Annexon, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and related notes thereto for the year ended December 31, 2024, included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission, or the SEC, on March 3, 2025. In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, based upon current expectations about us and our industry that involve substantial risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled “Risk Factors” under Part II, Item 1A below. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “position,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ from those anticipated. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements . Overview We are a biopharmaceutical company advancing a late-stage clinical platform of novel therapies for people living with devastating classical complement-mediated neuroinflammatory diseases. The classical complement pathway is a core component to the body’s immune system that activates a powerful inflammatory cascade. We believe that by stopping the classical complement pathway at its start by targeting C1q, the initiating molecule of the classical complement pathway, our approach may have the potential to provide more complete protection against complement-mediated disorders of the body, brain and eye. Using our proprietary platform, we are identifying and characterizing the role of the classical complement pathway in three therapeutic areas—autoimmune, neurodegeneration and ophthalmology. In so doing, we are advancing a pipeline of product candidates designed to block the early classical cascade and all downstream pathway components and their tissue-damaging functions. Our goal is to suppress excessive or aberrant classical complement activity that contributes to chronic inflammation and tissue damage to slow or even halt disease progression, while preserving the beneficial immune functions of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells. We have demonstrated robust target engagement in the body, brain and eye, and clinical proof of concept in multiple diseases, and have focused our resources on development of three priority programs: • Guillain-Barré Syndrome, or GBS: We are advancing tanruprubart (formerly ANX005), an investigational targeted immunotherapy delivered in a single infusion to rapidly halt aggressive neuroinflammation and damage in GBS, an acute, rare, neuromuscular emergency that affects ~150,000 people worldwide each year. There are currently no therapies approved by the U.S. Food and Drug Administration, or FDA, for GBS and no substantial evidence of effectiveness from the current standard of care. In the placebo-controlled Phase 3 trial, approximately 90% of GBS patients treated with tanruprubart improved by week 1 and more than twice as many treated patients achieved a normal state of health at week 26. Tanruprubart has consistently demonstrated rapid and sustained functional improvements across a comprehensive data package that includes successful placebo-controlled proof-of-concept, or POC, and Phase 3 data, Real-World Evidence, or RWE, indirect comparison data of tanruprubart’s treatment effect versus current standard of care, and drug-drug interaction safety data with tanruprubart with current standard of care. Completed placebo-controlled studies were conducted in Southeast Asia given GBS’ sudden and debilitating disease course and lack of approved comparator in the U.S. The open-label FORWARD study in the U.S. and Europe is ongoing and currently designed to broaden Western experience with tanruprubart by measuring pharmacokinetics, pharmacodynamics, early efficacy in week 1, and safety in up to 30 subjects including pediatric patients. We continue to engage with applicable EU and U.S. regulators to advance tanruprubart towards registration worldwide. Our Marketing Authorization Application, or MAA, submission for registration in Europe is expected in the first quarter of 2026. In parallel, we are in ongoing dialogue with the FDA to gain clarity on the generalizability package to support a BLA submission. Tanruprubart has been granted Fast Track and orphan drug designation for the treatment of GBS from the FDA. Tanruprubart has also been granted orphan designation from the European Medicines Agency, or EMA. 18 • Geographic Atrophy, or GA: We are advancing vonaprument (formerly ANX007), an investigational neuroprotective inhibitor of C1q and the classical complement cascade delivered intravitreally for dry AMD with GA, a leading cause of blindness affecting more than eight million people worldwide. There are no approved therapies for GA targeting the preservation of vision. Vonaprument is the only investigational therapy in GA to show significant vision preservation on assessments of best corrected visual acuity, or BCVA, and low luminance visual acuity, or LLVA, demonstrating significant protection from vision loss in both normal and low light conditions, as well as significant preservation of central retinal photoreceptors necessary for visual acuity as demonstrated in the Phase 2 ARCHER trial. In July 2025, we completed