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Item 7. Management’s Discussion and Analysis

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This report includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.

We are a global messenger RNA medicines company focused on the development of infectious disease vaccines and therapeutics for liver and respiratory rare diseases.

In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle (“LNP”) delivery system, LUNAR ® , has the potential to enable multiple nucleic acid medicines, and our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA, or STARR ® , technology) has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels as compared to conventional mRNA .

We are leveraging our proprietary LUNAR platform and our nucleic acid technologies to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and rare genetic disorders with significant unmet medical needs.

We continue to expand this platform by adding new innovative delivery solutions that allow us to expand our discovery efforts.

Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues.

We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes can allow us to deliver on the next generation of nucleic acid medicines.

In June 2020, we initiated our first clinical study, a Phase 1 study for our mRNA-based therapeutic candidate for ornithine transcarbamylase (“OTC”) deficiency.

We launched our COVID-19 vaccine program in March 2020, and in November 2023, our self-amplifying mRNA vaccine against COVID-19, ARCT-154, received marketing approval in Japan.

In November 2022, we entered into a Collaboration and License Agreement (the “CSL Collaboration Agreement”) with Seqirus, Inc.

(“CSL Seqirus”), a part of CSL Limited, and one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other respiratory infectious diseases and global non-exclusive rights to pandemic pathogens.

The CSL Collaboration Agreement became effective on December 8, 2022.

The collaboration (“CSL Collaboration”) combines CSL Seqirus’ established global vaccine commercial and manufacturing infrastructure with Arcturus’ manufacturing expertise and innovative STARR self-amplifying mRNA and LUNAR delivery platform technologies.

Our vaccines franchise, led by our self-amplifying mRNA-based COVID-19 program, made significant strides in 2023, highlighted by the marketing authorization approval in Japan of ARCT-154.

The approval is the world’s first for a self-amplifying RNA (sa-mRNA) COVID-19 Vaccine.

In August 2023, we successfully completed the 12-month safety follow-up of the pivotal Phase 1/2/3 study in Vietnam of ARCT-154 that completed dosing in April 2022 of over 19,000 participants.

In February 2023, Meiji Seika Pharma Co., Ltd.

(“Meiji”), a Japanese leader in the area of infectious disease, completed dosing of a Phase 3 clinical trial of ARCT-154 in Japan to evaluate the safety and immunogenicity of a booster dose of ARCT-154, and to assess the non-inferiority of ARCT-154 to a licensed mRNA vaccine, administered as a booster.

Meiji conducted the study under its exclusive partnership with CSL Seqirus for distribution of ARCT-154 in Japan.

The study enrolled 828 adult participants, with half in the ARCT-154 group and half in a comparator group (Comirnaty®, Pfizer-BioNTech).

The results of this study demonstrated that a booster dose of ARCT-154 elicited a numerically higher immune response (meeting the non-inferiority criteria) against the original Wuhan-Hu-1 virus strain and a superior immune response against Omicron BA.4/5 subvariant of SARS-CoV-2 virus compared to a booster dose of the conventional mRNA vaccine Comirnaty®.

These Phase 3 study results were used to support the approval of ARCT-154 in Japan for primary immunization and as a booster dose.

Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found within Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.

We are a messenger RNA medicines company focused on the development of infectious disease vaccines and opportunities within liver and respiratory rare diseases.

We developed the world’s first approved self-amplifying messenger RNA (sa-mRNA) vaccine, KOSTAIVE® (“KOSTAIVE”).

KOSTAIVE achieved approval in Japan in 2023 as a vaccine against COVID-19.

Sales of KOSTAIVE began in Japan in October 2024, marking our transition to a commercial stage company.

We have several key platform technologies that we leverage to develop and advance a pipeline of mRNA-based vaccines and therapeutics for infectious diseases and for rare genetic disorders with significant unmet medical needs.

Current mRNA medicines have two critical components:

the messenger RNA (“mRNA”) constructs and the lipid nanoparticles (“LNP”) which help deliver the mRNA to disease-relevant target tissues.

We believe we are among the world leaders in both areas.

