AN2 Therapeutics, Inc. 10-K

Item 7 . Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition as of December 31, 2025 and results of operations for the years ended December 31, 2025 and 2024 should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K (“Form 10-K”.) This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Except as otherwise indicated herein or as the context otherwise requires, references in this Form 10-K to “AN2,” the “Company,” “we,” “us” and “our” refer to AN2 Therapeutics, Inc. This discussion and analysis and other parts of this Form 10-K contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives and expectations for our business. Our actual results and the timing of selected events could differ materially from those described in or implied by these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. See also the section titled “Special Note Regarding Forward-Looking Statements.” Overview We are a clinical stage biopharmaceutical company focused on the discovery and development of novel small molecule therapeutics derived from our boron chemistry platform. Our development pipeline spans hematologic diseases, infectious diseases, and oncology with three Phase 2 studies expected to initiate in 2026 and two preclinical candidates, as well as advanced research programs focused on targets in oncology, bone disorders, and infectious diseases. We are committed to delivering high-impact drugs to patients that address critical medical needs and improve health outcomes. Epetraborole - Polycythemia vera In March 2026, we announced our plan to expand the development of oral epetraborole into a Phase 2 proof-of-concept clinical study in adults with phlebotomy-dependent polycythemia vera (PV). PV is a blood cancer characterized by overproduction of red blood cells in the bone marrow. This overproduction increases hematocrit, which can lead to serious medical complications including arterial and venous thromboembolic events. If untreated, PV can be life-threatening. Despite available therapies, many patients experience uncontrolled hematocrit levels and persistent symptom burden, requiring long-term management to maintain adequate disease control. PV is estimated to affect approximately 155,000 people in the U.S. We are proceeding through the regulatory process and anticipate initiating a Phase 2 trial in India in the third quarter of 2026. We expect to provide periodic data readouts beginning as early as the fourth quarter of 2026 and throughout 2027, subject to regulatory clearance and enrollment progress. Epetraborole – M. abscessus Building on the microbiological and safety data from our prior NTM study, we believe that epetraborole has the potential to address a critical unmet need in M. abscessus lung disease, one of the most difficult to treat NTM infections for which no FDA-approved therapies exist. The Company is supporting the design of an investigator-initiated trial (“IIT”) and anticipates that data from this potential study, if positive, could provide the clinical evidence of human proof-of-concept in M. abscessus and inform the design of a subsequent pivotal trial. NTM lung disease represents a growing global health concern. It is estimated that approximately 120,000–150,000 people in the U.S. are living with NTM lung disease, of which 10–15% are caused by M. abscessus . In December 2025, the U.S. Food and Drug Administration (“FDA”) cleared an Investigational New Drug Application (“IND”) to proceed with a Phase 2 investigator-initiated study (“IIT”) in collaboration with Oregon Health and Sciences University (“OHSU”) evaluating epetraborole for the treatment of M. abscessus lung disease. This multicenter, randomized, double-blind, placebo-controlled, prospective clinical study will be led by Dr. Kevin Winthrop, Professor of Public Health and Infectious Diseases at OHSU, in conjunction with other investigators across an estimated 10-15 sites in the U.S. M. abscessus lung disease is a serious and difficult-to-treat non-tuberculous mycobacterial infection requiring prolonged therapy including with IV-only antibiotics, and characterized by limited treatment options and high rates of morbidity and 5-year mortality. No FDA-approved drugs currently exist for its treatment. We expect to initiate enrollment in the first quarter of 2026 and to report topline results in late 2027. 71 AN2-502998 - Chagas disease In August 2025, as part of our Chagas disease clinical development program, we commenced our Phase 1 first-in-human trial of oral AN2-502998 (formerly known as AN15368), an investigational, boron-based small molecule in development for the treatment of chronic Chagas disease and we anticipate Phase 1 data in the first quarter of 2026 and initiation of a Phase 2 proof-of-concept study in patients with chronic Chagas disease in 2026, depending on the outcome and timing of completion of the Phase 1 study. The Phase 1 study is evaluating the safety, tolerability, and pharmacokinetics of oral AN2-502998 for chronic Chagas disease, in healthy volunteers. In October 2023, we announced an exclusive license agreement with the University of Georgia Research Foundation to advance the development of AN2-502998, originally discovered by researchers at Anacor, in close collaboration with the University of Georgia. AN2-502998 is the only compound of which we are aware to have demonstrated curative activity in preclinical studies across multiple species, including in non-human primates with long-term, naturally acquired chronic infections caused by diverse T. cruzi genetic types. Because NHP infections are naturally acquired in the environment, these efficacy data may be more predictive of efficacy in human clinical trials than other animal models. There are no FDA approved treatments for adults with chronic Chagas disease. In July 2025, we announced a collaboration with the non-profit