enrollment of 659 patients in ARCHER II, a global, sham-controlled, double-masked Phase 3 trial. The primary endpoint of ARCHER II is prevention of ≥15-letter loss of BCVA, and a secondary objective structural measure is prevention of ellipsoid zone, or EZ, loss. We have established a global registration path with the FDA and EMA which supports the potential of vonaprument to be the first treatment approved in both Europe and the U.S. for the protection of vision in patients who have dry AMD with GA, assuming positive Phase 3 results. We plan to report topline data in the second half of 2026. Vonaprument is the first and only therapeutic candidate for the treatment of GA to receive Priority Medicine, or PRIME, designation by the EMA, which provides early and proactive support to developers of promising medicines that may offer a major therapeutic advantage over existing treatments or benefit to patients without treatment options. Vonaprument was also selected by EMA for Product Development Coordinator (PDC) Pilot launched in July 2025 to help PRIME designation holders efficiently navigate regulatory interactions including expedited scientific advice, MAA submission readiness activities, and ad-hoc queries throughout the development program. • ANX1502 for Autoimmune Indications: We are advancing ANX1502, a novel oral small molecule inhibiting the activated form of C1s, an enzyme carried by C1q to initiate the classical cascade, which we believe is first-in-kind and has the potential to offer the advantages of selective upstream classical complement inhibition with the convenience and flexibility of oral administration. In a Phase 1 single-ascending dose, or SAD, and multiple-ascending dose, or MAD, clinical trial in healthy volunteers designed to evaluate the safety, tolerability, pharmacokinetics, or PK, and pharmacodynamics, or PD, ANX1502 was generally well tolerated across cohorts with no serious adverse events, achieved target levels of active drug and showed supportive impact on a PD biomarker of complement activity. We are evaluating a tablet formulation of ANX1502 in an ongoing POC study in patients with cold agglutinin disease, or CAD. Exposure exceeded target concentrations in fasted patients treated to date in the POC study, and evaluation of PK/PD in relation to food intake, and reduction in complement and bilirubin markers as a measure of hemolysis, are ongoing. We anticipate that PK/PD learnings from CAD patients will inform application of ANX1502 in a broad array of other autoimmune indications, and we plan to provide an update by the end of 2025. We were incorporated in March 2011 and commenced operations later that year. To date, we have focused primarily on performing research and development activities, hiring personnel and raising capital to support and expand these activities. We do not have any products approved for sale, and we have not generated any revenue from product sales. We have incurred net losses each year since our inception. Our net losses were $49.2 million and $29.6 million for the three months ended June 30, 2025 and 2024, respectively, and $103.5 million and $54.8 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $814.2 million and cash and cash equivalents and short-term investments of $227.0 million. Components of Operating Results Revenue Our product candidates are not approved for commercial sale. We have not generated any revenue from sales of our product candidates and do not expect to do so in the foreseeable future and until we complete clinical development, submit regulatory filings and receive approvals from applicable regulatory bodies for such product candidates, if ever. Operating Expenses Research and Development Research and development expenses account for a significant portion of our operating expenses. Research and development expenses consist primarily of direct and indirect costs incurred for the development of our product candidates. Direct expenses include: • preclinical and clinical outside service costs associated with discovery, preclinical and clinical testing of our product candidates; 19 • professional services agreements with third party contract organizations, investigative clinical trial sites and consultants that conduct research and development activities on our behalf; • contract manufacturing costs to produce clinical trial materials and commercial materials to support BLA package submission to the FDA; and • laboratory supplies and materials. Indirect expenses include: • compensation and personnel-related expenses (including stock-based compensation); • allocated expenses for facilities and depreciation; and • other indirect costs. We record research and development expenses as incurred. Payments made to other entities are under agreements that are generally cancelable by us. Advance payments for goods or services to be received in future periods for use in research and development activities are deferred as prepaid expenses. The prepaid amounts are then expensed as the related services are performed. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our future research and development expenses to increase as we pursue regulatory approval of our product candidates, continue to advance our product candidates through late-stage clinical trials, invest in capabilities to prepare for commercialization including manufacturing, and hire additional personnel to support our organization. The process of conducting the necessary clinical research, development and manufacturing to obtain regulatory approval is costly and time-consuming, and the successful development and approval of our product candidates is highly uncertain. General and Administrative General and administrative expenses consist primarily of compensation and personnel-related expenses (including stock-based compensation) for our personnel in executive, finance and other administrative functions. General and administrative expenses also include professional fees paid for accounting, legal and tax services, allocated expenses for facilities and depreciation and other general and administrative costs. We expect our general and administrative expenses to increase as we continue to support our research and development activities, grow our business, advance our product candidates in late-stage clinical trials and toward regulatory approval and commercialization activities, and operate as a public company. Interest and Other Income, Net Interest and other income, net, primarily consists of interest income earned on our cash equivalents and short-term investments. Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 The following tables summarize our results of operations for the periods presented: Three Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Operating expenses: Research and development $ 44,160 $ 25,026 $ 19,134 76 % General and administrative 7,566 8,554 (988 ) (12 %) Total operating expenses 51,726 33,580 18,146 54 % Loss from operations (51,726 ) (33,580 ) (18,146 ) 54 % Interest and other income, net 2,570 3,970 (1,400 ) (35 %) Net loss $ (49,156 ) $ (29,610 ) $ (19,546 ) 66 % 20 Research and Development Expenses Three Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Direct costs: Clinical and nonclinical outside services $ 16,519 $ 7,905 $ 8,614 109 % Contract manufacturing 6,896 2,970 3,926 132 % Consulting and professional services 6,925 3,835 3,090 81 % Laboratory supplies and materials 59 161 (102 ) (63 %) Indirect costs: Compensation and personnel-related (including stock-based compensation) 11,669 8,158 3,511 43 % Facilities and depreciation 1,869 1,770 99 6 % Other 223 227 (4 ) (2 %) Total research and development expenses $ 44,160 $ 25,026 $ 19,134 76 % Research and development expenses increased by $19.1 million, or 76%, for the three months ended June 30, 2025 compared to the same period in 2024. The change was attributable to $8.6 million in additional direct clinical and nonclinical outside services costs associated with the Phase 3 ARCHER II clinical trial and the initiation of the tanruprubart FORWARD study in GBS. Contract manufacturing expenses increased $3.9 million due to activities for tanruprubart (ANX005) supporting the preparation of the BLA submission, as well as the manufacturing technology transfer of vonaprument (ANX007) to a commercial-ready facility. In addition, compensation and personnel-related expenses increased by $3.5 million, driven by higher headcount. Consulting and professional services expenses increased by $3.1 million, primarily to support the preparation of our BLA submission for tanruprubart in GBS and to provide ongoing support for the ARCHER II clinical trial. General and Administrative Expenses Three Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Compensation and personnel-related (including stock-based compensation) $ 3,791 $ 4,324 $ (533 ) (12 %) Consulting and professional services 2,382 3,089 (707 ) (23 %) Facilities and depreciation 615 637 (22 ) (3 %) Other 778 504 274 54 % Total general and administrative expenses $ 7,566 $ 8,554 $ (988 ) (12 %) General and administrative expenses decreased by $1.0 million, or 12%, for the three months ended June 30, 2025 compared to the same period in 2024. The decrease was primarily driven by a $0.7 million reduction in consulting and professional services costs. Compensation and personnel-related expenses also declined by $0.5 million, mainly due to the full amortization of previously granted high fair value stock options, partially offset by higher headcount. Other expenses increased by $0.3 million due to cloud-based infrastructure costs. Interest and other income, net Interest and other income, net, decreased by $1.4 million, or 35%, for the three months ended June 30, 2025 compared to the same period in 2024. The decrease was primarily due to lower average cash and investment balances. 