What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 70 added, 108 removed, 166 unchanged (52% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q (Quarterly Report), our audited consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2023 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC), on March 14, 2024 (2023 Annual Report).

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q (Quarterly Report), our audited consolidated financial statements and accompanying notes thereto for the fiscal year ended December 31, 2024 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission (SEC), on March 13, 2025 (2024 Annual Report).

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

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Food and Drug Administration (FDA) has granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, and Fast Track designations for the treatment of pulmonary sarcoidosis and for the treatment of SSc-ILD.

The European Commission (EC) has granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, based on the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP).

The European Commission has granted efzofitimod orphan drug designations for the treatment of sarcoidosis and for the treatment of SSc, based on the opinion of the European Medicines Agency (EMA) Committee for Orphan Medicinal Products (COMP).

The Pharmaceutical and Medical Devices Agency (PMDA) has granted efzofitimod orphan drug designation for the treatment of sarcoidosis to Kyorin Pharmaceutical Co., Ltd.

(Kyorin), our partner in Japan.

In September 2021, we announced positive results and clinical proof-of-concept from a double-blind, placebo-controlled Phase 1b/2a clinical trial in 37 patients with pulmonary sarcoidosis.

The study was designed to evaluate the safety, tolerability, immunogenicity and preliminary efficacy of three doses of intravenous (IV) efzofitimod, 1.0, 3.0 and 5.0 mg/kg, in the context of a forced steroid taper.

Efzofitimod was safe and well-tolerated at all doses administered with no serious drug-related adverse events or signal of

immunogenicity.

Efzofitimod was safe and well-tolerated at all doses administered with no serious drug-related adverse events or signal of immunogenicity.

Additionally, the study demonstrated consistent dose response for efzofitimod on key efficacy endpoints and improvements compared to placebo, including measures of steroid reduction, lung function, pulmonary sarcoidosis symptom measures and inflammatory biomarkers.

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In February 2022, we met with the FDA in an end-of-Phase 2 meeting to discuss our plans for subsequent clinical development and path to registration for efzofitimod for pulmonary sarcoidosis.

Subsequently, we initiated a global pivotal Phase 3 randomized, double-blind, placebo-controlled clinical trial to evaluate the efficacy and safety of efzofitimod in patients with pulmonary sarcoidosis (the EFZO-FIT TM study).

The EFZO-FIT study is a 52-week study consisting of three parallel cohorts randomized equally to either 3.0 mg/kg or 5.0 mg/kg of efzofitimod or placebo dosed intravenously once a month for a total of 12 doses.

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The primary endpoint of the study is steroid reduction.

Secondary endpoints include measures of lung function assessed by forced vital capacity (FVC) and health-related quality of life assessments and questionnaires (KSQ lung score).

Secondary endpoints include measures of lung function assessed by health-related quality of life assessments and questionnaires (KSQ lung score) and forced vital capacity (FVC).

In September 2022, we dosed the first patient in the study.

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Based on the results of the Phase 1b/2a clinical trial, we believe efzofitimod has potential applications in the treatment of other ILDs, such as chronic hypersensitivity pneumonitis (CHP) and connective tissue disease related ILD (CTD-ILD), including SSc-ILD and rheumatoid arthritis-associated ILD.

As such, we designed a focused Phase 2 proof-of-concept clinical trial of efzofitimod (the EFZO-CONNECT TM study) in patients with SSc-ILD.

As such, we designed a focused Phase 2 proof-of-concept clinical trial of efzofitimod (the EFZO-CONNECT study) in patients with SSc-ILD.

The EFZO-CONNECT study is a randomized, double-blind placebo-controlled proof-of-concept study to evaluate the efficacy, safety and tolerability of efzofitimod in patients with SSc-ILD.

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The study intends to enroll up to 25 patients at multiple centers in the United States.

The objective of the study is to evaluate the efficacy of multiple doses of IV efzofitimod on pulmonary, cutaneous and systemic manifestations in patients with SSc-ILD.

The objective of the study is to evaluate the efficacy of multiple doses of IV efzofitimod on pulmonary, cutaneous (limited or diffuse) and systemic manifestations in patients with SSc-ILD.

