What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-21 compared with 2024-03-21 · 155 added, 111 removed, 134 unchanged (67% of the section changed)

3 unchanged sentences

See “Special Note Regarding Forward-Looking Statements.” Our actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form 10-K .

We are a clinical-stage biotechnology company focused on the development of pathogen-specific bacteriophage therapeutics for the treatment of antibiotic-resistant and difficult-to-treat bacterial infections using our proprietary bacteriophage-based technology.

We see bacteriophages as an alternative to antibiotics and an essential response to growing bacterial resistance to current classes of antibiotics.

Bacteriophages or “phages” have a powerful and highly differentiated mechanism of action that enables binding to and killing of targeted bacteria while uniquely preserving the human microbiome.

We are a clinical-stage biotechnology company focused on the development of high-purity, pathogen-specific bacteriophage therapeutics for the treatment of antibiotic-resistant and difficult-to-treat bacteria using our proprietary bacteriophage-based technology.

We see bacteriophages as a potentially safer and effective alternative to antibiotics and an essential response to the growing bacterial resistance to current classes of antibiotics.

Bacteriophages or “phages” have a powerful and highly differentiated mechanism of action that enables binding to and killing of specific targeted bacteria while uniquely preserving the normal human microbiome or “healthy bacteria”.

This is in direct contrast to traditional broad-spectrum antibiotics which can alter the human microbiome increasing susceptibility to opportunistic pathogens, such as C.

We believe that phages represent a promising means to effectively treat bacterial infections as an alternative to broad-spectrum antibiotics, especially for patients with bacterial infections resistant to current standard of care therapies, including the multidrug-resistant or “superbug” strains of bacteria.

We are a leading developer of phage therapeutics and are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections.

We are completing two critical Phase 2 trials to ensure a pathway towards pivotal Phase 3 trials.

current good manufacturing practice (“cGMP”) manufacturing capabilities to advance a target pipeline of high-quality bacteriophage product candidates for advanced development.

We are uniquely advancing two lead candidates to address both chronic and acute bacterial infections.

Our first lead candidate focused primarily on chronic bacterial infections is the clinical phage candidate for Pseudomonas aeruginosa (“P.

aeruginosa”).

We are a leading developer of clinical-stage phage therapeutics of high purity, and believe we are uniquely positioned to address the growing worldwide threat of antibiotic-resistant bacterial infections.

We have completed three critical Phase 2 trials, utilizing two distinct phage cocktails against two different bacterial pathogens with the potential to treat chronic pulmonary disease complicated by bacterial infection, as well as acute systemic bacterial infection.

We believe we are on a critical pathway towards pivotal Phase 3 clinical studies.

We are combining our proprietary approach and expertise in identifying, characterizing and developing both naturally occurring and engineered (synthetic) bacteriophages with our proprietary phage-specific host-engineered cGMP manufacturing capabilities to advance a target pipeline of high-quality bacteriophage product candidates for late-stage clinical development.

We have improved our manufacturing processes by significantly increasing phage titers and improving production efficiency with the goal of ensuring commercial viability.

We believe that we are uniquely advancing two lead candidates, referred to as AP-PA02 and AP-SA02, to address both chronic and acute bacterial infections.

Our first lead phage candidate, inhaled AP-PA02, is focused primarily on the treatment of chronic pulmonary infections due to P.

On October 14, 2020, we received the approval to proceed from the U.S.

1 unchanged sentence

In the first quarter of 2023, we announced positive topline results from the completed “SWARM- P.a.

” study – a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose (“SAD”) and multiple ascending dose (“MAD”) clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with cystic fibrosis (“CF”) and chronic pulmonary P.

” study – a Phase 1b/2a, multicenter, double-blind, randomized, placebo-controlled, single ascending dose and multiple ascending dose clinical trial to evaluate the safety and tolerability of inhaled AP-PA02 in subjects with cystic fibrosis and chronic pulmonary P.

aeruginosa infection.

Data indicate that AP-PA02 was well-tolerated with a treatment emergent adverse event profile similar to placebo.

Pharmacokinetics (PK) findings confirm AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum and exposure achievement relatively consistent across patient subjects.

Pharmacokinetics findings confirm that AP-PA02 can be effectively delivered to the lungs through nebulization with minimal systemic exposure, with single ascending doses and multiple ascending doses resulting in a proportional increase in exposure as measured in induced sputum.

AP-PA02 exposures were generally consistent across subjects.

Additionally, bacterial levels of P.

aeruginosa in the sputum measured at several timepoints suggest improvement in bacterial load reduction for subjects treated with AP-PA02 at the end of treatment as compared to placebo after ten days of dosing.

In addition, a correlation was seen between increasing phage dose and reduction in the bacterial load supporting the biologic plausibility of a bacterial specific mechanism of action and creating the opportunity for phage as a therapeutic alternative to inhaled antibiotics.

This study is supported by the Cystic Fibrosis Foundation (“CFF”), which granted us a Therapeutics Development Award of $5.0 million.

Following the promising Phase 1b/2a results of favorable safety and tolerability profile and plausible mechanism of action, an additional confirmatory Phase 2 trial was initiated in NCFB patients with similar chronic pulmonary infections due to Pseudomonas aeruginosa .

On February 22, 2022, we announced that we had received from the FDA the approval to proceed for our IND application for AP-PA02, in a second indication, non-cystic fibrosis bronchiectasis (“NCFB”).

