ARROWHEAD PHARMACEUTICALS, INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend that such forward-looking statements be subject to the safe harbors created thereby. For this purpose, any statements contained in this Quarterly Report on Form 10-Q except for historical information may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “might,” “will,” “expect,” “believe,” “anticipate,” “goal,” “endeavor,” “strive,” “intend,” “plan,” “project,” “could,” “estimate,” “target,” “might,” “forecast,” “potential,” or “continue” or the negative of these words or other variations thereof or comparable terminology are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, trends in our business, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements include, but are not limited to, statements about the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs; our expectations regarding the potential benefits of the partnership, licensing and/or collaboration arrangements and other strategic arrangements and transactions we have entered into or may enter into in the future; our beliefs and expectations regarding the amount and timing of future milestone, royalty or other payments that could be due to or from third parties under existing agreements; and our estimates regarding future revenues, sales of REDEMPLO (plozasiran), our expectations regarding regulatory approval for and commercial launch of plozasiran, operating income, research and development expenses, cash flows, capital requirements and payments to third parties. The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately, and many of which are beyond our control. As such, our actual results or outcomes and timing of certain events may differ materially from those discussed, projected, anticipated or indicated in any forward-looking statements. Forward-looking statements are not guarantees of future performance and our actual results of operations, financial condition and cash flows may differ materially. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations” of Part I and “Item 1A. Risk Factors” of Part II of this Quarterly Report on Form 10-Q as well as “Item 1. Business” and “ Item 1A. Risk Factors” of Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of our most recent Annual Report on Form 10-K. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). In light of the significant risks and uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking information. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Except as may be required by law, we disclaim any intent to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. OVERVIEW The Company develops medicines that treat intractable diseases by silencing the genes that cause them. Using a broad portfolio of RNA chemistries and modes of delivery, the Company’s therapies trigger the RNAi interference mechanism to induce rapid, deep and durable knockdown of target genes. RNAi is a mechanism present in living cells that inhibits the expression of a specific gene, thereby affecting the production of a specific protein. RNAi-based therapeutics seek to leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes. The Company believes that TRiM TM enabled therapeutics offer several potential advantages over prior generations and competing technologies, including: simplified manufacturing and reduced costs; multiple routes of administration including subcutaneous injection and inhaled administration; the ability to target multiple tissue types including liver, lung, skeletal muscle, central nervous system (CNS), adipose tissue, ocular, and cardio-myocytes; and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules. The Company's products: • REDEMPLO ® (Greater China rights out-licensed to Sanofi), indicated as an adjunct to diet to reduce triglycerides in adults with Familial Chylomicronemia Syndrome (FCS), which has received regulatory approvals 32 in the United States, Canada, and China The Company’s clinical pipeline includes: • Severe Hypertriglyceridemia - plozasiran (formerly ARO-APOC3, Greater China rights out-licensed to Sanofi); • Homozygous familial hypercholesterolemia (HoFH) - zodasiran (formerly ARO-ANG3); • Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen); • Mixed hyperlipidemia – ARO-DIMER-PA (Greater China rights out-licensed to Sanofi); • Inflammatory pulmonary conditions - ARO-RAGE; • Idiopathic pulmonary fibrosis - SRP-1002 (formerly ARO-MMP7, out-licensed to Sarepta); • Metabolic-dysfunction associated steatohepatitis (MASH) - GSK4532990 (formerly ARO-HSD, out licensed to GSK and Visirna); • Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda); • Chronic Hepatitis B virus - daplusiran/tomligisiran - GSK5637608 (formerly JNJ-3989 and ARO-HBV, out-licensed to GSK); • Complement mediated diseases - ARO-C3 and ARO-CFB; • Metabolic-dysfunction associated steatohepatitis (MASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1); • Obesity - ARO-INHBE and ARO-ALK7 • Facioscapulohumeral muscular dystrophy - SRP-1001 (formerly ARO-DUX4, out-licensed to Sarepta); • Myotonic Dystrophy Type 1 - SRP-1003 (formerly ARO-DM1 out-licensed to Sarepta; and • Spinocerebellar ataxia 2 - SRP-1004 (formerly ARO-ATXN2, out-licensed to Sarepta). • Parkinson’s disease – ARO-SNCA (out-licensed to Novartis) • Alzheimer’s disease – ARO-MAPT • Huntington’s disease – SRP-1005 (formerly ARO-HTT, out-licensed to Sarepta) The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place. The Company’s principal executive offices are located in Pasadena, California. The Company continues to develop other clinical candidates for future clinical trials. Clinical candidates are tested internally and through Good Laboratory Practice (GLP) toxicology studies at outside laboratories. Drug materials for such studies and clinical trials are either manufactured internally or contracted to third-party manufacturers. The Company engages third-party contract research organizations (CROs) to manage clinical trials and works cooperatively with such organizations on all aspects of clinical trial management, including plan design, patient recruiting, and follow up. These outside costs, including toxicology/efficacy testing and manufacturing costs, as well as the preparation for and administration of clinical trials, are referred to as “candidate costs.” As clinical candidates progress through clinical development, candidate costs will increase. The First Quarter of Fiscal 2026 Business Highlights The bullets below highlight key developments in our business during the first quarter of fiscal year 2026: • Filed a request for regulatory clearance to initiate a Phase 1/2a clinical trial of ARO-DIMER-PA, the Company’s investigational RNAi therapeutic being developed as a potential treatment for atherosclerotic cardiovascular disease (ASCVD) due to mixed hyperlipidemia. ARO-DIMER-PA is designed to silence expression of the proprotein convertase subtilisin kexin 9 (PCSK9) and apolipoprotein C3 (APOC3) genes. This represents an important step forward for the RNAi field as it is the first clinical candidate to target two genes simultaneously in one molecule, enabled by Arrowhead’s innovative and proprietary TRiM platform.; • On November 20, 2025, the Company earned a $200.0 million milestone payment from Sarepta Therapeutics, Inc., which was triggered on November 20, 2025, when the Company reached the second of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1); • Initiated and dosed the first subjects in a Phase 1/2a clinical trial of ARO-MAPT, the Company’s investigational RNAi therapeutic being developed as a potential treatment for tauopathies including Alzheimer’s disease, a progressive neurodegenerative disease characterized by cognitive and functional decline; • Announced that the FDA has granted Breakthrough Therapy designation to investigational plozasiran as an adjunct to diet to reduce triglyceride (TG) levels in adults with severe hypertriglyceridemia (SHTG) (TG 33 levels greater than or equal to 500 mg/dL); • The FDA approved the Company's New Drug Application (NDA) for REDEMPLO injection for Familial Chylomicronemia Syndrome (FCS), on November 18, 2025. This approval was supported by clinical data from the Phase 3 PALISADE study, a randomized, double-blind, placebo-controlled trial in adults with clinically diagnosed or genetically confirmed FCS. The PALISADE study met its primary endpoint and all multiplicity-controlled key secondary endpoints, including demonstrating significant reductions in triglycerides and APOC3. In PALISADE, 25 mg REDEMPLO achieved deep and durable reductions in triglycerides, with a median change from baseline of -80% versus -17% in the pooled placebo group, and a lower numerical incidence of acute pancreatitis compared with placebo; and • Entered into a global licensing and collaboration agreement with Novartis Pharma AG ("Novartis") on August 29, 2025, which closed on October 17, 2025. Closing of the transaction was subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary conditions. Upon closing, the Company received $200.0 million as an upfront payment on October 23, 2025. Additionally, the Company is eligible to receive up to $2.0 billion in potential milestone payments plus royalties on commercial sales. The bullets below highlight other key developments in our business subsequent to the first quarter of