The primary endpoint is reduction in FVC.

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Based on current enrollment projections, we expect to report interim data from the study in the second quarter of 2025.

In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin Pharmaceutical Co., Ltd.

(Kyorin) for the development and commercialization of efzofitimod for the treatment of ILD in Japan.

Under the Kyorin Agreement, Kyorin received an exclusive right to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan.

In January 2020, we entered into a collaboration and license agreement (Kyorin Agreement) with Kyorin for the development and commercialization of efzofitimod for the treatment of ILD in Japan.

Under the terms of the Kyorin Agreement, Kyorin received exclusive rights to develop and commercialize efzofitimod in Japan for all forms of ILD, and is obligated to fund all research, development, regulatory, marketing and commercialization activities in Japan.

We are responsible for supplying all drug product for Japan, as well as supporting development activities for efzofitimod.

In 2020, Kyorin conducted and funded a Phase 1 clinical trial of efzofitimod (known as KRP-R120 in Japan).

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To date, the Kyorin Agreement has generated $20.0 million in upfront and milestone payments to us and we are eligible to receive up to an additional $155.0 million in the aggregate upon achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

Discovery Pipeline

Discovery Platform

Using efzofitimod as a model, we have developed a process to advance novel tRNA synthetase domains from a concept to therapeutic candidate.

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Screening approaches are employed to identify target cells and extracellular receptors for these tRNA synthetase-derived proteins.

These cellular systems can then be used in mechanism-of-action studies to elucidate the role these proteins play in cellular responses and their potential

therapeutic utility.

These cellular systems can then be used in mechanism-of-action studies to elucidate the role these proteins play in cellular responses and their potential therapeutic utility.

We are working to identify new tRNA synthetase based drug candidates through our internal discovery efforts and external collaboration efforts.

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As a novel ligand, ATYR0750 interacts with FGFR4 in a differentiated way to other approaches targeting the receptor, which may lead to improved therapeutic benefit.

Impact of Geopolitical and Macroeconomic Conditions

Global economic and business activities continue to face widespread macroeconomic uncertainties, including global geopolitical tension, armed conflicts, potential future health pandemics, labor shortages, inflation and monetary supply shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and recession risks, which has resulted in further volatility in the U.S.

and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

The ultimate long-term impact of these evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows.

The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, will depend on future developments, which are uncertain and cannot be predicted;

however, any continued or renewed disruption resulting from these factors could negatively impact our business.

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operations since our inception.

As of September 30, 2024, we had an accumulated deficit of $517.1 million and we expect to continue to incur net losses for the foreseeable future.

As of September 30, 2024, we had cash, cash equivalents, restricted cash and available-for-sale investments of $68.9 million.

As of March 31, 2025, we had an accumulated deficit of $546.9 million, and we expect to continue to incur net losses for the foreseeable future.

As of March 31, 2025, we had cash, cash equivalents, restricted cash and available-for-sale investments of $78.8 million.

We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments will be sufficient to meet our material cash requirements from known contractual and other obligations for a period of at least one year from the date of this Quarterly Report.

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Sources of Cash

From our inception through September 30, 2024, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues.

Public Offerings

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’ option to purchase additional shares, at a price to the public of $2.25 per share.

The total net

proceeds from the offering were approximately $48.1 million, after deducting underwriting discounts, commissions and offering expenses payable by us.

From our inception through March 31, 2025, we have financed our operations primarily through the sale of equity securities and convertible debt, venture debt, term loans and through license and collaboration agreement revenues.

We rely primarily on the Jefferies ATM Offering Program for financing our activities.

Given recent volatility in capital markets generally, the price of our common stock has fluctuated materially since the start of 2025.

If markets remain volatile or our stock price continues to fluctuate, this may negatively affect our ability to generate cash from financing activities in future periods.

At-the-Market Offering Programs

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program (the Jefferies ATM Offering Program), pursuant to which we may offer and sell, from time to time and at our option, up to an aggregate of $65.0 million of shares of our common stock through Jefferies, acting as sales agent.

