease and sublease agreements.

In January 2023, ACELYRIN entered into a lease agreement to rent approximately 10,012 square feet of office space in Southern California.

The term of the lease is 65 months with an option to extend it for an additional three years .

Monthly rent payments are approximately $ 30,500 , subject to an annual 3.0 % increase.

In addition to the base rent, the Company is obligated to pay variable costs related to its share of operating expenses and taxes.

In December 2025, the Company entered into an agreement to sublease the entirety of its Southern California leased space through August 24, 2028, the remainder of the lease term.

The sublease included the operating lease right-of-use asset and certain property, plant and equipment.

Sublease income was immaterial for the year ended

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025.

In July 2023, ACELYRIN entered into a lease agreement to rent approximately 22,365 square feet of office space in South San Francisco, California.

The term of the lease is 60 months with an option to extend it for an additional five years .

Monthly base rent payments are approximately $ 150,000 , subject to an annual 3.5 % increase.

In February 2025, ACELYRIN entered into an agreement to sublease the entirety of its South San Francisco leased space through October 2029, the remainder of the lease term.

The sublease included the operating lease right-of-use asset and certain property, plant and equipment.

Sublease income was immaterial for the year ended December 31, 2025.

The components of lease costs were as follows (in thousands):

13 unchanged sentences

Total operating lease liabilities

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FronThera Contingent Consideration

In March 2021, the Company entered into a stock purchase agreement to acquire FronThera U.S.

Holdings, Inc.

and its wholly owned subsidiary, FronThera U.S.

Pharmaceuticals LLC., and the transaction was accounted for as an asset acquisition.

Under the stock purchase agreement, the Company is obligated to pay contingent consideration of up to an aggregate of $ 120.0 million based on the achievement of specified clinical and approval milestones, of up to an aggregate of $ 70.0 million payable for clinical milestones, and of up to an aggregate of $ 50.0 million payable for approval milestones, all related to technology acquired under the agreement.

In the year ended December 31, 2022, the Company incurred and made a $ 37.0 million milestone payment for the first administration of ESK-001 to a patient enrolled in a Phase 2 clinical trial of ESK-001, which was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss.

In July 2024, the Company met a milestone in connection with the first administration of ESK-001 to a patient enrolled in a Phase 3 clinical trial of ESK-001 and made a $ 23.0 million milestone payment in August 2024, which was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

In March 2021, the Company entered into the FronThera Acquisition, and the transaction was accounted for as an asset acquisition.

Under the stock purchase agreement, the Company is obligated to pay contingent consideration of up to an aggregate of $ 120.0 million based on the achievement of specified clinical and approval milestones, including receipt of first commercialization approval in the United States or certain other jurisdictions, of up to an aggregate of $ 70.0 million payable for clinical milestones, and of up to an aggregate of $ 50.0 million payable for approval milestones, all related to technology acquired under the agreement.

In the year ended December 31, 2022, the Company incurred and made a $ 37.0 million milestone payment for the first administration of envu to a patient enrolled in a Phase 2 clinical trial of envu, which

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss.

In July 2024, the Company met a milestone in connection with the first administration of envu to a patient enrolled in a Phase 3 clinical trial of envu and made a $ 23.0 million milestone payment in August 2024, which was recorded in research and development expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

No other milestones were achieved or were probable of being achieved as December 31, 2025.

Research and Development Agreements

License and Commercialization Agreement with Pierre Fabre

Upon the closing of the ACELYRIN Merger, the Company became the successor to ACELYRIN’s rights under the March 25, 2021 license and commercialization agreement with Pierre Fabre Medicament SAS (“Pierre Fabre”), as amended (the “Pierre Fabre Agreement”), through which ACELYRIN received certain exclusive worldwide licenses with the right to sublicense certain patents, know-how and other intellectual property to develop, manufacture, use and commercialize lonigutamab for non-oncology therapeutic indications.

The license from Pierre Fabre extends to any product containing lonigutamab (excluding any fragments or derivatives) as its sole active ingredient (each, a “PF Licensed Product”).

The Pierre Fabre Agreement prohibits the Company from using the licensed intellectual property in any antibody drug conjugate, multi-specific antibodies or any other derivatives of lonigutamab.

The Company is obligated to (i) make payments of up to $ 100.5 million upon the achievement of various development and regulatory milestones, (ii) make milestone payments of up to $ 390.0 million upon the achievement of certain commercial milestones, and (iii) pay tiered royalties in the high single-digit to low-teen percentages to Pierre Fabre on worldwide net sales in a given calendar year.

Royalties will be payable for each PF Licensed Product in a given country during a period commencing upon the first commercial sale of such PF Licensed Product in such country and continuing until the latest of (a) 10 years after such first commercial sale, (b) expiration of last-to-expire valid claim in a licensed patent in such country and (c) expiration of regulatory exclusivity for such PF Licensed Product in such country.

In the event the Company enters into a sublicense with a third party, the Company must also share with Pierre Fabre a percentage of any revenues from option fees, upfront payments, license maintenance fees, milestone payments or the like generated from the sublicense.

