Arcturus Therapeutics Holdings Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following is a discussion of the financial condition and results of operations of Arcturus Therapeutics Holdings Inc. for the three-month period ended March 31, 2025. Unless otherwise specified herein, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries. You should read the following discussion and analysis together with the interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 6, 2025. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2024 Annual Report. 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. This report also includes certain statements based solely on information, reports and studies provided by or conducted by Seqirus, Inc. and Meiji Holdings Co., Ltd or their respective affiliates. You should read this report and the documents that we reference in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. You should also review the factors and risks we describe in the reports we will file or submit from time to time with the Commission after the date of this report. Overview 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 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. 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. Given current market conditions, we have made a strategic decision to streamline resources to focus on our mRNA therapeutics pipeline. 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. Business Updates Vaccine Collaboration with CSL Seqirus In November 2022, we entered into a Collaboration and License Agreement (as amended, 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 global exclusive rights to research, develop, manufacture and commercialize self-amplifying mRNA vaccines against COVID-19, influenza and three other infectious diseases and global non-exclusive rights to pandemic pathogens. In November 2023, KOSTAIVE received marketing authorization approval from the Japanese Ministry of Health, Labour and Welfare for use as a primary immunization and booster in Japan for adults 18 years and older. Commercial sales of KOSTAIVE began in Japan in October 2024 by Meiji Seika Pharma (“Meiji”), CSL Seqirus’ exclusive partner in Japan. 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 for updated variant-specific versions of this vaccine. We may use KOSTAIVE or the specific internally generated name, such as ARCT-154, to identify the vaccine. 13 In January 2025, CSL Seqirus’ partner Meiji announced that it received approval for a partial amendment to the manufacturing and marketing approval of KOSTAIVE to include manufacturing sites in Japan. With this approval, Meiji and ARCALIS, Inc., Arcturus’ manufacturing joint venture in Japan, have been added as manufacturing sites. As a result, KOSTAIVE, with active pharmaceutical ingredients manufactured at such sites, may be shipped for commercial use in Japan. Approval of KOSTAIVE (ARCT-154) in Europe In February 2025, the European Commission granted marketing authorization for KOSTAIVE (ARCT-154) for individuals 18 years of age and older. The European Commission approval follows a positive opinion adopted by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) on December 12, 2024. The centralized marketing authorization of KOSTAIVE provided by the EC is valid in all 27 European Union (EU) member states and 3 additional European Economic Area (EEA) countries summarized here: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. The approval of KOSTAIVE in Europe, as well as the approval in Japan, are significant milestones, which further validate our LUNAR and STARR platforms, as well as sa-mRNA more generally as a meaningful modality. Clinical Studies of KOSTAIVE (COVID-19 vaccine) In connection with our collaboration with CSL Seqirus, we continue to collect data from various ongoing studies. See the 2024 Annual Report for a description of studies. Recent KOSTAIVE Publications In April 2025, we published a comprehensive analysis of safety data for KOSTAIVE®, with a 12-month follow-up from the pivotal clinical study in Vietnam (NCT05012943), which had 17,582 participants who received at least one dose of the study vaccine (https://doi.org/10.1080/14760584.2025.2487542). The study confirmed the favorable reactogenicity profile. Acceptable tolerability of ARCT-154 was also observed in older participants and in those liable to severe consequences of COVID-19 due to underlying medical conditions. ARCT-154 is the version of KOSTAIVE encoding the ancestral strain of the COVID-19 virus. Long-term follow-up has not revealed any safety concerns, with no reports of myocarditis or pericarditis. No serious consequences occurred in several pregnancies reported after vaccination. Long-term data from this large trial suggest that the sa-mRNA COVID-19 vaccine (ARCT-154; KOSTAIVE) is safe and well-tolerated. In April 2025, our Japanese partner, Meiji, published an analysis characterizing the distribution and clearance of ARCT-154 encoded spike protein and non-structural proteins nsP1, nsP2, nsP3 and nsP4 in the lymph nodes and injection-site muscle in mice following a single vaccination. The study showed the encoded spike protein reached its highest level approximately three days after vaccination and quickly disappeared from the injection site muscle. The spike protein levels also peaked at an early time point in the lymph nodes, it remained detectable 28 days after the vaccination and disappeared by 44 days after the vaccination. Expression of nsP1, nsP2 and nsP4 was observed in the injected muscle and/or the lymph nodes for up to 15 days post-vaccination. The data indicates that the extended expression of spike proteins in lymph nodes may be responsible for the induction of higher and prolonged levels of neutralizing antibodies. The study also