In April 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies) implementing an “at-the-market” offering program (the Jefferies ATM Offering Program).

In December 2024, we amended the Jefferies ATM Offering Program.

Under the Jefferies ATM Offering Program, we may offer and sell, from time to time and at our option, up to an aggregate of $215.0 million of shares of our common stock (inclusive of $65.0 million of sales made prior to the amendment) through Jefferies, acting as sales agent.

Jefferies is entitled to a fixed commission rate of up to 3.0% of the gross sales proceeds of shares sold under the Jefferies ATM Offering Program.

During the year ended December 31, 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $1.82 per share for net proceeds of approximately $18.4 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2024, we sold an aggregate of 12,463,407 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.4 million under the Jefferies ATM Offering Program.

During the year ended December 31, 2024, we sold an aggregate of 20,653,450 shares of common stock at a weighted-average price of $2.02 per share for proceeds of approximately $40.3 million under the Jefferies ATM Offering Program, net of offering costs.

During the three months ended March 31, 2025, we sold an aggregate of 4,941,895 shares of common stock at a weighted-average price of $3.93 per share for proceeds of approximately $18.8 million under the Jefferies ATM Offering Program, net of offering costs.

Kyorin Agreement Milestone Payments

On February 6, 2023, we announced that our partner Kyorin dosed the first patient in Japan in the EFZO-FIT study, which triggered a $10.0 million milestone payment by Kyorin to us pursuant to the Kyorin Agreement.

We recorded this $10.0 million milestone as revenue in the year ended December 31, 2022 and received the cash in February 2023.

Kyorin is our partner for the development and commercialization of efzofitimod for ILD in Japan.

Under the Kyorin Agreement, we have generated $20.0 million in upfront and milestone payments to date and are eligible to receive up to an additional $155.0 million in the aggregate upon the achievement of certain development, regulatory and sales milestones, as well as tiered royalties on any net sales in Japan.

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The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):

Nine Months Ended September 30,

Net cash provided by (used in):

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Operating activities.

Net cash used in operating activities for the nine months ended September 30, 2024 and 2023 was $56.0 million and $22.2 million, respectively.

The net cash used during the nine months ended September 30, 2024 was primarily due to increased costs for the EFZO-FIT and EFZO-CONNECT studies and upfront payments for manufacturing efforts toward and preparation for a possible biologics license application (BLA) for efzofitimod.

The net cash used during the nine months ended September 30, 2023 was lower primarily due to the receipt of a $10.0 million milestone from the Kyorin Agreement, lower clinical trial costs for the EFZO-FIT and EFZO-CONNECT studies and lower manufacturing costs for efzofitimod.

Net cash used in operating activities for the three months ended March 31, 2025 and 2024 was $15.4 million and $22.4 million, respectively.

The net cash used during the three months ended March 31, 2025 and 2024 was primarily for on-going costs for efzofitimod development and pre-commercialization activities.

The decrease in net cash used in operating activities during the three months ended March 31, 2025 as compared to the same period in 2024 was due primarily to the timing of certain upfront efzofitimod manufacturing payments made during the three months ended March 31, 2024.

Investing activities.

Net cash provided by (used in) investing activities for the nine months ended September 30, 2024 and 2023 was $23.3 million and $(37.9) million, respectively.

The fluctuation in net cash provided by or used in investing activities resulted primarily from the timing differences in investment purchases, sales and maturities, and the fluctuation of our portfolio mix between cash equivalents and investment holdings.

Net cash used in investing activities for the three months ended March 31, 2025 and 2024 was $4.4 million and $1.4 million, respectively.

The fluctuation in net cash used in investing activities resulted primarily from the timing differences in investment purchases, sales and maturities, and the fluctuation of our portfolio mix between cash equivalents and investment holdings.

The average term to maturity in our investment portfolio is less than one year.

Financing activities.

Net cash provided by financing activities for the nine months ended September 30, 2024 and 2023 was $21.0 million and $60.2 million, respectively.

Net cash provided by financing activities for the nine months ended September 30, 2024 consisted primarily of $21.4 million in net proceeds from the issuance of common stock through the Jefferies ATM Offering Program.

