What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-02-10 compared with 2024-08-08 · 88 added, 148 removed, 115 unchanged (67% of the section changed)

3 unchanged sentences

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,” “will,” “expect,” “believe,” “anticipate,” “goal,” “endeavor,” “strive,” “intend,” “plan,” “project,” “could,” “estimate,” “target,” “forecast” or “continue” or the negative of these words or other variations thereof or comparable terminology are intended to identify 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, including any commercialization efforts, our research and development programs, and our “20 in 25” pipeline goal;

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 regulatory approval for and commercial launch of plozasiran;

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;

16 unchanged sentences

RNAi-based therapeutics may leverage this natural pathway of gene silencing to target and shut down specific disease-causing genes.

The Company has focused its resources on therapeutics that exclusively utilize its high levels of pharmacologic activity in multiple animal models spanning several therapeutic areas.

The Company believes that TRiM TM enabled therapeutics offer several potential advantages over prior generation and competing technologies, including:

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, CNS, muscle and adipose tissue;

the ability to target multiple tissue types including liver, lung, central nervous system (CNS), muscle, and adipose tissue;

and the potential for improved safety and reduced risk of intracellular buildup, because there are fewer metabolites from smaller, simpler molecules.

The Company’s clinical pipeline includes:

The Company’s pipeline includes:

• Hypertriglyceridemia - plozasiran (formerly ARO-APOC3);

1 unchanged sentence

• Cardiovascular disease - olpasiran (formerly AMG 890 or ARO-LPA, out-licensed to Amgen);

• Muco-obstructive or inflammatory pulmonary conditions - ARO-MUC5AC and ARO-RAGE;

• Inflammatory pulmonary conditions - ARO-RAGE;

• Idiopathic pulmonary fibrosis - ARO-MMP7;

• Non-alcoholic steatohepatitis (NASH) - GSK-4532990 (formerly ARO-HSD, out-licensed to GSK);

• Metabolic-dysfunction associated steatohepatitis (MASH) - GSK-4532990 (formerly ARO-HSD, out

licensed to GSK);

• Alpha-1 antitrypsin deficiency (AATD) - fazirsiran (formerly ARO-AAT, a collaboration with Takeda);

1 unchanged sentence

• Complement mediated diseases - ARO-C3;

• Non-alcoholic steatohepatitis (NASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1);

• Metabolic-dysfunction associated steatohepatitis (MASH) - ARO-PNPLA3 (formerly JNJ-75220795 or ARO-JNJ1);

• Facioscapulohumeral muscular dystrophy - ARO-DUX4;

1 unchanged sentence

• Hepatic expression of complement factor B (CFB) - ARO-CFB;

• Obesity - ARO-INHBE;

• Spinocerebellar ataxia 2 - ARO-ATXN2.

The Company operates lab facilities in California and Wisconsin, where its research and development activities, including the development of RNAi therapeutics, take place.

5 unchanged sentences

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 Three Quarters of Fiscal 2024 Business Highlights

Key recent developments through the first three quarters of fiscal 2024 included the following:

• Announced plans to advance investigational plozasiran into a Phase 3 cardiovascular outcomes trial called CAPITAN, which is designed to enroll patients with mixed hyperlipidemia and residual risk of atherosclerotic cardiovascular disease;

• Announced successful top-line results from the pivotal Phase 3 PALISADE study of investigational plozasiran in patients with familial chylomicronemia syndrome (FCS).

The Company highlighted recent data for its cardiometabolic pipeline at its June 25, 2024, Cardiometabolic event;

• Presented preclinical data on ARO-INHBE for the treatment of obesity and metabolic diseases at the American Diabetes Association 84 th Scientific Sessions.

INHBE small interfering RNA (siRNA) administration resulted in multiple promising findings including:

(1) 95% reduction in INHBE mRNA expression, (2) 19% suppression of body weight compared to saline controls, (3) 26% loss of fat mass, and (4) preservation of lean mass;

• Announced results from the Phase 2b double blind, randomized ARCHES-2 study of investigational zodasiran in patients with mixed hyperlipidemia;

• Announced that new interim clinical data on ARO-RAGE achieves high level of gene knockdown in patients with asthma;

• Completed enrollment in Amgen’s Phase 3 OCEAN(a) - outcome trial of olpasiran, triggering a $50.0 million milestone payment to the Company, which was paid in the third quarter of fiscal 2024;

• Presented final data from the double-blind treatment period of the Company’s Phase 2 SHASTA-2 study of investigational plozasiran in patients with severe Hypertriglyceridemia.