We have extensive expertise in the design and optimization of mRNA constructs, including with respect to a type of mRNA technology known as self-amplifying mRNA (sa-mRNA).

Our proprietary self-amplifying mRNA technology platform, or STARR® (“STARR”), has been demonstrated to induce a longer-lasting and broader humoral immune response at lower dose levels than conventional mRNA-based vaccines.

Our proprietary LNP delivery system, LUNAR® (“LUNAR”), is intended to address the major hurdle in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues.

LUNAR may enable multiple nucleic acid medicines.

The approval of KOSTAIVE in Japan was a significant milestone which validates our LUNAR and STARR platforms, as well as sa-mRNA more generally as a meaningful modality.

Finally, we have significant expertise and valuable know-how in the development and scalability of complex and robust manufacturing processes required to deliver the next generation of nucleic acid medicines.

Our internal pipeline includes RNA therapeutic candidates to potentially treat ornithine transcarbamylase (OTC) deficiency and cystic fibrosis (CF), both rare diseases.

In our vaccine program, we have partnered with Seqirus, Inc.

(“CSL Seqirus”), a part of CSL Limited and one of the world’s leading influenza vaccine providers, on the development and commercialization of mRNA vaccines for COVID-19, influenza and certain other infectious diseases.

We made significant progress in 2024.

Commercial sales of KOSTAIVE began in October 2024 in Japan by Meiji Seika Pharma (“Meiji”), CSL Seqirus’ exclusive partner in Japan, marking the first commercial sales of an Arcturus-developed product.

In February 2025, we received approval of KOSTAIVE from the European Commission (EC), which provided further validation of our platform by another significant regulatory authority.

KOSTAIVE is the brand name approved in Japan and Europe for ARCT-154, which is the version of the sa-mRNA COVID vaccine encoding the ancestral strain of SARS-CoV-2, and also for updated variant-specific versions of this vaccine.

We may use KOSTAIVE or the specific internally generated name, such as ARCT-154, ARCT-2301 and ARCT-2303, to identify a version of the vaccine.

We initiated dosing in a Phase 1 clinical trial of a novel seasonal influenza sa-mRNA vaccine candidate under our collaboration with CSL Seqirus in January 2024.

In December 2024, we initiated dosing of an sa-mRNA vaccine candidate against pandemic avian influenza (bird flu) in a Phase 1 trial funded by the Biomedical Advanced Research and Development Authority (“BARDA”).

In our OTC program, we completed dosing of eight subjects in August 2024 in a Phase 2 double-blind multiple-dose study of ARCT-810.

In the second quarter of 2024, we expanded the Phase 2 clinical program of ARCT-810 with an open-label, multiple-dose study which initiated dosing in December 2024.

received Orphan Drug Designation from the FDA and Orphan Medicinal Product Designation from the European Medicines Agency (the “EMA”) for treatment of OTC deficiency, as well as Fast Track Designation and Rare Pediatric Disease Designation from the FDA.

In our CF program, we initiated dosing in December 2024 in a Phase 2 multiple ascending dose study of ARCT-032 designed to identify a safe and effective dose in people with Class I (null) CFTR mutations and other CF patients who do not benefit from CFTR modulators.

In July 2024, we completed dosing and follow-up visits for seven participants in a safety and tolerability Phase 1b clinical study in New Zealand of ARCT-032 in adults with CF.

ARCT-032 has received Orphan Drug Designation by the FDA and Orphan Medicinal Product Designation by the EMA for the treatment of CF, and Rare Pediatric Disease Designation from the FDA.

We also improved our platform technologies and advanced our early-stage research activities and manufacturing process development and operations.

We conducted exploratory platform development activities, including the evaluation of genome editing, and new targeting approaches, where our LUNAR and STARR platforms could potentially be useful for identification and development of additional products for our portfolio.

Also, with our sourcing partners, we manufactured cGMP (current good manufacturing practices) batches yielding significant quantities of clinical trial materials for global studies of our candidates, and with our collaborator, CSL Seqirus, we have established commercial production processes for the COVID-19 vaccine program.