Such percentage may be between the high single-digits to the low thirties based on which stage of development of a PF Licensed Product the sublicense relates to.

Unless earlier terminated, the Pierre Fabre Agreement will continue on a PF Licensed Product-by-PF Licensed Product and country-by-country basis until there are no more royalty payments owed to Pierre Fabre on any PF Licensed Product thereunder.

Either party may terminate the Pierre Fabre Agreement upon an uncured material breach, or upon the bankruptcy or insolvency of the other party.

Pierre Fabre may also terminate the agreement if the Company or any of its affiliates institutes a patent challenge against the licensed patents from Pierre Fabre.

The Company may also terminate the Pierre Fabre Agreement with or without cause upon nine months ’ prior written notice, so long as there is no ongoing clinical trial for any PF Licensed Product.

As of December 31, 2025, no milestones were probable and accrued in the consolidated balance sheets.

Purchase Commitments

The Company enters into various agreements in the ordinary course of business, such as those with suppliers, CROs , CMOs and clinical trial sites.

These agreements provide for termination at the request of either party, generally with less than one-year notice and are, therefore, cancellable contracts and, if cancelled, are not anticipated to have a material effect on the Company’s financial condition, results of operations, or cash flows.

Upon the closing of the ACELYRIN Merger, the Company became the successor to contracts with non-cancellable commitments under ACELYRIN contracts.

The total value of non-cancellable purchase commitments under contracts was $ 1.6 million as of December 31, 2025.

This presentation of non-cancellable purchase commitments does not include any estimates of potential reduction of such liabilities related to mitigation obligations of the counterparties in the event of cancellation under the terms of its engagements.

Legal Contingencies

From time to time, the Company may become involved in legal proceedings arising from the ordinary course of business.

From time to time, the Company has and may become involved in legal proceedings arising in the ordinary course of business, any or all of which could have a material adverse impact on the Company, including its financial position.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outcomes of legal proceedings are not within the Company’s complete control and may not be known for prolonged periods of time.

The Company records a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated.

Significant judgment by the Company is required to determine both probability and the estimated amount.

Management is currently not aware of any legal matters that could have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Legal costs related to these matters, including attorney fees, are expensed as incurred and are recorded as general and administrative expenses in the consolidated statements of operations and comprehensive loss.

On November 15, 2023, a purported federal securities class action lawsuit was commenced in the United States District Court for the Central District of California.

On February 15, 2024, the Court appointed joint lead plaintiffs and lead counsel.

An amended complaint was filed on March 26, 2024 (Boukadoum v.

Acelyrin, Inc.

2:23-cv-09672-FMO-MAA), naming ACELYRIN and then-current and former executive officers and directors as defendants.

The complaint alleges that the defendants violated the Exchange Act and Securities Act by misleading investors about the Phase 2b trial of izokibep in hidradenitis suppurativa.

The original complaint was filed following ACELYRIN’s announcement of the week 16 results from the Part B portion of such Phase 2b trial.

The amended complaint seeks damages and an award of reasonable costs and expenses, including attorneys’ fees, expert fees and other costs, as well as such other and further relief as the court may deem just and proper.

On May 3, 2024, the defendants filed their motion to dismiss the amended complaint, which was granted by the court, with leave to amend, in January 2026.

On February 5, 2026, the plaintiffs filed a second amended complaint, which seeks damages and an award of reasonable costs and expenses, as well as such other and further relief as the court may deem just and proper.

On February 19, 2026, the defendants filed their motion to dismiss the second amended complaint, which remains pending.

It is possible that additional suits will be filed, or allegations made by stockholders, with respect to these same or other matters and also naming the Company and/or its officers and directors as defendants.

This lawsuit and any other potential lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors.

The outcome of this lawsuit is necessarily uncertain.

The Company could be forced to expend significant resources in the defense against this and any other related lawsuits and the Company may not prevail.

The Company currently is not able to estimate the possible loss to the Company from this lawsuit, as this lawsuit is currently at an early stage, and such amounts could be material to the Company’s financial statements even if the Company prevails in the defense against this lawsuit.

The Company cannot be certain how long it may take to resolve this lawsuit or the possible amount of any damages that the Company may be required to pay.

As of December 31, 2025, the Company did not consider any payment to be probable or reasonably estimable and had not accrued for any potential liability relating to this lawsuit.

Guarantees and Indemnifications

5 unchanged sentences

Redeemable Convertible Preferred Stock

In May 2023, the Company issued and sold an aggregate of 10,722,340 shares of Series B-2 redeemable convertible preferred stock for gross proceeds of $ 53.6 million and 1,277,660 shares of Series B-2A redeemable convertible preferred stock for gross proceeds of $ 6.4 million and incurred $ 0.2 million of offering costs.

The purchase price for Series B-2 and B-2A redeemable convertible preferred stock was $ 5.00 per share.