fiscal year 2026: • Completed upsized offerings of convertible senior notes, common stock, and pre-funded warrants with gross proceeds of $930.0 million, which strengthened the Company’s balance sheet. • Announced interim results from two Phase 1/2a clinical trials of ARO-INHBE and ARO-ALK7, the Company’s investigational RNAi therapeutics being developed as potential treatments for obesity, showing for patients enrolled in the study that's: ◦ ARO-INHBE in combination with tirzepatide, a GLP-1/GIP receptor co-agonist, nearly doubled weight loss at week 16 and roughly tripled reductions in visceral fat, total fat, and liver fat versus tirzepatide alone in obese patients with type 2 diabetes mellitus at those same endpoints at week 12. ◦ ARO-ALK7, the first RNAi-therapeutic to show adipocyte gene target silencing in a clinical trial, achieved dose dependent reductions in adipose ALK7 mRNA with a mean reduction of -88% at the 200 mg dose at week 8 with a maximum reduction of -94%. There have been no significant changes to the Company’s critical accounting estimates disclosed in the most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2025. RESULTS OF OPERATIONS The following data summarizes the Company’s results of operations for the following periods indicated: Three Months Ended December 31, 2025 2024 (in thousands, except per share amounts) Revenue $ 264,033 $ 2,500 Operating income (loss) $ 40,809 $ (161,412) Net income (loss) attributable to Arrowhead $ 30,811 $ (173,085) Net income (loss) per diluted share attributable to Arrowhead $ 0.22 $ (1.39) Revenue Total revenue for the three months ended December 31, 2025 increased by $261.5 million, from the same period of 2024. The change was primarily driven by the revenue recognition associated with Sarepta, Novartis and Sanofi license agreements as discussed below. The Company has evaluated each agreement in accordance with FASB Topic 808– Collaborative Arrangements and Topic 606- Revenue for Contracts from Customers . See Note 2 — Collaboration and License Agreements of the Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements” for more information on revenue recognized under the collaboration and license agreements. 34 Sarepta : On November 25, 2024, the Company entered into the Sarepta Collaboration Agreement and Stock Purchase Agreement with Sarepta for the development and commercialization of multiple clinical and preclinical programs in rare, genetic diseases of the muscle, central nervous system, and lungs. During the three months ended December 31, 2025, the Company recorded $229.5 million in revenue. Novartis : On August 29, 2025, the Company entered into the Novartis Collaboration Agreement with Novartis for the development and commercialization of multiple preclinical programs in rare, genetic diseases of the central nervous system. During the three months ended December 31, 2025, the Company recorded $34.2 million in revenue. Visirna : On August 1, 2025, Visirna HK, a wholly owned subsidiary of Visirna Therapeutics, Inc, a majority owned subsidiary of the Company, entered into an Asset Purchase Agreement with Sanofi, pursuant to which Visirna HK sold all of its assets and rights in investigational plozasiran to Sanofi, which included an assignment of Visirna HK’s rights (as successor by assignment from Visirna) to develop and commercialize investigational plozasiran in Greater China pursuant to that certain License Agreement by and between the Company and Visirna dated, April 25, 2022 (the “Visirna License Agreement”). During the three months ended December 31, 2025 , the Company recorded $0.2 million in revenue. GSK : On December 11, 2023, the Company entered into the GSK-HBV Agreement pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989), the Company’s third-generation subcutaneously administered RNAi therapeutic candidate being developed as a potential therapy for patients with chronic hepatitis B virus infection. Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the GSK-HBV Agreement. Further, GSK dosed the fifth patient in a Phase 2 trial in December 2024, triggering a $2.5 million milestone payment to the Company which was paid in the second quarter of fiscal 2025. The Company did not recognize any revenue during the three months ended December 31, 2025. 