Our activities since inception have consisted principally of performing research and development activities, clinical research activities, general and administrative activities and raising capital to fund those efforts.

Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we

achieve sustainable revenues and profit from operations.

Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations.

As of December 31, 2024, we had an accumulated deficit of $448.8 million.

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During fiscal year 2024, we received milestone payments totaling $96.0 million from CSL Seqirus.

Additionally, we received milestone payments of $23.8 million from CSL Seqirus subsequent to December 31, 2023.

We expect to receive future payments from CSL Seqirus primarily by meeting future milestones related to the CSL Collaboration Agreement.

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Collaboration and License Agreement

We entered into the CSL Collaboration Agreement with CSL Seqirus, a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize mRNA vaccines.

CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other respiratory infectious diseases with non-exclusive rights to pandemic pathogens.

In 2022, we entered into the CSL Collaboration Agreement with CSL Seqirus, a part of CSL Limited, one of the world’s leading influenza vaccine providers, for the global exclusive rights to research, develop, manufacture and commercialize mRNA vaccines.

CSL Seqirus received exclusive global rights to our technology for vaccines against SARS-CoV-2 (COVID-19), influenza and three other infectious diseases with non-exclusive rights to pandemic pathogens.

We received an up-front payment of $200.0 million during the fourth quarter of 2022.

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On April 21, 2023, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc.

entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo agreed to make a $50.0 million revolving credit line available to the Company (the “Wells Fargo Loan”) with each Wells Fargo Loan evidenced by a revolving line of credit note (each, a “Note”).

Borrowings under the agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Wells Fargo Note), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York.

entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) whereby Wells Fargo agreed to make a $50.0 million revolving credit line available to the Company (as amended, the “Wells Fargo Loan”) with each Wells Fargo Loan evidenced by a revolving line of credit note (each, a “Note”).

On June 26, 2024, the parties entered into

Amendment No.

1 to the Wells Fargo Loan, whereby the term was extended by one year to April 2026.

As of December 31, 2024, no borrowings were made against the Wells Fargo Loan.

Borrowings under the agreement will bear interest at a rate of 1.00% above either the Daily Simple SOFR or Term SOFR (as such terms are defined in the Wells Fargo Loan), with “SOFR” being the rate per annum equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York.

If an Event of Default (as defined in the credit agreement) occurs, then all Wells Fargo Loans shall bear interest at a rate equal to 2.00% above the interest rate applicable immediately prior to the occurrence of the Event of Default.

The term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal.

The original term of the agreement is two years, with an option for one-year renewals subject to Wells Fargo approval and the Company furnishing to Wells Fargo a non-refundable commitment fee equal to 0.25% of the Wells Fargo Loan amount for each such renewal.

There is no penalty for terminating the agreement.

There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Note.

There is no penalty for terminating the facility prior to the maturity date of the Wells Fargo Loan.

As collateral, the Company has agreed to pledge $55.0 million in cash to be held at the Company’s securities accounts with Wells Fargo Securities, LLC, an affiliate of Wells Fargo, pursuant to a security agreement.

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On August 31, 2022, we entered into a cost reimbursement contract (the “BARDA Contract”) with the Biomedical Advanced Research and Development Authority (“BARDA”), a division of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) within the U.S.

Department of Health and Human Services

(“HHS”) to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform.

Department of Health and Human Services (“HHS”) to support the development of a low-dose pandemic influenza candidate based on our proprietary self-amplifying messenger RNA-based vaccine platform.

The BARDA Contract is to support our non-clinical and pre-clinical development, early-stage clinical development through Phase 1, and associated drug product manufacturing, regulatory and quality-assurance activities over a period of three years.

It provides for reimbursement by BARDA of our permitted costs up to $63.2 million.

As of December 31, 2024, the remaining available funding net of revenue earned was $40.0 million.

Vinbiocare Agreement

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We expect to continue to incur additional losses in the long term, and we will need to execute on milestones within the CSL Collaboration Agreement, raise additional debt or equity financing or enter into additional partnerships to fund development.