confirmed that the self-replication is limited over time. Seasonal Influenza Program Updates A Phase 1 dose-finding safety and immunogenicity study was initiated in January 2024 in Australia and completed recruitment of 132 young and older participants. The immunological testing and assessment of the study results are ongoing. Pandemic Avian Influenza Program (H5N1 Influenza) Updates Our LUNAR-H5N1 program, which is part of the CSL Collaboration Agreement, continues to progress under the award from BARDA that we obtained in 2022 to advance through Phase 1 a vaccine to protect against disease caused by H5N1 highly-pathogenic avian influenza. The Phase 1 study of ARCT-2304, an sa-mRNA vaccine candidate, also known as LUNAR-H5N1, initiated dosing in December 2024 and continues to advance. We recently completed the recruitment of 212 adults (132 participants 18-59 years old; 80 participants 60+ years old) for the randomized placebo-controlled Phase 1 trial (NCT06602531), which is being conducted at multiple sites in the U.S. The primary objective of this initial clinical trial is to evaluate the safety and immune responses of three different dose levels and two different vaccination schedules of the ARCT-2304 vaccine. Immune responses are measured by hemagglutination inhibition (HAI), virus microneutralization (MN) and neuraminidase enzyme-linked lectin assays (ELLA). The recruitment in this study was completed in April 2025. In April 2025, the U.S. Food and Drug Administration (“FDA”) granted Fast Track Designation for ARCT-2304. This designation recognizes the potential of ARCT-2304 as an innovative approach to address unmet medical needs for the prevention of disease caused by pandemic influenza A virus H5N1, a significant global health risk. Fast Track Designation from the FDA is granted to vaccines intended to prevent serious conditions caused by infectious diseases. The designation is designed to expedite the 14 development and review process, providing several benefits, including enhanced communication with the FDA, eligibility for priority review, and the possibility of a rolling review. Key Updates on Arcturus-Owned mRNA Therapeutic Development Candidates • LUNAR-CF/ARCT-032 . Our program for cystic fibrosis is being supported in part by the Cystic Fibrosis Foundation (“CFF”). In 2023, we initiated and successfully completed a safety and tolerability Phase 1 single ascending dose study of ARCT-032 (LUNAR-CF), our mRNA therapeutic candidate for cystic fibrosis (CF). Thirty-two healthy participants (eight subjects in each of four dose cohorts) received a single inhaled dose of ARCT-032. A subsequent protocol amendment to transition to a safety and tolerability Phase 1b clinical study of ARCT-032 in adults with CF received regulatory approval in August 2023 and completed dosing and follow-up visits for seven CF participants in August 2024, with each CF participant having received two administrations of ARCT-032 separated by two days. o We are advancing enrollment in our ARCT-032 Phase 2 multiple ascending dose study to identify a safe and effective dose in Class I (null) and other CF participants who do not benefit from CFTR modulators. The U.S. IND including Phase 2 protocol was allowed to proceed in August 2024. We initiated dosing in the study in US in December 2024. This study is supported by safety and tolerability data collected in healthy volunteers (N = 32) and the two-administration Phase 1b study in CF adults. Each participant in the Phase 2 CF study (NCT06747858) is expected to receive daily treatments of ARCT-032 over a period of 28 days. • LUNAR-OTC/ARCT-810 . The LUNAR-OTC development program addresses ornithine transcarbamylase (OTC) deficiency, a rare, life-threatening, genetic disease caused by mutations in the OTC gene that lead to dysfunctional or deficient OTC. o In June 2024, we expanded the Phase 2 clinical program of ARCT-810 to the U.S. with an open-label, multiple-dose study to evaluate pharmacodynamics and safety in adult and adolescent patients requiring clinical management for OTC-deficiency. The first OTC deficient participant receiving 0.5mg/kg of ARCT-810 initiated dosing in December 2024. We continue to enroll participants in the study. Each participant is expected to receive five intravenous infusions administered over two months. We previously completed the dosing phase (N=8; 0.3 mg/kg) of a placebo-controlled European Phase 2 double-blind study enrolling OTC deficient individuals. Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Report and our audited financial statements and related notes for the year ended December 31, 2024. Our historical results of operations and the year-to-year comparisons of our results of operations that follow are not necessarily indicative of future results. Revenue We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees and royalties on future sales. The following table summarizes our total revenues for the periods indicated: Three Months Ended March 31, Change 2025 vs 2024 (in thousands) 2025 2024 Change % Revenue $ 29,382 $ 38,012 $ (8,630 ) -23 % 15 Revenue decreased by $8.6 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease during the three months ended March 31, 2025 primarily relates to a $6.9 million decrease in revenue related to the CSL Collaboration Agreement, primarily caused by smaller milestone achievements and less amortization as KOSTAIVE transitions from a development program to the commercial phase. The remaining decrease is due to a $1.7 million decrease in revenue related to the BARDA Contract as well other revenue agreements. Operating Expense Our operating expenses consist of research and development and general and administrative expenses. Three Months Ended March 31, Change 2025 vs 2024 (in thousands) 2025 2024 $ change % change Operating expenses: Research and development, net $ 34,893 $ 53,573 $ (18,680 ) -35 % General and administrative 11,315 14,851 (3,536 ) -24 % Total $ 46,208 $ 68,424 $ (22,216 ) -32 % Research and Development Expenses, net The following table presents our total research and development expenses by category: Three Months Ended March 31, Change 2025 vs 2024 (in thousands) 2025 2024 $ change % change LUNAR-COVID $ 5,809 $ 20,730 $ (14,921 ) -72 % LUNAR-OTC 1,576 1,383 193 14 % BARDA 2,481 3,235 (754 ) -23 % LUNAR-CF, net 7,148 1,195 5,953 * Early-stage programs - 6,168 (6,168 ) * Discovery technologies 2,187 1,190 997 84 % Payroll and benefits 13,043 15,517 (2,474 ) -16 % Facilities and equipment 2,649 4,155 (1,506 ) -36 % Total research and development expenses, net $ 34,893 $ 53,573 $ (18,680 ) -35 % * Greater than 100% 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 $34.9 million for the three months ended March 31, 2025, compared with $53.6 million for the three months ended March 31, 2024, primarily reflecting a decrease in manufacturing costs related to the LUNAR-COVID and LUNAR-FLU programs, offset by an increase in clinical and manufacturing costs related to the LUNAR-CF and LUNAR-OTC programs as we have shifted our focus to our clinical stage programs. The remaining decrease is primarily attributable to a decrease in payroll and benefits costs and a decrease in facilities and equipment costs. 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, 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. 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. We expect that payroll and benefits costs will not increase over the next twelve months due to reduced share-based compensation expense. 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 the first quarter of 2025 as compared to the first quarter of 2024, as we downsized from three to two facilities. Facilities and equipment expenses are not expected to increase during the next twelve months. 16 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 $11.3 million for the three months ended March 31, 2025, compared with $14.9 million for the three months ended March 31, 2024. The decrease in general and administrative expenses was primarily attributable to reduced share-based compensation costs. Finance income (expense), net Three Months Ended March 31, Change 2025 vs 2024 (in thousands) 2025 2024 $ change % change Interest income $ 2,771 $ 4,016 $ (1,245 ) -31 % Interest income is generated on cash and cash equivalents. The decrease in interest income for the three months ended March 31, 2025 as compared to the comparable period last year was primarily the result of lower interest rates and a decrease in cash and cash equivalents during the three months ended March 31, 2025. Off-balance sheet arrangements Through March 31, 2025, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Liquidity and Capital Resources From the Company’s inception through the quarter ended March 31, 2025, the Company has funded its operations principally with the proceeds from revenues earned through collaboration agreements and government contracts, the sale of capital stock and long-term debt. Through the first quarter of 2025, we have achieved a total of approximately $488.1 million in upfront payments and milestones from CSL Seqirus, including milestones of $15.0 million achieved in the current quarter. We expect to receive future payments from CSL Seqirus primarily by meeting future milestones related to the CSL Collaboration Agreement. As of March 31, 2025, the Company’s balance of cash and cash equivalents, including restricted cash, was $273.8 million. CSL Seqirus, Inc. Collaboration and License Agreement 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. We will be eligible to receive development milestones totaling more than $1.3 billion if all products are registered in the licensed fields. We will also be entitled to receive up to $3.0 billion in commercial milestones based on “net sales” of vaccines in the various fields. In addition, we are entitled to receive a 40% share of net profits from COVID-19 vaccine sales and up to low double-digit royalties of annual net sales for vaccines against influenza and the other three specified infectious disease pathogens, as well as royalties on revenues from vaccines that may be developed for pandemic preparedness. The CSL Collaboration Agreement sets forth how CSL Seqirus and we shall collaborate to research and develop vaccine candidates. In the COVID-19 field, we will lead activities for certain regulatory filings for ARCT-154 in the US and Europe and for research and development activities of a next-generation COVID vaccine candidate. CSL Seqirus will lead and be responsible for all other research and development in COVID-19, influenza and the other fields. Wells Fargo Credit Agreement 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 (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 17 extended by one year to April 2026. During the three months ended March 31, 2025, we drew down $15.0 million which was subsequently repaid in April 2025. 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 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 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. Grant from the Biomedical Advanced Research and Development Authority 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. 