We initiated a Phase 2 trial (“Tailwind”) in NCFB in 2022 and reported first patient dosing in the first quarter of 2023.

The “Tailwind” study is a Phase 2, multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 phage therapeutic in subjects with NCFB and chronic pulmonary Pseudomonas aeruginosa infection.

We are actively accelerating enrollment and increasing phage dosing with the goal of defining a safe and promising biologic correlation for a Phase 3 definitive trial in 2025 which will evaluate phage as an alternative to antibiotics in chronic pulmonary infections.

In parallel, we have an acute bacterial infection clinical development plan focused on Staphylococcus aureus bacteremia, a difficult-to-treat and often life-threatening human infections that can result in high morbidity and mortality and for which bacterial resistance to antibiotics is growing.

A key advantage of our phage manufacturing expertise is the purity profiles of our phage products, including AP-SA02, our phage product candidate for Staphylococcus aureus (“ S.

In addition, a correlation was seen between increasing phage dose (higher AP-PA02 exposures) and reduction in the bacterial load, supporting the biologic plausibility of a bacterial specific mechanism of action and creating the opportunity for phage as a therapeutic alternative to inhaled antibiotics.

This study was supported by the CFF, which granted us a Therapeutics Development Award of $5.0 million.

We received the full award’s amount, including the final payment of $0.3 million, in January 2024.

Following the promising Phase 1b/2a results of favorable safety and tolerability profile and plausible mechanism of action, an additional confirmatory Phase 2 trial was initiated in non-cystic fibrosis Bronchiectasis (“NCFB”) patients with similar chronic pulmonary disease with infections due to P.

On February 22, 2022, Armata announced that it had received from the FDA the approval to proceed for our IND application for AP-PA02, in a second indication, non-cystic fibrosis bronchiectasis (“NCFB”).

On December 19, 2024, Armata announced encouraging results from the completed “Tail wind ” study – a Phase 2 multicenter, double-blind, randomized, placebo-controlled study to evaluate the safety, phage kinetics, and efficacy of inhaled AP-PA02 in subjects with NCFB and chronic pulmonary P.

aeruginosa infection.

Data indicated that inhaled AP-PA02 provides a durable reduction of P.

aeruginosa in the lung, with a favorable safety and tolerability profile.

The Tail wind study was conducted in two cohorts running in parallel:

subjects in one cohort (cohort A) received inhaled AP-PA02 as monotherapy, while subjects in another cohort (cohort B) received inhaled AP-PA02 in combination with inhaled anti-pseudomonal antibiotic treatment.

Subjects in both cohorts were dosed at home by nebulization with study drug

administered every 12 hours for 10 days and were followed for approximately four weeks after receiving their last dose of study drug.

The primary efficacy endpoint was the reduction in P.

aeruginosa colony forming units ("CFUs") in lung sputum at one week following completion of dosing (day 17) compared to baseline.

Per the statistical analysis plan, efficacy analysis of each independent cohort showed no significant difference between subjects treated with AP-PA02 and placebo due to small numbers of subjects in each cohort.

Notably, a post-hoc intent-to-treat analysis (n=33 active and n=15 placebo;

all subjects from both cohorts) demonstrated a statistically significant reduction of P.

aeruginosa CFUs in the lung at day 17 (AP-PA02 vs.

The reduction in P.

aeruginosa CFUs persisted two weeks following completion of dosing with AP-PA02 when compared with placebo at day 24 (AP-PA02 vs.

Additionally, paired analysis of P.

aeruginosa CFU density at baseline compared to day 10 (P=0.03), day 11 (P=0.01), day 17 (P=0.003) and day 24 (P=0.018) was significant in the AP-PA02-treated cohort.

We believe the data suggest that AP-PA02 alone is as effective as the combination therapy of phage and antibiotics in reducing P.

aeruginosa CFUs in the lung.

Additionally, approximately one-third of subjects treated with phage monotherapy exhibited at least a 2-log CFU reduction in P.

aeruginosa compared to no reduction in placebo treated subjects.

Safety data indicate that inhaled AP-PA02 was well-tolerated with treatment-emergent adverse events mild and self-limiting.

There was one possibly related serious adverse event that was linked to an acute pulmonary event requiring hospitalization that was responsive to antibiotics.

We believe the safety and tolerability of AP-PA02 offers a promising profile for treating chronically infected NCFB patients.

Results from the Phase 2 Tail wind study demonstrate the potential of Armata’s high-purity phage cocktail, AP-PA02, as a new monotherapy treatment alternative for chronic pulmonary disease caused by P.

aeruginosa infection, including drug-resistant bacteria, and indicate the potential for phage therapy to reduce reliance on chronic antibiotic use.

The Phase 2 Tail wind study represents the second successful clinical trial for AP-PA02, Armata’s lead pulmonary candidate, which was first evaluated in people with cystic fibrosis in the Phase 1b/2a SWARM- P.a.

trial that completed in 2023.

We believe the learnings on dose-schedule regimens gained from the two completed Phase 2 studies position us to define a safe and promising biologic correlation for a Phase 3 definitive trial which will aim to evaluate inhaled AP-PA02 as an alternative to antibiotics in chronic pulmonary P.

aeruginosa infection.

In parallel to developing novel phage therapeutics that target chronic bacterial infections, we have an acute bacterial infection clinical development plan focused on Staphylococcus aureus (“ S.

aureus ”) bacteremia, a difficult-to-treat and often life-threatening human infection that can result in high morbidity and mortality and for which bacterial resistance to antibiotics is growing.