Results from the SHASTA-2 study showed dramatic, consistent, and sustained reductions in Apolipoprotein C-III (APOC3) and triglycerides and improvement in multiple atherogenic lipoprotein levels;

• Announced an Expanded Access Program (“EAP”) to make investigational plozasiran available outside of a clinical trial for qualifying patients with familial chylomicronemia syndrome (FCS);

• Initiated a Phase 1/2a clinical trial of ARO-DM1, being developed as a potential treatment for type 1 myotonic dystrophy (DM1), the most common adult-onset muscular dystrophy;

• Filed an application for clearance to initiate a Phase 1/2a clinical trial of ARO-CFB, being developed as a potential treatment for complement mediated renal disease;

• Entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters.

The Company issued 15,790,000 shares of common stock at a price of $28.50 per share.

The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.3 million after deducting advisory fees and offering expenses;

• Entered into an Amended and Restated License Agreement with GSK, pursuant to which GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989).

Daplusiran/tomligisiran had previously been licensed to Janssen Pharmaceuticals, Inc.

See Note 2 - Collaboration and License Agreements to Consolidated Financial Statements of Part I, “Item 1.

Financial Statements.”

Net loss attributable to Arrowhead Pharmaceuticals, Inc.

was $170.8 million and $102.9 million for the three months ended June 30, 2024 and 2023, respectively.

The First Quarter of Fiscal 2025 Business Highlights

Key recent developments through the first quarter of fiscal 2025 included the following:

• Submitted a New Drug Application (NDA) to the U.S.

Food and Drug Administration (FDA) on November 16, 2024, which was accepted for filing on January 17, 2025.

The FDA provided a Prescription Drug User Fee Act (PDUFA) action date of November 18, 2025, and indicated it is not currently planning to hold an advisory committee meeting;

• Entered into a global and collaboration agreement with Sarepta Therapeutics, Inc.

The Company received $325.0 million as an equity investment on February 7, 2025 and will receive $500.0 million as an upfront payment during the second quarter of fiscal 2025.

The Company will also receive $250.0 million to be paid in equal installments over five years and is eligible to receive an additional $300.0 million in near-term payments.

Additionally, the Company is eligible to receive royalties on commercial sales and up to approximately $10.0 billion in future potential milestone payments;

• 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;

• Announced that the Company has dosed the first subjects in a Phase 1/2a clinical trial of ARO-INHBE;

• Presented interim results from a Phase 1/2a clinical study of ARO-CFB at the 8th Complement-Based Drug Development Summit.

The study resulted in multiple promising findings including:

(1) ARO-CFO led to dose dependent reductions in circulating CFB protein by up to 90% with greater than 3 months duration, (2) single and multiple doses of ARO-CFB led to near complete inhibition of alternative pathway activity based on Wieslab AP, and (3) single and multiple doses of ARO-CFB led to near complete inhibition of alternative pathway hemolytic activity, measured by AH50;

• Filed a request for regulatory clearance to initiate Phase 1/2a clinical trial of ARO-ALK7, which is being developed as a potential treatment for obesity.

Net loss attributable to Arrowhead Pharmaceuticals, Inc.

was $429.0 million and $95.6 million for the nine months ended June 30, 2024 and 2023, respectively.

Net loss per share – diluted was $1.38 and $0.96 for the three months ended June 30, 2024 and 2023, respectively.

Net loss per share – diluted was $3.63 and $0.90 for the nine months ended June 30, 2024 and 2023, respectively.

The changes in net loss attributable to the Company for the three and nine months ended June 30, 2024 were mainly due to a decrease in revenue from the Company’s license and collaboration agreements, in conjunction with increased research and development expenses, which have continued to increase as the Company’s pipeline of candidates has expanded and progressed through clinical trial phases.

The Company had $69.4 million of cash, cash equivalents and restricted cash, $367.3 million in available-for-sale securities, and $883.8 million of total assets as of June 30, 2024, as compared to $110.9 million of cash, cash equivalents and restricted cash, $292.7 million in available-for-sale securities and $765.6 million of total assets as of September 30, 2023.

Based upon the Company’s current cash and investment resources and operating plan, the Company expects to have sufficient liquidity to fund operations for at least the next twelve months from the date of the issuance of these financial statements.

was $173.1 million and $132.9 million for the three months ended December 31, 2024 and 2023, respectively.

Net loss per share – diluted was $1.39 and $1.24 for the three months ended December 31, 2024 and 2023, respectively.