The Series B-2 and Series B-2A stock purchase agreement contained an obligation to issue additional shares of Series B-2 or Series B-2A redeemable convertible preferred stock in a second tranche closing by October 2023 (the “Second Tranche Series B-2 Closing”) upon the occurrence of certain events, including the board of directors’ consent.

The Company recognized this call option as a derivative liability and estimated its fair value of $ 2.1 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In July 2023, the holders of the shares of Series B-2A redeemable convertible preferred stock elected to convert their 1,277,660 shares into the same number of Series B-2 redeemable convertible preferred stock.

In October 2023, the Company closed the Second Tranche Series B-2 Closing and issued an additional 4,221,170 shares of Series B-2 redeemable convertible preferred stock and 1,778,830 shares of Series B-2A redeemable convertible preferred stock at a price of $ 5.00 per share and received gross proceeds of $ 21.1 million and $ 8.9 million, respectively.

Accordingly, the derivative liability was settled, and the Company reclassified the derivative liability, remeasured at fair value of $ 2.2 million, into redeemable convertible preferred stock.

The Company incurred less than $ 0.1 million of offering costs in connection with the Second Tranche Series B-2 Closing.

In March 2024, the Company issued and sold an aggregate of 41,264,891 shares of Series C redeemable convertible preferred stock for gross proceeds of $ 129.5 million and incurred $ 0.4 million of offering costs.

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Under the Series C stock purchase agreement, any time prior to the earliest of (i) December 31, 2024, (ii) the execution of a letter of intent for the sale of the Company, or (iii) the closing date of the Company’s IPO, at the discretion of the Company’s board of directors, the Company was obligated to sell and each Series C purchaser was obligated to purchase additional shares of Series C redeemable convertible preferred stock with the amount equal to the purchaser’s aggregate purchase price in the first tranche Series C closing less any previous payments by the purchaser as part of the Put Right (as defined below) exercise.

If the purchaser did not purchase its full share in the second tranche closing (the “Second Tranche Series C Closing”), all of its existing shares of Series C redeemable convertible stock and Series C-1 redeemable convertible preferred stock were convertible into voting common stock at a 10 -to-1 basis.

If the purchaser did not purchase its full share in the second tranche closing (the “Second Tranche Series C Closing”), all of its existing

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

shares of Series C redeemable convertible stock and Series C-1 redeemable convertible preferred stock were convertible into voting common stock at a 10 -to-1 basis.

Additionally, a purchaser had a right to purchase shares of Series C-1 redeemable convertible preferred stock at a purchase price of $ 4.00 per share beginning from the earlier of (a) September 4, 2024 or (b) the date of a significant partnering or collaboration agreement and expiring upon the earlier of (a) December 31, 2024, (b) the public filing of a registration statement on Form S-1 for the IPO, (c) the Second Tranche Series C Closing and (d) the execution of a letter of intent for the sale of the Company (the “Put Right”).

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Accordingly, the derivative liabilities were settled, and the Company reclassified the derivative liabilities, remeasured at fair value of $ 14.3 million, into redeemable convertible preferred stock.

Immediately prior to the closing of the Company’s IPO on July 1, 2024, all outstanding shares of the Company’s redeemable convertible preferred stock were converted and then redesignated into voting and non-voting common stock (see Note 1) and are no longer outstanding.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s redeemable convertible preferred stock as of December 31, 2023, consisted of the following:

December 31, 2023

Shares Issued

(in thousands, except share amounts)

Series Seed redeemable convertible preferred stock

Series A redeemable convertible preferred stock

Series B redeemable convertible preferred stock

Series B-1 redeemable convertible preferred stock

Series B-2 redeemable convertible preferred stock

Series B-2A redeemable convertible preferred stock

Total redeemable convertible preferred stock

Stockholders’ Equity (Deficit)

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In June 2024, the Company’s board of directors approved the amended and restated certificate of incorporation, which was filed upon the closing of the IPO and which authorized the Company to issue up to 50,000,000 shares of preferred stock, with a par value of $ 0.0001 per share, and 492,815,092 shares of voting common stock and 7,184,908 shares of non-voting common stock, both with par values of $ 0.0001 per share.

Immediately prior to the closing of the IPO on July 1, 2024, all of the shares of the Company’s redeemable convertible preferred stock then outstanding converted 28,855,656 shares of Class A common stock and 7,184,908 shares of Class B common stock at a 1 -for-4.675 conversion ratio.

Immediately prior to the closing of the IPO on July 1, 2024, all of the shares of the Company’s redeemable convertible preferred stock then outstanding converted to 28,855,656 shares of Class A common stock and 7,184,908 shares of Class B common stock at a 1 -for-4.675 conversion ratio.

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Common stock reserved for issuance, on an as-converted basis, consisted of the following as of December 31, 2025 and 2024:

Outstanding and issued stock options

Shares available for grant under 2024 Equity Incentive Plan

Shares available for grant under 2024 Employee Stock Purchase Plan

Shares available for grant under 2024 Performance Option Plan

Shares available for grant under 2021 Stock Plan

Redeemable convertible preferred stock issued and outstanding

Stock options issued and outstanding

RSUs issued and outstanding

Shares available for grant under the 2024 Equity Incentive Plan

Shares available for grant under the 2024 Employee Stock Purchase Plan

Shares available for grant under the ACELYRIN, Inc.