Our ability to transition to profitability is dependent on executing on milestones within the CSL Collaboration Agreement and identifying and developing successful mRNA drug and vaccine candidates.

Our ability to transition to profitability is dependent on regulatory approvals and subsequent sales of KOSTAIVE, executing on milestones within the CSL Collaboration Agreement and identifying and developing other successful mRNA drug and vaccine candidates.

If we are not able to achieve planned milestones or incur costs in excess of our forecasts, we will need to reduce discretionary spending, discontinue the development of some or all of our programs, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.

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Financing activities

Net increase (decrease) in cash and restricted cash

Net decrease in cash and restricted cash

Operating Activities

Net cash used in operating activities in 2023 was $18.1 million and consisted of net loss of $29.7 million offset by adjustments of $4.2 million and a net change in assets and liabilities of $7.4 million.

Non-cash items primarily included stock-based compensation of $34.6 million and depreciation and amortization of $3.0 million offset by a gain on debt extinguishment of $34.0 million.

The net change in assets and liabilities was primarily due to an increase in deferred revenue of $38.6 million, a decrease in right-of-use assets of $4.0 million and a decrease in prepaid and other current assets of $1.2 million.

This was partially offset by an increase in accounts receivable of $29.3 million, a decrease in accounts payable and accrued liabilities of $2.9 million and a decrease lease liabilities of $4.3 million.

Net cash provided by operating activities in 2022 was $32.0 million and consisted of net income of $9.3 million and non-cash adjustments of $35.2 million, plus a net change in assets and liabilities of $12.6 million.

Non-cash items primarily included stock-based compensation of $30.6 million and depreciation and amortization of $1.5 million.

The net change in assets and liabilities was primarily due to a decrease in deferred revenue of $14.7 million, a decrease in lease liabilities of $4.5 million, and increase in prepaid and other current assets of $3.6 million and a decrease in accounts payable of $3.1 million, partially offset by an increase in accrued liabilities of $9.4 million, a decrease in right-of-use assets of $3.3 million and a decrease in accounts receivable of $0.6 million.

Net cash used in operating activities was $59.7 million for the year ended December 31, 2024, compared to $18.1 million for the year ended December 31, 2023.

The $41.6 million increase in cash used was primarily driven by a $93.8 million year-over-year impact from deferred revenue, as 2023 benefited from a $38.6 million deferred revenue inflow, while 2024 saw a $55.2 million outflow due to revenue recognition exceeding new milestone payments under the CSL collaboration agreement.

Additionally, the increase in cash outflows was due to a higher net loss and the absence of a $34.0 million debt extinguishment gain recognized in 2023.

These impacts were partially offset by a $57.4 million improvement in accounts receivable, as payments from CSL and BARDA were received in 2024 and a $6.5 million increase in accrued liabilities, primarily due to the timing of bonus accruals.

Investing Activities

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Financing Activities

Net cash used in financing activities in 2023 was $24.1 million, primarily from principal payments on long-term debt of $27.4 million, partially offset by proceeds from the exercise of stock options of $2.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.6 million.

Net cash used in financing activities in 2022 was $2.9 million, primarily from principal payments on long-term debt of $5.0 million, partially offset by proceeds from the exercise of stock options of $1.7 million and proceeds from the issuance of common stock related to our employee stock purchase plan of $0.4 million.

Net cash provided by financing activities was $5.4 million for the year ended December 31, 2024, compared to a net cash outflow of $24.1 million in 2023 ,representing a $29.5 million increase.

The primary drivers of this increase were the repayments of the Singapore Loan and the Loan and Security Agreement with Western Alliance Bank during 2023, with no similar debt repayments occurring in 2024.

Results of Operations

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The following table summarizes our total revenues for the periods indicated:

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Revenue decreased by $14.5 million during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The decrease during 2023 primarily relates to decreases in revenue of the following:

(i) $25.2 million related to the termination of the agreement with Vinbiocare during 2022, (ii) $12.5 million related to the recognition of revenue for agreement with the Israeli Ministry of Health during 2022, (iii) $8.5 million related to the termination of the agreement with Janssen during 2022 and (iv) $1.9 million related to the completion of the amortization of the upfront payment from the UGX agreement during the second quarter of 2023.