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 March 31, 2025, the remaining available funding net of revenue earned was $36.1 million. Vinbiocare Agreement During 2021, we entered into a technology license and technical support agreement and the framework drug substance supply agreement with Vinbiocare, a member of Vingroup Joint Stock Company (collectively, the “Vinbiocare License & Supply Agreements”), whereby we would provide technical expertise and support services to Vinbiocare to assist in the build out of an mRNA drug product manufacturing facility in Vietnam. We received an upfront payment in aggregate of $40.0 million as part of the Vinbiocare License and Supply Agreements. In October 2022, in association with the termination of the Vinbiocare License and Supply Agreements, we signed the Vinbiocare Support Agreement with Vinbiocare which continues Vinbiocare’s clinical obligations and reserved a portion of the original $40.0 million upfront payment received from the License and Supply Agreements to be paid over the future periods. The Vinbiocare Support Agreement requires us to pay to Vinbiocare certain limited payments, including upon the occurrence of specified events through the first quarter of 2025. Vinbiocare is also eligible to receive a single digit percentage of amounts received by Arcturus on net sales, if any, of ARCT-154 (or next-generation COVID vaccine) up to a capped amount. General Financial Resources A portion of our current cash balance is expected to be utilized during fiscal year 2025 to fund (i) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (ii) advances to our LUNAR-CF program in clinical trials, (iii) expenses incurred prior to customer payments under the CSL Collaboration Agreement and BARDA Contract and (iv) continued exploratory activities related to our platform and other general administrative activities. Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders. 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 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. 18 Overview The following table shows a summary of our cash flows for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, (in thousands) 2025 2024 Cash provided by (used in): Operating activities $ (35,138 ) $ (5,557 ) Investing activities (137 ) (240 ) Financing activities 15,195 2,188 Net decrease in cash and restricted cash $ (20,080 ) $ (3,609 ) Operating Activities Net cash used in operating activities was $35.1 million for the three months ended March 31, 2025, compared to a $5.6 million for the three months ended March 31, 2024. The increase was primarily driven by a $15.6 million use of cash in accounts receivable due to the timing of invoicing and collections. It was also impacted by a $15.5 million unfavorable change in both accrued liabilities and accounts payable related to payment timing, and a $5.8 million use of cash in deferred revenue, reflecting the recognition of amounts received under CSL supply agreements. Additionally, a $3.4 million reduction in non-cash share-based compensation contributed to the higher cash usage. These factors were partially offset by an $12.7 million improvement in net loss. Investing Activities Net cash used in investing activities of $0.1 million for the three months ended March 31, 2025, and $0.2 million for the three months ended March 31, 2024, reflected the acquisition of property and equipment. Financing Activities Net cash provided by financing activities was $15.2 million for the three months ended March 31, 2025, compared to a $2.2 million for the three months ended March 31, 2024. The increase was primarily due to the receipt of $15.0 million in debt proceeds during the current quarter. Funding Requirements We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans. We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses and continued funding from partners at anticipated levels. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing when and as needed. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations. Our future funding requirements are difficult to forecast and will depend on many factors, including the following: • the development of our LUNAR-COV19 and LUNAR-FLU vaccine candidates; • the achievement of milestones under our strategic alliance agreements; • maintaining and/or expanding our manufacturing network and capabilities; • the terms and timing of any other strategic alliance, licensing and other arrangements that we may establish, including those with CSL Seqirus and CSL Seqirus’ arrangement with Meiji, and any related payments thereunder; • the initiation, progress, timing and completion of preclinical studies and clinical trials for our product candidates; • the number and characteristics of product candidates that we pursue; • the outcome, timing and cost of regulatory approvals; • delays that may be caused by changing regulatory requirements; • the cost and timing of hiring new employees to support our continued growth; • the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims; 19 • the costs and timing of procuring clinical and commercial supplies of our product candidates; • the costs and timing of establishing sales, marketing and distribution capabilities; • the costs associated with legal proceedings; • the costs associated with potential litigation related to collaboration agreements; and • the extent to which we acquire or invest in businesses, products or technologies. Critical Accounting Policies and Estimates We prepare our condensed consolidated financial statements in conformity with GAAP. 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 reported 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, 2024. There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the 2024 Annual Report. 20 Item 3. Quantitative and Qualitati ve Disclosures About Market Risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the United States. Due to the nature of our cash and cash equivalents, we believe that we are not subject to any material market risk exposure. We maintain an immaterial amount of foreign currency, which we do not consider to pose a material risk. We do not use derivative financial instruments.