2023 Equity Incentive Plan

Shares available for grant under the 2024 Performance Option Plan

Common Stock Issued to Executives

In February 2021, the Company issued 100,532 shares of restricted common stock to two executives at a purchase price of $ 0.94 per share.

The shares vest over a four-year period with a one-year cliff vesting.

The holders have voting and dividends rights.

The Company has the right to repurchase unvested shares of common stock at the price paid by the holder in the event of termination of the holder’s continuous status as a service provider.

The shares vested over a four-year period with a one-year cliff vesting.

While the shares were unvested, the holders had voting and dividends rights and the Company had the right to repurchase unvested shares of common stock at the price paid by the holder in the event of termination of the holder’s continuous status as a service provider.

The Company estimated the fair value of the restricted stock awards based on the fair value of common stock at the grant dates.

The expense is recognized ratably over the vesting terms.

The Company recognized $ 0.1 million of stock-based compensation expense related to restricted stock awards for each of the years ended December 31, 2024 and 2023.

In the year ended December 31, 2024, a holder’s continuous service terminated, and the Company repurchased the unvested shares.

The expense was recognized ratably over the vesting terms.

The Company recognized less than $ 0.1 million of stock-based compensation expense related to restricted stock awards for each of the years ended December 31, 2025 and 2024.

The following table summarizes the activity for the Company’s restricted common stock for the years ended December 31, 2025 and 2024:

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Unvested as of December 31, 2025

As of December 31, 2024, the remaining unamortized stock-based compensation expense was immaterial.

Stock-Based Compensation

2021 Stock Plan

In February 2021, the Company adopted its 2021 Stock Plan (the “2021 Plan”), which provided for stock awards to eligible employees, directors and consultants of the Company.

Awards issuable under the 2021 Plan included incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units (“RSUs”) and stock grants.

In February 2021, the Company adopted the 2021 Stock Plan (the “2021 Plan”), which provided for stock awards to eligible employees, directors and consultants of the Company.

Awards issuable under the 2021 Plan included incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), RSUs and stock grants.

Subsequent to the adoption of the 2024 Equity Incentive Plan (the “2024 EIP”) in June 2024, described below, no additional shares were available for issuance under the 2021 Plan, and any stock options granted under the 2021 Plan that were subsequently forfeited would be made available for issuance under the 2024 EIP.

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The shares of common stock granted upon early exercise that have not yet vested are subject to repurchase by the Company in the event of termination of the holder’s continuous status as a service provider, at the price paid by the holder.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Option Repricing

In March 2024, the Company’s board of directors approved the repricing of all outstanding options as of March 29, 2024, which had an exercise price exceeding $ 8.84 per share.

The exercise price of outstanding options with a weighted average exercise price of $ 10.23 for 4,603,443 common stock shares was reduced to the estimated common stock fair value of $ 8.84 per share at the date of the repricing.

The exercise price of outstanding options with a weighted average

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

exercise price of $ 10.23 for 4,603,443 common stock shares was reduced to the estimated common stock fair value of $ 8.84 per share at the date of the repricing.

The vesting terms and expiration dates remain unchanged from the original grant dates.

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In May 2024, the Company granted NSOs to employees to purchase 1,880,680 shares of common stock at an exercise price of $ 10.19 under the 2024 POP.

Options generally vest on the date when the Company meets certain common stock public market price specified targets after the end of the lock-up period, subject to continuous service through each respective vest date.

Options generally vest on the date when the Company meets certain common stock public market price specified targets after the end of the IPO lock-up period, subject to continuous service through each respective vest date.

The price targets are calculated based on the volume weighted average price per share over 30 consecutive trading dates, in accordance with the grant terms.

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The 2024 EIP also provides that the number of shares initially reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2025 through January 1, 2034, by an amount equal to 5 % of the outstanding number of shares of the Company’s common stock as of the last day of the immediately preceding fiscal year, or such lesser number of shares as determined by the board of directors prior to the applicable January 1.

Pursuant to this evergreen provision, the Company increased the number of shares reserved under the 2024 EIP by 2,720,366 on January 1, 2025.

No more than 43,888,017 shares of common stock may be issued upon the exercise of incentive stock options under the 2024 EIP.

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Stock option grants under the 2024 EIP generally vest over four years .

The grant date fair market value of all awards made under the 2024 EIP and all cash compensation paid by the Company to any non-employee director for services as a director in any fiscal year may not exceed $ 750,000 , or increased to $ 1,000,000 in the fiscal year of their initial service as a non-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

employee director.

The grant date fair market value of all awards made under the 2024 EIP and all cash compensation paid by the Company to any non-employee director for services as a director in any fiscal year may not exceed $ 750,000 , increased to $ 1,000,000 in the fiscal year of their initial service as a non-employee director.