The decrease was primarily offset by increases in the revenue of $8.8 million related to the increase in reimbursable research and development expenses for the grant agreement with BARDA and $0.1 million related to other material transfer agreements during the year ended 2023.

The decrease during 2024 primarily relates to a $15.9 million decrease in revenue related to the CSL collaboration agreement, primarily due to an $82.0 million decrease in milestone achievements during 2024 as compared to 2023, offset by a $23.4 million increase in revenue related to CSL commercial supply agreements and increased revenue recognition from amortization due to the progress of the CSL development programs during 2024.

The remaining decrease is primarily due to a decrease of $1.8 million related to the completion of the amortization of the upfront payment during 2023 from the 2015 Research Collaboration and License Agreement with Ultragenyx

Pharmaceuticals, Inc., as well as $0.7 million less revenue in 2024 due the termination of the 2017 Research Collaboration and License Agreement with Janssen Pharmaceuticals, Inc.

The decrease was primarily offset by an increase in the revenue of $4.8 million related to the increase in reimbursable research and development expenses for the grant agreement with BARDA.

Operating Expenses

Our operating expenses consist of research and development and general and administrative expenses.

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External pipeline development expenses:

LUNAR-COVID, net

LUNAR-OTC, net

LUNAR-CF, net

Early-stage programs

Discovery technologies

External platform development expenses:

Personnel related expenses

Facilities and equipment expenses

Payroll and benefits

Facilities and equipment

Total research and development expenses, net

Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses, facility related expenses and laboratory supplies related to conducting research and development activities.

Research and development expenses were $192.1 million for the year ended December 31, 2023, compared with $147.8 million in the comparable period last year, primarily reflecting increased manufacturing costs of $27.4 million, an increase of $6.7 million in personnel related costs, an increase in consulting expenses of $3.7 million, an increase of $3.2 million in facilities expense and an increase of contra research and development expenses recognized of $8.4 million.

The increase was primarily offset by a decrease of clinical-related expenses of $5.0 million.

Research and development expenses were $195.2 million for the year ended December 31, 2024, compared with $192.1 million for the year ended December 31, 2023, primarily reflecting increased payroll and benefits costs due to share-based compensation expense, progress within our BARDA, LUNAR-CF, and LUNAR-FLU programs, and clinical trial costs for the LUNAR-COVID program.

The overall increase was offset by decreased manufacturing-related expenses due to lower costs associated with drug product supply agreements related to the LUNAR-COVID program during the year ended December 31, 2024.

We expect that our research and development efforts and associated costs will continue to be substantial over the next several years as our pipeline progresses.

Early-stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, including the LUNAR-CF and LUNAR-FLU programs.

Early-stage programs represent programs that are in the pre-clinical or Phase 1 clinical stage and may be partnered or unpartnered, and primarily includes the LUNAR-FLU program which is partnered with CSL Seqirus.

Discovery technologies represent our efforts to expand our product pipeline and are primarily related to pre-partnered studies and new capabilities assessment.

For some of our programs, the activities are part of our collaborative and other relationships, and the expenses may be partially offset with funds that have been awarded to the Company.

The expenses primarily consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees.

Both early-stage programs and discovery technologies expenses are expected to steadily increase over the coming years.

Personnel related expenses primarily consist of employee salaries and benefits, share-based compensation and consultants.

Although such expenses increased during 2023 as compared to 2022, we expect that they will not increase over the next twelve months.

Facilities and equipment expenses increased during the year ended December 31, 2023 as a result of increased rent and associated costs related to a new facility we took possession of in April 2022.

Facilities and equipment expenses are not expected to increase significantly during the next twelve months.

A few of our programs are part of our collaborative relationships.

The related expenses may be partially offset with funds that have been reimbursed or awarded to the Company and consist of external manufacturing costs, lab supplies, equipment, and consulting and professional fees.