medical research organization Drugs for Neglected Diseases initiative (“DNDi”) to advance clinical development of AN2-502998. Through the collaboration, AN2 will leverage DNDi's extensive clinical trial network and expertise in Chagas disease to rapidly advance the clinical development of AN2-502998. Our research and development initiatives - Oncology We are pursuing a number of oncology targets where we believe boron chemistry offers a competitive advantage in terms of binding-site differentiation, pharmacodynamics, drug-like properties and IP, including initially ENPP1 and PI3K α . The unique binding modes of boron-containing compounds enable the discovery of inhibitors with high ligand efficiency against targets considered undruggable or difficult to access with traditional chemistry approaches. Boron chemistry has produced first-in-class molecules against a number of targets including CPSF3 (AN2-502998 and acoziborole) and LeuRS (epetraborole, ganfeborole and tavaborole). The Company has discovered preclinical compounds with profiles that are sub-nanomolar, highly selective and have excellent oral pharmacokinetics. We plan to advance two oncology candidates into development in 2026 targeting PI3Kα and ENPP1. Melioidosis We are also studying epetraborole for the treatment of acute melioidosis, a highly lethal bacterial infection and recognized biothreat. We completed enrollment in a 200-patient observational trial (non-epetraborole treatment) in October 2024 and in June 2025 announced key insights from the trial, which reinforce the high mortality of the disease, despite standard of care (SOC). This study provided critical data which will allow the Company to optimize the design of upcoming clinical studies. Discussions are underway with the U.S. government to fund Phase 2 development of epetraborole in acute melioidosis. Melioidosis has a 90-day mortality rate approaching 40%, despite SOC drugs, including ceftazidime or meropenem. The aim of the program is to meaningfully lower the expected mortality rate by dosing epetraborole on top of SOC. If approved for the treatment of melioidosis, we plan to seek a priority review voucher and could generate revenue from U.S. and other governmental stockpiling, as well as from the use of treatment in disease-endemic countries. Recent developments In August 2024, we announced a reduction of approximately 50% of our workforce, which was approved by the Board in connection with our restructuring following discontinuation of the EBO-301 Phase 2/3 study of epetraborole in treatment refractory MAC lung disease and to further extend our operating capital. In connection with the workforce reduction, we recognized severance and other charges of $2.2 million, primarily consisting of severance payments and other employee termination-related expenses. Future funding requirements We have incurred significant operating losses to date. We expect that our operating expenses will increase significantly as we advance our current and future product candidates through preclinical, nonclinical, and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate, and develop additional product candidates; obtain, maintain, protect and enforce our intellectual property portfolio; hire additional personnel; and incur costs associated with operating as a public company. 72 We do not have any products approved for sale and have not generated any revenue since inception. Our net losses were $35.2 million and $51.3 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of $241.0 million. We have funded our operations from the sale and issuance of redeemable convertible preferred stock and proceeds from our initial public offering (“IPO”), “at-the-market” equity offering program (“ATM Offering”) and an underwritten offering (the “Underwritten Offering”). From November 2019 through October 2020, we raised an aggregate of $12.0 million from the sale of Series A redeemable convertible preferred stock. In March 2021, we raised an aggregate of $80.0 million from the sale of Series B redeemable convertible preferred stock. In March and April 2022, we completed our IPO, with gross proceeds of $79.4 million and net proceeds of $70.4 million, net of underwriting discounts, commissions and offering expenses. In June 2023, we raised gross proceeds of $20.0 million from the ATM Offering and net proceeds of $19.1 million, after deducting commissions and offering expenses. In August 2023, we raised gross proceeds of $70.0 million from the Underwritten Offering and net proceeds of $65.5 million, after deducting commissions and offering expenses. In March 2026, we entered into a Securities Purchase Agreement with certain investors to sell through a private placement 8,245,611 shares of common stock at a price of $2.85 per share and pre-funded warrants to purchase up to 5,789,473 shares of common stock at a purchase price of $2.84999 per pre-funded warrant, resulting in aggregate gross proceeds of $40.0 million before deducting the placement agent’s fees and other offering expenses and excluding any proceeds we may receive upon exercise of the pre-funded warrants (the “Private Placement”). Financial Operations Overview As of December 31, 2025, we had cash, cash equivalents and investments of $60.0 million. We believe that our available cash will be sufficient to fund our planned operations through at least twelve months following the date of this Form 10‑K. Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates. Until such time as we can generate revenue from our product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, non-dilutive financing, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates. We plan to continue to use third-party service providers, including outside research laboratories, clinical research organizations (“CROs”), and contract manufacturing organizations (“CMOs”), to carry out our preclinical, nonclinical and clinical development, and to manufacture and supply the materials to be used during the development and commercialization of our product candidates. We do not currently have a sales force. If we obtain regulatory approval for any of our product candidates, we intend to hire and deploy a specialty sales force, which will increase our operating costs. Due to ongoing developments in our business and clinical development and regulatory efforts, among other factors, our results of operations may vary substantially from year to year and from quarter to quarter and, as a result, we believe that period to period comparisons of our operating results may not be meaningful and should not be relied upon as being indicative of our future performance. For more information on the risks and uncertainties associated with our business and our clinical development and regulatory efforts, among other factors, see “Part I Item 1A—Risk Factors.” Components of Our Operating Results Operating Expenses Research and Development Expenses Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees incurred under arrangements with third parties, including CROs, CMOs, preclinical and nonclinical testing organizations, and academic and non-profit institutions. Research and development expenses also include consulting fees, license fees, payroll and personnel-related expenses, including salaries and bonuses, payroll taxes, employee benefit costs and non-cash stock-based compensation for our research and development employees. We expense both internal and external research and development expenses as they are incurred. 73 We expect our research and development expenses to increase substantially in the future, as we advance our product candidates into and through clinical trials and pursue regulatory approval. The process of conducting the necessary clinical studies to obtain regulatory approval is costly and time-consuming. Clinical studies generally become larger and more costly to conduct as they advance into later stages and we are required to make estimates for expense accruals related to clinical study expenses, which involve a degree of estimation. The successful development of our product candidates is highly uncertain. The actual probability of success for our product candidates may be affected by a variety of risks and uncertainties associated with drug development, including those set forth in the section of this Form 10-K titled “Risk Factors.” At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of our current or any future product candidates. As a result of these uncertainties, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. General and Administrative Expenses Our general and administrative expenses consist primarily of payroll and personnel-related expenses, including salaries and bonuses, payroll taxes, employee benefit costs, and non-cash stock-based compensation. Other general and administrative expenses include legal costs of pursuing patent protection of our intellectual property, and professional service fees for auditing, tax, general legal services, and other external consulting and vendor services. We expect our general and administrative expenses to continue to increase in the future, including expenses related to legal, accounting, regulatory, and tax-related services associated with maintaining compliance with requirements of the Nasdaq Global Select Market and the Securities and Exchange Commission (“SEC”), directors and officers liability insurance premiums, and investor relations activities. Restructuring Charges Our restructuring charges consist primarily of employee severance payments and other employee termination-related expenses. Interest Income Interest income consists of interest income and investment income earned on our cash, cash equivalents, and investments. Other Income Other income consists of income associated with foreign currency fluctuations. Results of Operations Comparison of the Years Ended December 31, 2025 and 2024 The following table sets forth the significant components of our results of operations: Year Ended December 31, 2025 2024 Change % Change (in thousands, except percentages) Operating Expenses: Research and development $ 24,769 $ 40,488 $ (15,719 ) (39 %) General and administrative 13,340 14,066 (726 ) (5 %) Restructuring charges — 2,234 (2,234 ) (100 %) Total operating expenses 38,109 56,788 (18,679 ) (33 %) Loss from operations (38,109 ) (56,788 ) 18,679 (33 %) Interest income 2,934 5,466 (2,532 ) (46 %) Other income 1 1 — * Net loss $ (35,174 ) $ (51,321 ) $ 16,147 (31 %) *Change not meaningful 74 Research and Development Expenses Research and development expenses were $24.8 million for the year ended December 31, 2025 compared to $40.5 million for the year ended December 31, 2024. The decrease of $15.7 million was primarily due to decreases in clinical trial expenses, personnel-related expenses, consulting and outside services expenses, chemistry manufacturing and controls (“CMC”) expenses, and facilities and miscellaneous expenses, partially offset by increased preclinical and research study expenses and other expenses. Clinical trial expenses decreased by $12.8 million primarily due to the termination of the EBO-301 trial in August 2024, partially offset by the initiation of the Phase 1 trial in Chagas disease. Personnel-related expenses decreased by $4.3 million primarily due to our restructuring activities in 2024. Consulting and outside services expenses decreased by $2.3 million primarily due to reduced activities related to the clinical development of epetraborole in treatment-refractory NTM, completion of the melioidosis observational study, and the timing of non-dilutive contract offsets. CMC expenses decreased by $1.3 million due to decreases in expenses related to epetraborole development in treatment-refractory