The terms of the 2024 EIP do not permit option holders to exercise options before their options are vested.

2024 Employee Stock Purchase Plan

In June 2024, the Company’s board of directors adopted, and its stockholders approved, the 2024 Employee Stock Purchase Plan (the “2024 ESPP”), which became effective on June 28, 2024, upon execution of the underwriting agreement related to the Company’s IPO.

The Company reserved 650,000 shares of common stock for issuance under the 2024 ESPP.

The number of shares of common stock reserved for issuance under the 2024 ESPP will be automatically increased each year for ten calendar years beginning on January 1, 2025 through January 1, 2034, by the lesser of (i) 1 % of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (ii) 1,950,000 shares;

provided that before the date of any such increase, the board of directors may determine that such increase will be less than the amount in (i) and (ii) above.

The 2024 ESPP allows an eligible employee to purchase shares of common stock at an amount equal to 85 % of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or at each applicable purchase date during an offering period as established by the board of directors.

In December 2024, the Company’s board of directors approved the grant of purchase rights under an offering period beginning on January 24, 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACELYRIN Plans

Pursuant to the Merger Agreement, the Company assumed certain stock options, RSUs and performance RSUs outstanding under the ACELYRIN, Inc.

2020 Stock Option and Grant Plan, as amended (the “ACELYRIN 2020 Plan”), the ValenzaBio, Inc.

Stock Plan (the “ValenzaBio Plan”) and the ACELYRIN, Inc.

2023 Equity Incentive Plan (the “ACELYRIN 2023 Plan” and, together with the ACELYRIN 2020 Plan and the ValenzaBio Plan, the “ACELYRIN Plans”).

In connection with the closing of the ACELYRIN Merger, the Company also assumed the ACELYRIN 2023 Plan, which, as modified in connection with such assumption, permits equity awards to be issued to the extent permissible under applicable law and Nasdaq listing rules.

Stock options that were outstanding under the ACELYRIN Plans immediately prior to the Closing Date were assumed by the Company and converted into options to purchase the Company’s common stock.

RSUs that were outstanding and unvested immediately prior to the Closing Date were assumed by the Company and converted into the Company’s RSU awards.

Performance RSUs outstanding and unvested immediately prior to the Closing Date were converted into the Company’s RSU awards subject only to a service vesting condition.

Stock Option Activity

2021 Plan and 2024 EIP

The following table summarizes the Company’s stock option activity under the 2021 Plan and 2024 EIP for the years ended December 31, 2024 and 2023.

The table includes early exercised shares as part of stock options exercised.

The following table summarizes the Company’s stock option activity, excluding under the 2024 POP, for the year ended December 31, 2025 and includes early exercised shares as part of stock options exercised:

(in thousands)

Outstanding as of December 31, 2024

Stock options assumed in connection with the ACELYRIN Merger

Forfeited or expired

( 1,117,997 )

Outstanding, vested and expected to vest as of December 31, 2025

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Total exercisable shares of 10,844,789 as of December 31, 2025 included 1,975,031 unvested shares that were early exercisable under the 2021 Plan.

The total fair value of stock options vested during the years ended December 31, 2025 and 2024 was $ 27.0 million and $ 5.8 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Exercisable as of December 31, 2025

Valuation of Stock Options Granted Under the 2021 Plan and 2024 EIP

The weighted-average grant date fair value of stock options granted under the 2021 Plan and the 2024 EIP for the years ended December 31, 2024 and 2023 was $ 9.92 and $ 10.93 per stock option, respectively.

The total fair value of stock options vested for the years ended December 31, 2024 and 2023 was $ 5.8 million and $ 8.1 million, respectively.

The fair value of these stock options was estimated using the Black-Scholes option pricing model with the following assumptions:

Valuation of Stock Options Granted under Non-Performance Plans

The weighted-average grant date fair value of stock options granted for the years ended December 31, 2025 and 2024 was $ 3.86 and $ 9.92 per stock option, respectively.

The fair value of stock options granted for the years ended December 31, 2025 and 2024, was estimated using the Black-Scholes option pricing model with the following assumptions:

Year Ended December 31,

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Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future.

Consequently, an expected dividend yield of zero was used.

Common Stock Fair Value

Prior to the IPO, the fair market value of the Company’s common stock was determined by the board of directors with assistance from management and external valuation experts.

The approach to estimating the fair market value of common stock was consistent with the methods outlined in the Practice Aid.

Prior to May 2023, the Company utilized an Option Pricing Method (“OPM”) based analysis, primarily the OPM backsolve methodology, to determine the estimated fair value of the common stock.

Within the OPM framework, the backsolve method, for inferring the total equity value implied by a recent financing transaction or by an estimated equity value of the Company’s pipeline product candidates, involves the construction of an allocation model that takes into account the Company’s capital structure and the rights, preferences and privileges of each class of stock, then assumes reasonable inputs for the other OPM variables (expected time to liquidity, volatility, and risk-free rate).

The total equity value is then iterated in the model until the model output value for the equity class sold in a recent financing round equals the price paid in that round.