A key advantage of our phage manufacturing expertise is the purity profiles of our phage products, including AP-SA02, our phage product candidate for S.

this has enabled us to pursue treatment of complicated S.

aureus bacteremia, where repetitive intravenous dosing is required.

On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we expect to receive a $15.0 million grant and entered into a three-year program administered by the U.S Department of Defense (the “DoD”) through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

On June 15, 2020, we entered into an agreement (the “MTEC Agreement”) with the Medical Technology Enterprise Consortium (“MTEC”), pursuant to which we received a $15.0 million award and entered into a multi-year program administered by the U.S Department of Defense through MTEC and managed by the Naval Medical Research Command (NMRC) – Naval Advanced Medical Development (NAMD) with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the second half of 2024.

The grant is being used to partially fund a Phase 1/2, multi-center, randomized, double-blind, placebo- controlled dose escalation study that will assess the safety, tolerability, and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S.

In July 2024, the MTEC Agreement was modified to increase the total award by $5.3 million to $21.6 million and extend the term into the third quarter of 2025.

We are using the award to partially fund a Phase 1b/2a, multicenter, randomized, double-blind, placebo-controlled dose escalation study that will assess the safety, tolerability and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S.

aureus (“diSArm” study) .

On November 17, 2021, we announced that we had received approval from the FDA to proceed with our IND application for AP-SA02.

On November 12, 2024, we announced completion of enrollment of the Phase 1b/2a diSArm study of intravenous AP-SA02 as a potential treatment for S.

aureus bacteremia.

On November 17, 2021, we announced that we had received from the FDA the approval to proceed for our IND application for AP-SA02.

We are focused on accelerating enrollment of the Phase 2a segment of the “diSArm” study, evaluating safety with higher intravenous doses, which is possible due to the high purity of our phage product candidates.

We are committed to developing a definitive efficacy trial in 2025 focused on phage as an alternative to broad-spectrum antibiotics and/or antibiotic sparing to decrease the utilize of broad-spectrum antibiotics and their detrimental impact of the normal human microbiome.

On August 1, 2022, we announced that we had received from the FDA the approval to proceed for our IND application for AP-SA02, in a second indication, prosthetic joint infections (“PJI”).

We had planned to initiate a Phase 1b/2a trial in 2023, however in light of the growing concerns of both PJI and wound infection, we are revising the protocol to include both indications.

The last patient final follow-up visit was completed on January 14, 2025.

During the Phase 2a portion of diSArm, Armata focused on evaluating clinical safety of higher intravenous doses of AP-SA02 and accelerating enrollment to arrive at topline data expeditiously.

The manufacture of highly purified phages using Armata's proprietary methods enabled dose escalation to 5E10 PFU every six hours (2E11 PFU every 24 hours) for five days without clinically significant adverse events.

In parallel with dose escalation, the evolution of two distinct blinded subsets of subjects receiving phage has been observed.

comprising approximately half of the treated group, has evidence of persistence of detectable phage in the blood providing early evidence of in vivo phage amplification and resultant release of phage progeny.

The Company anticipates topline data from the diSArm study in the first half of 2025 where it can explore the two aforementioned subsets in an unblinded manner.

Topline results are also expected to inform the optimal dose of AP-SA02 to be evaluated in a larger definitive efficacy study.

Data from this Phase 1b/2a study will be invaluable for a follow-on trial that is being designed to demonstrate efficacy of AP-SA02 in treating S.

aureus bacteremia.

We anticipate findings from the Phase 1b/2a study will provide the basis for constructing a robust trial strategy for registration which can be the basis for an End-of-Phase-2 meeting with the FDA that enables us to obtain agreement on a path to approval.

We are committed to developing a definitive efficacy trial focused on phage as an alternative to broad-spectrum antibiotics and/or antibiotic sparing to decrease the utilization of broad-spectrum antibiotics and their detrimental impact on the normal human microbiome.

On August 1, 2022, we announced FDA approval to proceed with our IND application for AP-SA02 in a second indication, prosthetic joint infections (“PJI”) with S.

We had planned to initiate a Phase 1b/2a trial;

however, in light of the growing concerns of both PJI and wound infections, we are considering revising the protocol to include both indications.

Driven by data from the bacteremia study, and with sufficient funding, we may in the future initiate a Phase 1b/2a trial to assess the safety and tolerability of intravenous and intra-articular AP-SA02 as an adjunct to standard of care antibiotics in adults undergoing treatment of periprosthetic joint infections and/or wound infections caused by S.

We remain committed to conducting randomized controlled clinical trials required for FDA approval in order to move toward the commercialization of its phage products as alternatives to traditional antibiotics, providing a potential method of treating patients suffering from drug-resistant and difficult-to-treat bacterial infections.

We remain committed to our mission to evaluate phage-based therapeutics in randomized controlled clinical trials that evaluate safety and efficiacy required to support potential regulatory approval and commercialization of our phage products as alternatives to traditional antibiotics, providing a potential method of treating patients suffering from drug-resistant and difficult-to-treat bacterial infections.

The following chart summarizes the status of our phage product candidate development programs and partners.

2 unchanged sentences

We currently expect to use our existing cash and cash equivalents for the focused research and development of our current product candidates and for working capital and other general corporate purposes.

We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development and seeking to obtain regulatory approval of our product candidates.

We anticipate that a substantial portion of our capital resources and efforts in the foreseeable future will be focused on completing the development of and seeking to obtain regulatory approval for our product candidates.