21 Comparison of the Six Months Ended June 30, 2025 and 2024 The following tables summarize our results of operations for the periods presented: Six Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Operating expenses: Research and development $ 92,339 $ 45,989 $ 46,350 101 % General and administrative 16,792 16,163 629 4 % Total operating expenses 109,131 62,152 46,979 76 % Loss from operations (109,131 ) (62,152 ) (46,979 ) 76 % Interest and other income, net 5,619 7,366 (1,747 ) (24 %) Net loss $ (103,512 ) $ (54,786 ) $ (48,726 ) 89 % Research and Development Expenses Six Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Direct costs: Clinical and nonclinical outside services $ 27,081 $ 14,611 $ 12,470 85 % Contract manufacturing 22,761 4,728 18,033 * Consulting and professional services 13,389 6,061 7,328 121 % Laboratory supplies and materials 381 318 63 20 % Indirect costs: Compensation and personnel-related (including stock-based compensation) 24,416 16,331 8,085 50 % Facilities and depreciation 3,853 3,457 396 11 % Other 458 483 (25 ) (5 %) Total research and development expenses $ 92,339 $ 45,989 $ 46,350 101 % __________________ *Greater than 200% change for the periods presented. Research and development expenses increased by $46.4 million, or 101%, for the six months ended June 30, 2025 compared to the same period in 2024. The change was attributable to a $18.0 million increase in contract manufacturing expenses related to the activities for tanruprubart (ANX005) supporting the preparation of the BLA submission, as well as the manufacturing technology transfer of vonaprument (ANX007) to a commercial-ready facility. There was also a $12.5 million increase in direct clinical and nonclinical outside services costs associated with the Phase 3 ARCHER II clinical trial and the initiation of the tanruprubart FORWARD study in GBS. Compensation and personnel-related expenses increased by $8.1 million, driven by higher headcount. In addition, consulting and professional services expenses increased by $7.3 million, primarily to support the preparation of our BLA submission for tanruprubart in GBS and to provide ongoing support for the ARCHER II clinical trial. 22 General and Administrative Expenses Six Months Ended June 30, 2025 2024 Dollar Change % Change (in thousands) Compensation and personnel-related (including stock-based compensation) $ 8,536 $ 8,285 $ 251 3 % Consulting and professional services 5,582 5,641 (59 ) (1 %) Facilities and depreciation 1,327 1,313 14 1 % Other 1,347 924 423 46 % Total general and administrative expenses $ 16,792 $ 16,163 $ 629 4 % General and administrative expenses increased by $0.6 million, or 4%, for the six months ended June 30, 2025 compared to the same period in 2024. The change was primarily driven by a $0.3 million increase in compensation and personnel-related expenses, mainly due a higher headcount, partially offset by the full amortization of previously granted high fair value stock options. Other expenses increased by $0.4 million due to cloud-based infrastructure costs. Interest and other income, net Interest and other income, net, decreased by $1.7 million, or 24%, for the six months ended June 30, 2025 compared to the same period in 2024. The decrease was primarily due to lower average cash and investment balances. Liquidity and Capital Resources Sources of Liquidity Due to our significant research and development expenditures, we have generated operating losses since our inception. We have funded our operations primarily through the sale of equity securities. As of June 30, 2025, we had available cash and cash equivalents and short-term investments of $227.0 million and an accumulated deficit of $814.2 million. Historical Cash Flows Six Months Ended June 30, 2025 2024 (in thousands) Net cash used in operating activities $ (88,126 ) $ (49,976 ) Net cash provided by (used in) investing activities 170,702 (173,883 ) Net cash provided by financing activities 212 156,064 Increase (decrease) in cash, cash equivalents and restricted cash $ 82,788 $ (67,795 ) Cash Flows from Operating Activities Cash used in operating activities for the six months ended June 30, 2025 was $88.1 million, which consisted of a net loss of $103.5 million, partially offset by $8.0 million in non-cash charges and a net change of $7.4 million in our operating assets and liabilities. The non-cash charges consisted of stock-based compensation of $9.3 million, depreciation and amortization of $1.1 million and a reduction in the carrying amount of right-of-use assets of $0.7 million, partially offset by accretion of discount on available-for-sale securities of $3.1 million. Cash used in operating activities for the six months ended June 30, 2024 was $50.0 million, which consisted of a net loss of $54.8 million and a net change of $3.6 million in our operating assets and liabilities, partially offset by $8.4 million in non-cash charges. The non-cash charges consisted of stock-based compensation of $9.6 million, depreciation and amortization of $1.1 million and a reduction in the carrying amount of right-of-use assets of $0.6 million, partially offset by accretion of discount on available-for-sale securities of $2.9 million. 