The OPM is generally utilized when specific future liquidity events are difficult to forecast (i.e., the enterprise has many choices and options available), and the enterprise’s value depends on how well it follows an uncharted path through the various possible opportunities and challenges.

In determining the estimated fair value of the common stock, the board of directors also considered the fact that the stockholders could not freely trade the common stock in the public markets.

Accordingly, the Company applied discounts to reflect the lack of marketability of its common stock based on the weighted-average expected time to liquidity.

The estimated fair value of the common stock at each grant date reflected a non-marketability discount partially based on the anticipated likelihood and timing of a future liquidity event.

For valuations performed between May 2024 and before June 27, 2024, the Company utilized a hybrid method that combined the Probability-Weighted Expected Return Method (“PWERM”), an accepted valuation method described in the Practice Aid, and the OPM.

The Company determined this was the most appropriate method for determining the fair value of its common stock based on the stage of development and other relevant factors.

The PWERM is a scenario-based analysis that estimates the value per share of common stock based on the probability-weighted present value of expected future equity values for the common stock, under various possible future liquidity event scenarios, considering the rights and preferences of each class of shares, discounted for a lack of marketability.

Under the hybrid method, an OPM was utilized to determine the fair value of the Company’s common stock in certain of the PWERM scenarios (capturing situations where its development path and future liquidity events were difficult to forecast), potential exit events were explicitly modeled in the other PWERM scenarios.

A discount for lack of marketability was applied to the value derived under each scenario to account for a lack of access to an active public market to estimate the common stock fair value.

The Company also considered the amount of time between the independent third-party valuation dates and the grant dates and performed an interpolation of the fair value between the two valuation dates to estimate common stock fair value at each grant date.

This determination includes an evaluation of whether the subsequent valuation indicated that any significant change in valuation had occurred between the previous valuation and the grant date.

The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment.

As a result, if the Company had used significantly different assumptions or estimates, the fair value of the common stock and the stock-based compensation expense could have been materially different.

Once a public trading market for the Company’s common stock was established in connection with its IPO, the fair value of the Company’s common stock was based on the IPO price per share and thereafter on its publicly traded common stock price at grant date, as listed on the Nasdaq Global Select Market under the ticker “ALMS.”

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The Company’s estimated fair value of stock options issued under the 2024 POP of $ 18.0 million is recognized using graded vesting from July 1, 2024, the closing of the IPO, when the performance condition was met, over the longer of (i) the explicit service period of the service condition of 36 months or (ii) the derived service period between 1.4 years to 2.1 years, as determined for each graded vesting tranche.

The Company recognized $ 5.7 million in stock-based compensation expense related to the 2024 POP for the year ended December 31, 2024.

Early Exercise of Employee Stock Options

Proceeds from the early exercise of stock options are recorded as share repurchase liability, and as shares vest are recognized to additional paid-in capital in the consolidated balance sheets.

As of December 31, 2024 and 2023, there was $ 0.8 million and $ 1.8 million share repurchase liability related to the unvested shares, respectively, included in share repurchase liability in the consolidated balance sheets.

The following table summarizes the activity for the Company’s early exercisable shares for the years ended December 31, 2024 and 2023:

As of December 31, 2025 and 2024, there was $ 0.1 million and $ 0.8 million share repurchase liability related to unvested shares, respectively, classified as share repurchase liability in the consolidated balance sheets.

The following table summarizes the activity for the Company’s early exercised shares for the years ended December 31, 2025 and 2024:

Exercise Price

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Unvested as of December 31, 2025

2024 Employee Stock Purchase Plan

In June 2024, the Company’s board of directors adopted, and its stockholders approved, the 2024 ESPP, which became effective on June 28, 2024, upon execution of the underwriting agreement related to the Company’s IPO.

The Company initially reserved 650,000 shares of common stock for issuance under the 2024 ESPP.

provided that before the date of any such increase, the board of directors may determine that such increase will be less than the amount in (i) and (ii) above.

Pursuant to this evergreen provision, the Company increased the number of shares reserved under the 2024 ESPP by 544,073 on January 1, 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

board of directors.

The first purchase period commenced on January 24, 2025 and ended on May 20, 2025.

During the year ended December 31, 2025, 388,739 shares of common stock were purchased under the 2024 ESPP.

The following table summarizes the Black-Scholes option pricing model used in estimating the fair value of the stock purchase rights under the 2024 ESPP for the year ended December 31, 2025:

December 31, 2025

Expected term (in years)

67.54 % - 133.00 %

Risk-free interest rate

3.75 % - 4.33 %

Dividend yield

Restricted Stock Units

A summary of unvested RSU activity for the year ended December 31, 2025 is presented in the following table:

RSUs assumed in connection with the ACELYRIN Merger

RSUs released

( 1,201,282 )

RSUs forfeited

Unvested as of December 31, 2025

Stock-Based Compensation Expense

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Total stock-based compensation expense

Stock-based compensation expense included $ 9.0 million as general and administrative expenses and $ 4.1 million as research and development expenses for the year ended December 31, 2025, related to accelerated vesting and exercise term modification for severed employees in connection with the ACELYRIN Merger.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Total stock-based compensation expense

Stock-based compensation expense related to non-employee awards was $ 0.3 million for the years ended December 31, 2024 and 2023.