Net cash provided by financing activities for the nine months ended September 30, 2023 consisted primarily of $48.1 million in net proceeds from the underwritten follow-on public offering and $12.3 million in proceeds from the issuance of common stock through the Jefferies ATM Offering Program, net of offering costs.

Net cash provided by financing activities for the three months ended March 31, 2025 and 2024 was $18.6 million and $7.7 million, respectively.

Net cash provided by financing activities for the three months ended March 31, 2025 primarily consisted of $18.8 million in proceeds from the issuance of common stock through the Jefferies ATM Offering Program, net of offering costs.

Net cash provided by financing activities for the three months ended March 31, 2024 consisted of $8.6 million in proceeds from the issuance of common stock through the Jefferies ATM Offering Program, net of offering costs and of which $0.8 million was included in accounts receivable as of March 31, 2024.

Material Cash Requirements

To date, we have not generated any revenues from product sales.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance efzofitimod in clinical development, manufacturing and technology transfer activities, continue our research and development activities with respect to other potential therapies based on tRNA synthetase biology and seek marketing approval for product candidates that we may develop.

In addition, if we obtain marketing approval for any of our

product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

We currently have no sales or marketing capabilities and would need to expand our organization to support these activities.

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance efzofitimod in clinical development, manufacturing, regulatory and pre-commercialization activities, continue our research and development activities with respect to other potential therapies based on tRNA synthetase biology and seek marketing approval for product candidates that we may develop.

In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

We currently have minimal sales and marketing capabilities and would need to expand our organization to support these activities.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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If we are unable to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

As of September 30, 2024, our material cash requirements from known contractual and other obligations consisted primarily of (i) an operating lease for our corporate headquarters, and (ii) our master financing lease agreement for various research and development and informational technology equipment.

As of March 31, 2025, our material cash requirements from known contractual and other obligations consisted primarily of (i) an operating lease for our corporate headquarters and laboratory space, and (ii) our master financing lease agreement for various research and development and informational technology equipment.

Corporate Headquarters Facility Lease

In May 2022, we entered into a lease (the Lease) with San Diego Creekside, LLC (Landlord), as lessor, pursuant to which we agreed to lease from Landlord approximately 23,696 rentable square feet (subject to increase pursuant to the terms of the Lease) of office and laboratory space.

In May 2022, we entered into a non-cancelable facility lease that is subject to base lease payments that started at $5.75 per square foot of rentable area per month for the first 12 months of the lease and which escalate 3.0% annually over the term of the lease, and additional charges for common area maintenance and other costs.

The term of the lease (the Lease Term) commenced on March 20, 2023 (the Lease Commencement Date) and will continue for 124 months from the Lease Commencement Date.

We also have one option to extend the Lease Term for five years.

Base rent during such extension period would be at the fair market rent for the Premises (as that term is defined in the Lease).

Under the terms of the Lease, the base rent during the first 12 months of the Lease Term was $5.75 per square foot of rentable area per month, and the base rent following the first 12 months of the Lease Term is subject to certain upward adjustments of approximately 3.0% annually.

We received $5.3 million in allowance payments for tenant improvements, which represents the full allowance to which we were entitled under the Lease.

We provided a $0.7 million security deposit in the form of a letter of credit which is included in restricted cash as of September 30, 2024.

During the second quarter of 2023, additional common area amenities were completed by the Landlord which provided us with access to an estimated 1,500 additional rentable square feet.

In April 2024, we finalized an amendment to the Lease (the Lease Amendment), effective June 2023.

The additional rentable square feet was adjusted to 1,170 square feet for a total of 24,866 rentable square feet and our base rent increased for this additional rentable square feet at the same monthly base rent per rentable square foot as contemplated in the Lease.

In April 2024, we entered into a lease amendment for additional common area amenities, effective as of June 2023.

The amendment increased the total rentable square feet from 23,696 rentable square feet to 24,866 rentable square feet.

We provided a $0.7 million security deposit in the form of a letter of credit which is included in restricted cash as of March 31, 2025.

Financing Lease

In April 2022, we entered into a master financing lease to lease various research and development and information technology equipment over a 48-month term.