The change in net loss for the three months ended December 31, 2024 was primarily due to increased research and development expenses, which have continued to increase as the Company’s

pipeline of candidates has expanded and progressed through clinical trial phases.

The Company had $53.9 million of cash, cash equivalents and restricted cash and $499.0 million in available-for-sale securities as of December 31, 2024, as compared to $102.7 million of cash, cash equivalents and restricted cash and $578.3 million in available-for-sale securities as of September 30, 2024.

Critical Accounting Estimates

2 unchanged sentences

The following data summarizes the Company’s results of operations for the following periods indicated:

Three Months Ended June 30, Nine Months Ended June 30,

2024 2023 2024 2023

Three Months Ended December 31,

(in thousands, except per share amounts)

4 unchanged sentences

$ (173,085) $ (132,864)

Net loss per share-diluted

Net loss per share (diluted) attributable to Arrowhead Pharmaceuticals, Inc.

$ (1.39) $ (1.24)

Total revenue for the three months ended June 30, 2024 decreased by $15.8 million or 100.0% from the same period of 2023.

Total revenue for the nine months ended June 30, 2024 decreased by $221.1 million, or 98.4% from the same period of 2023.

The changes were primarily driven by decreased revenue recognition associated with the Company’s license and collaboration agreements during the nine months ended June 30, 2024.

The revenue for the nine months ended June 30, 2023 was mainly driven by the revenue recognition associated with Takeda, GSK, and Horizon/Amgen license agreements, as discussed below.

Total revenue for the three months ended December 31, 2024 and 2023 was $2.5 million and $3.6 million, respectively, and was primarily driven by the revenue recognition associated with GSK and Takeda 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 to Consolidated Financial Statements of Part I, “Item 1.

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.

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.

In October 2020, Takeda and the Company entered into the Takeda License Agreement.

3 unchanged sentences

As such, all revenue has been fully recognized as of December 31, 2023.

During the nine months ended June 30, 2023, the Company recorded $146.5 million revenue, including a $40.0 million milestone payment by dosing the first patient in the Phase 3 REDWOOD clinical study of fazirsiran.

On December 11, 2023, GSK and the Company entered into the GSK-HBV Agreement.

Under the GSK-HBV Agreement, GSK received a worldwide, exclusive license to develop and commercialize daplusiran/tomligisiran (GSK5637608, formerly JNJ-3989).

Daplusiran/tomligisiran had previously been licensed to Janssen in October 2018.

Under the terms of the GSK-HBV Agreement, the Company received $2.7 million in December 2023, upon signing the GSK-HBV Agreement.

During the nine months ended June 30, 2023, the Company recorded a $30.0 million milestone payment by dosing the first patient in a Phase 2b trial under GSK-HSD License Agreement.

Horizon/Amgen :

During the nine months ended June 30, 2023, the Company recorded $6.7 million revenue of the total $40.0 million upfront payment received in July 2021, which was recognized on a straight-line basis over the timeframe for completing the Horizon R&D Services, concluding in the first quarter of 2023.

There was also $1.5 million of reimbursable costs.

Horizon enrolled the first subject in December 2022 in a Phase 1 randomized, placebo-controlled trial to assess the safety, tolerability, pharmacokinetics and pharmacodynamics of HZN-457, triggering a $15.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023.

Further, Amgen enrolled the first subject in its Phase 3 trial of olpasiran, which triggered a $25.0 million milestone payment to the Company which was paid in the second quarter of fiscal 2023.

On October 6, 2023, Amgen Inc.

completed its acquisition of Horizon and subsequently notified the Company of Amgen’s intent to terminate the HZN-457 license.

Horizon exercised its right to terminate the Horizon License Agreement for convenience, which took effect on December 21, 2023.

During the three months ended December 31, 2023, the Company recorded $0.9 million revenue.

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 and nine months ended June 30, 2024 and 2023 are shown in the tables below.

For purposes of comparison, the amounts for the three months ended December 31, 2024 and 2023 are shown in the tables below.

Research and Development (R&D) Expenses

1 unchanged sentence

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 does not separately track R&D expenses by individual research and development project, or by individual drug candidate.

The Company does not separately track R&D expenses by individual research and development projects, or by individual drug candidates.