35 Operating Expenses The analysis below details the operating expenses and discusses the expenditures of the Company within the major expense categories. For purposes of comparison, the amounts for the three months ended December 31, 2025 and 2024 are shown in the tables below. Research and Development (“R&D”) Expenses Research and development expenses consist of expenses for drug candidate and drug discovery costs, which are comprised primarily of outsourced costs related to the manufacturing of clinical supplies, toxicity/efficacy studies and clinical trial expenses. Internal costs primarily relate to discovery operations at the Company’s research facilities in California and Wisconsin, including facility costs and laboratory-related expenses. The Company operates in a cross-functional manner across projects and does not separately allocate facilities-related costs, candidate costs, discovery costs, compensation expenses, depreciation and amortization expenses, and other expenses related to research and development activities. The Company does not fully track research and development expenses by individual research and development projects, or by individual drug candidates. The following table provides details of research and development expenses for the periods indicated: (in thousands) Three Months Ended December 31, 2025 % of Expense Category Three Months Ended December 31, 2024 % of Expense Category Increase (Decrease) $ % Candidate costs $ 104,990 59 % $ 76,896 56 % $ 28,094 37 % R&D discovery costs 21,829 12 % 12,936 9 % 8,893 69 % Salaries 30,039 17 % 27,145 20 % 2,894 11 % Facilities related 8,102 5 % 7,750 6 % 352 5 % Total research and development expense, excluding non-cash expense $ 164,960 93 % $ 124,727 91 % $ 40,233 32 % Stock compensation 6,357 4 % 7,549 6 % (1,192) (16) % Depreciation and amortization 5,886 3 % 4,726 3 % 1,160 25 % Total research and development expense $ 177,203 100 % $ 137,002 100 % $ 40,201 29 % Candidate costs increased $28.1 million, or 37%, for the three months ended December 31, 2025 compared to the same period of 2024. The increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher outsourced clinical trial costs, manufacturing, and toxicity study costs. R&D discovery costs increased $8.9 million, or 69%, for the three months ended December 31, 2025 compared to the same period of 2024. This increase primarily reflects higher R&D discovery activity associated with ongoing discovery efforts and expansion into novel therapeutic areas and tissue types; partially offset by lower partnership cost. Salaries consist of salary, bonuses, payroll taxes, and related benefits for the Company’s R&D personnel. Salaries expense increased $2.9 million, or 11%, for the three months ended December 31, 2025 compared to the same period of 2024. The increase was primarily due to an increase in headcount that has occurred as the Company has expanded its pipeline of candidates and worked to prepare for the manufacture of commercial material at the Verona facility, as well as annual salary increases. Facilities-related expense includes lease costs for the Company’s research and development facilities in San Diego, California and in Madison and Verona, Wisconsin. These expenses increased $0.4 million, or 5%, for the three months ended December 31, 2025 compared to the same period of 2024. This increase was primarily due to expenses, such as utilities and repair and maintenance charges, associated with the expanded manufacturing facilities in Verona, Wisconsin to support manufacturing operations. Stock compensation expense, a non-cash expense, is primarily based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date. Stock compensation expense decreased $1.2 million, or 16%, for the three months ended December 31, 2025 compared to the same period of 2024. The decrease was primarily related to stock options award expense incurred in the first fiscal quarter 2024 related to Visirna, our variable interest entity, that did not repeat in the first fiscal quarter 2025. Depreciation and amortization expense, a non-cash expense, relates to depreciation on buildings, lab equipment and leasehold improvements. These expenses increased $1.2 million, or 25% for the three months ended December 31, 2025 36 compared to the same period of 2024. The increase was primarily attributable to the transfer of additional manufacturing equipment following the completion of certification, qualification and validation to support manufacturing operations. General & Administrative Expenses The following table provides details of general and administrative expenses for the periods indicated: (in thousands) Three Months Ended December 31, 2025 % of Expense Category Three Months Ended December 31, 2024 % of Expense Category Increase (Decrease) $ % Salaries $ 11,940 26 % $ 7,331 27 % $ 4,609 63 % Professional, outside services, and other 18,900 41 % 10,126 38 % 8,774 87 % Facilities related 1,663 4 % 1,285 5 % 378 29 % Total general & administrative expense, excluding non-cash expenses $ 32,503 71 % $ 18,742 70 % $ 