We do not expect to generate product revenue unless and until we successfully complete development and obtain marketing approval for at least one of our product candidates.

We may also use a portion of our existing cash and cash equivalents for the potential acquisition of, or investment in, product candidates, technologies, formulations or companies that complement our business, although we have no current understandings, commitments or agreements to do so.

Our existing cash and cash equivalents together with the $35.0 million loan proceeds received in March 2024 will not be sufficient to enable us to complete all necessary development of any potential product candidates.

Our existing cash and cash equivalents of $9.3 million as of December 31, 2024 will not be sufficient to enable us to complete all necessary development of any potential product candidates and fund our operations for the next twelve months from the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are

These circumstances raise substantial doubt about the Company’s ability to continue as a going concern.

Accordingly, we will be required to obtain further funding through one or more other public or private equity offerings, debt financings, collaboration, strategic financing, grants or government contract awards, licensing arrangements or other sources.

4 unchanged sentences

Recent Events

MTEC Agreement Modification

In July 2024, we extended the MTEC Agreement to August 2025 and increased the amount of the award by $5.3 million to a total of $21.6 million.

We will recognize an increase in grant revenue from the third quarter of 2024 until the full amount of the amended award is utilized.

2025 Credit Agreement

On March 4, 2024, we entered into a credit and security agreement (the “2024 Credit Agreement”) for a loan in an aggregate amount of $35.0 million with Innoviva Strategic Opportunities LLC (“Innoviva SO”), a wholly owned subsidiary of Innoviva, Inc.

INVA) (collectively, “Innoviva”), our principal stockholder and a related party.

The 2024 loan bears interest at an annual rate of 14% and matures on June 4, 2025.

On March 12, 2025, the Company entered the 2025 Credit Agreement for the 2025 Loan in an aggregate amount of $10.0 million.

The 2025 Loan bears interest at an annual rate of 14.0% and matures on March 12, 2026.

Principal and accrued interest are payable at maturity.

Repayment of the Loan is guaranteed by our domestic subsidiaries, and the loan is secured by substantially all of our assets and our subsidiary guarantors .

Concurrently with the execution of the 2024 loan, we amended certain provisions of the Convertible Loan and Credit Agreement to, among other things, conform certain terms relating to permitted indebtedness and permitted liens.

Repayment of the 2025 Loan is guaranteed by the Company’s domestic subsidiaries, and the loan is secured by substantially all of the assets of the Company and the subsidiary guarantors.

Concurrently with the execution of the 2025 Credit Agreement, the Company entered into amendments to (i) the Convertible Loan and Convertible Credit Agreement, (ii) the 2023 Loan and 2023 Credit Agreement, and (iii) the 2024 Loan and 2024 Credit Agreement, which, among other things, extended the maturity date of the Convertible Loan, 2023 Loan and 2024 Loan, respectively, to March 12, 2026.

2024 Credit Agreement

On July 10, 2023, we entered into the Credit Agreement with Innoviva,.

The Credit Agreement provides for a secured term loan facility in an aggregate amount of $25.0 million (the “Loan”) at an interest rate of 14.0% per annum and has a maturity date of January 10, 2025.

On March 4, 2024, the Company entered into the 2024 Credit Agreement for the 2024 Loan in an aggregate amount of $35.0 million.

The 2024 Loan bears interest at an annual rate of 14.0% and was scheduled to mature on June 4, 2025.

Principal and accrued interest are payable at maturity.

Repayment of the Loan is guaranteed by our domestic subsidiaries, and the Loan is secured by substantially all of our assets and our subsidiary guarantors.

The Credit Agreement contains customary affirmative and negative covenants and representations and warranties, including financial reporting obligations and certain limitations on indebtedness, liens, investments, distributions (including dividends), collateral, investments, mergers or acquisitions and fundamental corporate changes.

The Credit Agreement also includes customary events of default, including payment defaults, breaches of provisions under the loan documents, certain losses or impairment of collateral and related security interests, the occurrence of certain events that could reasonably be expected to have a “material adverse effect” as set forth in the Credit Agreement, certain bankruptcy or insolvency events, and a material deviation from our operating budget.

The Loan was initially recognized at fair value of $21.2 million and subsequently accounted for at the amortized cost net of debt issuance costs and debt discount.

We amortized $0.9 million of debt issuance costs and debt discount during the year ended December 31, 2023 using the effective interest method.

The Loan’s annual effective interest rate was 27.3% as of December 31, 2023.

2023 Convertible Credit Agreement

On January 10, 2023, we entered into the Convertible Credit Agreement with Innoviva.

The Convertible Credit Agreement provides for a secured term loan facility in an aggregate amount of $30.0 million (the “Convertible Loan”) which bears interest at a rate of 8.0% per annum, and was scheduled to mature on January 10, 2024.

Concurrently with the execution of the Credit Agreement, we amended certain provisions of the Convertible Credit Agreement, to, among other changes, extend the maturity of the Convertible Loan to January 10, 2025.

Repayment of the Convertible Loan is guaranteed by our domestic subsidiaries and foreign material subsidiaries, and the Convertible Loan is secured by substantially all of our assets and the subsidiary guarantors.

The Convertible Credit Agreement provides that if there is a financing from new investors of at least $30.0 million (a “Qualified Financing”), the outstanding principal amount of, and all accrued and unpaid interest on, the Convertible Loan shall be converted into shares of our common stock at a price per share equal to a 15.0% discount to the lowest price per share for common stock paid by investors in a Qualified Financing (which price paid by investors in a Qualified Financing may not be less than a 15.0% discount to the closing price of common stock immediately prior to the consummation of a Qualified Financing event).