Financing lease liabilities totaled $1.6 million as of September 30, 2024.

Additionally, as of September 30, 2024, we have $2.2 million in cash collateral for the financing lease, and this amount is included in restricted cash.

We did not have any off-balance sheet arrangements as of September 30, 2024.

In April 2022, we entered into a financing lease to lease various research and development and information technology equipment over a 48-month term.

Financing lease liabilities total $1.3 million as of March 31, 2025.

Additionally, as of March 31, 2025, we have $1.7 million in cash collateral for the financing lease, and this amount is included in restricted cash.

We did not have any off-balance sheet arrangements as of March 31, 2025.

Financial Operations Overview

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was incorporated in the State of Delaware in September 2005.

The unaudited interim condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, as of September 30, 2024.

The unaudited condensed consolidated financial statements in this Quarterly Report include our accounts and our 98% majority-owned subsidiary in Hong Kong, Pangu BioPharma, as of March 31, 2025.

All intercompany transactions and balances are eliminated in consolidation.

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Kyorin is also participating in the EFZO-FIT study as the local sponsor in Japan.

In February 2023, Kyorin dosed the first patient in Japan in the EFZO-FIT study which triggered a $10.0 million milestone payment to us.

Research and Development Expenses

To date, our research and development expenses have related primarily to the development of, and clinical trials for, our product candidates, and to research efforts for potential therapeutics based on tRNA synthetase biology.

To date, our research and development expenses have been related primarily to the development of, and clinical trials for, our product candidates, and to research efforts targeting the potential therapeutic application of tRNA synthetase-based immunomodulators.

These expenses consist primarily of:

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• costs associated with conducting our preclinical, development and regulatory activities, including fees paid to third-party professional consultants, service providers and our scientific, therapeutic and clinical advisory board;

• costs to acquire, develop and manufacture preclinical study and clinical trial materials with contracted development and manufacturing organizations (CDMOs);

• costs incurred under clinical trial agreements with contract research organizations (CROs) and investigative sites;

• costs to acquire, develop and manufacture preclinical study and clinical trial materials and to support biologics license application (BLA) filing activities with contracted development and manufacturing organizations (CDMOs);

• costs incurred under clinical trial agreements with CROs and investigative sites;

• costs for laboratory supplies;

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We primarily outsource our clinical trial administration to CROs, and we outsource our manufacturing of clinical trial materials to CDMOs.

These outsourced expenses are typically substantially higher than the expenses we incur on our other product candidates which are all currently in preclinical development.

These outsourced expenses are typically substantially higher than the expenses we incur on our other product candidates which are all currently

in preclinical development.

As such, we separately track and report on the majority of our research and development expenses associated with the advancement of efzofitimod.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, corporate development and administrative support functions, including stock-based compensation expenses and benefits.

General and administrative expenses consist primarily of salaries and related costs for employees in executive, finance and administration, pre-commercialization, corporate development and administrative support functions, including stock-based compensation expenses and benefits.

Other significant general and administrative expenses include accounting, legal services, expenses associated with applying for and maintaining patents, cost of insurance, cost of various consultants, occupancy costs, information systems costs and depreciation.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these unaudited interim condensed 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 as of the date of the unaudited interim condensed consolidated financial statements, as well as the reported expenses during the reporting periods.

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these unaudited condensed 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 as of the date of the unaudited condensed consolidated financial statements, as well as the reported expenses during the reporting periods.

We monitor and analyze these items for changes in facts and circumstances, and material changes in these estimates could occur in the future.

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Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):

Three Months Ended September 30,

Research and development expenses:

Efzofitimod expenses

Preclinical development and other shared research and development expenses

Non-cash expenses (depreciation and stock-based compensation)

Total research and development expenses

General and administrative expenses:

Non-cash expenses (depreciation and stock-based compensation)

Other general and administrative expenses

Total general and administrative expenses

Other income (expense), net

Research and development expenses.

Research and development expenses were $14.8 million and $10.3 million for the three months ended September 30, 2024 and 2023, respectively.