23 Cash Flows from Investing Activities Cash provided by investing activities for the six months ended June 30, 2025 was $170.7 million, which consisted of $291.3 million of proceeds from maturities of available-for-sale securities, partially offset by $120.5 million of purchases of available-for-sale securities and $0.1 million of purchases of property and equipment. Cash used in investing activities for the six months ended June 30, 2024 was $173.9 million, which consisted of $266.2 million of purchases of available-for-sale securities, partially offset by $92.3 million of proceeds from maturities of available-for-sale securities. Cash Flows from Financing Activities Cash provided by financing activities for the six months ended June 30, 2025 was $0.2 million, which consisted of proceeds from the exercise of common stock options and employee stock purchase plans. Cash provided by financing activities for the six months ended June 30, 2024 was $156.1 million, which consisted of $116.8 million of net proceeds from the issuance of common stock and pre-funded warrants under our 2024 financing, $38.4 million of net proceeds from the issuance of common stock under our 2021 ATM program and $0.6 million of proceeds from the exercise of common stock options and employee stock purchase plans. Funding Requirements We use our cash to fund operations, primarily to fund our clinical trials, research and development expenditures and related personnel costs. We expect our future research and development expenses to increase as we pursue regulatory approval of our product candidates, continue to advance our product candidates through late-stage clinical trials, invest in capabilities to prepare for commercialization including manufacturing, and hire additional personnel to support our organization. In addition, we expect our general and administrative expenses to increase as we continue to support our research and development activities, grow our business, advance our product candidates in late-stage clinical trials and toward regulatory approval and commercialization activities, and operate as a public company. The timing and amount of our operating expenditures will depend on many factors, including: • the scope, progress, results and costs of researching and developing our current product candidates or any other future product candidates we choose to pursue, and conducting preclinical studies and clinical trials; • the timing of, and the costs involved in, obtaining feedback from regulators on our clinical trials and regulatory approvals for our lead product candidates or any future product candidates; • the number and characteristics of any additional product candidates we develop or acquire; • the timing and amount of any milestone, royalty and/or other payments we are required to make pursuant to our current or any future license or collaboration agreements; • the cost of manufacturing our lead product candidates or any future product candidates and any products we successfully commercialize; • the cost of building a sales force in anticipation of product commercialization; • the cost of commercialization activities of our product candidates, if approved for sale, including marketing, sales and distribution costs; • our ability to establish strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with operating as a public company; • the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and • the timing, receipt and amount of sales of any future approved products. Based upon our current operating plan, we believe that our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2026. We will require substantial 24 additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We will be required to seek additional funding in the future until such time, if ever, as we can generate substantial product revenue, and currently intend to do so through public or private equity offerings or debt financings, credit or loan facilities, collaborations or a combination of one or more of these funding sources. We may also need to seek additional funds sooner than planned as result of changes in our development plans and regulatory requirements to support registration of our product candidates. Additional funds may not be available to us on acceptable terms or at all. If we fail to obtain necessary capital when needed on acceptable terms, or at all, we could be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets. 2024 Financing In June 2024, we raised net proceeds of approximately $116.8 million after deducting underwriting discounts and offering expenses through the sale of 13,001,120 shares of our common stock, par value $0.001 per share at a price of $6.25 per share and pre-funded warrants to purchase an aggregate of 7,000,000 shares of common stock at a price of $6.249 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. 2023 Financing In December 2023, we raised net proceeds of approximately $117.0 million after deducting underwriting discounts and offering expenses through the sale of 25,035,000 shares of our common stock, par value $0.001 per share at a price of $2.880 per share and pre-funded warrants to purchase an aggregate of 18,379,861 shares of common stock at a price of $2.879 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each pre-funded warrant. We issued an aggregate of 5,243,400 and 965,427 shares of common stock upon cashless and cash exercise of these pre-funded warrants in February 2024 and April 2024, respectively. 