13,761 73 % Stock compensation 13,014 28 % 7,659 28 % 5,355 70 % Depreciation and amortization 504 1 % 509 2 % (5) (1) % Total general & administrative expenses $ 46,021 100 % $ 26,910 100 % $ 19,111 71 % Salaries expense increased $4.6 million, or 63%, for the three months ended December 31, 2025 compared to the same period of 2024. The increase was driven by higher headcount required to support the Company’s growth as the Company prepared for commercialization as well as of annual salary increases. Professional, outside services, and other expenses include costs related to legal, consulting, patent filings, business insurance, other external services, as well as travel, communication, and technology expenses. These expenses increased $8.8 million, or 87%, for the three months ended December 31, 2025 compared to the same period of 2024. The increase was mainly due to professional services associated with commercialization as the Company initiated a product launch, including costs for data analytics, marketing and commercial launch support. Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California. These expenses increased $0.4 million, or 29%, for the three months ended December 31, 2025 compared to the same period of 2024. The increase was primarily driven by higher staff amenities expenses driven by higher headcount. Stock compensation expense, a non-cash expense, is based on the valuation of restricted stock units granted to employees, which is based on the closing stock price on the grant date. These expenses increased $5.4 million, or 70%, for the three months ended December 31, 2025 compared to the same periods of 2024. The increase was primarily due to recognition of compensation expense related to a performance-based restricted stock unit award following the achievement of a pre-specified performance milestone. Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters. Other (Expense) Income Other (expense) income is primarily related to interest income and expense. Other expense decreased $1.2 million for the three months ended December 31, 2025 compared to the same period of 2024. The decrease was primarily due to higher income from increased investment yields. Net Income (Loss) Net income attributable to Arrowhead Pharmaceuticals, Inc. was $30.8 million for the three months ended December 31, 2025, compared to a net loss attributable to Arrowhead Pharmaceuticals, Inc. of $173.1 million for the three months ended December 31, 2024. Net income per diluted share was $0.22 for the three months ended December 31, 2025, compared to a net loss per diluted share of $1.39 for the three months ended December 31, 2024. The increase in net income attributable to Arrowhead Pharmaceuticals, Inc. for the three months ended December 31, 2025 compared to the same period of 2024 was primarily due to an increase in revenue from the Sarepta Collaboration Agreement, partially offset by higher research and development expenses, associated with the expansion of the Company's pipeline and progression through clinical trial phases. 37 LIQUIDITY AND CAPITAL RESOURCES The Company has historically financed its operations through the sale of its equity securities, credit facility, revenue from its licensing and collaboration agreements, and the sale of certain future royalties. Research and development activities have required significant capital investment since the Company’s inception and are expected to continue to require significant cash expenditure as the Company’s pipeline continues to expand and matures into later stage clinical trials, including commercialization efforts. The Company’s cash, cash equivalents and restricted cash was $201.6 million as of December 31, 2025 compared to $226.5 million as of September 30, 2025. Cash invested in available-for-sale securities was $715.0 million as of December 31, 2025 compared to $692.8 million as of September 30, 2025. In August 2024, the Company entered into the Credit Facility, which provides for a senior secured term loan facility of $500.0 million, which includes $400.0 million funded on the closing date with an additional $100.0 million at the Company’s option during the seven-year term of the agreement. The Company received net proceeds of $388.9 million, after issuance costs as of September 30, 2024. On November 25, 2024, the Company entered into a licensing and collaboration agreement with Sarepta. Upon closing, the Company received $325.0 million for the purchase of 11,926,301 shares of common stock, at a price per share of $27.25, and received $500.0 million as an upfront payment on February 24, 2025. During the fourth quarter of fiscal 2025, a $100.0 million milestone