The increase of $4.5 million was primarily attributable to an increase of $3.5 million in efzofitimod expenses, which was primarily due to the advancement of the EFZO-FIT study in patient enrollment activity as well as increased manufacturing efforts for preparation toward a possible BLA for efzofitimod.

Preclinical development and other shared research and development expenses increased by $1.0 million.

The increase was because in September 2023, we determined that we were eligible to claim an employee retention benefit credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and submitted an application for such ERC which resulted in a reduction of personnel costs.

Non-cash expenses were relatively consistent at $0.3 million in each period.

General and administrative expenses.

General and administrative expenses were $3.3 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively.

The increase of $0.7 million was because in September 2023, we determined that we were eligible to claim an ERC under the CARES Act and submitted an application for such ERC which resulted in a reduction of personnel costs.

Non-cash expenses were relatively consistent at $0.5 million for each period.

Other income, net.

Other income, net was $0.8 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively.

The change was primarily a result of lower cash balance as compared to the same period in the prior year.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes our results of operations for the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

License and collaboration agreement revenues

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General and administrative expenses:

Non-cash expenses (depreciation and stock-based compensation)

Other general and administrative expenses

Non-cash expenses (depreciation and stock-based compensation)

Total general and administrative expenses

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License and collaboration agreement revenues.

Revenues of $0.2 million and $0.4 million for the nine months ended September 30, 2024 and 2023, respectively, consisted of drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

Revenues of $0.2 million for the three months ended March 31, 2024 consisted of drug product material sold to Kyorin for the Japan portion of the EFZO-FIT study.

Research and development expenses.

Research and development expenses were $42.1 million and $29.5 million for the nine months ended September 30, 2024 and 2023, respectively.

The increase of 12.6 million was due primarily to an increase of $12.5 million in efzofitimod expenses, which was primarily due to the advancement of the EFZO-FIT study in patient enrollment activity as well as increased manufacturing efforts for preparation toward a possible BLA for efzofitimod.

Preclinical development and other shared research and development expenses decreased by $0.1 million, and this decrease was primarily attributable to reduced discovery costs for our preclinical product candidates.

Non-cash expenses increased by $0.2 million primarily due to increased non-cash depreciation expense associated with tenant improvements to our corporate headquarters facility.

Research and development expenses were $11.8 million and $13.4 million for the three months ended March 31, 2025 and 2024, respectively.

The decrease of $1.6 million was due primarily to a decrease of $2.2 million in efzofitimod expenses for the EFZO-FIT study since the enrollment was completed in July 2024 as well as decreased manufacturing costs due to the timing of certain manufacturing activities being completed.

Preclinical development and other shared research and development expenses increased by $0.5 million, and was primarily attributable to increase in discovery costs for our preclinical product candidates.

Non-cash expenses increased by $0.1 million primarily due to increased non-cash stock-based compensation expense.

Despite the decreased expenses as compared to the same period in the prior year, we expect research and development expenses to increase as we advance clinical and manufacturing efforts toward possible commercialization of efzofitimod.

General and administrative expenses.

General and administrative expenses were $10.2 million and $9.8 million for each of the nine months ended September 30, 2024 and 2023, respectively.

The increase of $0.4 million was attributable to higher personnel related costs as well as higher professional fees.

General and administrative expenses were $4.0 million and $3.5 million for the three months ended March 31, 2025 and 2024, respectively.

Other general and administrative expenses increased by $0.1 million primarily due to higher personnel related costs.

Non-cash expenses increased by $0.3 million primarily due to increased non-cash stock-based compensation expenses.

Other income, net.

Other income, net was relatively consistent at $3.0 million and $3.3 million for the nine months ended September 30, 2024 and 2023, respectively.

The change was primarily a result of lower cash balance as compared to the same period in the prior year.

We expect general and administrative expenses to increase as we incur pre-commercialization costs to prepare for the possible commercialization of efzofitimod.

Other income (expense), net.

Other income (expense), net was $0.9 million and $1.1 million for the three months ended March 31, 2025 and 2024, respectively.

The change was primarily a result of lower interest income earned on lower cash balances as compared to the same period in the prior year.

Recent Accounting Pronouncements

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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