The Convertible Credit Agreement also required us to file a registration statement (the “Registration Statement”) for the resale of all securities issued to the lender in connection with any conversion under the Convertible Credit Agreement, which we originally filed on February 13, 2023 and which was declared effective by the SEC on April 6, 2023.

The Convertible Credit Agreement also confers upon the lender the option to convert any outstanding Convertible Loan amount, including all accrued and unpaid interest thereon, at the lender’s option, into shares of common stock at a price per share equal to the greater of book value or market value per share of common stock on the date immediately preceding the effective date of the Convertible Credit Agreement, which was $1.52 (as may be appropriately adjusted for any stock split, combination or similar act).

On July 10, 2023, in connection with the Credit Agreement with Innoviva, we amended the terms of the Convertible Loan, to, among other changes, extend the maturity of the Convertible Loan to January 10, 2025.

We concluded that the amendment is an extinguishment for accounting purposes.

We recognized a $1.8 million gain as the change in fair value of the convertible debt before the extinguishment date, July 10, 2023.

We estimated fair value of the combined Loan and the Convertible Loan before and after modification and recognized an extinguishment loss of $3.9 million in the consolidated statements of operations for the year ended December 31, 2023.

We recognized a $23.6 million loss as the change in fair value of the Convertible Loan from July 10, 2023 to December 31, 2023.

Repayment of the 2024 Loan is guaranteed by the Company’s domestic subsidiaries, and the loan is secured by substantially all of the assets of the Company and the subsidiary guarantors.

Concurrently with the execution of the 2024 Credit Agreement, the Company amended certain provisions of the Convertible Loan and Convertible Credit Agreement and the 2023 Loan and 2023 Credit Agreement to, among other things, conform certain terms relating to permitted indebtedness and permitted liens.

On March 12, 2025, the Company executed an amendment to the 2024 Credit Agreement which, among other things, extended the 2024 Loan maturity date to March 12, 2026.

2023 Credit Agreement

On July 10, 2023, the Company entered into the 2023 Credit Agreement.

The 2023 Credit Agreement provides for the 2023 Loan, a secured term loan facility in an aggregate amount of $25.0 million at an interest rate of 14.0% per annum, and was scheduled to mature on January 10, 2025.

Principal and accrued interest are payable at maturity.

Repayment of the 2023 Loan is guaranteed by the Company’s domestic subsidiaries, and the 2023 Loan is secured by substantially all of the assets of the Company and the subsidiary guarantors.

On November 12, 2024, the Company executed an amendment to the 2023 Credit Agreement, which, among other things, extended the 2023 Loan maturity date to January 10, 2026.

On March 12, 2025, the Company executed a

subsequent amendment to the 2023 Credit Agreement which, among other things, extended the 2023 Loan maturity date to March 12, 2026.

Results of Operations

11 unchanged sentences

Interest expense

Change in fair value of convertible debt

Loss on convertible debt extinguishment

Total other (expense) income, net

*Not meaningful

Change in fair value of the Convertible Loan

Gain (loss) on debt and the Convertible Loan extinguishments

Total other income (expense), net

Grant Revenue

We recognized $4.5 million and $5.5 million of grant revenue for the years ended December 31, 2023 and 2022, respectively, which represents MTEC’s share of the clinical development costs incurred for our AP-SA02 program for the treatment of Staphylococcus aureus bacteremia.

We recognized $5.2 million and $4.5 million of grant revenue for the years ended December 31, 2024 and 2023, respectively, which represents MTEC’s share of the clinical development costs incurred for our AP-SA02 program for the treatment of S.

aureus bacteremia.

Research and Development

9 unchanged sentences

Total research and development expense:

Research and development expenses decreased by $1.2 million, from $35.0 million for the year ended December 31, 2022 to $33.8 million for the year ended December 31, 2023.

Clinical trial costs decreased by $0.8 million, from $10.8 million for the year ended December 31, 2022, to $9.9 million for the year ended December 31, 2023.

The decrease is primarily due to a decrease in clinical trial expenses for AP-PA02 Cystic Fibrosis study and AP-SA02 Prosthetic Joint Infection study, offset by an increase in clinical trial expenses for AP-PA02 Non-Cystic Fibrosis Bronchiectasis study and AP-SA02 Bacteremia study, based on the progress of our clinical trials.

Other external research and development costs increased by $0.7 million from $4.0 million for the year ended December 31, 2022 to $4.7 million for the year ended December 31, 2023.

We recognized $0.3 million and $1.0 million credits to research and development expenses related to the CFF grant for the years ended December 31, 2023 and 2022, respectively.

Our spending on laboratory supplies decreased by $1.4 million, which was partially offset by a $1.2 million increase in consulting expenses.

Research and development expenses increased by $0.6 million, from $33.8 million for the year ended December 31, 2023 to $34.4 million for the year ended December 31, 2024.

Clinical trial costs increased by $0.3 million, from $10.0 million for the year ended December 31, 2023, to $10.3 million for the year ended December 31, 2024.

The increase is primarily due to a $2.2 million increase in the AP-PA02 NCFB study as the study is at an active stage with significant developments during the year ended December 31, 2024, offset by a $1.9 million decrease in other clinical trial expenses, based on the progress of our clinical trials.