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 following table provides details of research and development expenses for the periods indicated:

The following table provides details of research and development expenses:

(in thousands) Three Months Ended

June 30, 2024 % of

December 31, 2024 % of

Three Months Ended

June 30, 2023 % of

December 31, 2023 % of

Increase (Decrease)

7 unchanged sentences

Total research and development expense $ 137,002 100 % $ 116,491 100 % $ 20,511 18 %

(in thousands) Nine Months Ended

June 30, 2024 % of

Nine Months Ended

June 30, 2023 % of

Increase (Decrease)

Candidate costs $ 157,546 43 % $ 110,079 43 % $ 47,467 43 %

R&D discovery costs 84,898 23 % 50,377 20 % 34,521 69 %

Salaries 72,048 19 % 47,725 19 % 24,323 51 %

Facilities related 19,597 5 % 11,601 5 % 7,996 69 %

Total research and development expense, excluding non-cash expense $ 334,089 90 % $ 219,782 87 % $ 114,307 52 %

Stock compensation 23,735 7 % 26,129 10 % (2,394) (9) %

Depreciation/amortization 12,220 3 % 7,422 3 % 4,798 65 %

Total research and development expense $ 370,044 100 % $ 253,333 100 % $ 116,711 46 %

Candidate costs increased $37.2 million, or 90%, for the three months ended June 30, 2024 and $47.5 million, or 43%, for the nine months ended June 30, 2024 compared to the same period of 2023.

Candidate costs increased $23.9 million, or 45%, for the three months ended December 31, 2024 compared to the same period of 2023.

This increase was primarily due to the additional progression of the Company’s pipeline of candidates into and through clinical trials, which resulted in higher manufacturing, outsourced clinical trial, and toxicity study costs.

R&D discovery costs increased $10.6 million, or 53%, for the three months ended June 30, 2024 and $34.5 million, or 69%, for the nine months ended June 30, 2024 compared to the same period of 2023.

This increase was primarily driven by the growth of the Company’s discovery efforts and continued advancement into novel therapeutic areas and tissue types, along with rising costs associated with CNS studies and lab supplies.

R&D discovery costs decreased $8.6 million, or 40%, for the three months ended December 31, 2024 compared to the same period of 2023.

This decrease was primarily driven by strategic shifts toward clinical development and commercial launch.

R&D discovery costs are influenced by the Company’s ongoing discovery efforts, continued advancements into novel therapeutic areas and tissue types, and increasing costs related to CNS studies and lab supplies.

Salaries consist of salary, bonuses, payroll taxes, and related benefits for the Company’s R&D personnel.

Salaries expense increased $7.9 million, or 47%, for the three months ended June 30, 2024 and $24.3 million, or 51%, for the nine months ended June 30, 2024 compared to the same period of 2023.

Salaries expense increased $4.6 million, or 20%, for the three months ended December 31, 2024 compared to the same period of 2023.

The increase was primarily due to an increase in R&D headcount that has occurred as the Company has expanded its pipeline of candidates, in addition to annual salary increases.

Facilities-related expense includes lease costs for the Company’s research and development facilities in San Diego, California and Madison, Wisconsin.

Facilities-related costs increased $2.3 million, or 48%, for the three months ended June 30, 2024 and $8.0 million, or 69%, for the nine months ended June 30, 2024 compared to the same period of 2023.

This increase was mainly due to the ATIAs on the lease in San Diego, California.

See Note 8 — Leases of Notes to Consolidated Financial Statements of Part I, “Item 1.

Financial Statements.”

Stock compensation expense, a non-cash expense, was based upon the valuation of stock options and restricted stock units granted to employees.

Stock compensation expense decreased $1.7 million, or 19%, for the three months ended June 30, 2024 and $2.4 million, or 9%, for the nine months ended June 30, 2024 compared to the same period of 2023.

The decrease was primarily due to the cancelled awards upon the departure of employees.

Depreciation and amortization expense, a non-cash expense, increased $1.4 million, or 49% for the three months ended June 30, 2024 and $4.8 million, or 65%, for the nine months ended June 30, 2024 compared to the same period of 2023.

The increase was primarily attributed to higher leasehold improvements, due to completion of the development of the San Diego facility.

Additionally, as of December 31, 2023, the Company completed the build out of one of its laboratory and office facilities in Verona, Wisconsin, and commenced depreciation.

The Company anticipates these R&D expenses to continue to increase as its pipeline of candidates grows and

progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.

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 $1.2 million, or 18%, for the three months ended December 31, 2024 compared to the same period of 2023.

This increase was primarily due to property taxes charged to the laboratory and office facilities in Verona, Wisconsin, which completed their build out during the first quarter of fiscal 2024.

Stock compensation expense, a non-cash expense, is based up the valuation of stock options and restricted stock units granted to employees.