NTM and the timing of when receipt of research contract offsets became reasonably assured, partially offset by increased CMC activities for our Chagas program. Allocated facilities and miscellaneous expenses decreased by $0.1 million. These decreases were partially offset by increased preclinical and research study expenses of $5.0 million resulting from the prioritization and increased activities of certain research programs and increased other expenses of $0.1 million. During the years ended December 31, 2025 and 2024, reimbursement of $5.2 million and $3.7 million, respectively, of operating expenses was recognized related to our funding arrangements. The following table shows our research and development expenses by type of activity: Year Ended December 31, 2025 2024 Change % Change (in thousands, except percentages) Personnel-related expenses $ 8,971 $ 13,244 $ (4,273 ) (32 %) Preclinical and research study expenses 8,524 3,569 4,955 139 % Clinical trials expenses 2,783 15,626 (12,843 ) (82 %) Consulting and outside services 2,400 4,707 (2,307 ) (49 %) Chemistry manufacturing and controls 1,580 2,909 (1,329 ) (46 %) Other expenses 511 433 78 18 % Total research and development expenses $ 24,769 $ 40,488 $ (15,719 ) (39 %) General and Administrative Expenses General and administrative expenses were $13.3 million for the year ended December 31, 2025 compared to $14.1 million for the year ended December 31, 2024. The decrease of $0.8 million was primarily attributable to $0.6 million decrease in personnel-related expenses, primarily related to stock-based compensation expense, and a $0.3 million decrease in professional services expenses. These decreases were partially offset by a $0.1 million increase in facilities and miscellaneous expenses. Restructuring Charges There were no restructuring charges for the year ended December 31, 2025. Restructuring charges were $2.2 million for the year ended December 31, 2024, consisting of severance payments and other employee termination-related expenses. Interest Income Interest Income was $2.9 million for the year ended December 31, 2025 compared to $5.5 million for the year ended December 31, 2024. The decrease of $2.6 million was due to lower cash, cash equivalents and short and long-term investment balances and lower interest rates in 2025 as compared to 2024. 75 Liquidity and Capital Resources Sources of Liquidity We have incurred net losses since our inception. For the years ended December 31, 2025 and 2024, we had net losses of $35.2 million and $51.3 million, respectively, and we expect to incur substantial additional losses in future periods. As of December 31, 2025, we had an accumulated deficit of $241.0 million. As of December 31, 2025, we had cash, cash equivalents, short-term investments and long-term investments of $60.0 million. Based on our current business plan, we believe that our available cash will be sufficient to fund our planned operations for at least 12 months following the date of this Form 10-K. To date, we have funded our operations primarily through our Underwritten Offering, ATM Offering, IPO and private placements of our then existing redeemable convertible preferred stock. In March 2026, we generated aggregate gross proceeds from the Private Placement of $40.0 million before deducting the placement agent’s fees and other offering expenses. In August 2023, we generated approximately $65.5 million from the Underwritten Offering, after deducting commissions and offering expenses. In June 2023, we generated approximately $19.1 million in net proceeds from the ATM Offering, after deducting commissions and offering expenses. In March and April 2022, we generated aggregate net proceeds of approximately $70.4 million from our IPO, after deducting underwriting discounts and commissions and offering expenses. Prior to our IPO, we raised $91.6 million from the issuance of our redeemable convertible preferred stock. Upon the closing of our IPO, all outstanding shares of our then existing redeemable convertible preferred stock were converted into shares of our common stock. Future Funding Requirements We do not have any products approved for sale, and we have never generated any revenue from contracts with customers. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval for and commercialize any of our current and future product candidates and we do not know when, or if, those events will occur. Historically, we have incurred operating losses and negative cash flows as a result of ongoing efforts to develop our initial drug product candidate, epetraborole, including conducting ongoing preclinical and nonclinical studies, clinical trials, registration API and drug product materials manufacturing, and providing general and administrative support for these operations. We expect our negative cash flows to increase significantly over the next several years as we advance our product candidates through clinical development, seek regulatory approval, prepare for and, if approved, proceed to commercialization, and continue our research and development efforts. We are subject to all the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. Moreover, we expect to continue to incur costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations, as we do not expect positive cash flows from operations in the foreseeable future. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our future cash needs through public or private equity offerings or debt financings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our current or future product candidates. If we raise additional funds by issuing equity or convertible debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. 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. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us. Any of the foregoing could significantly harm our business, financial condition, results of operations, and prospects. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our operating capital requirements. Our future capital requirements depend on many factors, including: • the scope, timing, rate of progress, results and costs of our preclinical and nonclinical development activities and clinical trials for our current and future product candidates; 76 • the timing of, and the costs involved in, obtaining regulatory approvals for our drug product candidates; • the timing of enrollment of any future clinical trials; • the scope and costs of development and commercial manufacturing activities; • the number and characteristics of any additional product candidates we develop or acquire; • the cost of manufacturing our product candidates that we successfully commercialize; • the cost of building a specialty sales force in anticipation of product commercialization; • the cost of commercialization activities, including building a commercial infrastructure, marketing, sales, and distribution costs; • our ability to maintain existing, and establish new 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 securities class action, product liability or other lawsuits related to our products; • the expenses needed to attract, hire, and retain skilled personnel; • our implementation of operational, financial, and management systems; • the ongoing costs associated with being 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, if any. A change in the outcome of any of these or other variables with respect to the development of any of our current and future product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitation on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. Adequate funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies. If we are unable to raise additional funds when needed, we may be required to delay, reduce or terminate some or all of our development programs and clinical trials or we may also be required to terminate rights to future product candidates. If we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders, which could materially affect our business and financial condition. See the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for additional risks associated with our substantial capital requirements. Summary Statements of Cash Flows The following table sets forth a summary of the primary sources and uses of cash: Year Ended December 31, 2025 2024 (in thousands) Cash used in operating activities $ (29,834 ) $ (49,257 ) Cash provided by investing activities 28,311 54,589 Cash provided by financing activities 113 372 Net (decrease) increase in cash and cash equivalents $ (1,410 ) $ 5,704 77 Cash Used in Operating Activities Net cash used in operating activities was $29.8 million for the year ended December 31, 2025, which consisted of a net loss of $35.2 million, primarily due to the use of funds to develop our product candidates, and a net decrease of $0.2 million in our net operating assets and liabilities, partially offset by a net increase of $5.2 million in non-cash charges. The non-cash charges consisted of stock-based compensation expense of $6.2 million, partially offset by net accretion of discounts on investments of $1.0 million. The net decrease in our operating assets and liabilities was primarily due to a decrease of $1.5 million in prepaid expenses and other current assets and increases of $0.7 million in accrued compensation, $0.4 million in other current liabilities, and $0.2 million in other non-current liabilities, partially offset by increases of $2.4 million in accrued liabilities and $0.3 million in accounts payable. Net cash used in operating activities was $49.3 million for the year ended December 31, 2024, which consisted of a net loss of $51.3 million, primarily due to the use of funds to develop our product candidates, and a net decrease of $3.0 million in our net operating assets and liabilities offset by a net increase of $5.0 million in non-cash charges. The net decrease in our operating assets and liabilities was primarily due to a decrease of $4.5 million in accrued compensation and accrued liabilities due to a decrease in accrued research and development expenses, partially offset by an increase of $0.8 million in prepaid expenses and other current assets, an increase of $0.6 million in accounts payable and an increase of $0.1 million in other current liabilities. The non-cash charges consisted of stock-based compensation expense of $8.3 million, partially offset by net accretion of discounts on investments of $3.3 million. Cash Provided by Investing Activities Net cash provided by investing activities was $28.3 million for the year ended December 31, 2025, which primarily consisted of $74.5 million in proceeds from maturities of investments, partially offset by $46.2 million in purchases of investments. Net cash provided by investing activities was $54.6 million for the year ended December 31, 2024, which primarily consisted of $101.3 million in proceeds from maturities of investments, partially offset by $46.7 million in purchases of investments. Cash Provided by Financing Activities Net cash provided by financing activities was $0.1 million for the year ended December 31, 2025, which primarily consisted of net proceeds from the issuance of common stock under the ESPP and from the exercises of stock options. Net cash provided by financing activities was $0.4 million for the year ended December 31, 2024, which primarily consisted of net proceeds from the issuance of common stock under the ESPP and from the exercises of stock options. Contractual Obligations and Commitments In November 2019, we entered into an exclusive worldwide license agreement with Anacor for certain compounds and other intellectual property controlled by Anacor for the treatment, diagnosis, or prevention of disease. In