Other external research and development costs decreased by $1.3 million from $4.7 million for the year ended December 31, 2023 to $3.4 million for the year ended December 31, 2024.

We recognized zero and $0.3 million credits to research and development expenses related to the CFF grant for the years ended December 31, 2024 and 2023, respectively.

Our consultant expenses decreased by $0.9 million, spending on outsource service contracts decreased by $0.4 million, laboratory supplies decreased by $0.2 million.

Our external research and development expenses by project for the years ended December 31, 2024 and 2023 were as follows (in thousands):

6 unchanged sentences

* Expenses not allocated by projects include consultants, lab supplies and outsource service expenses

Personnel-related costs, including employee payroll and related expenses, decreased by $2.0 million, from $11.6 million for the year ended December 31, 2022 to $9.7 million for the year ended December 31, 2023, largely due to a decrease in payroll and related taxes of $0.9 million and recruiting expenses of $0.3 million, as well as employee stock-based compensation expenses decrease of $0.8 million, which was primarily due to the full vesting of awards issued in prior periods.

Facilities and overheads increased by $0.8 million from $8.6 million for the year ended December 31, 2022 to $9.4 million for the year ended December 31, 2023, largely as a result of an increase in lease expense of $1.0 million, an increase of $0.2 million related to laboratory equipment maintenance costs, partially offset by a decrease of $0.4 million in expensed noncapitalizable lab equipment.

Personnel-related costs, including employee payroll and related expenses, increased by $1.3 million, from $9.7 million for the year ended December 31, 2023 to $11.0 million for the year ended December 31, 2024, largely due to an increase of $0.9 million in incentive compensation expense, whereas no such expense was incurred during the year ended December 31, 2023, an increase of $0.7 million in severance expense, offset by a decrease of $0.3 million in employee stock-based compensation expenses, which was primarily due to the full vesting of awards issued in prior periods.

Facilities and overheads increased by $0.3 million from $9.5 million for the year ended December 31, 2023 to $9.8 million for the year ended December 31, 2024, largely as a result of an increase in lease expense of $1.0 million, partially offset by a decrease of $0.7 million in expensed noncapitalizable lab equipment, lab equipment maintenance and other research and development costs.

General and Administrative

General and administrative expenses were $13.1 million and $11.7 million for the years ended December 31, 2024 and 2023, respectively.

The increase of $4.2 million is primarily related to an increase of $3.7 million in legal, accounting and other consulting expenses, a one-time expense of $0.5 million related to the prepaid financing costs , an increase of $0.3 million in other facilities and overhead expenses, an increase of $0.2 million in leases and recruiting expenses, and a net decrease in personnel-related costs of $0.6 million, including a stock-based compensation expense decrease of $1.3 million, related to the full vesting of awards issued in prior periods and a reversal of expense related to certain equity awards modifications, offset by a $0.7 million increase in severance costs payable to two former employees.

The increase of $1.4 million is primarily related to an increase of $2.1 million in personnel related costs, including $2.3 million in stock-based compensation expense, mainly related to the awards granted in March 2024, an increase of $0.7 million in salaries, an increase of $0.2 million in incentive compensation expense, offset by a $1.1 million decrease in severance expense.

The increase in general and administrative expenses was also attributable to an increase of $0.5 million in lease expenses, an increase of $0.8 million in other facilities, general, administrative and overhead expenses, partially offset by a decrease of $2.0 million in legal, accounting and other consulting expenses.

Interest Income

Interest income for the years ended December 31, 2023 and 2022 was $0.2 million and less than $0.1 million, respectively, which was related to interest income earned on our cash, cash equivalents and restricted cash balances.

Interest income for the years ended December 31, 2024 and 2023 was $0.7 million and $0.2 million, respectively, which was related to interest income earned on our cash, cash equivalents and restricted cash balances.

Interest Expense

We recognized interest expense of $2.6 million for the year ended December 31, 2023, which relates to the interest and the amortization of debt discount and issuance costs for the Loan received from Innoviva in July 2023.

Interest expense is accrued at each period end and is payable at the Loan maturity in January 2025.

Change in Fair Value of Convertible Debt

We recognized a fair value of the convertible debt loss for the year ended December 31, 2023 of $21.9 million.

The Convertible Loan received is accounted at fair value using a weighted probability of various settlement scenarios of the Convertible Loan during its term discounted to each reporting date.

We recognized interest expense of $10.7 million and $2.6 million for the years ended December 31, 2024 and 2023, respectively, which relates to the interest and the amortization of debt discount and issuance costs for the 2023 Loan and 2024 Loan received from Innoviva in July 2023 and March 2024, respectively.

Interest expense is accrued at each period end and is payable at the loan maturity.

Refer to Note 8, “ Term Debt ”, in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Change in Fair Value of Convertible Loan

We recognized a fair value of the Convertible Loan gain of $31.4 million for the year ended December 31, 2024 and the Convertible Loan loss of $21.8 million for the year ended December 31, 2023.

The Convertible Loan is accounted at fair value using a weighted probability of various settlement scenarios of the Convertible Loan during its term discounted to each reporting date.

Conversion option scenarios are valued using an option pricing model with significant assumptions and estimates such as volatility, expected term and risk-free interest rates.

Refer to Note 7, “ Convertible Debt ”, in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Loss on Convertible Debt Extinguishment

We recognized a loss on convertible debt extinguishment for the year ended December 31, 2023 of $3.9 million which relates to the amendment to the Convertible Loan on July 10, 2023.The loss amount was estimated as a difference between the fair value of the Convertible Loan before and after modification.