As of December 31, 2024, there was unrecognized stock-based compensation expense of $ 54.4 million related to unvested stock options which the Company expects to recognize over a remaining weighted-average period of 2.5 years.

Stock-based compensation expense related to non-employee awards was $ 0.8 million and $ 0.3 million for the years ended December 31, 2025 and 2024, respectively.

The Company recognized $ 7.4 million and $ 5.7 million in stock-based compensation expense related to the 2024 POP for the years ended December 31, 2025 and 2024.

As of December 31, 2025, there was unrecognized stock-based compensation expense of $ 60.0 million related to unvested stock options and RSUs which the Company expects to recognize over a remaining weighted-average period of 2.58 years.

Employee Benefit Plans

The Company sponsors a qualified 401(k) defined contribution plan covering eligible employees.

Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service.

There were no employer contributions under this plan for the years ended December 31, 2025 and 2024.

In November 2025, the Company’s board of directors approved a Company match of 100 % of participating employees’ deferral contribution up to 3 % of eligible compensation and a 50 % match of participating employees’ deferral contribution from 3 % to 5 % of eligible compensation, effective from January 1, 2026.

Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2024 and 2023 (in thousands, except share and per share amounts):

The following table presents the computation of the basic and diluted net loss per share attributable to common stockholders for the years ended December 31, 2025 and 2024 (in thousands, except share and per share amounts):

Year Ended December 31,

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Net loss per share attributable to common stockholders, basic and diluted

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following outstanding potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis):

December 31, 2024

December 31, 2023

Stock options issued and outstanding

Unvested restricted common stock and early exercised stock options

Redeemable convertible preferred stock issued and outstanding

No provision for income taxes was recorded for the years ended December 31, 2024 and 2023, as the Company operated with taxable losses.

The Company has incurred net operating losses only in the United States since inception.

RSUs issued and outstanding

Common stock issuable under the 2024 ESPP

Early exercised stock options and unvested restricted common stock

Net loss before provision for income taxes distributed geographically was as follows for the years ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31,

The provision for income taxes was as follows for the years ended December 31, 2025 and 2024 (in thousands):

Year Ended December 31,

State and local

Total Current

State and local

Total Deferred

Total income tax provision (benefit)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The differences between the effective income tax rate and the U.S.

federal statutory income tax rate for the years ended December 31, 2024 and 2023 were as follows (in thousands):

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

federal income tax rate to net loss before income taxes after the adoption of ASU 2023-09 is as follows (in thousands):

Year Ended December 31, 2025

Net loss before income taxes

federal statutory tax rate

State and local income taxes, net of federal effect (1)

Research and development credits

Changes in valuation allowance

Nontaxable or nondeductible items

Nondeductible officer's compensation

Gain on bargain purchase

Stock-based compensation

Transaction costs

(1) The state and local tax effect in this category is not material to the consolidated financial statements.

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

federal income tax rate to net loss before income taxes for the year ended December 31 2024, prior to the adoption of ASU 2023-09, is as follows (in thousands):

Year Ended December 31,

Amount at statutory tax rates

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Federal research and development credit

Significant components of the deferred tax asset balances as of December 31, 2024 and 2023 were as follows (in thousands):

The Company recognized a benefit from income taxes of $ 8.6 million for the year ended December 31, 2025.

The income tax benefit is primarily related to the realization of deferred tax assets and valuation allowance release as a result of the ACELYRIN Merger.

No provision for income taxes was recorded for the year ended December 31, 2024, as the Company operated with taxable losses.

The Company has only incurred net operating losses in the United States since inception.

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the United States.

The OBBBA includes significant provisions, including, but not limited to, modifications of capitalization of research and development expenses and accelerated fixed asset depreciation.

The adoption of the OBBBA did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2025.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant components of the deferred tax assets (liabilities) balances as of December 31, 2025 and 2024 were as follows (in thousands):

Deferred tax assets:

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Research and development capitalization

Fixed assets and intangibles

Accruals and reserves

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Deferred tax liabilities:

Fixed assets and intangibles

Operating lease right-of-use assets

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Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

The Company believes that, based on a number of factors such as the history of operating losses, it is more likely than not that the deferred tax assets will not be fully realized, such that a full valuation allowance has been recorded.

The valuation allowance increased by $ 66.6 million and by $ 35.4 million for the years ended December 31, 2024 and 2023, respectively, primarily due to the net operating losses carryforwards and research and development credits.

The following table sets forth the Company’s U.S.

The valuation allowance increased by $ 165.0 million and by $ 66.6 million for the years ended December 31, 2025 and 2024, respectively, primarily due to capitalized research and development expenditures and net operating losses carryforwards.