2022 Financing In July 2022, we raised net proceeds of approximately $122.5 million after deducting fees and expenses through the sale of an aggregate of 9,013,834 shares of common stock, pre-funded warrants to purchase up to 24,696,206 shares of our common stock and accompanying common warrants to purchase up to 8,427,508 shares of our common stock. The offering price per share and accompanying common warrant was $3.87125 per share and the offering price per pre-funded warrant and accompanying common warrant was $3.87025 per share, which equals the per share offering price for the shares of common stock less the $0.001 exercise price for each such pre-funded warrant. The pre-funded warrants remain exercisable until exercised in full. The common warrants had an exercise price of $5.806875 per share and expired on June 30, 2025. Both the pre-funded and common warrants were immediately exercisable, subject to beneficial ownership limitations. We issued an aggregate of 2,582,557 shares of common stock upon the cashless exercise of the pre-funded warrants in March 2023. We issued an aggregate of 19,901 shares of common stock upon the cashless exercise of the 322,893 common warrants in June 2024. In June 2025, we and holders of common warrants to purchase 6,877,622 shares of our common stock entered into amendments to the common warrants held by such holders. The amendments extended the term of the common warrants by one year until June 30, 2026, and removed the cashless exercise option. If all such warrants are exercised in full for cash (without regard to any applicable ownership limitations), we would receive aggregate gross proceeds of approximately $39.9 million. The remaining common warrants to purchase 1,226,993 shares of our common stock not subject to these amendments expired unexercised on June 30, 2025. We concluded that the modified common warrants retain equity classification. The excess of fair value of the modified warrants over the fair value of the warrants immediately before the modification of $1.9 million was recognized as a deemed dividend. This modification included a related party transaction involving 613,497 common warrants held by a member of our board of directors, which accounted for $0.2 million of the deemed dividend recognized. As we had an accumulated deficit as of June 30, 2025, the deemed dividend was recognized in additional paid-in capital with zero net impact on stockholders' equity. Pre-Funded and Common Warrants The following summarizes warrant activity during the six months ended June 30, 2025 and 2024: 25 Number of Common Warrants Number of Pre-funded Warrants Weighted-Average Exercise Price Balances as of December 31, 2024 8,104,615 38,543,577 Issued — — $ — Exercised — — $ — Balances as of June 30, 2025 8,104,615 38,543,577 Number of Common Warrants Number of Pre-funded Warrants Weighted-Average Exercise Price Balances as of December 31, 2023 8,427,508 40,492,923 Issued — 7,000,000 $ 0.001 Exercised (322,893 ) (6,209,871 ) $ 0.307 Balances as of June 30, 2024 8,104,615 41,283,052 2024 At-the-Market (ATM) Program In March 2024, we entered into a sales agreement with Cowen and Company LLC, or TD Cowen, as sales agent, or 2024 ATM program, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering of $100.0 million. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2024 ATM program. No sales were made under the 2024 ATM program during the six months ended June 30, 2024 and 2025. As of June 30, 2025, approximately $95.4 million remained available for the offer and sale of shares of common stock under the 2024 ATM program. 2021 ATM Program In August 2021, we entered into a sales agreement with TD Cowen, as sales agent, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering of $100.0 million under an at-the-market offering program, or 2021 ATM program. TD Cowen is entitled to compensation up to 3% of the aggregate gross proceeds for the common stock sold through the 2021 ATM program. During the six months ended June 30, 2024, we sold 7,576,067 shares of common stock under the 2021 ATM program for net proceeds of approximately $38.4 million, after deducting commissions paid to TD Cowen and other financing costs. The Form S-3 registration statement, which registered the 2021 ATM Program, expired on August 15, 2024. As a result, no shares of common stock may be sold under the 2021 ATM Program. Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, expenses and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. During the quarter ended June 30, 2025, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024. Recent Accounting Pronouncements Not Yet Adopted See Note 2— Basis of Presentation and Significant Accounting Policies to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations. 26 Item 3. Quantitative and Qualitat ive Disclosures About Market Risk Not applicable.