Refer to Note 7, “ Convertible Debt ”, in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Refer to Note 7, “ Convertible Loan ”, in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Gain (Loss) on Debt and Convertible Loan Extinguishments

We recognized a gain of $2.2 million on debt extinguishment for the year ended December 31, 2024, which relates to the amendments to the 2023 Loan and Convertible Loan on November 12, 2024.

The gain was estimated as the difference between the carrying value of the 2023 Loan and Convertible Loan before the modification and the fair value of the 2023 Loan and Convertible Loan after the modification.

Refer to Note 8, “ Term Debt ” and Note 7, “ Convertible Loan ”, in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

We recognized a loss of $3.9 million on the Convertible Loan extinguishment for the year ended December 31, 2023, which relates to the amendment to the Convertible Loan on July 10, 2023.

Refer to Note 7, “ Convertible Loan” , in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Liquidity, Capital Resources and Financial Condition

We have incurred net losses since our inception and have negative operating cash flows.

Our cash and cash equivalents of $13.5 million as of December 31, 2023, together with the loan proceeds of $35.0 million received in March 2024, will not be sufficient to fund our operations for the next 12 months from the date of this Annual Report.

Our cash and cash equivalents of $9.3 million as of December 31, 2024, will not be sufficient to fund our operations for the next 12 months from the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K are issued.

We plan to control our expenses and to raise additional capital through a combination of public and private equity, debt financings, strategic alliances, and grant arrangements.

2 unchanged sentences

We may not be able to secure additional financing in a timely manner or on favorable terms, if at all .

In March 2024, we received a $35.0 million loan from Innoviva, which matures in June 2025 and bears interest at a rate of 14% per year.

Principal and accrued interest are payable at maturity and may be prepaid at the Company’s option.

During the year ended December 31, 2023, we received from Innoviva the Convertible Loan in the aggregate amount of $30.0 million and the Loan in the aggregate amount of $25.0 million from Innoviva.

The Convertible Loan and the Loan mature in January 2025, and principal and accrued interest are payable at maturity.

The Convertible Loan provides for various conversion and repayment options, including the conversion of principal and accrued interest into shares of our common stock upon a Qualified Financing and our option to repay the Convertible loan prior to maturity.

On March 12, 2025, the Company entered the 2025 Credit Agreement for the 2025 Loan in an aggregate amount of $10.0 million.

The 2025 Loan bears interest at an annual rate of 14.0% and matures on March 12, 2026.

Principal and accrued interest are payable at maturity.

Repayment of the 2025 Loan is guaranteed by the Company’s domestic subsidiaries, and the loan is secured by substantially all of the assets of the Company and the subsidiary guarantors.

In July 2024, we amended the MTEC Agreement and increased the amount of the award by $5.3 million to a total of $21.6 million.

We will recognize grant revenue from the third quarter of 2024 until the full amount of the amended award is utilized.

Future Capital Requirements

4 unchanged sentences

● manufacturing costs associated with our targeted phage therapies strategy and other research and development activities;

● the costs of completing the construction and improvements of our leased premises to be used as our new headquarters.

We expect to incur $5.4 million of additional expenses by mid-2024, which may increase or decrease as we complete the construction by mid 2024;

● the costs and timing of seeking regulatory approvals;

10 unchanged sentences

We cannot be certain that sufficient funds will be available to us when required or on acceptable terms.

If we are unable to secure additional funds on a timely basis or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require us to relinquish rights to

certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether.

Any of these events could have a material adverse effect on our business, financial condition and results of operations, increase a risk of insolvency and loss of investment by our stockholders.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in dilution to our existing stockholders.

Any of these events could have a material adverse effect on our business, financial condition and results of operations, increase the risk of insolvency and loss of investment by our stockholders.

To the extent that additional capital is raised through the sale of equity or convertible loan securities, the issuance of such securities could result in dilution to our existing stockholders.

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide.

4 unchanged sentences

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Cash Flows Used in Operating Activities

Net cash used in operating activities was $37.6 million and $47.4 million for the years ended December 31, 2024 and 2023, respectively.

Cash used in operating activities in the year ended December 31, 2023 was primarily due to our net loss for the period of $69.0 million, adjusted by non-cash net expenses of $31.3 million and a net change of $9.7 million in our net operating assets and liabilities.

The non-cash items consist of $21.8 million related to a loss from change in fair value of convertible debt, $3.9 million related to the Convertible Loan extinguishment loss, $2.6 million of non-cash interest expense on the Loan, $1.0 million related to depreciation and amortization expense, $1.0 million related to change in right-of-use asset, $0.9 million related to stock-based compensation expense.

The changes in our net operating assets and liabilities were primarily due to a decrease of $13.5 million in operating lease liability, mainly related to payments for our new leased facility construction, which we expect to complete by mid-2024, and rent payments, a decrease of $1.1 million in accrued compensation, partially offset by a decrease of $4.8 million in prepaid expenses and other assets.

Cash used in operating activities in the year ended December 31, 2024 was primarily due to our net loss for the period of $18.9 million, adjusted by non-cash net changes of $16.5 million and a net change of $2.1 million in our net operating assets and liabilities.