exchange for the worldwide, sublicensable, exclusive right and licenses to develop, manufacture, and commercialize the specified compounds, we paid Anacor a $2.0 million upfront payment in November 2019 and issued Anacor shares of our Series A redeemable convertible preferred stock. We agreed to make further payments to Anacor upon achievement of various development milestones for an aggregate maximum payment of $2.0 million, various commercial and sales threshold milestones for an aggregate maximum payment of $125.0 million, and up to 50% of royalties received under certain sublicensing arrangements. Royalties are subject to certain customary reductions, including lack of patent coverage and generic product entry. We also agreed to pay Anacor sales royalties as a percentage of net sales ranging from single to mid-teens. We enter into contracts in the normal course of business with third-party contract organizations for preclinical and nonclinical studies and clinical trials, manufacture and supply of our preclinical, nonclinical, clinical trial, and other services and products used for operating purposes. These contracts generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. 78 Critical Accounting Policies, Significant Judgments, and Use of Estimates Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us 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 expenses incurred during the reporting periods. 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. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. While our significant accounting policies are described in more detail in Part I, Note 2—Basis of Presentation and Summary of Significant Accounting Policies to our financial statements appearing elsewhere in this Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements. Research and Development We have entered into various agreements with CMOs and CROs. We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our technology and include: internal research and development expense, including employee-related expenses (such as salaries, bonus, benefits and non-cash stock-based compensation expense); external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, CMOs, academic and non-profit institutions and consultants; license fees; and other expenses. Costs to develop our technologies are recorded as research and development expense as incurred. As part of the process of preparing financial statements, we are required to estimate and accrue expenses. We record the estimated expenses of research and development activities conducted by third-party service providers based upon the estimated level of services performed, progress of the studies, including the receipt of deliverables or completion of agreed-upon events, and contracted costs, within research and development expense in the statements of operations and comprehensive loss. These services include the conduct of clinical, nonclinical and preclinical studies, contract manufacturing activities and consulting services. Payments made to CMOs and CROs under these arrangements in advance of the performance of the related services are deferred and recognized as expense in the period in which the related goods are received or services are realized or utilized. If the costs have been prepaid, this expense reduces the prepaid expenses in the balance sheets, and if not yet invoiced, the costs are included in accrued liabilities in the balance sheets. These costs are a significant component of our research and development expenses. We record amortization of prepaid expenses or accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these third parties. Such payments are evaluated for current or long-term classification based on when they will be realized. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. To date, our estimated accruals have not differed materially from the actual costs. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. We make judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external CROs, CMOs and other third-party service providers. To date, we have not experienced material differences between our accrued expenses and actual expenses. 79 Indemnification Agreements We enter into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, we indemnify, hold harmless and agree to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, including in connection with any trade secret, copyright, patent, or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments we could be required to make under these arrangements is not determinable. We have never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the fair value of these agreements is minimal. We have also agreed to indemnify our directors and officers for certain events or occurrences while the director or officer is, or was serving, at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. The maximum potential amount of future payments we could be required to make under these indemnification agreements is not specified in the agreements; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. Recent Accounting Pronouncements See the section “Recently Adopted Accounting Pronouncements” in Note 2 to the Notes to Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K. JOBS Act Accounting Election The JOBS Act permits an “emerging growth company” or “EGC” such as us to delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an EGC or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the information we provide may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. In addition, we intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. We will remain an EGC until the earliest to occur of: (1) the last day of our first fiscal year in which we have total annual revenues of more than $1.235 billion; (2) the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our IPO.