Expenses for both early-stage programs and discovery technologies are expected to decrease as we shift our focus to later-stage programs.

Payroll and benefits primarily consists of employee salaries and benefits, share-based compensation and consultant costs.

Although such expenses increased during 2024 as compared to 2023, we expect that they will not increase over the next twelve months due to reduced share-based compensation.

Facilities and equipment expenses include rent, common area maintenance (“CAM”) costs, depreciation, shipping costs and various other costs related to the operation of our two office and laboratory locations.

These costs decreased during 2024 as compared to 2023 as we downsized from three to two facilities.

Facilities and equipment expenses are not expected to increase during the next twelve months.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits for our executive, administrative and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses.

General and administrative expenses were $52.9 million and $46.1 million for the year ended December 31, 2023 and 2022, respectively.

These increases in expenses resulted primarily from increased personnel expenses due to increased headcount and salaries, increased travel and consulting expenses as well as increased rent expense

associated with the new facility.

We expect that general and administrative expenses will remain consistent during the next twelve months.

General and administrative expenses were $52.8 million and $52.9 million for the years ended December 31, 2024 and 2023, respectively.

We expect that general and administrative expenses will decrease slightly during the next twelve months due to reduced share-based compensation from fully vested stock options.

Finance income (expense), net

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Interest income is generated on cash and cash equivalents.

The increase in interest income from 2022 to 2023 was the result of higher interest rates during the year ended 2023 and an increase in cash due to large amounts received under the CSL Seqirus agreement during the fourth quarter of 2022.

Interest expense decreased during the year ended 2023 as compared to the year ended 2022 as no interest expense was incurred subsequent to the first quarter of 2023.

This was a result of the extinguishment of the Western Alliance loan and forgiveness of the Singapore Loan.

The decrease in interest income from 2023 to 2024 was the result of lower interest rates during the year ended 2024 and a decrease in cash and cash equivalents.

Interest expense decreased during the year ended 2024 as compared to the year ended 2023 as no interest expense has been incurred since to the first quarter of 2023.

This was a result of the extinguishment of the Loan and Security Agreement dated October 12, 2018 with Western Alliance Bank, and forgiveness of the term loan from Economic Development Board of the Republic of Singapore pursuant to the Manufacturing Support Agreement dated November 7, 2020.

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S.

As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon information available to us.

These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our results of operations and financial condition.

We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2023.

In the following paragraphs, we describe the specific risks associated with these critical accounting policies and we caution that future events may not reflect exactly as one may expect, and that best estimates may require adjustment.

The following are our significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results.

Our significant accounting policies are summarized in “Note 2 Summary of Significant Accounting Policies,” included in our consolidated financial statements included elsewhere in this annual report on Form 10-K.

The preparation of our consolidated financial statements in conformity with “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 consolidated financial statements, and the reported amounts of expenses during the reporting period.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, assumptions related to revenue recognition, accrual of research and development expenses, determination of incremental borrowing rates, and the valuations of stock options.

We based our estimates on historical experience, known trends and other market-specific or other relevant factors that we believe to be reasonable under the circumstances.

On an ongoing basis, management evaluates these estimates when there are changes in circumstances, facts and experience.

Changes in estimates are recorded in the period in which they become known.

Actual results could differ from those estimates.

Revenue Recognition

Research and development revenue under collaborative agreements

We recognize research and development revenue from several collaboration agreements.

We recognize revenue when control of the products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services.

This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.

Our collaboration agreements typically contain promised goods and services, including technology licenses or options to obtain technology licenses, research and development and regulatory services.

Upon entering into a collaboration agreement, we are required to make the following judgments:

Identifying the performance obligations contained in the agreement

Identifying the performance obligations and measuring progress

Our assessment of what constitutes a separate performance obligation requires us to apply judgment.

Specifically, we are required to identify which goods and services we are required to provide under the contract are distinct, if any.

For performance obligations that are satisfied over time, we typically use the percentage-of-completion method which requires us to estimate the total forecasted costs required to complete the performance obligation.