The following table presents the Company’s U.S.

federal and state net operating loss carryforwards and tax credits as of December 31, 2025 (in thousands):

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Tax credits, U.S.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Utilization of some of the U.S.

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The annual limitation may result in the expiration of net operating losses and credits before utilization.

As of December 31, 2024, the Company has completed an Internal Revenue Code section 382 analysis which did not result in any expiration of U.S.

federal net operating losses and credits before utilization.

As the Company has recorded a full valuation allowance, any potential limitation is not expected to have a material impact to the consolidated financial statements.

As of December 31, 2025, the Company has completed an Internal Revenue Code Section 382 analysis which resulted in the expiration of U.S.

federal net credits before utilization and, as such, has recognized a reduction of deferred tax assets.

As the Company has recognized a valuation allowance, any potential limitation is not expected to have a material impact to the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Uncertain Tax Positions

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The Company has elected to include interest and penalties as a component of other income (expense), net.

For the years ended December 31, 2024 and 2023, the Company did no t recognize accrued interest and penalties related to unrecognized tax benefits.

The Company does no t anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.

For the years ended December 31, 2025 and 2024, the Company did no t recognize any accrued interest and penalties related to unrecognized tax benefits.

As of December 31, 2025, the Company is not under audit by the Internal Revenue Service or any state authority for income taxes for any open years.

Due to the Company’s net operating loss carryforwards, the Company’s domestic income tax returns are open to examination by the Internal Revenue Service beginning with tax year 2017 and by state taxing authorities beginning with tax year 2021.

Employee Benefit Plans

The Company sponsors a qualified 401(k) defined contribution plan covering eligible employees.

Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service.

There were no employer contributions under this plan for the years ended December 31, 2024 and 2023.

Income Taxes Paid Disclosure (under ASU 2023-09)

The amounts of cash income taxes paid by the Company for the years ended December 31, 2025 and 2024 were immaterial.

Segment Reporting

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Year Ended December 31,

License revenue

Collaboration revenue

Total revenue

Operating expenses:

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Milestones related to previously acquired IPR&D assets

CRO, CMO and clinical trials

CROs, CMOs and clinical trials

Professional consulting services

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Total other income (expense), net

Consolidated net loss

Net loss before income taxes

Income tax benefit

Subsequent Events

Merger Agreement

On February 6, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ACELYRIN, Inc., a Delaware corporation (“ACELYRIN”), and Arrow Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Merger Sub”).

Under the terms of the Merger Agreement, Merger Sub will merge with and into ACELYRIN, with ACELYRIN continuing as a direct wholly owned subsidiary of the Company (the “Merger”).

The Merger Agreement was approved by the disinterested directors on the Company’s board of directors and the board of directors of ACELYRIN and is subject to stockholder approval by the stockholders of each company and satisfaction or waiver of other closing conditions.

In connection with the Merger, all of the issued and outstanding shares of common stock of ACELYRIN, par value $ 0.00001 per share (the “ACELYRIN Shares”), will be cancelled and converted into the right to receive 0.4274 shares of the Company’s voting common stock, without interest (the number of shares of the Company’s common stock in exchange for each ACELYRIN Share, the “Exchange Ratio”) and, if applicable, cash in lieu of fractional shares, subject to any applicable withholding.

Consummation of the Merger is subject to certain closing conditions, including the absence of any law or judgment that restrains, enjoins or otherwise prohibits consummation of the Merger, the effectiveness of a registration statement on Form S-4 to be filed with the SEC by the Company, adoption of the Merger Agreement by the holders of a majority of the outstanding ACELYRIN Shares at ACELYRIN’s stockholders’ meeting, and approval of the share issuance by the holders of a majority of votes of the Company’s common stock cast at the Company’s stockholders’ meeting.

The Merger Agreement contains certain termination rights for both the Company and ACELYRIN, including the right of either party to terminate the Merger Agreement if the transactions have not been consummated prior to July 7, 2025.

The Company or ACELYRIN will pay a termination fee of $ 10.0 million or $ 10.0 million, respectively, under certain circumstances, including termination to accept and enter into a definitive agreement with respect to a superior proposal.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Immediately following the Merger, the Company’s pre-Merger equityholders are expected to collectively own approximately 55 % of the shares of the combined company and the pre-Merger equityholders of ACELYRIN as of immediately prior to the Merger are expected to collectively own approximately 45 % of the combined company, in each case, calculated on a fully diluted basis as of January 31, 2025.

On March 18, 2026, the Company entered into a Controlled Equity Offering SM Sales Agreement (the “Sales Agreement”) with Cantor as sales agent, pursuant to which the Company may offer and sell, from time to time through Cantor, at its option, shares of its common stock having an aggregate offering price of up to $ 300.0 million (the “ATM Shares”).

The sales of the ATM Shares will be made by any method permitted that is deemed to be an “at-the-market” equity offering as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through the Nasdaq Global Select Market.

The Company agreed to pay Cantor a commission of up to 3.0 % of the aggregate gross proceeds from any ATM Shares sold by Cantor.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data