Stock compensation expense decreased $1.5 million, or 16%, for the three months ended December 31, 2024 compared to the same period of 2023.

The decrease was primarily due to the cancellation of awards upon the departure of employees.

Depreciation and amortization expense, a non-cash expense, relates to depreciation on buildings, lab equipment and leasehold improvements.

These expenses increased $0.9 million, or 23% for the three months ended December 31, 2024 compared to the same period of 2023.

The increase was primarily attributed to completion of the build out of facilities in Verona, Wisconsin, and the commencement of depreciation.

The Company anticipates these R&D expenses to continue to increase as its pipeline of candidates grows and progresses to later phase clinical trials, in addition to inflationary pressure on goods and services and the labor market.

General & Administrative Expenses

The following table provides details of the Company’s general and administrative expenses for the periods indicated:

The following table provides details of general and administrative expenses:

(in thousands) Three Months Ended

June 30, 2024 % of

December 31, 2024 % of

Category Three Months Ended

June 30, 2023 % of

Category Increase (Decrease)

Salaries $ 6,740 28 % $ 5,063 21 % $ 1,677 33 %

Professional, outside services, and other 5,410 23 % 5,987 25 % (577) (10) %

Facilities related 1,238 5 % 1,352 6 % (114) (8) %

Total general & administrative expense, excluding non-cash expenses

$ 13,388 56 % $ 12,402 52 % $ 986 8 %

Stock compensation 9,809 42 % 10,965 46 % (1,156) (11) %

Depreciation and amortization 513 2 % 404 2 % 109 27 %

Total general & administrative expenses

$ 23,710 100 % $ 23,771 100 % $ (61) — %

(in thousands) Nine Months Ended

June 30, 2024 % of

Category Nine Months Ended

June 30, 2023 % of

December 31, 2023 % of

Category Increase (Decrease)

8 unchanged sentences

$ 26,910 100 % $ 23,605 100 % $ 3,305 14 %

Salaries expense increased $1.7 million, or 33%, for the three months ended June 30, 2024 and $5.8 million, or 41%, for the nine months ended June 30, 2024 compared to the same period of 2023.

Salaries expense increased $1.1 million, or 17%, for the three months ended December 31, 2024 compared to the same period of 2023.

The increase was driven by the combination of annual salary increases and increased headcount required to support the Company’s growth.

Professional, outside services, and other expense includes legal, consulting, patent expenses, business insurance expenses, other outside services, travel, and communication and technology expenses.

This expense decreased $0.6 million, or 10%, for the three months ended June 30, 2024 and increased $1.6 million, or 11%, for the nine months ended June 30, 2024 compared to the same period of 2023.

The increase for the nine months ended June 30, 2024 was mainly due to legal services associated with patent applications and intellectual property matters, as well as other professional services.

Professional, outside services, and other expenses include costs related to legal, audit, consulting, patent filings, business insurance, other external services, as well as travel, communication, and technology expenses.

This expense increased $4.9 million, or 94%, for the three months ended December 31, 2024 compared to the same period of 2023.

The increase was mainly due to professional services associated with commercialization and business development efforts.

Facilities related expense primarily includes rental costs and other facilities-related costs for the Company’s corporate headquarters in Pasadena, California.

Stock compensation expense, a non-cash expense, was based upon the valuation of stock options and restricted stock units granted to employees.

This expense decreased $1.2 million, or 11%, for the three months ended June 30, 2024 and $3.1 million, or 9%, for the nine months ended June 30, 2024 compared to the same period of 2023.

The decrease was mainly due to the decreased compensation costs related to performance awards.

Stock compensation expense, a non-cash expense, is based on the valuation of stock options and restricted stock units granted to employees.

This expense decreased $3.0 million, or 28%, for the three months ended December 31, 2024 compared to the same period of 2023.

The decrease was primarily due to lower compensation costs related to performance awards, as the timing of these expenses can vary based on the achievement of related performance targets.

Depreciation and amortization expense, a noncash expense, was primarily related to amortization of leasehold improvements for the Company’s corporate headquarters.

2 unchanged sentences

Other income (expense) is primarily related to interest income and expense.

Other income increased $2.8 million for the three months ended June 30, 2024 compared to the same period of 2023.

The increase was primarily due to the higher

yields on investments due to higher interest rates, offset by the non-cash interest expense on the liability related to the sale of future royalties.

The balance remained consistent for the nine months ended June 30, 2024 compared to the same period of 2023.