Adjustments to these estimates could materially impact the timing and amount of recognized revenue.

If actual costs exceed initial estimates, revenue recognized to date may need to be adjusted downward, negatively impacting current period results.

Conversely, favorable cost variances could accelerate revenue recognition.

Determining the transaction price, including any variable consideration

To determine the transaction price, we review the amount of consideration we are eligible to earn under the agreement.

We do not typically include any payments we may receive in the future in our initial transaction price since the payments are typically not probable because they are contingent upon certain future events.

We apply a constraint to any payments we may receive in the future to avoid significant reversals since the payments are typically not probable because they are contingent upon certain future events.

We are required to reassess the total transaction price at each reporting period to determine if we should include additional payments that have become probable in the transaction price.

Allocating the transaction price to each of our performance obligations

When we allocate the transaction price to more than one performance obligation, we make estimates of the relative stand-alone selling price of each performance obligation because we do not typically sell our goods or

services on a stand-alone basis.

The estimate of the relative stand-alone selling price requires us in some cases to make significant judgments.

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the number of internal hours we will spend on the services, the cost of work we and third parties will perform and the cost of clinical trial material we will use.

The research and development revenue we recognize each period is comprised of several types of revenue, including license fees, amortization from upfront payments, milestone payments, option exclusivity fees and other services.

The revenue we recognize each period is comprised of several types of revenue, including license fees, amortization from upfront payments, milestone payments, research and development and other services.

Each of these types of revenue require us to make various judgments and estimates.

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If we determine that our partner has full use of the license and we do not have any additional material performance obligations related to the license after delivery, then we consider the license to be a separate performance obligation.

We generally recognize as license revenue the total amount of the transaction price we determine to be the allocated to the performance obligation based upon the relative stand-alone selling price of a license when we deliver the license to our partner.

We generally recognize as license revenue the total amount of the transaction price we determine to be allocated to the performance obligation based upon the relative stand-alone selling price of a license when we deliver the license to our partner.

We discuss the estimates we make related to the relative stand-alone selling price of a license in detail above under “Allocating the transaction price to our performance obligations.”

Research and Development Expenses, Including Clinical Trial Accruals/Expenses

Research and development costs consist of salaries and benefits, including related stock-based compensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs, and contract manufacturing organizations, or CDMOs.

Research and development costs consist of salaries and benefits, including share-based compensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on our behalf, such as clinical research organizations, or CROs, and contract manufacturing organizations, or CDMOs.

Research and development costs are expensed as incurred.

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Our historical clinical trial accrual estimates have not been materially different from our actual costs.

We cannot readily determine the interest rate implicit in the lease, therefore, we use our incremental borrowing rate to measure lease liabilities.

The incremental borrowing rate is the rate of interest that we would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use, or ROU, asset in a similar economic environment.

The incremental borrowing rate therefore reflects what we ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease.

We estimate the incremental borrowing rate using observable inputs (such as market interest rates) when available and are required to make certain entity and asset-specific estimates.

The incremental borrowing rate used in the calculation of the present value of lease payments in calculating lease liabilities and the corresponding ROU requires the use of significant judgment by management.

Share-Based Compensation

We recognize compensation expense related to stock options granted to employees and nonemployees based on the estimated grant date fair value and recognize forfeitures as they occur.

We estimate the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model for service-based and performance-based awards.

The grant date fair value of the share-based awards is recognized on a straight-line basis over the requisite service period, which is typically the vesting period of the respective awards.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions to determine the fair value of share-based awards.

Such assumptions involve inherent uncertainties and the application of significant judgment.

As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our share-based compensation could be materially different.

Quantitative and Qualitat ive Disclosures About Market Risk

1 unchanged sentence

Due to the nature of our investments, we believe that we are not subject to any material market risk exposure.

We do not have any foreign currency or other derivative financial instruments.

We do not hold a material balance in foreign currencies or engage in derivative financial instruments that could materially impact our financial position.

Financial Statement s and Supplementary Data

2 unchanged sentences

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 7. Management’s Discussion and Analysis