The non-cash items consist of $31.4 million related to a gain from change in fair value of our Convertible Loan, $2.2 million extinguishment gain related to the extension of our Convertible Loan and 2023 Loan maturity to January 10, 2026, $10.8 million of non-cash interest expense on outstanding balances of the 2023 Loan and the 2024 Loan, $1.3 million related to depreciation and amortization expense, $2.1 million related to change in right-of-use asset, $2.9 million related to stock-based compensation expense.

The changes in our net operating assets and liabilities were primarily due to a decrease of $5.0 million in operating lease liability, mainly related to payments for our new leased facility construction, which was completed in 2024, and rent payments, $3.8 million decrease in accounts payable and accrued liabilities, partially offset by a decrease of $5.1 million in prepaid expenses and other assets and an increase of $1.5 million in accrued compensation.

The non-cash amounts consisted of $3.1 million related to stock-based compensation expense and $0.9 million related to depreciation and amortization expense.

The changes in our net operating assets and liabilities were primarily due to an increase of $3.6 million in operating lease liability, an increase of $0.8 million in accrued compensation, an increase of $3.7 million in accounts payable and accrued liabilities, partially offset by an increase of $7.7 million in prepaid expenses and other current assets.

The non-cash items consist of $21.8 million related to a loss from change in fair value of the Convertible Loan, $3.9 million related to the Convertible Loan extinguishment loss, $2.6 million of non-cash interest expense on the Convertible Loan, $1.0 million related to depreciation and amortization expense, $1.0 million related to change in right-of-use asset, $0.9 million related to stock-based compensation expense.

The changes in our net operating assets and liabilities were primarily due to a decrease of $13.5 million in operating lease liability, mainly related to payments for our new leased facility construction, and rent payments, a decrease of $1.1 million in accrued compensation, partially offset by a decrease of $4.8 million in prepaid expenses and other assets.

Cash Flows Used in Investing Activities

Net cash used in investing activities was $1.9 million and $8.1 million for the years ended December 31, 2024 and 2023, respectively, which is mostly attributable to purchases of laboratory and manufacturing equipment acquired for our new manufacturing facility.

We expect our spending for property and equipment to decrease as our manufacturing facility will be ready by mid-2024.

We expect our spending for property and equipment to decrease as the construction of our manufacturing facility was completed as of December 31, 2024.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2023 was $54.0 million, which consisted primarily of net proceeds from issuance of convertible debt of $29.1 million and net proceeds from issuance of long-term debt of $24.9 million.

Cash provided by financing activities for the year ended December 31, 2022 was $44.0 million, which consisted primarily of proceeds from the sale of common stock, net of offering costs of $44.4 million, proceeds from the exercise of stock options of $0.1 million, offset by payment of deferred offering costs of $0.5 million.

Cash provided by financing activities for the year ended December 31, 2024 was $34.9 million, which consisted primarily of net proceeds from the issuance of the 2024 Loan.

Cash provided by financing activities for the year ended December 31, 2023 was $54.0 million, which consisted primarily of net proceeds from the issuance of the Convertible Loan of $29.1 million and net proceeds from the issuance of long-term debt of $24.9 million.

Off-Balance Sheet Arrangements

1 unchanged sentence

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements as of December 31, 2023 and December 31, 2022, which have been prepared in accordance with U.S.

Management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements as of December 31, 2024 and December 31, 2023, which have been prepared in accordance with U.S.

generally accepted accounting principles.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods.

These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates and assumptions could occur in the future.

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.

Changes in estimates are reflected in reported results for the period in which they become known.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate estimates and assumptions, including but not limited to those related to the fair value estimate of the Convertible Loan, stock-based compensation expense, accruals for research and development costs, impairment of goodwill and intangible assets and impairment of long-lived assets.

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

Actual results may differ from these estimates under different assumptions or conditions.

9 unchanged sentences

Judgments and estimates are made in determining the accrued balances at the end of the reporting period.

Payments made under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered.

To date, there have been no material differences between estimates of such expenses and the amounts actually incurred.

Fair Value Estimate of the Convertible Loan

In January 2023, we entered into the Convertible Credit Agreement with Innoviva, which was amended in July 2023.

In January 2023, we entered into the Convertible Credit Agreement with Innoviva, which was amended in July 2023 and November 2024.

The Convertible Loan includes various conversion and repayment options, including the conversion of principal and accrued interest into shares of our Common Stock upon a Qualified Financing and our option to repay the Convertible Loan prior to maturity.

Refer to Note 7, “ Convertible Debt ”, in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

Refer to Note 7, “ Convertible Loan ”, in the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional details.

We account for the Convertible Loan at fair value and changes in fair value are included in other income (expense) in the consolidated statements of operations in each reporting period.

We estimate the fair value using a weighted probability of various settlement scenarios during the Convertible Loan term discounted to each reporting date.

To estimate the fair value of the conversion option scenarios, we use an option pricing model with assumptions, such as volatility, expected term and risk-free interest rates.

estimate the fair value of the conversion option scenarios, we use an option pricing model with assumptions, such as volatility, expected term and risk-free interest rates.

Changes in the fair value of our Common Stock and probabilities of scenarios significantly impact the fair value of the Convertible Loan.

1 unchanged sentence

As of December 31, 2024, we estimated the fair value of the Convertible Loan to be $32.9 million.

For the year ended December 31, 2023, we recognized a change in fair value loss of $21.8 million in the consolidated statements of operations and comprehensive loss.

For the year ended December 31, 2024, we recognized a change in fair value gain of $31.4 million in the consolidated statements of operations and comprehensive loss.

Recent Accounting Pronouncements

3 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