Other expense increased $11.6 million for the three months ended December 31, 2024 compared to the same period of 2023.

The increase was primarily due to non-cash interest expense associated with the liability related to the sale of future royalties and the Credit Facility, partially offset by higher income from increased investment yields due to higher average cash balance.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations through the sale of its equity securities, 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.

Additionally, the Company expanded its facilities in Verona, Wisconsin and leased additional facilities in San Diego, California.

Each of these expansions is designed to increase the Company’s internal manufacturing and discovery capabilities and requires significant capital investment.

The Company’s cash, cash equivalents and restricted cash decreased to $69.4 million at June 30, 2024 compared to $110.9 million at September 30, 2023.

Cash invested in available-for-sale securities was $367.3 million at June 30, 2024 compared to $292.7 million at September 30, 2023.

On December 2, 2022, the Company entered into the Open Market Sale Agreement, pursuant to which the Company may, from time to time, sell up to $250.0 million in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering.

As of June 30, 2024, no shares have been issued under the Open Market Sale Agreement.

On January 2, 2024, the Company entered into an underwriting agreement with Jefferies LLC, BofA Securities, Inc., and Cowen and Company, LLC, as representatives of the several underwriters.

The Company issued 15,790,000 shares of common stock at an offering price of $28.50 per share.

The aggregate purchase price paid by investors was $450.0 million and the Company received net proceeds of $429.3 million after deducting advisory fees and offering expenses.

The Company believes its current financial resources are sufficient to fund its operations through at least the next twelve months from the date of the issuance of these financial statements.

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.

The Company’s cash, cash equivalents and restricted cash was $53.9 million as of December 31, 2024 compared to $102.7 million as of September 30, 2024.

Cash invested in available-for-sale securities was $499.0 million as of December 31, 2024 compared to $578.3 million as of September 30, 2024.

On December 2, 2022, the Company entered into an open market sale agreement (the “Open Market Sale Agreement”), pursuant to which the Company may, from time to time, sell up to $250.0 million in shares of the Company’s common stock through Jefferies LLC, acting as the sales agent and/or principal, in an at-the-market offering.

As of December 31, 2024, no shares have been issued under the Open Market Sale Agreement.

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.

The Company believes its current financial resources are sufficient 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:

Nine Months Ended June 30,

Three Months Ended December 31,

(in thousands)

4 unchanged sentences

Net decrease in cash, cash equivalents and restricted cash $ (48,728) $ (52,734)

$ (41,353) $ (2,396)

Cash, cash equivalents and restricted cash at end of period $ 53,889 $ 58,215

During the nine months ended June 30, 2024, cash flow used in operating activities was $325.6 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 amounted to $197.1 million, which was primarily attributable to capital expenditures of $117.2 million and investment purchases of $428.6 million, offset by proceeds from sales and maturities of investments of $348.6 million.

Cash provided by financing activities of $481.4 million was related to cash received from the issuance of common stock, a milestone payment from Royalty Pharma, and stock option exercises (See Note 6 — Stockholders’ Equity of Notes to Consolidated Financial Statements of Part I, “Item 1.

Financial Statements.”).

During the nine months ended June 30, 2023, cash flows used in operating activities was $128.0 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses, partially offset by the receipt of $110.0 million from collaboration and license agreements.

Cash used in investing activities was $126.7 million, which was primarily related to capital expenditures, $112.8 million of construction in progress and investment purchases of $234.0 million, offset by maturities of investments of $220.2 million.

Cash provided by financing activities of $252.2 million was primarily related to the $250.0 million payment from Royalty Pharma as well as cash received from stock option exercises.

See Note 11 – Liability Related to the Sale of Future

Royalties of Notes to Consolidated Financial Statements of Part I, “Item 1.

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 provided by investing activities amounted to $76.9 million, which was primarily attributable to proceeds from maturities of investments of $118.2 million, offset by capital expenditures of $7.5 million and investment purchases of $33.7 million.

Cash provided by financing activities of $20.6 million was primarily related to cash received from the pre-funded warrants and stock option exercises (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, 2023, cash flow used in operating activities was $117.8 million, which was primarily due to the ongoing expenses related to the Company’s research and development programs and general and administrative expenses.

Cash provided by investing activities was $64.8 million, which was primarily related to sales and maturities of investments of $133.5 million, offset by capital expenditures of $68.7 million of construction in progress.

Cash provided by financing activities of $0.3 million was primarily related to cash received from stock option exercises.

Contractual Obligations

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-Q

Item 2. Management’s Discussion and Analysis