payment from Sarepta was triggered, when the Company reached the first of two prespecified enrollment targets and subsequent authorization to dose escalate in a Phase 1/2 clinical study of ARO-DM1, an investigational RNAi therapeutic for the treatment of type 1 myotonic dystrophy (DM1). The Company received $53.2 million of Arrowhead common stock and $50.0 million cash from Sarepta to satisfy the milestone payment. The Company is eligible to receive additional milestones of up to $250.0 million over the 12 months from December 31, 2025, inclusive of the second DM1 milestone payment of $200.0 million earned in November 2025 and received in January 2026. On August 29, 2025, the Company entered into a licensing and collaboration agreement with Novartis. Upon closing in October 2025, the Company received $200.0 million as an upfront payment. On December 10, 2025, the Company entered into an Amended and Restated Open Market Sale Agreement (the “Amended and Restated Sale Agreement”) with Jefferies LLC, acting as sales agent and/or principal, which amended and restated the Company’s prior open market sale agreement in its entirety. Pursuant to the Amended and Restated Sale Agreement, the Company may, from time to time, sell shares of the Company’s common stock through Jefferies LLC in an at-the-market offering, up to the maximum program amount permitted under the Company’s effective shelf registration statement. As of December 31, 2025, the Company had sold approximately 689,000 shares of common stock under the Amended and Restated Sale Agreement, generating gross proceeds of $48.2 million and net proceeds of $46.8 million, after deducting commissions and offering costs. Based upon the Company's current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund its operations through at least the next twelve months from the date of the issuance of these unaudited consolidated financial statements. The following table presents a summary of cash flows: Three Months Ended December 31, 2025 2024 (in thousands) Cash Flow from: Operating activities $ 13,481 $ (146,272) Investing activities (23,742) 76,910 Financing activities (14,750) 20,634 Net decrease in cash, cash equivalents and restricted cash $ (25,011) $ (48,728) Cash, cash equivalents and restricted cash at end of period $ 201,643 $ 53,889 During the three months ended December 31, 2025, cash flow provided by operating activities was $13.5 million, which was primarily due to $200.0 million of cash received as part of the Novartis agreement which was recorded in deferred revenue, increase in ongoing expenses related to the Company's research and development programs and general and administrative expenses, partially offset by the increase in accounts receivable relating to the achievement of the ARO-DM1 development milestone of $200 million per the Sarepta Collaboration Agreement. Cash used in investing activities amounted to $23.7 million, which was primarily attributable to investment purchases of $136.9 million, and capital 38 expenditures of $2.1 million, partially offset by proceeds from maturities of investments of $115.3 million. Cash used in financing activities of $14.8 million was primarily due to the repayment of the credit facility of $66.7 million, partially offset by $46.8 million in proceeds received from the issuance of common stock under the ATM Offering and $5.1 million from the exercise of stock options (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part I, “Item 1. Financial Statements”). During the three months ended December 31, 2024, cash flow used in operating activities was $146.3 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses. Cash used in investing activities was $76.9 million, which was primarily attributable to capital expenditures of $7.5 million and investment purchases of $33.7 million, partially offset by proceeds from sales and maturities of investments of $118.2 million. Cash provided by financing activities of $20.6 million was primarily related to cash received from the issuance of common stock as well as stock option exercises. Contractual Obligations The Company entered into a global licensing and collaboration agreement with Novartis on August 29, 2025, which closed on October 17, 2025 (see Note 2). There has been no other material change in the Company’s contractual obligations from that described in Item 7 of its Annual Report on Form 10-K for the fiscal year ended September 30, 2025. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There has been no material change in the Company ’ s exposure to market risk from that described in Item 7A of its Annual Report on Form 10-K for the fiscal year ended September 30, 2025.